<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1997
REGISTRATION NO. 333-________
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
J.G. WENTWORTH & COMPANY, INC.
(Exact name of registrant as specified in its charter)
---------------------------
DELAWARE 6162 23-2927741
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
THE GRAHAM BUILDING
15TH AND RANSTEAD STREETS
10TH FLOOR
PHILADELPHIA, PA 19102
(215) 567-7660
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------------
JAMES D. DELANEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
J.G. WENTWORTH & COMPANY, INC.
THE GRAHAM BUILDING
15TH AND RANSTEAD STREETS
10TH FLOOR
PHILADELPHIA, PA 19102
(215) 567-7660
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
With copies to:
JASON M. SHARGEL, ESQ. JAMES R. TANENBAUM, ESQ.
RICHARD P. PASQUIER, ESQ. STROOCK & STROOCK & LAVAN LLP
WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP 180 MAIDEN LANE
TWELFTH FLOOR PACKARD BUILDING NEW YORK, NY 10038-4982
111 SOUTH 15TH STREET (212) 806-5400
PHILADELPHIA, PA 19102-2678
(215) 977-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As promptly as practicable after the effective date of this
Registration Statement.
If the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE
--------------------------------- -------------- -------------- ------------------ ------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value.......................... 6,079,749 $16.00 $97,275,984 $29,477.57
</TABLE>
- ------------
(1) Includes 793,011 shares which the Underwriters have a right to purchase to
cover over-allotments, if any.
(2) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sales of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION -- DATED OCTOBER 14, 1997
PROSPECTUS
- --------------------------------------------------------------------------------
5,286,738 Shares
[LOGO] J.G. WENTWORTH & COMPANY, INC.
Common Stock
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Of the shares of Common Stock, par value $.01 per share (the 'Common Stock'),
offered hereby (the 'Offering'), 4,000,000 shares are being sold by J.G.
Wentworth & Company, Inc. (the 'Company') and 1,286,738 shares are being sold by
certain selling stockholders (the 'Selling Stockholders'). The Company will not
receive any of the proceeds from the sale of shares by the Selling Stockholders.
See 'Principal and Selling Stockholders.'
Prior to the Offering, there has been no public market for the Common Stock of
the Company. It is currently anticipated that the initial public offering price
per share will be between $14.00 and $16.00. See 'Underwriting' for a discussion
of the factors to be considered in determining the initial public offering
price. Application has been made to have the Common Stock approved for inclusion
in The Nasdaq Stock Market's National Market (the 'Nasdaq National Market')
under the symbol 'JGWC.'
SEE 'RISK FACTORS' ON PAGES 8 TO 17 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
-------------- -------------- -------------- --------------
Per Share.... $ $ $ $
Total(3)..... $ $ $ $
- ------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. See 'Underwriting.'
(2) Before deducting expenses payable by the Company estimated to be $1 million.
(3) The Selling Stockholders have granted the Underwriters a 30-day
over-allotment option to purchase up to 793,011 additional shares of Common
Stock on the same terms and conditions as set forth above. If all such
additional shares are purchased by the Underwriters, the total Price to
Public will be $ , the total Underwriting Discounts and Commissions
will be $ , the total Proceeds to Company will be $ and the
total Proceeds to Selling Stockholders will be $ . See
'Underwriting.'
- --------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and the Selling Stockholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters is expected
to be made at the office of Prudential Securities Incorporated, One New York
Plaza, New York, New York, on or about , 1997.
PRUDENTIAL SECURITIES INCORPORATED
OPPENHEIMER & CO., INC.
FURMAN SELZ
, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF
COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING.'
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Combined Financial
Statements of the J.G. Wentworth Affiliated Companies and the Notes thereto
appearing elsewhere in this Prospectus. Except as otherwise indicated, all
information in this Prospectus gives effect to the following transactions which
will occur on or before completion of the Offering (collectively, the
'Reorganization') pursuant to which: (i) the limited partners of J.G. Wentworth
MFC Associates, L.P., a Delaware limited partnership ('MFC'), and J.G. Wentworth
S.S.C. Limited Partnership, a Delaware limited partnership ('SSC' and,
collectively with MFC, the 'Partnerships'), will contribute all of their limited
partnership interests in the Partnerships to the Company; (ii) the shareholders
of J.G. Wentworth Funding Corp., a Pennsylvania corporation ('MFC Funding'), and
J.G. Wentworth Structured Settlement Funding Corporation, a Delaware corporation
('SSC Funding'), the respective general partners of the Partnerships
(collectively, the 'General Partners'), will contribute all of the capital stock
of the General Partners to the Company; and (iii) the shareholders of J.G.
Wentworth & Company, Inc., a Pennsylvania corporation ('JGW'), and SSC
Management Company, Inc., a Pennsylvania corporation ('SCC Management' and,
together with JGW, the Partnerships and the General Partners, the 'J.G.
Wentworth Affiliated Companies'), will contribute all of the capital stock of
JGW to the Company; each in exchange for the issuance by the Company of shares
of Common Stock. See 'The Reorganization and Change in Tax Status' and the
Combined Financial Statements of the J.G. Wentworth Affiliated Companies and the
Notes thereto. Unless the context otherwise requires, (a) all references herein
to the 'Company' refer to the J.G. Wentworth Affiliated Companies on a combined
basis, (b) all references herein to the Company's activities, financial
condition or results of operations refer to those of the J.G. Wentworth
Affiliated Companies, taken as a whole and (c) all information in this
Prospectus assumes that the Underwriters' over-allotment option will not be
exercised.
THE COMPANY
The Company is a specialty finance company that originates, securitizes and
services rights to receive payments from structured settlements and other
deferred payment obligations. Deferred payment obligations are contractual
arrangements under which one party has agreed to make fixed, scheduled payments
to another party over time to satisfy an obligation that would otherwise be paid
in an up-front, lump sum. The Company specializes in transactions involving two
types of deferred payment obligations: (i) structured settlements arising from
personal injury litigation as to which highly-rated insurance companies are the
obligor, and, to a lesser extent, (ii) other deferred payment obligations such
as claims arising from personal injury litigation and state-operated lotteries
as to which governmental or quasi-governmental entities are the obligor.
According to industry sources, in excess of $40 billion of annuity premiums
paid to third parties to fund structured settlements were generated from 1980 to
1995 and approximately $4 billion to $5 billion in new structured settlements
are generated each year in the United States. Structured settlements continue to
be an attractive option for claimants and insurance companies because structured
settlements: (i) offer favorable tax treatment; (ii) permit payment flexibility
and incorporation of investment management features; and (iii) lower the cost of
compensating victims and thereby help foster timely settlement of litigation.
From the claimants' point of view, however, structured settlements have a
significant weakness, inflexibility. When claimants' financial needs change, the
fixed payment schedule of a structured settlement may no longer satisfy these
needs. The Company's funding programs offer those claimants the ability to
convert their rights to future payments into cash that they can use for such
purposes as paying medical or tuition expenses, purchasing or improving a home,
starting a business or repaying debt.
The Company has achieved significant growth in the number and maturity
value of receivables purchased since commencing operations. From inception to
June 30, 1997, the Company has purchased 14,022 deferred payment obligation
receivables with an aggregate maturity value of $374.8 million.
3
<PAGE>
Maturity value equals the sum of all future payments to be received under a
deferred payment obligation. The Company has generally purchased receivables at
a significant discount from maturity value. The difference between the amount
paid by the Company and the maturity value of the receivables is accrued as
income over the life of the receivable. The weighted average yield of the
Company's portfolio was 22.5% for the six months ended June 30, 1997. The
Company's revenues have increased significantly as the Company's originations
volume and portfolio have grown and the Company has employed securitizations to
fund its operations. Revenues increased from $249,000 in 1992 to $11.8 million
in 1996 and $20.5 million in the six months ended June 30, 1997.
In June 1997, the Company completed a $70.8 million securitization in what
it believes is the first investment grade rated securitization of structured
settlement receivables. The Company sold, through a special purpose entity,
$59.5 million of senior pass-through certificates rated 'A2' by Moody's
Investors Service, Inc. ('Moody's') and 'A' by Duff & Phelps Credit Rating Co.
('Duff & Phelps'). The Company retained $11.3 million in face value of unrated
subordinated certificates and recorded a Gain on Sale (as defined herein) of
$11.3 million for the six months ended June 30, 1997. The Company completed a
securitization transaction in which it sold $31.0 million of receivables in
September 1997 and $41.0 million of receivables in October 1997, and recorded a
Gain on Sale of $6.8 million and $8.0 million, respectively. Structured
settlement receivables and other deferred payment obligations differ from other
regularly securitized financial assets, such as consumer credit cards and
mortgage loans, in that (i) prepayment risk is minimal because the timing of
scheduled payments is fixed and (ii) credit risks are low because obligors are
typically insurance companies that have received a credit rating of 'A' or
better from A.M. Best or are governmental entities. From inception through
December 31, 1996, the Company had not charged-off any receivables. For the six
months ended June 30, 1997, the Company recorded a net charge-off of 0.7% of the
Company's average owned portfolio.
The Company does not rely on brokers to originate structured settlements
and other deferred payment receivables and its policies prohibit the 'cold
calling' of prospective customers. Instead, the Company utilizes a nationwide
television advertising campaign to identify hard-to-find claimants who want to
sell their payment rights to the Company. Using a 21,520-square-foot call
center, the Company's originations staff responds to claimant inquiries,
attempts to quantify an individual claimant's financial needs and endeavors to
structure the funding transaction to meet those needs. The Company's policies
prohibit the origination of receivables from minors and incompetent persons.
The Company's growth strategy is to increase its originations of deferred
payment receivables and profitability by further enhancing its position as the
leading originator of the rights to receive payments from structured settlements
and other deferred payment obligations. To achieve its goals for profitable
growth, the Company intends to continue to: (i) increase retail originations
through its nationwide targeted television advertising campaign; (ii) provide
quality customer service by continuing to qualify and structure transactions
based on the needs of the claimant through the Company's trained marketing,
underwriting and servicing personnel; (iii) maintain stringent underwriting
standards to minimize the risks of claimant fraud; (iv) market to referral
sources such as attorneys and bankruptcy and estate trustees; (v) obtain
institutional financing and complete regular securitizations of its receivables;
(vi) maintain its state-of-the-art information management systems; and (vii)
expand into new deferred payment market niches through internal growth and
possible acquisitions.
The Company was formed in October 1997 in connection with the
Reorganization as a successor to the businesses of the J.G. Wentworth Affiliated
Companies. See 'The Reorganization and Change in Tax Status.' JGW was formed by
James D. Delaney and Gary Veloric in 1991 as a merchant bank specializing in
transactions in the healthcare industry. In 1992, the Company entered the
business of purchasing the deferred settlement obligations of the New Jersey
Full Insurance Joint Underwriting Association ('JUA'), and its successor, the
New Jersey Market Transition Facility ('MTF'). As the Company's success in the
JUA/MTF market established its reputation as a creative funding source, it began
to search for other opportunities to purchase income streams that, while secure
and predictable, did not meet the requirements for more traditional means of
financing. After evaluating a number of market possibilities, the Company
decided in 1995 to enter the secondary market for structured
4
<PAGE>
settlements. By using the capabilities and systems it developed for the JUA/MTF
business, the Company emerged as a market leader in the business of purchasing
structured settlements. In May 1995, ING (U.S.) Capital Corporation (together
with its affiliates, 'ING') extended a credit facility to the Company to fund
its originations of other deferred payment obligations. In August 1995, the
Company and ING expanded their relationship to include funding the acquisition
of structured settlement receivables, at which time ING became a stockholder of
the Company.
The Company's principal executive office is located at The Graham Building,
15th and Ranstead Streets, 10th Floor, Philadelphia, PA 19102, and its telephone
number is (215) 567-7660.
THE OFFERING
Common Stock Offered by the 4,000,000 shares (1)
Company..........................
Common Stock Offered by the Selling 1,286,738 shares (1)
Stockholders.....................
Common Stock to be Outstanding 16,466,667 shares (2)
after the Offering...............
Use of Proceeds.................... To pay a cash tax distribution to certain of
the Company's stockholders, to pay down
outstanding amounts on the Credit Facilities
(as defined herein) and for other general
corporate purposes. See 'The Reorganization
and Change in Tax Status' and 'Use of
Proceeds.'
Proposed Nasdaq National Market JGWC
symbol...........................
- ------------------
(1) Assumes that the Underwriters' over-allotment option to purchase 793,011
shares from the Selling Stockholders will not be exercised.
(2) Does not include 650,000 shares issuable upon exercise of stock options to
be granted to employees and directors upon the completion of the Offering
with an exercise price equal to the initial public offering price.
RISK FACTORS
Investors should consider the material risk factors involved in connection
with an investment in the Common Stock and the impact to investors from various
events which could adversely affect the Company's business. See 'Risk Factors.'
5
<PAGE>
SUMMARY COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary combined financial information should be read in
conjunction with the Combined Financial Statements of the J.G. Wentworth
Affiliated Companies and the Notes thereto, 'Selected Combined Financial Data'
and 'Management's Discussion and Analysis of Financial Condition and Results of
Operations' included elsewhere in this Prospectus. The following table also
includes certain unaudited pro forma combined statement of operations data for
the year ended December 31, 1996 and the six months ended June 30, 1997, which
give effect to the Reorganization, the Offering and certain other adjustments as
if they had occurred on June 30, 1997. The unaudited operating data has been
derived from management records for all periods presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Interest income............. $ -- $ 389 $ 2,755 $ 8,560 $ 10,426 $ 5,601 $ 8,743
Gain on sale of
receivables............... -- -- -- 268 576 -- 11,419
Other income................ 249 1,008 417 894 785 319 386
----- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues............ 249 1,397 3,172 9,722 11,787 5,920 20,548
Total expenses............ 256 1,322 3,248 8,078 15,862 7,280 14,279
----- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary loss.......... (7) 75 (76) 1,644 (4,075) (1,360) 6,269
Extraordinary loss............ -- -- -- 876 -- -- --
----- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ (7) $ 75 $ (76) $ 768 $ (4,075) $(1,360) $ 6,269
----- ----------- ----------- ----------- ----------- ----------- -----------
----- ----------- ----------- ----------- ----------- ----------- -----------
UNAUDITED PRO FORMA
INFORMATION:
Pro forma (benefit) provision
for income taxes (1)........ (1,508) 2,320
----------- -----------
Pro forma net income (loss)
(1)......................... $ (2,567) $ 3,949
----------- -----------
----------- -----------
PER SHARE DATA:
Pro forma net income (loss)
per share (1)(2)............ $ (0.20) $ 0.31
----------- -----------
----------- -----------
Pro forma number of shares
outstanding (1)(2).......... 12,549,134 12,549,134
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED (3)
------- ---------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Finance receivables........... $71,757 $ 71,757
Retained interests............ 5,219 5,219
Servicing asset............... 890 890
Total assets.................. 81,445 81,445
Notes payable, banks.......... 75,165 21,571
Deferred tax liability........ -- 6,220
Total liabilities............. 82,135 34,741
Total equity (deficit)........ (690) 46,704
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
UNAUDITED OPERATING DATA:
Portfolio Owned and Serviced:
Maturity value........................ $ 14 $3,839 $38,799 $74,820 $166,061 $82,377 $245,337
Carrying value........................ $ 12 $3,221 $33,778 $60,104 $ 90,930 $71,255 $142,394
Weighted average yield.................. 29.7% 26.2% 18.0% 14.0% 20.2% 17.4% 22.4%
Allowance for credit losses............. -- -- -- -- $ 500 $ 165 $ 1,630
Allowance for credit losses as a
percentage of average portfolio
owned................................. -- -- -- -- 0.8% 0.2% 2.3%
Net charge-offs......................... -- -- -- -- -- -- $ 610
Net charge-offs as a percentage of
average portfolio owned............... -- -- -- -- -- -- 0.6%
Structured Settlements:
Total number of receivables
originated.......................... -- -- -- 136 2,197 577 2,219
Cost of receivables originated........ -- -- -- $ 4,916 $ 56,004 $17,762 $ 48,889
Maturity value of receivables
originated.......................... -- -- -- $13,674 $125,697 $41,242 $103,239
Weighted average yield................ -- -- -- 20.5% 22.3% 20.7% 23.2%
Weighted average maturity (in
years).............................. -- -- -- 9.1 6.5 7.6 6.1
Total number of defaulted
receivables......................... -- -- -- 2 34 6 71
Total number of defaulted payments.... -- -- -- 4 146 33 321
Carrying amount of defaulted
payments............................ -- -- -- $ 7 $ 200 $ 39 $ 334
Carrying value of defaulted
receivables......................... -- -- -- $ 40 $ 1,313 $ 151 $ 3,280
Percentage of defaulted receivables... -- -- -- 0.8% 2.2% 0.7% 3.1%
Net charge-offs....................... -- -- -- -- -- -- $ 610
Net charge-offs as a percentage of
portfolio owned..................... -- -- -- -- -- -- 0.7%
Other Deferred Payment Obligations:
Total number of receivables
originated.......................... 1 475 2,637 4,610 1,409 919 354
Cost of receivables originated........ $ 12 $1,427 $31,854 $53,213 $ 17,052 $12,280 $ 4,192
Maturity value of receivables
originated.......................... $ 14 $1,871 $38,745 $62,851 $ 19,738 $14,217 $ 4,905
Weighted average yield................ 29.7% 26.2% 18.1% 14.1% 13.2% 12.7% 13.5%
Weighted average maturity (in
years).............................. 0.5 1.1 1.2 1.3 1.2 1.3 1.2
Total number of delinquent
receivables......................... -- -- -- 13 20 16 10
Carrying value of delinquent
receivables......................... -- -- -- $ 133 $ 197 $ 127 $ 63
Delinquent receivables as a percentage
of average portfolio................ -- -- -- 0.3% 0.7% 0.3% 0.4%
Net charge-offs....................... -- -- -- -- -- -- --
</TABLE>
- ------------------
(1) Prior to the Reorganization, JGW and the General Partners were treated as S
corporations under Subchapter S of the Internal Revenue Code of 1986 (the
'Code') and applicable state law. The pro forma presentation reflects the
provision for income taxes as if JGW and the General Partners had always
been C corporations and the activities of the Partnerships had always been
taxed as if owned by the Company at an assumed effective tax rate of 37%.
(2) Pro forma net income (loss) per share is computed based on 12,466,667 shares
of Common Stock outstanding before the Offering and gives effect to the
Reorganization and reflects the 82,467 shares of Common Stock which would
need to be issued to generate the cash necessary to fund the Tax
Distribution (as defined herein) at an assumed initial public offering price
of $15.00 per share (the mid-point of the price range set forth on the cover
page of this Prospectus). See 'The Reorganization and Change in Tax Status.'
(3) Adjusted to reflect (i) the conversion of JGW and the General Partners to C
corporations and (ii) the sale of 4,000,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $15.00 per share (the
mid-point of the price range set forth on the cover page of this Prospectus)
after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company. See 'The Reorganization and Change
in Tax Status.'
7
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock involves a high degree of risk.
Prospective investors should carefully consider the following risk factors, in
addition to the other information set forth in this Prospectus, in connection
with the investment in the shares of Common Stock.
When used in this Prospectus, the words 'may,' 'will,' 'expect,'
'anticipate,' 'continue,' 'estimate,' 'project,' 'intend,' and similar
expressions are intended to identify forward-looking statements regarding
events, conditions and financial trends that may affect the Company's future
plans of operations, business strategy, results of operations and financial
position. Prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included
within the forward-looking statements as a result of various factors. Factors
that could cause or contribute to such differences include, but are not limited
to, those described below, and under the heading 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and elsewhere in this
Prospectus.
CAPITAL NEEDS AND ACCESS TO CAPITAL MARKETS
History of Negative Cash Flow. The Company has operated, and expects to
continue to operate, on a negative operating cash flow basis, and the level of
negative operating cash flow is expected to increase as the volume of the
Company's originations of deferred payment obligations and other receivables
increases. The Company incurs significant expenses in connection with its
originations and does not receive cash from receivables until scheduled payments
are received or its receivables are sold. The Company's primary operating cash
requirements include the funding of (i) originations of deferred payment
obligations and other receivables, (ii) reserve accounts, over-collateralization
requirements, fees and expenses incurred in connection with its securitizations,
(iii) interest expense due under various financing arrangements, (iv)
television, radio and direct mail advertising and other marketing expenses, (v)
administrative and other operating expenses and (vi) working capital
requirements. The Company has historically funded its operations principally
through borrowings from financial institutions, payments on receivables and
securitizations. For the six months ended June 30, 1997, the Company used $9.7
million more than it generated through its operations.
Dependence on Credit Facilities. The Company depends on credit facilities
with financial institutions to finance the purchase of deferred payment
obligations and other receivables pending securitization. The Company currently
has a $105 million Revolving Credit Facility with ING and a bank (the 'SSC
Facility') and a $20.0 million Credit Facility with ING and a bank (the 'MFC
Facility' and together with the SSC Facility, the 'Credit Facilities') of which
$28.3 million and $12.3 million were outstanding at October 3, 1997,
respectively. The SSC Facility expires on August 25, 1998 and the MFC Facility
expires on May 20, 1998. To finance its growth, the Company intends to seek
additional financing, whether by increasing the amounts available pursuant to
the Credit Facilities or otherwise. There can be no assurance, however, that
such financing will be available to the Company on favorable terms or at all.
The inability of the Company to arrange new financing capacity or to extend the
term of the Credit Facilities when they expire would have a material adverse
effect on the Company's financial condition and results of operations. Continued
availability of the Credit Facilities is subject to, among other things,
continued compliance by the Company with various representations and covenants
included within the applicable loan documents and the absence of an occurrence
of any of the events of default set forth in the loan documents. The SSC
Facility includes as an event of default failure of J.G. Wentworth Receivables
II LLC (a special purpose limited liability company wholly owned by SSC) to meet
various financial and other covenants. The MFC Facility provides for events of
default upon the failure of MFC to abide by financial covenants including
maintaining a minimum net worth of its receivables and upon any change in the
law that may materially alter the schedule of payments due on the deferred
payment obligations owned by MFC. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources.'
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Dependence on Securitizations. The Company intends to rely significantly
upon securitizations to generate cash proceeds for repayment of the Credit
Facilities and to finance originations of deferred payment obligations and other
receivables. In addition, Gain on Sale (as defined below) of receivables
generated by these securitizations is expected to represent a significant
portion of the Company's revenues. In June, September and October 1997, the
Company completed securitizations of structured settlement receivables. There
can be no assurance that the Company will be able to securitize its deferred
payment obligations and other receivables efficiently or successfully in the
future.
As of October 3, 1997, the majority of the approximately $30.0 million in
structured settlement receivables on the Company's balance sheet did not meet
the eligibility criteria of the recent securitizations. These receivables
include originations from Notice States (as defined herein), from Illinois and
payment rights arising from workers' compensation awards. The Company does not
anticipate securitizing these receivables and presently intends to hold them to
maturity.
The securitization market for the Company's assets is relatively
undeveloped and may be more susceptible to market fluctuations or other adverse
changes than markets for other asset classes. Securitization transactions may be
affected by a number of factors, some of which are beyond the Company's control,
including, among others, conditions in the securities markets in general,
conditions in the asset-backed securitization market, conformity of asset pools
to rating agency requirements and the type of credit enhancements used. Adverse
changes in the secondary market could impair the Company's ability to originate,
purchase or sell assets on a favorable or timely basis. Failure to obtain
acceptable rating agency ratings could adversely affect the terms or timing of
future securitizations. The Company intends to continue securitizing its
receivables on a regular basis. Any delay in the sale of an asset pool beyond a
quarter end may eliminate reported Gain on Sale in that quarter and would likely
result in losses for such quarter being reported by the Company. If the Company
were unable to securitize receivables for any reason, the Company's growth could
be materially impaired and the Company's financial condition and results of
operations could be materially adversely affected. See 'Management Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources' and 'Business -- Securitizations.'
Need for Additional Capital. The net proceeds of the Offering, along with
borrowings under the Credit Facilities and proceeds from regular
securitizations, are expected to be sufficient to meet the Company's expected
cash requirements and fund operations based on management's strategic growth
plans for the twelve months following the Offering. See 'Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources.' The Company's ability to implement its business strategy
will depend upon its ability to effect securitizations, to continue to obtain
sufficient financing under the existing Credit Facilities or to establish
alternative long-term financing arrangements. There can be no assurance that
such financing will be available to the Company on favorable terms. If such
financing were not available or the Company's capital requirements exceed
anticipated levels, then the Company may be required to seek additional equity
financing which would dilute the interests of stockholders who purchase Common
Stock in the Offering. The Company cannot determine the amount and timing of
additional equity financing requirements because such requirements are tied to,
among other factors, the growth of the Company's originations of deferred
payment obligations. If the Company were unable to access the capital markets,
its financial condition and results of operations would be materially adversely
affected. No assurance can be given, however, that the Company will have access
to the capital markets in the future for securitizations or for equity or debt
issuances, or that financing through borrowings or other means will be available
on acceptable terms to satisfy the Company's cash requirements and implement its
business strategy. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources.'
INTEREST RATE FLUCTUATIONS. The Company's profitability is directly
affected by levels of and fluctuations in interest rates. Such profitability is
largely determined by the difference, or 'spread,' between the effective yield
earned by the Company on the deferred payment obligations and other receivables
acquired by the Company and the interest rates payable under the Credit
Facilities and for pass-through certificates or notes issued in securitizations.
Several factors affect the Company's ability
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to manage interest rate risk. Deferred payment obligations and other receivables
are purchased at effective yields which are fixed, while amounts borrowed under
the Credit Facilities bear interest at variable rates that are subject to
frequent adjustment to reflect prevailing rates for short-term borrowings. As a
result, increases in interest rates after deferred payment obligations and other
receivables are acquired, but before they are securitized or otherwise sold,
could have a material adverse effect on the Company's results of operations and
financial condition. Securitization of the Company's receivables fixes the
spread between the effective yields earned by the Company and the interest rates
paid to investors in securitizations (the 'Excess Spread') with respect to such
receivables. This Excess Spread is a component of what will determine Gain on
Sale if the securitization meets the requirements of Statement of Financial
Accounting Standards No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities ('SFAS 125'), although such
Excess Spread may be less than the potential spread that existed at the time the
receivables were purchased by the Company. Furthermore, the interest rates
demanded by investors in securitizations are affected by prevailing market rates
for comparable transactions and the general interest rate environment. The
Excess Spread discounted to its present value is a significant component of the
Company's Gain on Sale. Thus, increases in interest rates prior to the sale or
securitization of deferred payment obligations and other receivables may reduce
Gain on Sale earned by the Company. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
VALUATION AND POTENTIAL IMPAIRMENT OF RETAINED INTEREST. As a fundamental
part of its business and financing strategy, the Company intends to sell a
significant portion of its receivables through securitizations. In a
securitization, the Company sells receivables that it has originated to a
special purpose vehicle for a cash purchase price and may retain a subordinated
interest in the receivables securitized and an interest in any excess cash
flows, after expenses (collectively, the 'Retained Interest'). The cash purchase
price is raised through an offering of pass-through certificates or notes by the
special purpose vehicle. Following securitization, purchasers of the
pass-through certificates or notes receive the principal collected and the
investor pass-through interest rate on the principal balance, while the Company
receives the cash flows from the Retained Interest and servicing fees.
A substantial portion of the Company's total revenues for the six months
ended June 30, 1997 was recognized as gain on sale of receivables, which
represents the difference between the cash proceeds (less expenses from the sale
of pass-through certificates to investors) and the allocated basis attributable
to the pass-through certificates ('Gain on Sale'). The Company will recognize
such Gain on Sale of receivables in the quarter in which such receivables are
sold. Concurrent with recognizing such Gain on Sale, the Company records the
value of the Retained Interest and the servicing asset on its balance sheet.
To account for the securitization of its receivables, the Company has
adopted SFAS 125. Under SFAS 125, the Company determines the value of the
Retained Interest by allocating the recorded investment in the receivables based
on the relative fair values of each portion on the date of sale. To value the
Retained Interest, the cash flows are projected over the life of the residual
certificates using default and interest rate assumptions that market
participants would use for similar financial instruments, subject to credit and
interest rate risks. These cash flows are discounted using an interest rate that
market participants would use for similar financial instruments. The fair
valuation also includes considerations of type of receivable, size, date of
origination and schedule of payment. The estimate of the fair value of the
servicing asset is initially calculated from market quotes for the type of
servicing performed by the Company; or alternatively, the fair value is based on
an analysis of discounted cash flows from servicing that incorporates estimates
of (i) prevailing market servicing costs; (ii) servicing revenues and (iii)
prevailing market profit margins. Although management of the Company believes
that it has made reasonable estimates of the Retained Interest and servicing
asset likely to be realized, it should be recognized that assumptions utilized
by the Company represent estimates. Actual experience may vary from these
estimates. If the Company's assumptions used in deriving the value of the
Retained Interest and the servicing asset differ from the actual results,
earnings could be negatively affected and the Company may be required to write
down the value of its
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Retained Interest and servicing asset. Furthermore, if a liquid market for the
Retained Interest exists, it is limited. Therefore, no assurance can be given
that all or any portion of the Retained Interest could be sold at any price,
including at its stated value on the balance sheet, if at all. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Certain Accounting Considerations.' If the Reorganization had occurred as of
June 30, 1997, the amount of the deferred tax charge would have been
approximately $6.2 million.
COMPETITION. As an originator of rights to receive payments from
structured settlements and other deferred payment obligations, the Company faces
competition, primarily from other specialty finance companies. In the future,
the Company could face competition from a wide variety of financial services
providers, including commercial banks, credit unions, savings and loans and
other consumer and commercial lending institutions. Many of these existing and
potential competitors in the financial services business are substantially
larger and have more capital and other resources than the Company. Competition
can take many forms, including convenience in obtaining funding, service,
marketing and distribution channels and effective interest rates and may be
affected by fluctuations in interest rates and general economic conditions.
During periods of rising interest rates, competitors which have 'locked in' low
borrowing costs may have a competitive advantage. Furthermore, the current level
of gains realized on the sale of the type of receivables by the Company and its
competitors is attracting additional competitors into this market with the
effect of lowering the gains that may be realized by the Company on future sales
and securitizations. In addition, greater investor acceptance of securities
backed by assets comparable to the Company's receivables and greater
availability of information regarding the default experience of such receivables
creates greater efficiencies in the market for such securities. Such
efficiencies may create a desire for even larger transactions giving companies
with greater volumes of originations a competitive advantage. In addition, a
more efficient market for such securities may lead certain investors to purchase
securities backed by other types of assets where potential returns may be
greater. See 'Business -- Competition.'
POSSIBLE LOSS IN QUARTER; VARIABLE QUARTERLY EARNINGS. The Company will
record a one-time, non-cash charge to the provision for income taxes in the
quarter when the Offering is completed to reflect the deferred tax liability of
the J.G. Wentworth Affiliated Companies recorded in connection with the
Reorganization. Accordingly, the recording of such charge in the quarter in
which the Offering is completed may result in the Company reporting a net loss
for such quarter. See Note 2 to Combined Financial Statements for a discussion
of the effects of the change in tax status of the Company.
Several other factors affecting the Company's business can cause
significant variations in its quarterly results of operations. In particular,
variations in the volume of the Company's receivables originations, the interest
rate spreads between the Company's cost of funds and the average effective yield
on purchased receivables, gains recorded on the sale of receivables which are
affected by the rate paid to investors in securitizations, and the timing and
size of securitizations, can result in significant increases or decreases in the
Company's revenues and income from quarter to quarter. Moreover, should the
volume of originations fail to grow as anticipated in any quarterly or other
period, the Company's earnings for such period will experience an immediate
adverse impact since the costs associated with the Company's internal
originations capacity cannot be easily or quickly reduced should the volume of
originations fall. Any significant decrease in the Company's quarterly revenues
or income could have a material adverse effect on the Company's financial
condition and results of operations. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Quarterly Results of
Operations.'
ABILITY OF THE COMPANY TO CONTINUE GROWTH STRATEGY. The Company's ability
to continue its growth strategy depends on its ability to increase the volume of
deferred payment receivables it originates while successfully managing its
growth. This volume increase is, in part, dependent on the Company's ability to
effect regular securitizations and to procure, maintain and manage sources of
funding pursuant to the Credit Facilities or otherwise. In addition to the
Company's financing needs, the Company's ability to manage its growth
successfully and sustain profitability will depend upon, among other factors,
(i) offering attractive products to prospective customers, (ii) marketing its
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products successfully, (iii) maintaining appropriate procedures, policies and
systems to ensure that the Company's receivables have an acceptable level of
credit risk and loss, (iv) managing the costs associated with expanding its
infrastructure, (v) identifying new lines of business and asset classes where
the opportunities for profitable operations are present as competition
intensifies in existing lines of business, (vi) hiring and retaining qualified
personnel and (vii) continuing to operate in competitive economic, regulatory
and judicial environments that are conducive to the Company's business
activities. In order to support the growth of its business, the Company has
added a significant number of new operating procedures and personnel. The
Company recently implemented new computer hardware and software systems that
require additional corresponding investments in training and education. The
Company's significant growth has placed substantial new and increased pressures
on the Company personnel. There can be no assurance that the addition of new
operating procedures and personnel, together with the Company's enhanced
computer system, will be sufficient to enable it to meet its current or future
operating needs. Changes in the Company's ability to obtain or maintain any or
all of these factors or to successfully manage its growth strategy could have a
material adverse effect on the Company's operations, profitability and growth.
RISKS ASSOCIATED WITH STRUCTURED SETTLEMENTS
Limited Operating Experience in Structured Settlements. The Company began
acquiring rights to receive payments from structured settlements in 1995.
Consequently, the Company has limited operating history in acquiring, servicing
and collecting structured settlement receivables. Therefore, the historical
performance of the Company's operations, including its underwriting and
servicing operations, may be of limited relevance in predicting future
performance. Any collections or other problems associated with the large number
of structured settlement receivables originated in the recent past will not
become apparent until sometime in the future. Consequently, the Company's
historical results of operations may be of limited relevance to an investor
seeking to predict the Company's future performance.
Restrictions on Assignability of Structured Settlement Receivables. Most
of the settlement agreements giving rise to the structured settlement payments
purchased by the Company contain anti-assignment clauses that expressly
proscribe the assignment of the scheduled payments due thereunder. Consequently,
there is no assurance that the assignment proscribed by an anti-assignment
clause would be effective against the obligor which, in the case of most
structured settlements, is a special purpose entity to which an insurance
company assigns its obligations to make payments under the settlement (the
'Assumption Party'). Although the Company believes that the modern trend in the
law would permit assignments to be effective against the Assumption Party
notwithstanding an express contractual provision to the contrary, the
traditional legal rule would hold that an express prohibition of assignment will
normally be enforced in accordance with its terms. In the majority of the
states, case law is insufficient to allow any determination as to how a court
would rule. Even in the jurisdictions which have adopted the modern trend,
however, an assignment in violation of an anti-assignment clause would give rise
to a breach of the underlying settlement contract, thereby permitting the
beneficiary of such clause to recover damages, if any could be proved, for
breach of contract. The presence of restrictions on the assignability of certain
receivables may make such receivables ineligible for the Company's
securitization program. Therefore, to the extent that courts permit the recovery
of damages from claimants, the Company's business could be materially adversely
affected. Furthermore, although the Company believes that reported case law
appears to allow it to maintain a successful action to enforce the assignment as
against the Assumption Party or the Annuity Provider (as defined herein) even in
the presence of an anti-assignment clause, there is no assurance that a court
would permit the Company to enforce the assignment. For a description of the
typical structure of a structured settlement, see 'Business -- Market Overview
- -- Structured Settlements.'
In addition, a Texas statute deems assignments of payment rights in
contravention of anti-assignment clauses void ab initio. Although the Company
does not seek to originate receivables from claimants who the Company believes
would be subject to the Texas statute, to the extent any of the
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<PAGE>
Company's receivables are subject to Texas law, the Company's ability to collect
delinquent payments may be adversely affected.
Because of the legal uncertainties associated with the effectiveness of an
assignment to the Company, the Company may not be able to enforce its rights to
the scheduled payments directly against the Assumption Party or the Annuity
Provider. Because the Company believes that the claimant has the right to
enforce the settlement contract and that the power to enforce that right can be
delegated, the Company has required that each claimant deliver to the Company a
power of attorney giving the Company the right to assert the claimant's rights
to such enforcement, subject to its potential liability for damages for breach
of contract as discussed above. The Company believes that the form of such power
of attorney gives the Company the power to sue to enforce its rights with
respect to the scheduled payments and that the power will not terminate upon the
bankruptcy of a claimant. If, however, a bankruptcy court were to rule that the
scheduled payments were part of the bankruptcy estate of the claimant, the
automatic stay imposed by Section 362 of the U.S. Bankruptcy Code of 1978, as
amended (the 'Bankruptcy Code'), would prevent the exercise of such power of
attorney. Although in such cases the Company would seek relief from automatic
stay from the bankruptcy court, there is no assurance that the court would rule
in the Company's favor. See '-- Insolvency Risks.'
Furthermore, the assignment by the claimant of its rights may violate the
terms of the annuity contract entered into between the Assumption Party and the
Annuity Provider. The assignment of the rights to the proceeds of an annuity
contract may in some states be governed by insurance statutes whose provisions
may be more restrictive than the general legal principles governing assignments
of payment rights. In addition, the assignment of the settlement payments may
result in the breach of certain other provisions in the underlying settlement
agreements. These restrictions on assignability may also have an adverse effect
on the Company's ability to complete securitizations of its receivables.
Risk of Tax Law Change. The use of structured settlements is largely the
result of the favorable federal income tax treatment of such transactions under
current law. See 'Business -- Market Overview -- Structured Settlements.' If
such treatment were changed adversely by a statutory change or a change in
interpretation, the dollar volume of structured settlements could be reduced
significantly which would also reduce the level of the Company's structured
settlement business. In addition, if there were a change in the Code that would
result in adverse tax consequences of the assignment of deferred payment
obligations, such change could have a material adverse effect on the Company's
business.
Risk of Diversion of Scheduled Payments. Approximately 2.7% of the
claimants from whom the Company has purchased structured settlement receivables
have diverted scheduled payments. Diverted scheduled payments are considered
defaults. Although the Company, as part of its collection efforts, has
instituted litigation to recover the diverted payments, the Company's ability to
enforce judgments entered against the claimants may be adversely affected by the
actions of Annuity Providers. In connection with its collection efforts, the
Company, upon obtaining a judgment against a claimant, serves garnishment
process on the applicable Annuity Provider in order to enforce the judgment and
preclude the claimant from receiving and diverting additional scheduled
payments. Certain garnishee Annuity Providers have filed pleadings challenging
the Company's garnishment process. The responsive pleadings of such Annuity
Providers have included allegations and legal arguments to the effect that: (i)
contractual provisions in the underlying settlement agreements and annuity
contracts prohibit assignment, encumbrance, or garnishment of the scheduled
payments thereunder; (ii) the settlement purchase agreements entered into by the
Company and the claimant are unenforceable because of fraud or prohibitions on
assignment and offer of scheduled payments set forth in the settlement
agreements and/or the annuity contracts; and/or (iii) the scheduled payments are
exempt from garnishment under certain state laws. Certain states have enacted
statutes that prohibit garnishment of payments under specified arrangements such
as insurance contracts and workers' compensation awards. Although collections
under the deferred payment obligations originated by the Company have not to
date been adversely affected by such statutes, there is no assurance that such
statutes will not have a material adverse effect on the Company's business in
future periods.
Although the Company has filed pleadings contesting all of the material
allegations and defenses asserted by such garnishee Annuity Providers and is
presently engaged in settlement discussions with
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substantially all such garnishee Annuity Providers with whom the Company is
currently engaged in litigation, to the extent that any such Annuity Provider is
successful in contesting the Company's garnishment process, the collectibility
of any diverted scheduled payments and the value of the Company's owned or
managed receivables may be materially adversely impacted. Any impairment of the
collectibility of the managed receivables may also constitute an event of
default under the documents governing any applicable securitization transaction.
See 'Business -- Legal Proceedings.'
Insolvency Risks. The Company's rights to scheduled payments in structured
settlement transactions will be adversely affected if any of the claimant, the
Assumption Party or the Annuity Provider becomes insolvent and/or becomes a
debtor in a case under the Bankruptcy Code.
Risks of Insolvency of the Claimant. The ability of the Company to
collect scheduled payments from the Annuity Provider may be adversely
affected by a number of risks related to the possible insolvency of the
claimant, including without limitation the following:
o Risk of Scheduled Payments Being Deemed a Part of the Claimant's
Estate. The Company believes that, if a claimant were to become a
debtor in a case under the Bankruptcy Code, a court would hold that the
scheduled payments transferred by the claimant under the applicable
settlement purchase agreement would not constitute property of the
estate of the claimant under the Bankruptcy Code. If, however, a
trustee in bankruptcy or other receiver were to assert a contrary
position, such as by requiring the Company (or any securitization
vehicle) to establish its right to those payments under Federal
bankruptcy law or by persuading courts to recharacterize the
transaction as secured loans, such result could have a material adverse
effect on the Company's business. Such risks may be greater in cases
where anti-assignment clauses are enforced. See '-- Restrictions on
Assignment of Structured Settlements.'
o Risk of Avoidance of Assignment by Trustee. If the scheduled payments
are deemed to be property of the bankruptcy estate of the claimant, the
trustee may be able to avoid assignment of the receivable to the
Company. Courts in the jurisdictions that have ruled on such matters
are not in agreement as to the ability of the trustee to avoid the
transfer when the Assumption Party has not been notified of the
assignment. The Company is aware that of the states that have
considered such issues, judicial decisions of only four (each
hereinafter referred to as a 'Notice State') conclude that a subsequent
creditor takes priority over an assignee of a payment right who did not
notify the obligor of such assignment. Although the Company purchases
receivables in Notice States, it has not securitized receivables
purchased from residents of the Notice States where it has not given
proper notice. To the extent that other states in which claimants
reside from whom the Company originates receivables adopt the rule of
the Notice States, the Company's ability to collect or securitize its
receivables may be adversely affected.
Risks of Insolvency of Assumption Party and Annuity Provider. The
Company believes that the vast majority of its structured settlement
receivables emanate from qualified assignments which require that the
Assumption Parties fund their respective obligations under the applicable
settlement agreements with an annuity contract covering the payments
required to be made under such settlement agreements. Pursuant to each
qualified assignment and the related annuity contract, the obligation to
make the scheduled payments in respect of a structured settlement continues
to be the responsibility of the Assumption Party, but an Assumption Party's
ability to make such payments is typically dependent on the ability of the
Annuity Provider to fund such payments under the related annuity contract.
Although the large majority of the Company's structured settlement
receivables are funded with annuity contracts issued by Annuity Providers
rated 'A' or better by A.M. Best, there can be no assurance that such
Annuity Providers will satisfy their obligations under the annuity
contracts when due.
Furthermore, a general creditor or representative of the creditors
(such as a trustee in bankruptcy) of an Assumption Party could make the
argument that the payments due from the Annuity Provider are the property
of the estate of such Assumption Party (as the named owner thereof). There
is very little judicial precedent addressing this issue in the context of
annuity contracts. To the extent that a court would accept this argument,
the resulting delays or reductions
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in payments on the Company's receivables could have a material adverse
effect on the Company's financial condition and results of operations.
Relationships with Annuity Providers. The ability of the Company to
collect payments under structured settlement transactions depends on the Annuity
Providers not successfully challenging the claimant's right to direct the
payment to be sent to lockboxes or bank accounts controlled by the Company.
Although the Company believes that the claimant is legally entitled to change
the address of payment and the majority of Annuity Providers have changed the
address of payment when requested to do so by claimants, certain Annuity
Providers have resisted, and continue to resist, sending payments to Company
controlled lockboxes and bank accounts. Successful challenges by Annuity
Providers in this regard or any effort by Annuity Providers to resist
redirecting payments to the Company could have a material adverse affect on the
Company's business. See 'Business -- Legal Proceedings.'
REGULATION AND LEGISLATION. There is currently no significant government
regulation of the Company's current business, except in Illinois, where the
legislature enacted a law that takes effect on January 1, 1998 and requires that
any assignment of a structured settlement be approved by a court having
jurisdiction over the underlying claim and prohibits an Annuity Provider from
mailing payments to any party other than the claimant without such court
approval. The Illinois law does not currently specify the standards on which
courts would grant approval of assignments or the process by which such approval
should be sought. Accordingly, although the Company expects to gain court
approval for any structured settlement receivables purchased in Illinois, there
is no assurance that such approvals will be granted. As of June 30, 1997, 4.3%
of the Company's serviced receivables consisted of receivables relating to
structured settlements originated in Illinois. Also, there is no assurance that
other states will not enact similar statutes or impose other forms of regulation
in the future or that the assignment of certain receivables originated outside
of Illinois may not be subject to the restrictions in the Illinois law.
Consequently, the Company's structured settlements business may become subject
to similar or other government regulation. The nature and impact of any such
future regulation cannot be determined. There is no assurance that any such
regulation will not have a material adverse effect upon the Company's financial
condition and results of operations.
Every state has statutes that regulate activities related to 'conducting an
insurance business.' Although the Company does not believe that it is conducting
an 'insurance business' and is not aware of any judicial authority in favor of
such interpretation, there can be no assurance that some or all of these
statutes will not be interpreted in the future to preclude the Company's
purchase of rights under annuity contracts or other insurance products in that
state. In addition, federal law and the laws of each state regulate the
activities of lending institutions. Although the Company believes that its
originations of receivables are true sales of such assets and thus are not
lending transactions, there is no assurance that laws that regulate lending
activities may not be interpreted in the future as applying to all or any aspect
of the Company's business activities. The application of lending regulations,
such as usury limits, disclosure requirements and capital requirements, could
have a material adverse effect on the Company's business.
LOSS OF SERVICING RIGHTS AND SUSPENSION OF FUTURE SERVICING CASH
FLOWS. The Company is entitled to receive servicing income only while it acts
as servicer for securitized receivables. Any loss of the servicing rights would
have a material adverse effect on the Company's operations and financial
condition. The Company's right to act as servicer can be terminated under
certain circumstances described in the purchase and contribution agreement or
the pooling and servicing agreement applicable to each securitization. The
Company's loss of the servicing rights under any purchase and contribution
agreement or the pooling and servicing agreement or the occurrence of a trigger
event that would block release of future servicing cash flows from the servicing
account would have a material adverse effect on the Company's financial
condition and results of operations.
RISKS RELATING TO PURCHASES OF NEW CLASSES OF ASSETS. The Company plans to
expand the scope of its business by investing in additional classes of assets on
a trial basis prior to making large scale commitments to purchases of such
assets. See 'Business -- Strategy.' As a result, investors in the Offering will
not know into what new areas, if any, the Company will expand its business and,
accordingly, will have to rely on management's determinations in this regard.
Any such new areas may involve a number of financial, competitive, regulatory
and other risks. As result, there is no assurance
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that the Company will be able to expand the scope of its business or, if it
does, that it will be able to do so on a long-term profitable basis. Any
unsuccessful attempt in this regard may have a material adverse effect on the
Company's financial condition and results of operations.
RISKS RELATING TO ENTRY INTO MARKET FOR SELLER-FINANCED MORTGAGES. The
Company has recently hired a group of brokers to assist it in investigating the
market for seller-financed mortgages. If the Company expands into this market as
a principal, the Company's business could be affected by new risks including:
(i) potentially weak credit profiles of some obligors; (ii) lack of uniform
documentation of the transactions; (iii) prepayment risks; and (iv) factors
affecting the value of real estate as collateral and the state of the economy
generally. Any failure of the Company to manage these risks successfully could
have a material adverse impact on its future financial condition and results of
operations. See 'Business -- Market Overview -- Other Markets.'
RISKS RELATING TO INVESTMENT COMPANY ACT REGISTRATION. A company is
generally required to register as an investment company under the Investment
Company Act of 1940, as amended (the 'Investment Company Act'), if it owns
'investment securities,' as defined under the Investment Company Act, having a
value exceeding 40% of the value of the company's total assets (exclusive of
government securities and cash items) on an unconsolidated basis (the '40%
Test'). There is no direct authority on whether any or all of the various types
of rights that the Company acquires as part of its business constitute
investment securities for purposes of the 40% Test. Although the Company
believes that none of such rights constitutes investment securities for such
purposes, there is no assurance that the Securities and Exchange Commission (the
'Commission') or courts will not reach a contrary conclusion with respect to
some or all of such rights. Registration as an investment company under the
Investment Company Act would result in a number of restrictions and requirements
that would make it impracticable for the Company to operate as currently
contemplated. Accordingly, the Company will have to monitor the mix of its
current and future investments so that it does not become subject to the
requirement to register as an investment company as a result of the 40% Test or
otherwise.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a
significant degree upon the continuing contributions of its key management
personnel including James D. Delaney, its President and Chief Executive Officer,
Gary Veloric, its Chairman, and Michael B. Goodman, its Executive Vice President
and Chief Operating Officer (collectively, 'the Principals'). The Company
currently has employment agreements with each of the Principals for a three-year
term. The loss of these or other key management or technical personnel could
have a material adverse effect on the Company's financial condition and results
of operations. The Company does not intend to obtain key man insurance with
respect to any of its executives.
CONTROL BY EXISTING STOCKHOLDERS AND POSSIBLE EFFECT OF ANTI-TAKEOVER
PROVISIONS. The Principals, together with Alpha Nikelberry, Edward S. Stone and
ING (collectively, the 'Existing Stockholders'), currently own 100% of the
issued and outstanding capital stock of the Company. All of the Existing
Stockholders are participating in the Offering as Selling Stockholders (in this
context, the 'Selling Stockholders'). After the Offering, the Existing
Stockholders are expected to own approximately 67.9% of the outstanding Common
Stock. As a result, the Existing Stockholders would effectively be able to
control all matters requiring approval by the Company's stockholders, including
the election of directors. See 'Principal and Selling Stockholders' and 'Shares
Eligible for Future Sale.' In addition, the Company is subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law,
which prohibit the Company from engaging in a 'business combination' with an
'interested stockholder' for a period of three years after the date of the
transaction which such stockholder became an 'interested stockholder' unless the
business combination is approved in a prescribed manner. These provisions,
together with other provisions in the Company's Certificate of Incorporation and
By-laws, may discourage acquisition bids for the Company by persons unrelated to
certain existing stockholders. The effect of Existing Stockholders' stock
ownership and these provisions may be to limit the price that investors might be
willing to pay in the future for shares of the Common Stock or prevent or delay
a merger, takeover, or other change in control of the Company and thus
discourage attempts to acquire the Company. In addition, the Company's Board of
Directors has the authority to issue up to 5,000,000 shares of Preferred Stock
(as defined herein) and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may
16
<PAGE>
be issued in the future. The issuance of Preferred Stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. The Company
has no present plan to issue any shares of Preferred Stock. The Company's
Certificate of Incorporation and By-laws contain other provisions, such as a
classified Board of Directors, notice requirements for stockholders and
limitations on the stockholders' ability to remove directors or to present
proposals to the stockholders for a vote, all of which may have the further
effect of making it more difficult for a third party to gain control or to
acquire the Company. See 'Description of Capital Stock.'
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE. Prior to the
Offering, there has been no public market for the Common Stock, and there can be
no assurance that an active trading market will develop or, if developed, be
sustained after the Offering. The initial public offering price will be
determined through negotiations between the Company and the representatives of
the Underwriters and may bear no relationship to the price at which the Common
Stock will trade after the Offering. See 'Underwriting.' The market price of the
Common Stock may be volatile and may be significantly affected by factors such
as actual or anticipated fluctuations in the Company's operating results,
announcements of new lines of business by the Company or its competitors,
developments with respect to conditions and trends in the Company's lines of
business or in the financial services industry as a whole, governmental
regulation, changes in estimates by securities analysts of the Company's or its
competitors' future financial performance, general market conditions and other
factors, many of which are beyond the Company's control. In addition, the stock
market has from time to time experienced significant price and volume
fluctuations that have adversely affected the market prices of securities of
companies irrespective of such companies' operating performances.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of the
Common Stock in the public market following the Offering could adversely affect
the market price of the Common Stock. Upon the completion of the Offering, the
Company will have 16,466,667 shares of Common Stock outstanding. Of these
shares, the 5,286,738 shares of Common Stock sold in the Offering will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the 'Securities Act'). The remaining 11,179,929 shares of
Common Stock outstanding as of the date of this Prospectus are 'restricted
securities' as defined by Rule 144 under the Securities Act ('Rule 144').
Upon the completion of the Offering, there will be 650,000 shares of Common
Stock issuable upon exercise of options under the 1997 Stock Incentive Plan. The
options will become exercisable in four equal annual installments beginning on
the first anniversary of the completion of the Offering. The Company intends to
file a registration statement on Form S-8 covering the shares of Common Stock
issuable upon exercise of options within one year from the date of this
Prospectus. The shares registered under such registration statement will be
available for resale in the open market upon the exercise of options, subject to
Rule 144 volume limitations applicable to affiliates. See 'Management -- 1997
Stock Incentive Plan.'
The Company, the Selling Stockholders, directors, executive officers and
certain other securityholders of the Company have agreed that they will not,
directly or indirectly, offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, pledge, grant of any option to
purchase or other sale or disposition) any shares of Common Stock, or of equity
securities of the Company substantially similar thereto or any other securities
convertible into, or exercisable or exchangeable for, any shares of Common Stock
or such similar securities for a period of 180 days after the date of this
Prospectus, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, except that during such period,
shares of Common Stock may be issued upon the exercise of outstanding stock
options and the Company may issue employee stock options which are exercisable
after the 180th day after the date of this Prospectus. Prudential Securities
Incorporated, on behalf of the Underwriters, may, in its sole discretion at any
time and without prior notice, release all or any portion of the shares of
Common Stock subject to the agreement.
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of shares of Common Stock
in the Offering will experience an immediate and substantial dilution of
approximately $12.16 per share, assuming an initial public offering price of
$15.00 (the mid-point of the price range set forth on the cover page of this
Prospectus) in the pro forma net tangible book value per share of Common Stock
from the initial public offering price. See 'Dilution.'
17
<PAGE>
THE REORGANIZATION AND CHANGE IN TAX STATUS
On the date of the Reorganization, pursuant to the terms of a contribution
agreement (the 'Contribution Agreement'), the Principals will contribute all of
their capital stock in JGW, SSC Management and the General Partners and the
Existing Stockholders will contribute 100% of their interests in the
Partnerships to the Company, in exchange for a number of shares of Common Stock
determinable pursuant to a formula set forth in the Contribution Agreement. The
Reorganization will occur immediately prior to the completion of the Offering.
The Common Stock issued pursuant to the Contribution Agreement will constitute
all of the outstanding stock of the Company prior to the completion of the
Offering. The total number of shares distributable to the Existing Stockholders
in the Reorganization will be 12,466,367.
As a result of the Reorganization, JGW and the General Partners, each of
which will become a wholly owned subsidiary of the Company, will be fully
subject to federal and state income taxes, and the Company will record a net
deferred tax liability on its balance sheet. From their formation until the
Reorganization, JGW and the General Partners have been treated as S corporations
for federal income tax purposes and for certain state corporate income tax
purposes. As a result, the historical earnings of JGW and the General Partners
have been taxed directly to their respective stockholders at their individual
federal and state income tax rates. The amount of the deferred tax liability to
be recorded as of the date of termination of the S corporation status will
result principally from temporary differences between accounting and tax
treatment of income earned from finance receivables and Gain on Sale. The net
deferred tax liability will be recorded as a non-cash charge to the provision
for taxes in the quarter in which the Offering is completed. If the S
corporation status of JGW and the General Partners had been terminated as of
June 30, 1997, the amount of the deferred tax liability would have been
approximately $6.2 million. See 'Risk Factors--Possible Loss in Quarter;
Variable Quarterly Earnings;' 'Capitalization' and 'Selected Combined Financial
Data.'
Since inception, JGW and the General Partners have paid approximately 92%
of their estimated taxable income, including an estimate for the six months
ended June 30, 1997 to the Principals as S corporation distributions
(approximately $1.2 million was distributed from January 8, 1991 through June
30, 1997). Such distributions were paid to the Principals as distributions of a
portion of JGW's and the General Partner's earnings and to pay the Principals'
taxes. In September 1997, JGW made a distribution of $70,000. From June 30, 1997
through October 8, 1997, SSC distributed $2.1 million to the Existing
Stockholders and intends to distribute an additional $2.0 million to the
Existing Stockholders in October 1997. Since inception through June 30, 1997,
the Partnerships paid approximately $4.4 million to the Existing Stockholders.
Prior to the Reorganization, JGW will distribute an estimated $1.2 million cash
payment to the Principals (the 'Tax Distribution'). The Tax Distribution
represents the sum of approximately (i) $298,000 in taxes payable at the
applicable statutory rate by the Principals on the estimated net earnings of JGW
and the General Partners for the period from January 1, 1997 to November 30,
1997 and (ii) $939,000 in taxes payable at the applicable statutory rate by the
Principals on the estimated net profits of the Partnerships from January 1, 1997
to November 30, 1997.
The Company, JGW, the General Partners and the Existing Stockholders have
entered into a tax indemnification agreement (the 'Tax Agreement') relating to
their respective income tax liabilities. Because JGW and the General Partners
will be fully subject to corporate income taxation after the termination of
their S corporation status, the reallocation of income and deductions between
the period during which JGW and the General Partners were treated as S
corporations and the period during which the Company, JGW and the General
Partners will be subject to corporate income taxation may increase the taxable
income of one party while decreasing that of another party. Accordingly, the Tax
Agreement is intended to assure that taxes are borne by the Company on the one
hand and the Existing Stockholders on the other only to the extent that such
parties received the related income. The Tax Agreement generally provides that
the Company will indemnify the Existing Stockholders against any liabilities of
the Company after the Reorganization, and the Existing Stockholders will
indemnify the Company against any tax liabilities of the Existing Stockholders
prior to the date of the Reorganization (in each case such indemnified amounts
include interest and penalties and related costs and expenses).
18
<PAGE>
The Company will also indemnify the Existing Stockholders for all taxes imposed
upon them as the result of their receipt of an indemnification payment under the
Tax Agreement. Any payment made by the Company to the Existing Stockholders
pursuant to the Tax Agreement may be considered by the Internal Revenue Service
or state taxing authorities to be non-deductible by the Company for income tax
purposes. The Tax Agreement also provides that the Company will reimburse the
Existing Stockholders for any taxes that result from the disallowance of
deductions taken by the Existing Stockholders, the result of which is to permit
the Company, JGW or the General Partners to take such disallowed deductions
after completion of the Reorganization. None of the parties' obligations under
the Tax Agreement are secured, and, as such, there can be no assurance that the
Existing Stockholders or the Company will have funds available to make any
payments which may become due under the Tax Agreement. See 'Certain
Relationships and Related Party Transactions.'
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of 4,000,000 shares of Common
Stock offered by the Company hereby are estimated to be $54.8 million, assuming
an initial public offering price of $15.00 per share (the mid-point of the price
range set forth on the cover page of this Prospectus) and after deducting
underwriting discounts and commissions and estimated offering expenses. The
Company will not receive any of the proceeds from the shares of Common Stock
sold by the Selling Stockholders.
The Company anticipates applying approximately $1.2 million to fund the
cash Tax Distribution to the Principals and to pay down the outstanding amounts
on the Credit Facilities that were incurred to fund the Company's originations
of structured settlements and other deferred payment obligations. At October 3,
1997, $28.3 million was outstanding on the SSC Facility, which bore interest at
a rate of 9.15% per annum on that date, and $12.3 million was outstanding on the
MFC Facility, which bore interest at a rate of 7.15% per annum on that date. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.'
The remainder of the net proceeds will be added to working capital to be
used for general corporate purposes. Pending such uses, the net proceeds will be
invested in interest-bearing instruments.
DISTRIBUTIONS AND DIVIDEND POLICY
Prior to the Reorganization, the Partnerships distributed cash to their
partners on a periodic basis, including the Principals. MFC paid $793,000,
$928,000 and $0 in distributions to its partners in 1995, 1996 and the six
months ended June 30, 1997, respectively, and SSC paid $0, $702,000 and $2.0
million in distributions to its partners in 1995, 1996 and the six months ended
June 30, 1997, respectively. In addition, JGW and the General Partners made S
corporation distributions to their shareholders of $22,000, $285,000 and
$793,000 in 1995, 1996 and the six months ended June 30, 1997, respectively.
During the period from June 30, 1997 until October 8, 1997, JGW, SSC and MFC
distributed $70,000, $2.01 million and $221,000 to their partners, respectively.
Also, SSC intends to distribute an additional $2.0 million to the Existing
Stockholders in October 1997.
The Company, as a newly formed entity, has not paid or declared cash
dividends on its capital stock. The Company currently expects it will retain its
future earnings for use in the operation and expansion of its business and does
not anticipate paying or declaring any cash dividends in the foreseeable future.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1997 (i) on a historical combined basis, (ii) on a pro forma combined basis
assuming the Reorganization, the payment of the Tax Distribution and the
recording of a deferred tax liability, and (iii) on a pro forma combined basis
as adjusted to reflect the sale of the 4,000,000 shares of Common Stock offered
by the Company at the assumed initial public offering price of $15.00 per share
(the mid-point of the price range set forth on the cover page of this
Prospectus) and the application of the estimated net proceeds therefrom.
The table should be read in conjunction with the Combined Financial
Statements of the J.G. Wentworth Affiliated Companies and the Notes thereto
included elsewhere herein. See 'The Reorganization and Change in Tax Status,'
'Use of Proceeds' and 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.'
JUNE 30, 1997
-------------------------------------
PRO
ACTUAL FORMA(1) AS ADJUSTED(2)
------- -------- --------------
(DOLLARS IN THOUSANDS)
Debt:
Notes payable, banks.......... $75,165 $ 75,165 $ 21,571
Stockholders' equity:
Preferred Stock $.01 par
value, 5,000,000 shares
authorized and no shares
outstanding.............. -- -- --
Common stock, $.01 par
value, 30,000,000 shares
authorized, 12,466,667
outstanding pro-forma and
16,466,667 shares
outstanding, as
adjusted................. 2 125 165
Additional paid-in capital.... 261 (3,960) 50,800
Retained earnings (deficit)... 1,939 (4,261) (4,261)
Partners capital (deficit)
accounts.................... (2,861) -- --
Due from shareholders or
partners.................... (31) -- --
------- -------- --------------
Total equity (deficit)... (690) (8,096) 46,704
------- -------- --------------
Total capitalization..... $74,475 $ 67,069 $ 68,275
------- -------- --------------
------- -------- --------------
- ------------------
(1) Gives pro forma effect to (i) the Tax Distribution to the Principals in the
amount of $1.2 million and (ii) the creation of a net deferred tax liability
in the amount of $6.2 million arising in connection with the Company's
conversion to a C corporation. See 'The Reorganization and Change in Tax
Status' and Notes 2 and 3 to the Combined Financial Statements of the J.G.
Wentworth Affiliated Companies.
(2) Gives pro forma effect to the Reorganization and issuance and sale by the
Company of 4,000,000 shares of Common Stock offered hereby at the assumed
initial public offering price of $15.00 per share (the mid-point of the
price range set forth on the cover page of this Prospectus) and the
application of the net proceeds therefrom, including an assumed $54.8
million to be paid to reduce amounts outstanding under the Credit
Facilities. See 'Use of Proceeds' and Notes 1 and 2 to the Combined
Financial Statements of the J.G. Wentworth Affiliated Companies.
21
<PAGE>
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the net tangible book value of their Common Stock
from the initial public offering price. The pro forma negative net tangible book
value of the Company as of June 30, 1997 was $(8.1) million or $(0.66) per
share. Pro forma negative net tangible book value per share is determined by
dividing the net negative tangible book value of the Company on a pro forma
basis (total tangible assets less total liabilities) by the number of shares of
Common Stock outstanding on a pro forma basis, after giving effect to the
Reorganization. After giving effect to the sale by the Company of 4,000,000
shares of Common Stock offered by the Company at an assumed initial public
offering price of $15.00 per share (the mid-point of the price range set forth
on the cover page of this Prospectus), after deducting underwriting discounts
and commissions and estimated offering expenses, the pro forma net tangible book
value of the Company as of June 30, 1997 would have been $46.7 million or $2.84
per share. This represents an immediate increase in pro forma net tangible book
value of $3.50 per share to the Existing Stockholders and an immediate and
substantial dilution in pro forma net tangible book value of $12.16 per share to
new investors purchasing Common Stock in the Offering. The following table
illustrates this per share dilution:
Initial public offering price per share at
June 30, 1997.............................. $ 15.00
Negative net tangible book value per
share at June 30, 1997............ $ (0.06)
Decrease attributable to Tax
Distribution...................... (0.10)
Decrease due to deferred tax
liability......................... (0.50)
-------
(0.66)
Increase in net tangible book value
per share attributable to new
public investors.................. 3.50
Pro forma net tangible book value per share
after the Offering......................... 2.84
-------
Dilution per share to new public investors... $ 12.16
-------
-------
- ------------------
The following table summarizes, on a pro forma basis (as described above)
as of June 30, 1997, the number of shares of Common Stock purchased from the
Company, the total consideration paid to the Company and the average price per
share paid by the Existing Stockholders (which for the purposes of this table is
assumed to be zero) and by the new investors purchasing shares of Common Stock
in the Offering, at an assumed initial public offering price of $15.00 per share
(the mid-point of the price range set forth on the cover page of this
Prospectus) and before deducting underwriting discounts and commissions and
estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders... 12,466,667 75.7% $ -- --% $ --
New Investors........... 4,000,000 24.3% 60,000,000 100% 15.00
Total................... 16,466,667 100.0% $60,000,000 100% $ 3.64
------- ----------- -------
------- ----------- -------
</TABLE>
The foregoing tables assume that the Underwriters' over-allotment option to
purchase 793,011 shares of Common Stock to be granted prior to the completion of
the Offering with an exercise price per share equal to the initial public
offering price will not be exercised. See 'Management -- 1997 Stock Incentive
Plan' and 'Underwriting.'
22
<PAGE>
SELECTED COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table contains certain combined financial data of the Company
and is qualified by the more detailed Combined Financial Statements of the J.G.
Wentworth Affiliated Companies and Notes thereto included elsewhere in this
Prospectus. The combined statement of operations data for the years ended
December 31, 1994, 1995, and 1996 and the combined balance sheet data as of
December 31, 1995 and 1996 have been derived from the Combined Financial
Statements of the J.G. Wentworth Affiliated Companies which have been audited by
Coopers & Lybrand L.L.P., independent accountants, as indicated in their report
included elsewhere in this Prospectus. The selected combined statement of
operations data for the years ended December 31, 1992 and 1993 and for the six
months ended June 30, 1996 and 1997 and the combined balance sheet data as of
December 31, 1992, 1993 and 1994, and June 30, 1997 of the J.G. Wentworth
Affiliated Companies have been derived from unaudited combined financial
statements. The combined unaudited financial statements, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the financial condition and
results of operations for such periods. The results of operations for the six
months ended June 30, 1996 and June 30, 1997 are not necessarily indicative of
the results that may be expected for any other interim period or for the entire
year. The selected combined financial data set forth below should be read in
conjunction with 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' and all of the Combined Financial Statements of the
J.G. Wentworth Affiliated Companies and Notes thereto included elsewhere in this
Prospectus. The selected pro forma combined financial data should be read in
conjunction with Note 1 to the Combined Financial Statements of the J.G.
Wentworth Affiliated Companies included elsewhere in this Prospectus. The
following table also includes certain unaudited pro forma combined statement of
operations data for the year ended December 31, 1996 and the six months ended
June 30, 1997 which give effect to the Reorganization, the Offering and certain
other adjustments as if they had occurred on June 30, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Interest income............. $ -- $ 389 $ 2,755 $ 8,560 $ 10,426 $ 5,601 $ 8,743
Gain on sale of
receivables............... -- -- -- 268 576 -- 11,419
Other income................ 249 1,008 417 894 785 319 386
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues............ 249 1,397 3,172 9,722 11,787 5,920 20,548
----------- ----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Interest expense............ -- 163 1,541 4,995 6,380 2,820 4,783
Salaries and benefits....... 42 453 686 1,509 1,992 697 2,384
Marketing expenses.......... -- 45 148 224 3,606 1,010 3,682
Other operating expenses.... 214 661 873 1,350 3,384 2,588 1,800
Provision for credit
losses.................... -- -- -- -- 500 165 1,630
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses............ 256 1,322 3,248 8,078 15,862 7,280 14,279
Income (loss) before
extraordinary loss.......... (7) 75 (76) 1,644 (4,075) (1,360) 6,269
Extraordinary loss............ -- -- -- 876 -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ (7) $ 75 $ (76) $ 768 $ (4,075) $(1,360) $ 6,269
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
UNAUDITED PRO FORMA
INFORMATION:
Pro forma (benefit) provision
for income taxes (1)........ $ (1,508) $ 2,320
----------- -----------
Pro forma net income (loss)
(1)......................... $ (2,567) $ 3,949
----------- -----------
----------- -----------
PER SHARE DATA:
Pro forma net income (loss)
per share (1)(2) ........... $ (0.20) $ 0.31
----------- -----------
----------- -----------
Pro forma number of shares
outstanding (1)(2).......... 12,549,134 12,549,134
----------- -----------
----------- -----------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------------------------------------------------- -----------
1992 1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Finance receivables...... $ 12 $ 3,221 $33,778 $60,104 $90,930 $ 71,757
Retained interests....... -- -- -- -- -- 5,219
Servicing asset.......... -- -- -- -- -- 890
Total assets............. 246 4,629 35,270 62,987 91,975 81,445
Notes payable, banks..... -- 3,443 32,840 56,907 91,858 75,165
Total liabilities........ 4 3,925 34,642 61,943 96,378 82,135
Total equity (deficit)... 242 704 628 1,044 (4,403) (690)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
UNAUDITED OPERATING DATA:
Portfolio Owned and
Serviced:
Maturity value......... $ 14 $3,839 $38,799 $74,820 $166,061 $82,377 $245,337
Carrying value......... $ 12 $3,221 $33,778 $60,104 $ 90,930 $71,255 $142,394
Weighted average yield... 29.7 % 26.2 % 18.0% 14.0% 20.2% 17.4% 22.4%
Allowance for credit
losses................. -- -- -- -- $ 500 $ 165 $ 1,630
Allowance for credit
losses as a percentage
of portfolio owned..... -- -- -- -- 0.8% 0.2% 2.3%
Net charge-offs.......... -- -- -- -- -- -- $ 610
Net charge-offs as a
percentage of average
portfolio owned........ -- -- -- -- -- -- 0.6%
Structured Settlements:
Total number of
receivables
originated........... -- -- -- 136 2,197 577 2,219
Cost of receivables
originated........... -- -- -- $ 4,916 $ 56,004 $17,762 $ 48,889
Maturity value of
receivables
originated........... -- -- -- $13,674 $125,697 $41,242 $103,239
Weighted average
yield................ -- -- -- 20.5% 22.3% 20.7% 23.2%
Weighted average
maturity (in
years)............... -- -- -- 9.1 6.5 7.6 6.1
Total number of
defaulted
receivables.......... -- -- -- 2 34 6 71
Total number of
defaulted payments... -- -- -- 4 146 33 321
Carrying amount of
defaulted payments... -- -- -- $ 7 $ 200 $ 39 $ 334
Carrying value of
defaulted
receivables.......... -- -- -- $ 40 $ 1,313 $ 151 $ 3,280
Percentage of defaulted
receivables.......... -- -- -- 0.8% 2.2% 0.7% 3.1%
Net charge-offs........ -- -- -- -- -- -- $ 610
Net charge-offs as a
percentage of
portfolio owned...... -- -- -- -- -- -- 0.7%
Other Deferred Payment
Obligations:
Total number of
receivables
originated........... 1 475 2,637 4,610 1,409 919 354
Cost of receivables
originated........... $ 12 $1,427 $31,854 $53,213 $ 17,052 $12,280 $ 4,192
Maturity value of
receivables
originated........... $ 14 $1,871 $38,745 $62,851 $ 19,738 $14,217 $ 4,905
Weighted average
yield................ 29.7 % 26.2 % 18.1% 14.1% 13.2% 12.7% 13.5%
Weighted average
maturity (in
years)............... 0.5 1.1 1.2 1.3 1.2 1.3 1.2
Total number of
delinquent
receivables.......... -- -- -- 13 20 16 10
Carrying value of
delinquent
receivables.......... -- -- -- 133 197 127 63
Delinquent receivables
as a percentage of
average portfolio.... -- -- -- 0.3% 0.7% 0.3% 0.4%
Net charge-offs........ -- -- -- -- -- -- --
</TABLE>
- ------------------
(1) Prior to the Reorganization, JGW and the General Partners were treated as S
corporations for state and federal income tax purposes. The pro forma
presentation reflects the provision for income taxes as if JGW and the
General Partners had always been C corporations and the activities of the
Partnerships had always been taxed as if owned by the Company at an assumed
effective tax rate of 37%.
(2) Pro forma net income (loss) per share is computed based on 12,466,667 shares
of Comon Stock outstanding before the Offering and gives effect to the
Reorganization and reflects the 82,467 shares of Common Stock which would
need to be issued to generate the cash necessary to fund the Tax
Distribution at an assumed initial public offering price of $15.00 per share
(the mid-point of the price range set forth on the cover page of this
Prospectus). See 'The Reorganization and Change in Tax Status.'
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Combined
Financial Statements of the J.G. Wentworth Affiliated Companies and the Notes
thereto included elsewhere in this Prospectus.
GENERAL
Overview. The Company is a specialty finance company that originates,
securitizes and services rights to receive payments from structured settlements
and other deferred payment obligations. In 1991, the Company was formed as a
merchant banking firm to pursue healthcare related transactions. It entered the
business of purchasing deferred payment obligations with the purchase of
deferred auto insurance settlement obligations of the JUA in 1992, and of MTF
and other entities in 1994. Because neither the JUA nor MTF currently defer
significant amounts of new settlement obligations, the Company's acquisition of
these claims has decreased and is not expected to increase in the near future.
In August 1995, the Company commenced the purchase of structured settlements
from private litigation claimants. This has been the Company's primary business
since 1995. The Company generates revenues from interest income earned on these
originations and the ultimate disposition of these obligations. The Company
continued to engage in the merchant banking business and earned brokerage fees
and commissions which are included in other income in the combined financial
statements for periods prior to October 1996. In October 1996, the investment
banking business was split into separate entities which are not included in the
combined financial statements subsequent to that date. The new entities formed
in October 1996 are owned by Messrs. Delaney and Veloric and it is their intent
to dispose of their entire investment in these entities prior to the completion
of the Offering.
To date, the Company has not experienced any significant seasonal
variations in its acquisitions of receivables.
Recent Growth. The Company has experienced significant growth particularly
since August 1995. Management believes that this growth is primarily
attributable to (i) development of its originations staff and systems; (ii) the
development of a national brand identity through television and other
advertising; (iii) strong relationships with referral sources; (iv) the
Company's further penetration into its established markets; and (v) adequate
funding sources from credit facilities and securitizations to finance
originations.
There can be no assurance that the Company will continue to grow
significantly in the future. Future growth may be limited by, among other
things, the Company's need for continued funding sources, access to capital
markets, ability to attract and retain qualified personnel, fluctuations in
interest rates, competition from existing competitors and new market entrants,
changes in regulation and legislation and other market conditions.
The Company's recent and rapid growth may have a somewhat distortive impact
on certain of the Company's ratios and financial statistics and may make
period-to-period comparisons less meaningful. In light of the Company's growth,
the Company's historical earnings may be of limited relevance in predicting
future performance. Furthermore, the Company's recent earnings and other
financial results may not be indicative of the Company's results in future
periods. Any credit or other problems associated with the large number of
receivables acquired in the recent past may not become apparent until sometime
in the future. See 'Risk Factors -- Ability of the Company to Continue Growth
Strategy' and '-- Risks Associated with Structured Settlements -- Limited
Operating Experience in Structured Settlements.'
ACCOUNTING CONSIDERATIONS
Revenue Recognition. The Company purchases deferred payment obligations at
an amount less than maturity value. The difference between the purchase price
and the maturity value is recorded as unearned income. Unearned income is
recognized as interest income on the interest method over the life of the
related deferred payment obligation.
25
<PAGE>
The Company, in accordance with a Statement of Financial Accounting
Standards No. 91, Accounting for Non-refundable Fees and Costs Associated with
Originations or Acquiring Loans and Indirect Costs of Leases ('SFAS 91'), defers
certain incremental origination costs which are then amortized as an adjustment
to interest income over the life of the related deferred payment obligations
using the interest method.
There are certain expenses incurred by the Company, marketing and other
indirect costs of origination, which are expended currently as operating
expenses, but for which the related income originated is earned in the future.
The Company records marketing expenses and other costs of origination that are
not capitalized under SFAS 91 but are expensed as incurred. The effect of
expensing these costs, particularly marketing expenses, is a primary cause of
the net loss in 1996.
Securitization. As a part of its business and financing strategy the
Company intends regularly to securitize rights to receive payment from
structured settlements. In a securitization, receivables originated by the
Company are sold to a special purpose entity which issues interests to
independent investors. The Company sells the receivables for a cash price and
records a Retained Interest. The book value of the Retained Interest is
calculated as the difference between the maturity value to be received from the
structured receivables sold and the sum of: (i) principal and interest to be
paid to the independent investors; (ii) trustee fees; (iii) servicing fees; and
(iv) credit losses projected to be sustained by the securitized pool. The
Company's right to the excess cash flows is subordinated to certain reserve
requirements specific to each securitization which function as a means of credit
enhancement. The Company determines the present value of the anticipated excess
cash flows at the time each securitization transaction closes using valuation
assumptions for that securitization and records an asset called the Retained
Interest.
The Retained Interest is classified as being 'held to maturity' and
therefore is carried at amortized cost in accordance with Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. The Retained Interest is recorded by the Company based on an
allocation of fair value based on the structured receivables sold. Valuation
assumptions for the Retained Interest are generally related to the maturity
value of the securitized receivables, market and economic conditions and the
anticipated credit losses associated with the receivables. Structured
receivables do not have prepayment risk. The Company's risk is limited to its
Retained Interest and the settlement cash reserve. Consequently, the Company has
not recorded a valuation allowance or recorded a writedown for the six months
ended June 30, 1997 or 1996, 1995 or 1994. The excess cash flows were discounted
at a 13% rate which provides for valuation including possible credit losses and
current market and economic conditions.
Gains or losses are determined based upon the difference between the sale
proceeds of the receivables sold and the allocation of recorded investment
therein. The Company allocates the recorded investment in the receivables
between the receivables sold, the Retained Interest and the servicing asset
based on the relative fair values of those portions on the date of sale.
The value of a servicing asset is determined by allocating the receivables'
previous carrying amount among the servicing asset, the receivables that were
sold, and the Retained Interest, if any, based on their relative fair values at
the date of sale. The fair value of the servicing asset is initially calculated
from market estimates of other servicing arrangements using a discount rate that
management believes is appropriate where available; or alternatively, the fair
value is based on an analysis of discounted cash flows that incorporates
estimates of: (i) market servicing costs; (ii) servicing revenue; and (iii)
market profit margins. The servicing asset is amortized in proportion to, and
over the period of, estimated net servicing income. The servicing asset recorded
by the Company as of June 30, 1997 amounted to $890,000.
There can be no assurance that the Company's estimates used to determine
Gain on Sale and servicing asset valuations will remain appropriate for the life
of each securitization. If actual losses exceed the Company's estimates, the
carrying value of Company's servicing asset may have to be written down or the
Company may record a charge against its earnings during the period within which
management recognizes the disparity. See 'Risk Factors -- Valuation and
Potential Impairment of Retained Interest.'
26
<PAGE>
Allowance for Credit Losses. An allowance for credit losses is maintained
at a level management considers adequate to provide for possible losses based on
known defaulted or delinquent claims, economic conditions and other relevant
factors. The Company calculates its allowance for credit losses in accordance
with Statement of Financial Accounting Standards No. 114, Accounting by
Creditors for Impairment of a Loan. Management considers its portfolio of
receivables to be homogenous except large dollar receivables, defined as
receivables with a purchase price in excess of $250,000. Management individually
determines the valuation of impairment on large receivables and collectively
evaluates the remaining portfolio for impairment. Management will charge-off the
receivables balance at the time it determines it to be uncollectible or if no
progress has been made to restore payments of the defaulted claim for a 12-month
period.
TERMINATION OF S CORPORATION STATUS, PARTNERSHIP STATUS AND INCOME TAXES
Prior to the Reorganization, each of JGW and the General Partners had
elected to be taxed as an S corporation under the Code and applicable provisions
of Pennsylvania law. No provision was made for income taxes by such entities
since all income was taxed directly to, and losses and tax credits utilized
directly by, the stockholders or partners.
Upon the completion of the Reorganization, JGW and the General Partners
will terminate their S corporation status, the Company will directly or
indirectly own 100% of the Partnerships and will be taxed as a C corporation and
adopt Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes ('SFAS 109'). See 'The Reorganization and Change in Tax Status.' Under the
asset and liability method prescribed by SFAS 109, deferred tax assets and
liabilities are recognized for future tax consequences attributable to temporary
differences between the accounting carrying amounts of existing assets and
liabilities and their respective tax bases using currently enacted tax rates.
The effect on deferred tax assets or liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date of the tax
change. Under SFAS 109, deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit carry forwards, and then
a valuation allowance is established to reduce that deferred tax asset if it is
'more likely than not' that the related tax benefits will not be realized.
On a pro forma basis, the net deferred tax liability resulted primarily
from differences in the treatment of income earned and treatment of the
securitization transaction. The net deferred tax liability will be recorded as a
non-cash charge to the provision for taxes in the quarter in which the Offering
is completed and may result in the Company reporting a net loss for the quarter.
The pro forma provision for income taxes in the accompanying combined statements
of operations shows results as if the Company had always been fully subject to
federal and state taxes at an assumed tax rate of 37%.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 Compared To Six Months Ended June 30, 1996
Revenues. Total revenues increased by $14.6 million, or 247.5%, to $20.5
million for the six months ended June 30, 1997 from $5.9 million for the six
months ended June 30, 1996. This increase was primarily due to the $11.3 million
Gain on sale of receivables sold in the June 1997 securitization and the
increase in interest earned as a result of increases in the size of the
Company's originations and receivables portfolio.
Interest Income. Interest income increased by $3.1 million, or 55.4%, to
$8.7 million for the six months ended June 30, 1997 from $5.6 million for the
six months ended June 30, 1996. This increase resulted from an increase in the
average balance of finance receivables which was a result of increased
originations of structured settlements partially offset by a decrease in
acquisitions of other deferred payment obligations which resulted in higher
weighted average yield on the Company's receivables. As a result of the higher
yields experienced on structured settlement receivables, the average portfolio
yield was 20.4% for the six months ended June 30, 1997 compared to 17.4% for the
six months ended June 30, 1996. The Company has adopted a strategy of retail
origination to minimize its dependence on outside brokers. Through retail
originations, the Company avoids paying broker fees and establishes a direct
relationship with its customers which often lead to 'continuations.'
Continuations occur when
27
<PAGE>
claimants sell the Company a portion of their payments due under their
structured settlement and subsequently sell another portion of their payments at
a later time. Continuations give the Company the opportunity to develop a
history with a claimant prior to making additional purchases and, therefore,
potentially minimize risk of loss. The following is a table of originations,
yields and maturities:
SIX MONTHS ENDED JUNE
30,
------------------------
ORIGINATIONS INFORMATION 1996 1997
- --------------------------------------------- -------- --------
(DOLLARS IN THOUSANDS)
Structured Settlements:
Maturity value............................. $ 41,242 $103,239
Unearned discount.......................... (23,480) (54,350)
-------- --------
Purchase price............................. $ 17,762 $ 48,889
-------- --------
-------- --------
Broker referrals........................... 48.0% 6.8%
Retail originations........................ 52.0% 93.2%
Continuations as a percentage of
originations............................ 17.0% 28.5%
Other Deferred Payment Obligations:
Maturity value............................. $ 14,217 $ 4,905
Unearned discount.......................... (1,937) (713)
-------- --------
Purchase price............................. $ 12,280 $ 4,192
-------- --------
-------- --------
Weighted Average Yields on Originations:
Structured settlements..................... 20.7% 23.2%
Other deferred payment obligations......... 12.7% 13.5%
Weighted Average Maturity in Years (at
origination):
Structured settlements..................... 7.6 6.1
Other deferred payment obligations......... 1.3 1.2
Gain on Sale of Receivables. The Company completed its first
securitization and recorded a Gain on sale of receivables of $11.3 million in
the six months ended June 30, 1997. The Company securitized receivables with a
book value of $51.3 million, including initial direct costs of origination, and
received cash totaling $59.5 million and a Retained Interest with a book value
of $5.2 million. Included in Gain on sale of receivables at June 30, 1997 is a
Gain on sale of lottery claims totaling $135,000. No receivables were sold
during the six months ended June 30, 1996. In connection with the June 1997
securitization, the Company recorded a servicing asset of $890,000.
Other Income. Other income consists primarily of income earned for
management and other services provided to entities affiliated with Messrs.
Veloric and Delaney. See 'Certain Relationships and Related Party Transactions.'
Other income increased by $67,000, or 21.0%, to $386,000 for the six months
ended June 30, 1997 from $319,000 for the six months ended June 30, 1996. This
increase was the result of an increase in the management fees offset by a
decrease in brokerage fees and commissions due to the separation of the
investment banking business discussed above. Since Messrs. Veloric and Delaney
intend to complete the divestiture of these interests, the Company does not
expect that this income will recur after the completion of the Offering.
Expenses. Interest expense increased by $2.0 million, or 71.4%, to $4.8
million for the six months ended June 30, 1997 from $2.8 million for the six
months ended June 30, 1996. Interest expense increased primarily because of
significant increases in the average borrowings outstanding under the Credit
Facilities in the six months ended June 30, 1997. Average borrowings outstanding
under the Credit Facilities were $107.3 million for the six months ended June
30, 1997 and bore interest at a weighted average rate of approximately 8.8%.
Average borrowings outstanding under the Credit Facilities were $64.1 million
for the six months ended June 30, 1996 and bore interest at a weighted average
rate of approximately 8.8%.
Salaries and benefits expense increased by $1.7 million, or 244.3%, to $2.4
million for the six months ended June 30, 1997 from $697,000 for the six months
ended June 30, 1996. The Company employed 167 persons on a full-time equivalent
basis as of June 30, 1997 and 69 persons on a full-time
28
<PAGE>
equivalent basis as of June 30, 1996, an increase of 142.0%. This increase was
principally the result of an increase in the Company's origination and servicing
activities related to structured settlements.
Marketing expenses increased by $2.7 million, or 270.0%, to $3.7 million
for the six months ended June 30, 1997 from $1.0 million for the six months
ended June 30, 1996 primarily because of the significant increase in the
Company's television, radio and print media-based origination activities. During
the six months ended June 30, 1997, the Company ran 33,827 television
commercials compared to 2,049 for the six months ended June 30, 1996. The
Company's ratio of marketing expenses to receivable originations was 3.4% for
the six months ended June 30, 1997, compared to 1.8% for the six months ended
June 30, 1996. This increase in the ratio of the Company's marketing expenses to
originations is a result of the Company's decreased reliance on brokers as a
source of originations.
Other expenses decreased by $788,000, or 30.8%, to $1.8 million for the six
months ended June 30, 1997 from $2.6 million for the six months ended June 30,
1996. Other expenses include rent, office supplies, legal and professional fees
and other general and administrative expenses. This decrease resulted from the
Company refining its estimate of direct origination costs to be deferred in
accordance with SFAS 91. The increase in deferred costs resulted in a decrease
in other expenses in the six months ended June 30, 1997.
The provision for credit losses increased by $1.4 million to $1.6 million
for the six months ended June 30, 1997 from $165,000 for the six months ended
June 30, 1996. The increase in the provision for credit losses for the six
months ended June 30, 1997, resulted primarily from a review of the portfolio in
light of the increase in originations of structured settlements of 175.2%.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Total revenues increased by $2.1 million, or 21.6%, to $11.8
million in 1996 from $9.7 million in 1995 primarily due to the $51.0 million
increase in originations of rights to payment under structured settlements
offset by a $36.2 million decline in originations of other deferred payment
obligations.
29
<PAGE>
Interest Income. Interest income increased by $1.8 million, or 20.9%, to
$10.4 million in 1996 from $8.6 million in 1995 as a result of an increased
volume in the origination of structured settlements and overall increase in
weighted average yields. The average yields have increased as a result of
increased direct originations versus broker referrals and the increasing
concentration of higher yield structured settlements in the Company's mix of
receivables. The average yield on receivables increased to 20.2% in 1996 versus
14.0% in 1995. The following is a table of originations, yields and maturities:
YEAR ENDED DECEMBER 31,
-----------------------
ORIGINATIONS INFORMATION 1995 1996
- --------------------------------------------- ------- --------
(DOLLARS IN THOUSANDS)
Structured Settlements:
Maturity value............................. $13,674 $125,697
Unearned discount.......................... (8,758) (69,693)
------- --------
Purchase price............................. $ 4,916 $ 56,004
------- --------
------- --------
Broker referrals........................... 68.8% 32.6%
Retail originations........................ 31.2% 67.4%
Continuations as a percentage of
originations............................ 8.2% 15.2%
Other Deferred Payment Obligations:
Maturity value............................. $62,851 $ 19,738
Unearned discount.......................... (9,638) (2,686)
------- --------
Purchase price............................. $53,213 $ 17,052
------- --------
------- --------
Weighted Average Yields on Originations:
Structured settlements..................... 20.5% 22.3%
Other deferred payment obligations......... 14.1% 13.2%
Weighted Average Maturity in Years (at
origination):
Structured settlements..................... 9.1 6.5
Other deferred payment obligations......... 1.3 1.2
Gain on Sale of Receivables. The Gain on sale of receivables increased by
$308,000, or 114.9%, to $576,000 in 1996 from $268,000 in 1995 and represented
gains on sale of lottery claims purchased and sold to financial institutions.
Other Income. Other income decreased by $109,000, or 12.2%, to $785,000 in
1996 from $894,000 in 1995. This income consisted principally of consulting and
brokerage fees related to merchant banking operations. Since the Company in 1996
transferred the operations of these businesses to entities controlled by Messrs.
Delaney and Veloric, this income will not recur after the completion of the
Offering.
Expenses. Interest expense increased by $1.4 million, or 28.0%, to $6.4
million in 1996 from $5.0 million in 1995 primarily because of significant
increases in the average borrowings outstanding under the Company's credit
facilities in 1996. Average borrowings outstanding under the Company's credit
facilities were $74.4 million for 1996 and bore interest at a weighted average
rate of approximately 8.8%. Average borrowings outstanding under the Credit
Facilities were $50.0 million for 1995 and bore interest at a weighted average
rate of approximately 9.2%.
Salaries and benefits expense increased by $483,000, or 33.3%, to $2.0
million in 1996 from $1.5 in 1995. The Company employed 106 persons on a
full-time equivalent basis as of December 31, 1996, and 40 persons on a
full-time equivalent basis as of December 31, 1995, an increase of 165.0%. This
increase was principally the result of an increase in the Company's origination
and servicing activities related to structured settlements.
Marketing expenses increased by $3.4 million to $3.6 million in 1996 from
$224,000 in 1995. Marketing expenses increased primarily because of the
significant increase in the Company's television, radio and print media-based
originations activities. The Company commenced its television
30
<PAGE>
advertising campaign in March 1996. Prior to that time, the Company was
advertising only in print media.
Other expenses increased by $2.0 million, or 142.9%, to $3.4 million in
1996 from $1.4 million in 1995. This increase is principally related to the
growth in the structured settlement business in 1996.
The Company provided $500,000 as a provision for credit losses in 1996 as
an estimate of potential losses. The Company's structured settlement business
grew in 1996 and the provision was based on possible losses based on this
growth.
Extraordinary Loss. In March 1995, the Company refinanced all of its then
outstanding notes payable. The Company incurred an extraordinary loss of
$876,000 representing $456,000 of deferred financing costs and $420,000 of
profit sharing payments under a provision of its debt agreement, both of which
were expensed in 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues. Total revenues increased by $6.5 million, or 203.1%, to $9.7
million in 1995 from $3.2 million in 1994 primarily due to an increase in the
volume of other deferred payment obligations originated by the Company and its
entrance into the market for structured settlements.
Interest Income. Interest income increased by $5.8 million, or 207.1%, to
$8.6 million in 1995 from $2.8 million in 1994 as a result of the increase in
the acquisition of other deferred payment obligations and the commencement in
August 1995 of the origination of structured settlements. A comparison of
originations, referral sources, weighted average yield and maturities were as
follows:
YEARS ENDED DECEMBER
31,
----------------------
ORIGINATIONS INFORMATION 1994 1995
- --------------------------------------------- ------- -------
(DOLLARS IN THOUSANDS)
Structured Settlements:
Maturity value............................. $ -- $13,674
Unearned discount.......................... -- (8,758)
------- -------
Purchase price............................. $ -- $ 4,916
------- -------
------- -------
Broker referrals........................... -- 68.8%
Retail originations........................ -- 31.2%
Continuations as a percentage of
originations............................ -- 8.1%
Other Deferred Payment Obligations:
Maturity value............................. $38,745 $62,851
Unearned discount.......................... (6,891) (9,638)
------- -------
Purchase price............................. $31,854 $53,213
------- -------
------- -------
Weighted Average Yields on Originations
Structured settlements..................... -- 20.5%
Other deferred payment obligations......... 18.1% 14.1%
Average Life in Years (at origination)
Structured settlements..................... -- 9.1
Other deferred payment obligations......... 1.2 1.3
Gain on Sale of Receivables. The $268,000 Gain on sale of receivables in
1995 related to lottery claim sales in 1995. There were no similar sales in
1994.
Other Income. Other income increased by $477,000, or 114.4%, to $894,000
in 1995 from $417,000 in 1994. Other income consists primarily of commissions
and brokerage fees earned. Since the Company in 1996 transferred the operations
of these businesses to entities controlled by Messrs. Delaney and Veloric, this
income will not recur after the completion of the Offering.
Expenses. Interest expense increased by $3.5 million, or 233.3%, to $5.0
million in 1995 from $1.5 million in 1994 primarily because of significant
increases in the average borrowings outstanding under the Credit Facilities in
1995. Average borrowings outstanding under the Credit Facilities were
31
<PAGE>
$50.0 million in 1995 and bore interest at a weighted average rate of
approximately 9.2%. Average borrowings outstanding under the Credit Facilities
were $16.2 million in 1994 and bore interest at a weighted average rate of
approximately 10.2%.
Salaries and benefits expense increased by $823,000 million, or 118.7%, to
$1.5 million in 1995 from $686,000 in 1994. The Company employed 40 persons on a
full-time equivalent basis as of December 31, 1995 and 32 persons on a full-time
equivalent basis as of December 31, 1994, an increase of 25.0%. This increase
was principally the result of an increase in the Company's commencement of
originations of structured settlements in August 1995.
Marketing expenses increased by $76,000, or 51.4%, to $224,000 million in
1995 from $148,000 in 1994. This increase was the result of additional
advertising being conducted in 1995.
Other expenses increased by $477,000, or 60.4%, to $1.4 million in 1995
from $873,000 in 1994. This increase was related to the commencement of the
acquisition of structured settlements in August 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced, and expects to continue experiencing, negative
cash flow in its operations and requires continued access to financing sources.
The Company's primary operating cash requirements include the funding of (i)
receivables originations, (ii) reserve accounts, overcollateralization
requirements, fees and expenses incurred in connection with its securitization
transactions, (iii) payments due under the Credit Facilities, (iv) tax payments
due on the Company's taxable net income, (v) television, radio and direct mail
advertising and other marketing and (vi) administrative and other operating
expenses.
Adequate credit facilities and other sources of funding, which permit the
Company to fund its operating cash requirements and to securitize or sell
receivables in the secondary market, are essential to the continuation of the
Company's ability to originate and purchase loans. After utilizing available
working capital, the Company borrows money to fund its receivables originations,
and repays these borrowings as the receivables are collected or are sold. Upon
securitization and the subsequent repayment of the borrowings, the Credit
Facilities then become available to fund additional receivables originations.
Cash used in operations increased $1.1 million, or 12.7%, to $9.7 million
for the six months ended June 30, 1997 from $8.6 million for the six months
ended June 30, 1996. The increase resulted primarily from increased salaries and
benefits, marketing and other indirect organization and other costs to grow the
structured settlement receivables business.
Cash provided by investing activity was $30.3 million for the six months
ended June 30, 1997 compared with cash used of $5.9 million for the six months
ended June 30, 1996. The increase in cash provided related to the cash received
from the securitization of receivables in June 1997 offset by an increase in the
purchase of deferred payment obligation receivables.
Cash used in financing activities was $20.0 million for the six months
ended June 30, 1997 compared with cash provided by financial activities of $13.4
million for the six months ended June 30, 1996. This increase in cash used
related to the repayment of notes payable to banks using the proceeds of the
securitization.
The Company's total borrowing authority under the Credit Facilities totals
$125.0 million. The SSC Facility, a $105.0 million facility with ING and a bank
which expires on August 25, 1998, bears interest at a rate of 3.5% above the
then current London Interbank Offered Rate ('LIBOR') and if not extended is
converted to a term loan. The MFC Facility also provided by ING and a bank
totals $20.0 million in borrowing authority, bears interest at a rate of 1.5%
above LIBOR and expires May 20, 1998. Like the SSC Facility, the MFC Facility
contains no provision to extend the facility upon expiration. Upon expiration,
the amounts outstanding under the MFC Facility will convert to a term loan. The
SSC Facility is available for the purchase of structured settlements and working
capital while the MFC Facility is available for the purchase of deferred
governmental obligations and working capital governing the MFC Facility. The
Company plans to securitize and sell receivables on a periodic basis. As of
October 3, 1997, the Company had availability of $76.7 million under the SSC
Facility
32
<PAGE>
and $7.6 million under the MFC Facility for purchases and other working capital
needs. The proceeds of those securitizations will be used to repay the amounts
outstanding under the Credit Facilities to create availability for future
purchases and working capital. The Company completed a securitization and sale
of receivables that closed in two transactions on September 30 and October 1,
1997 from which it realized proceeds that the Company used to repay and increase
the availability under the Credit Facilities. These arrangements together with
the net proceeds of the Offering are expected to be sufficient to meet cash
requirements to purchase deferred payments and fund operations provided that (i)
the Company completes securitizations and (ii) the Company extends the Credit
Facilities or obtains new credit facilities. There is no assurance that the
Company will be able to extend the Credit Facilities beyond their expiration
dates or obtain replacement financing or favorable terms, if at all.
IMPACT OF INFLATION
To date, inflation has had no material effect on the Company's results of
operations. Inflation, however, can have a substantial effect on operating costs
and interest rates. Interest rates normally increase during periods of high
inflation and decrease during periods of low inflation. Profitability may be
directly affected by the level and fluctuation in interest rates which affect
the Company's ability to earn a spread between interest income and costs of its
borrowings. The profitability of the Company is likely to be adversely affected
during any period of unexpected or rapid increases in inflation and related
changes in interest rates.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board ('FASB') issued
Statement of Financial Accounting Standards No. 128, Earnings per Share ('SFAS
128'), which supersedes Accounting Principles Board No. 15, Earnings per Share
('APB 15'), and is effective for the Company for both interim and annual periods
for the year ending December 31, 1997. This statement requires restatement of
all prior-period Earnings per Share data presented. SFAS 128 establishes
standards by simplifying the computation and presentation of earnings per share
('EPS'), and applies to entities with publicly held common stock or to-be-issued
common stock. It replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of shares of Common Shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other rights to be issued Common Stock were
exercised or converted into Common Stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB 15. If EPS had been calculated in
accordance with SFAS 128, the basic EPS and diluted EPS for the six months ended
June 30, 1997 would have been the same as primary EPS under APB 15.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ('SFAS 130'), which is effective for the
Company for the year ending December 31, 1998, and requires restatement of all
prior-period financial statements presented for comparative purposes. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS 130 requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. It is anticipated that the
adoption of SFAS 130 will not have a material effect on the financial condition
or results of operations of the Company.
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BUSINESS
GENERAL
The Company is a specialty finance company that originates, securitizes and
services rights to receive payments from structured settlements and other
deferred payment obligations. Deferred payment obligations are contractual
arrangements under which one party has agreed to make fixed, scheduled payments
to another party over time to satisfy an obligation that would otherwise be paid
in an up-front, lump sum. The Company specializes in transactions involving two
types of deferred payment obligations: (i) structured settlements arising from
personal injury litigation as to which highly-rated insurance companies are the
obligor, and, to a lesser extent, (ii) other deferred payment obligations such
as claims arising from personal injury litigation and state-operated lotteries
as to which governmental or quasi-governmental entities are the obligor.
According to industry sources, in excess of $40 billion of annuity premiums
paid to third parties to fund structured settlements were generated from 1980 to
1995 and approximately $4 billion to $5 billion in new structured settlements
are generated each year in the United States. Structured settlements continue to
be an attractive option for claimants and insurance companies because structured
settlements: (i) offer favorable tax treatment to claimants and insurers; (ii)
permit payment flexibility and incorporation of investment management features;
and (iii) lower the cost of compensating victims and thereby help foster timely
settlement of litigation. From the claimants' point of view, however, structured
settlements have a significant weakness, inflexibility. When claimants'
financial needs change, the fixed payment schedule of a structured settlement
may no longer satisfy these needs. The Company's funding programs offer those
claimants the ability to convert their rights to future payments into cash that
they can use for such purposes as paying medical or tuition expenses, purchasing
or improving a home, starting a business or repaying debt.
The Company has achieved significant growth in the number and maturity
value of receivables purchased since commencing operations. From inception to
June 30, 1997, the Company has purchased 14,022 deferred payment obligation
receivables with an aggregate maturity value of $374.8 million. Maturity value
equals the sum of all future payments to be received under a deferred payment
obligation. The Company has generally purchased receivables at a significant
discount from maturity value. The difference between the amount paid by the
Company and the maturity value of the receivables is accrued as income over the
life of the receivable. The weighted average yield of the Company's portfolio
was 22.5% for the six months ended June 30, 1997. The Company's revenues have
increased significantly as the Company's originations volume and portfolio have
grown and the Company has employed securitizations to fund its operations.
Revenues increased from $249,000 in 1992 to $11.8 million in 1996 and $20.5
million in the six months ended June 30, 1997.
In June 1997, the Company completed a $70.8 million securitization in what
it believes is the first investment grade rated securitization of structured
settlement receivables. The Company sold, through a special purpose entity,
$59.5 million of senior pass-through certificates rated 'A2' by Moody's and 'A'
by Duff & Phelps. The Company retained $11.3 million in face value of unrated
subordinated certificates and recorded a Gain on Sale of $11.3 million for the
six months ended June 30, 1997. The Company completed a securitization
transaction in which it securitized $31.0 million of receivables in September
1997 and $41.0 million of receivables in October 1997, and recorded a Gain on
Sale of $6.8 million and $8.0 million, respectively. Structured settlement
receivables and other deferred payment obligations differ from other regularly
securitized financial assets, such as consumer credit card and mortgage loans,
in that (i) prepayment risk is minimal because the timing of scheduled payments
is fixed and (ii) credit risks are low because obligors are typically insurance
companies that have received a credit rating of 'A' or better from A.M. Best or
governmental entities. From inception through December 31, 1996, the Company had
not charged-off any receivables. For the six months ended June 30, 1997, the
Company recorded a net charge-off of 0.6% of the Company's owned portfolio.
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The Company does not rely on brokers to originate structured settlements
and other deferred payment receivables and its policies prohibit 'cold calling'
of prospective customers. Instead, the Company utilizes a nationwide television
advertising campaign to identify hard-to-find claimants who want to sell their
payment rights to the Company. Using a 21,520-square-foot inbound call center,
the Company's originations staff responds to claimant inquiries, attempts to
quantify an individual claimant's financial needs and endeavors to structure the
funding transaction to meet those needs. The Company's policies prohibit the
origination of receivables from minors and incompetent persons.
The Company was formed in October 1997 in connection with the
Reorganization as a successor to the businesses of the Affiliated Companies. See
'The Reorganization and Change in Tax Status.' JGW was formed by James D.
Delaney and Gary Veloric in 1991 as a merchant bank specializing in transactions
in the health care industry. In 1992, the Company entered the business of
purchasing the deferred settlement obligations of the JUA, and its successor,
the MTF. As the Company's success in the JUA/MTF market established its
reputation as a creative funding source, it began to search for other
opportunities to purchase income streams that, while secure and predictable, did
not meet the requirements for more traditional means of financing. After
evaluating a number of market possibilities, the Company decided in 1995 to
enter the secondary market for structured settlements. The Company leveraged the
capabilities and systems it developed for the JUA/MTF business and emerged as a
market leader in the business of purchasing structured settlements. In May 1995,
ING extended a credit facility to the Company for funding its origination of
other deferred obligations. In August 1995, the Company and ING expanded their
relationship to include funding the origination of structured settlement
receivables, at which time ING became a stockholder of the Company.
STRATEGY
The Company's growth strategy is to increase its originations of deferred
payment receivables and profitability by further enhancing its position as the
leading originator of the rights to receive payments from structured settlements
and other deferred payment obligations. The Company believes that the creation
of a strong brand image will enable the Company to increase profitably the
volume of its receivables originated and the size of its servicing portfolio. To
achieve its profitable growth, the Company intends to continue to:
Increase Retail Originations. The Company has been successful at
internally originating leads for the purchase of structured settlements by
developing brand awareness for the 'Wentworth' name among potential
claimants through a variety of marketing media, including 88,000
thirty-second television commercials broadcast nationally from March 1996
through September 1997. By effectively reaching its target market, the
Company has virtually eliminated its reliance on brokers. The Company
currently originates nearly all of its receivables using its own specially
trained personnel. Independence from the broker community permits the
Company to control the integrity of its origination process, avoid
conflicts among origination channels and maintain pricing flexibility. The
Company operates a 21,520-square-foot call center with approximately 200
telemarketing workstations that utilize predictive dialing and data
tracking technology. The Company has a policy that prohibits making
unsolicited marketing calls to establish initial contact with claimants.
The call center operates 24 hours a day Monday through Saturday.
Provide Quality Customer Service. The Company believes that the
flexibility of its funding options, the speed of its approval process and
the responsiveness of its customer service personnel help to differentiate
the Company from its competitors. The Company processes applications from
claimants who demonstrate that they have a financial need for funding and
who can establish the existence of the right to be paid under a settlement
agreement. After the Company has evaluated the claimant's request for
funding, the Company typically offers the claimant alternative proposals
for funding. The proposals offer the claimant the choice of funding varying
portions of scheduled payments depending on the claimant's individual
funding needs. The Company believes that its turnaround time for processing
a claim from application to funding compares favorably with its
competitors. The Company's trained personnel also maintain contact with
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<PAGE>
claimants during and after the funding process to reduce claimant fraud and
encourage repeat business.
Maintain High Underwriting Standards. The Company's comprehensive
underwriting procedures are designed to ensure the quality of originated
receivables and to minimize the risk of claimant fraud, payment diversions
and loss with respect to the receivables. Each claimant file goes through
several stages of review, including a taped exit interview with the
claimant, culminating in approval by a Company staff attorney. After
Company counsel approves a claimant for funding, the Company submits the
file to Electronic Data Systems, Inc. ('EDS') for back-up review and
approval prior to disbursing funds. The Company's Underwriting Operations
Group is located at a separate facility from the Company's Originations
Group. This physical separation of the divisions and their clearly
delineated responsibilities provides the Company with an effective checks
and balances system.
Market to Referral Sources Such as Attorneys and Bankruptcy and Estate
Trustees. The Company markets directly to referral sources such as
attorneys and bankruptcy and estate trustees. The Company maintains contact
with these sources through a mix of outbound telemarketing, company
sponsored newsletters and advertising in trade and professional magazines.
The Company is the only organization that has received endorsement of the
American Trial Lawyers Association in New Jersey ('ATLA-NJ') in connection
with its settlement funding programs.
Obtain Institutional Financing and Complete Regular
Securitizations. The Company intends to continue to finance its business
by maintaining strong relationships with institutional sources of capital.
The Company intends to complete securitizations on a regular basis to
enhance its liquidity and to reduce outstanding amounts under the Credit
Facilities and its exposure to fluctuations in interest rates. In June
1997, the Company completed the securitization of $70.8 million in
structured settlement receivables, resulting in the realization of a Gain
on Sale of $11.3 million in the second quarter of 1997. In addition, the
Company has completed the securitization of an aggregate of approximately
$31.0 million and $41.0 million in carrying value of structured settlement
receivables in September and October 1997, respectively.
Maintain its Telecommunications and Information Management
Systems. As part of its ongoing effort to increase efficiency, the Company
has equipped its new on-line call center with a proprietary system that
tracks information from initial contact with the claimant through
collection. The Company has recently upgraded its accounting systems and
proprietary databases and portfolio tracking systems. Its proprietary
databases were developed with the assistance of EDS and the Company's
accounting firm. The Company will continue to pursue and evaluate methods
for improving efficiencies by maintaining and upgrading its
telecommunications and information management systems.
Expand into New Deferred Payment Market Niches. The Company regularly
examines new markets to identify opportunities for completing profitable
funding transactions. The Company believes that it can replicate its past
successes in identifying, researching and developing, and then aggressively
entering and becoming a recognized leader in, the structured settlement and
other deferred payment obligations markets by applying its analytical and
empirical approach to new market niches. Company marketing personnel
maintain regular communication with attorneys, insurers and other market
participants and gather information on new deferred payment streams and
funding needs that are compatible with the Company's business model. The
Company's executive team then analyzes these opportunities and seeks the
input of the Company's legal staff as to alternative transaction
structures. In areas perceived as promising, the Company engages in limited
transactions on a trial basis to evaluate the attractiveness of the
markets. The Company also intends to consider expanding into new markets by
the selective acquisition of existing businesses. See 'Risk Factors --
Risks Relating to Purchase of New Classes of Assets.'
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<PAGE>
MARKET OVERVIEW
General
The need for the Company's funding services arises from the inflexible
nature of many deferred payment plans and the changing financial needs of many
claimants. Payment structures that originally met a claimant's needs may no
longer meet such claimant's needs as life circumstances change. The Company
provides liquidity to the claimant by purchasing, for a lump sum, the claimant's
right to receive future scheduled payments. Many claimants want to sell their
payment rights because they lack access to traditional sources of financing. The
claimant gains the advantage of realizing immediate liquidity on an otherwise
illiquid asset and the Company gains the advantage of acquiring a predictable
stream of payments from sources with strong credit profiles, such as insurance
companies and governmental or quasi-governmental entities.
Structured Settlements
Historically, personal injury lawsuits were settled with up-front, lump-sum
payments in exchange for releases from liability. However, favorable tax rulings
in the 1970s, which allowed future periodic payments to be received by personal
injury claimants on a tax-free basis, and the increasing size of jury awards in
the personal injury arena, propelled the recent growth of structured
settlements. Certain judgments, like settlements, are sometimes structured to
provide for periodic payments rather than payment of a single lump-sum. As
arrangements for payment of structured settlements and structured judgment
awards are substantially similar, the discussion of structured settlements in
this Prospectus applies both to structured settlements and judgments.
In structuring litigation settlements, defendant insurers typically assign
their liability to an Assumption Party, which then enters into an annuity
contract with the Annuity Provider to fund the payments. The Assumption Party
receives a lump-sum payment from the defendant insurer in return for assuming
the liability for making settlement payments. The lump sum is sufficient to
purchase from another insurance company (the 'Annuity Provider') an annuity
contract to fund the periodic payments to the claimant.
The Code provides for a tax-free receipt of the defendant insurer's payment
to the Assumption Party, provided that the assumption party simultaneously
purchases a 'qualified funding asset' defined as an annuity purchased from an
insurance company that matches the terms of the settlement. The tax treatment of
the lump sum payment to the Assumption Party would be in jeopardy if the annuity
payments were accelerated. As a result, it is not feasible to restructure the
schedule of settlement payments once the annuity contract is purchased by the
Assumption Party.
The desire of claimants to access cash from their structured settlements
has created a secondary market. Specialty finance companies have developed
programs to purchase some or all of the claimant's right to payment under the
settlement agreement in exchange for paying to the claimant a lump sum. The
purchase transaction is structured as an assignment of payment rights under the
underlying settlement agreement because the claimant is not technically the
owner of the annuity contract and does not have the power to alter any terms
except the name of the beneficiary and the address for payment. See 'Risk
Factors -- Risks Associated with Structured Settlements -- Restrictions on
Assignability of Structured Settlement Receivables.'
Other Deferred Payment Obligations
A significant amount of litigation arises from personal injuries allegedly
caused by the operations of municipalities and government-owned enterprises such
as mass transit authorities. Typically these governmental operations
self-insure. Also, many private litigation settlements are funded by insurance
provided through mandatory underwriting pools that state governments established
to respond to failures in the private market for insurance of certain risks,
such as automobile insurance for high risk drivers. The settlement obligations
of self-insured government agencies are backed by the full faith and credit of
the state government. Obligations of the state mandated underwriting pools,
however, are not
37
<PAGE>
typically backed by government guarantees. Nevertheless, such claims have proved
to have low credit risk.
Certain state governments and municipalities responded to the growing
volume of personal injury litigation in which they were involved by seeking to
defer settlement payments. Examples of this trend are the deferral programs
established by the JUA, a state-sponsored insurance pool for high risk drivers
in New Jersey, and its successor the MTF. In the early 1990's, the JUA and MTF
experienced financial problems and initiated several deferral programs under
which claimants were forced to wait from 12 to 18 months to receive payment and
in exchange were given the opportunity to earn interest at the rate of six
percent per annum.
These deferral programs offered a significant business opportunity to
firms, such as the Company, who were willing to purchase the deferred payments
from the claimant. Many claimants were willing to sell their payments at a
substantial discount to their maturity value to purchasers who, in turn,
obtained the right to be paid by a creditworthy entity. The number of JUA/MTF
claims originated by the Company has fallen dramatically in recent periods
because of the decreasing number of new claims and is not expected to increase
significantly in the near future. As a result, the Company has no plans to
purchase significant numbers of new JUA/MTF claims.
Certain other deferred payment obligations have many of the same attractive
characteristics to an originator as structured settlements. Because the deferral
arrangement fixes a payment as due on a specific date in the future, these other
deferred payment obligations do not suffer from any risk of prepayment. Also,
because the government-affiliated obligors have relatively strong credit
profiles, credit risks are effectively minimized.
Other Markets
As an integral element of its strategy, the Company regularly evaluates
opportunities to purchase other classes of financial assets. As an outgrowth of
these efforts, in October 1997, the Company hired six individuals with
experience in brokering seller-financed mortgages. The Company plans to engage
in transactions in this market on a trial basis to determine its potential for
development on a larger scale using institutional financing. Seller-financed
mortgages are obligations negotiated directly between a single buyer and a
single seller of real estate. Because they are not originated by financial
institutions, seller-financed mortgages lack uniform underwriting standards. The
varied risk profile of each mortgage loan requires that entities seeking to
purchase seller-financed mortgages in the secondary market perform a detailed
review of information relevant to the credit risks associated with the
transactions. The Company believes that its experience underwriting transactions
involving unconventional assets and its ability to locate sellers of such assets
may give the Company competitive advantages in the secondary market for
seller-financed mortgages. The Company has not yet completed a detailed review
of the opportunities and risks of the market for seller-financed mortgages.
Although the Company believes this and other businesses may present attractive
business opportunities, each new business has significant risks and, as such,
the commitment of significant resources to any one or more of such businesses
may have a material adverse effect on the Company's business and results of
operations. See 'Risk Factors -- Risks Relating to Purchase of New Classes of
Assets' and 'Risk Factors -- Risks Relating to Entry into Market for
Seller-Financed Mortgages.'
Certain large municipalities, such as the City of Philadelphia, and
governmental authorities, such as the Southeastern Pennsylvania Transportation
Authority ('SEPTA') self-insure against many risks, such as bodily injuries
caused by their activities. When these entities settle claims they often impose
deferred payments on claimants. The City of Philadelphia defers payment of its
claims for twelve months and SEPTA defers payments for nine months. Many state
lottery commissions impose structured payouts of awards funded by annuity
contracts. Similar opportunities exist for funding these payments as exists in
the market for structured settlements.
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RECEIVABLES ORIGINATIONS
Since its inception through September 1997, the Company has originated
approximately $303.0 million in maturity value of structured settlements and has
originated more than 9,400 JUA/MTF settlements with a maturity value of
approximately $131.7 million. The following table shows certain information
regarding the Company's deferred payment receivables originations on a quarterly
basis for the quarters shown:
QUARTERLY DEFERRED PAYMENT ORIGINATIONS
<TABLE>
<CAPTION>
NUMBER
THREE MONTHS ENDED OF CLAIMS CARRYING VALUE(1) MATURITY VALUE(2)
- ------------------------- ----------- ----------------- -----------------
<S> <C> <C> <C>
December 31, 1992........ 1 $ 12,155 $ 13,750
March 31, 1993........... 38 387,917 485,132
June 30, 1993............ 118 1,077,552 1,386,470
September 30, 1993....... 154 1,567,395 1,990,099
December 31, 1993........ 116 1,280,741 1,687,365
March 31, 1994........... 263 3,584,010 4,471,797
June 30, 1994............ 359 6,097,913 7,511,585
September 30, 1994....... 784 9,396,090 11,447,672
December 31, 1994........ 1,252 12,776,731 15,492,868
March 31, 1995........... 1,377 15,292,890 18,241,866
June 30, 1995............ 1,463 17,081,460 20,273,265
September 30, 1995....... 1,189 15,320,795 18,850,975
December 31, 1995........ 726 10,387,094 19,165,817
March 31, 1996........... 680 13,273,953 22,590,421
June 30, 1996............ 819 16,759,435 33,078,039
September 30, 1996....... 1,074 21,547,767 46,608,781
December 31, 1996........ 1,036 21,456,514 43,357,622
March 31, 1997........... 1,225 25,937,301 52,987,903
June 30, 1997............ 1,348 25,130,082 55,191,722
September 30, 1997....... 1,676 29,355,622 62,444,070
----------- ----------------- -----------------
15,698 $ 247,723,415 $ 437,277,218
----------- ----------------- -----------------
----------- ----------------- -----------------
</TABLE>
- ------------------
(1) The carrying value equals the purchase price paid by the Company to
originate the receivables.
(2) The maturity value equals the sum of all future payments to be received
under a deferred payment obligation.
MFC's level of origination of JUA/MTF settlements in recent quarters has
fallen in tandem with the decreasing supply of deferred claims. In addition, the
Company does not expect the JUA and MTF to announce any new deferral programs in
the near future. Since inception, the Company has also purchased, in the
aggregate, claims against the City of Philadelphia and Southeastern Pennsylvania
Transportation Authority with maturity values of approximately $929,000 and $1.7
million, respectively. The Company does not expect that originations of these
claims will have a material impact on the Company's financial condition or
results of operations in 1997.
The Company has originated 11.6% and 11.2% of its portfolio of structured
settlement receivables from residents of California and New York, respectively,
and only three other states represent the source of in excess of five percent of
its portfolio of structured settlement receivables. The deferred payment
obligations of the JUA/MTF purchased by the Company were all originated in the
State of New Jersey.
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The following table shows certain information with regard to the
distribution of structured settlement originations through September 30, 1997
based on A.M. Best Ratings of Annuity Providers.
DISTRIBUTION OF ORIGINATIONS BY A.M. BEST RATINGS
PERCENT
OF TOTAL
ORIGINATION
RATING PRICE
------- ------------
A++.... 24.7%
A+..... 45.4%
A...... 18.1%
A-..... 5.2%
B++.... 0.0%
B+..... 0.2%
F...... 3.1%
U...... 3.3%
------------
100.0%
Only two Annuity Providers represent in excess of 10% of the Company
originations based on carrying value, one of which is rated 'A++' and the other
is rated 'A+.'
MARKETING AND CUSTOMER SERVICE
The Company markets its structured settlement business through a variety of
channels. Newspaper and television advertising is used to publicize the
Company's services to the broad population of claimants who may require the
Company's services. The Company has developed a comprehensive national
television advertising campaign that the Company believes helps to differentiate
it from its competitors. From March 1996 through September 1997, the Company
broadcast approximately 88,000 thirty-second television commercials nationwide.
The Company utilizes a proprietary call-tracking system that allows it to
trace the origin of each inbound call by geographic market, estimate the
approximate marketing costs incurred to generate the call and track the progress
of each file arising from the call to eventual funding or termination. The
Company's compensation policies for originations personnel rely heavily on
performance bonuses.
The Company also markets directly to referral sources such as attorneys and
bankruptcy and estate trustees. The Company maintains contact with these sources
by a mix of outbound telemarketing, company sponsored newsletters and
advertising in trade and professional magazines. As an example of its successful
marketing to attorneys, the Company is the only organization to receive the
endorsement of ATLA-NJ in connection with its settlement funding programs. The
Company also seeks to increase awareness of the Company's funding products among
attorneys and other professionals and their clients by publishing and
distributing a newsletter named The National Funding Chronicle.
Company personnel have also sought to increase the profile of the Company
among targeted groups by publishing articles in legal and other specialty
publications and making presentations to meetings of local bar associations and
trial lawyers' groups and other professional and business gatherings.
UNDERWRITING
The Origination Process
The Company originates substantially all of its receivables using its own
trained personnel as opposed to outside brokers. The Company has two separate
divisions that are involved in the funding process, the Originations Group
located in Fort Lee, New Jersey and the Underwriting Operations
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Group located at the Company's corporate headquarters in Philadelphia,
Pennsylvania. This physical separation of the groups and their clearly
delineated responsibilities provide the Company with an effective checks and
balances system. The 175-member Originations Group establishes the initial
contact with the claimant but has no power to execute a transaction. Meanwhile,
the 17-member Underwriting Operations Group processes and executes transactions
but does not initiate business.
The origination process starts when a claimant or a broker calls the
Company and ends with the execution of legal documentation and the disbursement
of funds. The Company's policies prohibit personnel from 'cold calling'
prospective claimants in connection with structured settlement originations. The
Company's first contact with a prospective claimant is always initiated by the
claimant or a referral source. The Originations Group includes an in-house
advertising agency as well as a 200-seat telemarketing call center with both
inbound and outbound capacity equipped with predictive dialing technology.
The Company's use of its own personnel (as opposed to purchasing claims
through brokers) offers significant operational advantages. Minimizing reliance
on the broker community permits the Company to maintain more control of its
origination process. Broker-generated originations have fallen to less than five
percent of monthly production largely due to the Company's successful direct
marketing efforts. The Company relies on its highly trained sales force to
handle incoming claimant inquiries, provide customer service and thereby
increase the acquisition of high-quality receivables.
The Originations Group is primarily responsible for gathering the
information from the claimant that is necessary for the Company to determine
whether the claimant has an asset that qualifies for funding and whether the
claimant has a real need for the Company's funding products. A claimant who
cannot supply appropriate evidence of the existence of an annuity contract that
names the claimant as the beneficiary of the policy, as well as appropriate
evidence of the settlement agreement giving rise to the receivable, or whose
financial profile does not make the claimant a logical candidate for funding is
rejected by trained staff member without the need of further review.
Once a claimant is qualified, the account representative sends the file to
a staff member responsible for pricing, who analyzes the funding requirements of
the claimant, the structure of payments due the claimant and the Company's
return objective and then presents alternative funding choices to the claimant.
To meet the claimant's funding requirements, the Company may propose buying only
certain scheduled payments or may propose buying varying portions of each
scheduled payment. These alternatives are presented to the claimant, who then
makes a decision as to which structure best meets his or her requirements. The
Company establishes a direct relationship with its customers which often lead to
'continuations.' Continuations occur when claimants sell the Company a portion
of their payments due under the structured settlement and subsequently sell
another portion of their payments at a later time. Continuations give the
Company the opportunity to develop a history with a claimant prior to making
additional purchases and, therefore, potentially minimize risk of loss.
Contract Review and Processing
Once the claimant chooses a funding option, the file is submitted to the
Underwriting Operations Group for detailed review. The Company's comprehensive
underwriting procedures are designed to minimize the risk of claimant fraud and
the resulting loss with respect to its receivables. The Company does not need to
employ traditional underwriting procedures designed to determine the credit
quality of the obligor since a majority of the structured settlement receivables
are funded by highly rated Annuity Providers. The most prominent fraud-related
risks inherent in the purchase, financing, or securitization of structured
settlements are (i) diversion of payments to addresses other than those of the
bank accounts controlled by the Company, (ii) competing creditor interests and
(iii) duplicative financing of the receivable in question. The Company's
underwriting objective is to obtain an unencumbered interest in the right to
receive payments from the structured settlements.
The Company has established written underwriting standards to minimize the
frequency and severity of these types of fraud risks. The review process is
divided into separate stages, with each stage of review being the responsibility
of different staff members. Staff members at each stage of
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review have independent authority to reject an application. In the case of
structured settlements, the Company: (i) requires that the claimant retain an
attorney in good standing with the applicable state bar association; (ii)
conducts UCC, lien, and judgment searches against the claimant with whom the
Company is considering a transaction; (iii) accesses a database located at a
secure intranet web site that was created by the Company and several of its
competitors to identify quickly a claimant who is trying to sell his right to
receive payments more than once; (iv) obtains an 'estoppel' letter from
claimant's attorney confirming that the claimant agreed to assign payment rights
under the structured settlement knowingly and voluntarily after seeking the
advice of an attorney; (v) conducts taped exit interviews with claimants prior
to funding; (vi) completes review by in-house attorneys to ensure compliance
with eligibility criteria; and (vii) obtains confirmation from EDS that
settlement purchase agreements and other related documents are properly
executed.
In 1995, the Company entered into an agreement with EDS, which in June 1997
was amended to increase its term to twenty years, pursuant to which the Company
delivers to EDS files with respect to each receivable the Company originates. As
a recipient of each file, EDS can track the Company's portfolio and
independently verify that the underwriting process for each receivable conforms
to the Company's standards. EDS also acts as 'back-up' servicer with respect to
both the Company's owned and serviced receivables.
COLLECTIONS
The Company's five-member Collections Department is responsible for
monitoring any receivable for which a payment has not been received as expected,
and to take actions necessary to ensure collection. These instances include
circumstances when: (i) a payment is lost; (ii) a payment is not sent to the
proper address by the Annuity Provider or other obligor; (iii) a claimant has
diverted payment or otherwise compromised the Company's interest in a
receivable; (iv) the claimant seeks protection under the Bankruptcy Code; or (v)
the claimant is deceased.
In the case of structured settlements, once a receivable has been referred
to the Collections Department, the Company investigates the cause of non-payment
and attempts to collect directly from the responsible party. The Company views
its first-level collection efforts as a 'rehabilitation' process. Administrative
delinquencies described in subparagraphs (i) and (ii) above are generally
quickly resolved by contacting the Annuity Provider responsible for the payment.
In these cases, the Company first works with the Annuity Provider to freeze
additional payments until it can be determined who is entitled to be paid. In
the event of actual diversion by the claimant, the Company's internal legal
staff initiates legal proceedings and seeks to obtain a judgment against the
claimant. Upon obtaining a judgment against the claimant, the Company serves
notice of such judgment on the Annuity Provider, and the Company subsequently
seeks to garnish the annuity payments and redirect them to the Company. If the
Annuity Provider is located in a jurisdiction different than the one in which
the judgment is obtained, the Company 'domesticates' the judgment in the
appropriate jurisdiction and garnishment process is then served on the Annuity
Provider. If the Company's efforts to garnish the annuity payments are
contested, the matter is referred to outside counsel. See 'Risk Factors --
Relationships with Annuity Providers.'
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<PAGE>
The following table shows certain information with regard to the
delinquency history regarding the Company's receivables:
DEFAULT DELINQUENCY HISTORY
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------- ------------------
1994 1995 1996 1996 1997
---- ---- ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Structured Settlements:
Defaulted receivables...................... -- 2 34 6 71
Defaulted payments......................... -- 4 146 33 321
Carrying value of defaulted receivables.... -- $ 40 $1,313 $ 151 $3,280
Carrying value of defaulted payments....... -- $ 7 $ 200 $ 39 $ 334
Defaulted receivables as a percentage of
portfolio............................... -- 0.8% 2.2% 0.7% 3.1%
Other Deferred Payment Obligations:
Delinquent receivables..................... -- 13 20 16 10
Carrying value of delinquent receivables... -- $133 $ 197 $ 127 $ 63
Delinquent receivables as a percentage of
portfolio............................... -- 0.3% 0.7% 0.3% 0.4%
</TABLE>
The Company's other deferred payment obligations have had no charge-offs
since inception. The Company recorded a net charge-off of $610,000 of structured
settlement receivables for the six months ended June 30, 1997, 0.6% of its
average portfolio for such period.
SECURITIZATIONS
In a securitization transaction, the Company sells a pool of structured
settlements to a securitization trust or other special purpose vehicle, which in
turn issues interests that are sold to investors. Payments on the securitized
receivables, less a servicing fee and certain related expenses, are made by the
special purpose vehicle to investors. The Company recognizes revenue in an
amount equal to the Gain on Sale when the receivables are sold to the special
purpose vehicle. The Company also retains a subordinated interest in the pool of
securitized receivables which is recorded as a Retained Interest on the
Company's balance sheet.
The following table presents certain information with respect to the
Company's securitizations:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE CREDIT
OFFERING PASS-THROUGH RATING OVER-
SECURITIZATION DATE COMPLETED SIZE RATE (1) (2) COLLATERALIZATION
- -------------- ------------------ ------------- ---------------- ------ -----------------
<S> <C> <C> <C> <C> <C>
1997-1........ June 13, 1997 $70.8 million 7.8% A2/A 16%
1997-A........ September 30, 1997 $31.0 million 7.2% A2/A 16%
October 1, 1997 $41.0 million 7.2% A2/A 16%
</TABLE>
- ------------------
(1) Senior Security only.
(2) Rating from Moody's and Duff & Phelps, respectively.
The Company acts as the master servicer of the securitized receivables for
which it receives a fee equal to one percent of the average discounted balance
of the securitized receivables on each monthly distribution date. See 'Risk
Factors,' 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' and '--Servicing Operations.'
As of October 3, 1997, the majority of the approximately $30.0 million in
structured settlement receivables on the Company's balance sheet did not meet
the eligibility criteria of the recent securitizations. These receivables
include originations from Notice States, from Illinois and payment
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<PAGE>
rights arising from workers' compensation awards. The Company does not
anticipate securitizing these receivables and presently intends to hold them to
maturity.
SERVICING OPERATIONS
The Company has the administrative capacity to manage all aspects of the
servicing of its owned and serviced receivables. The Company maintains a
detailed computerized data base which lists payment due dates with respect to
all owned and serviced receivables. Any payment which is not received on time by
the Company is promptly investigated by the Company's Underwriting Operations
Department. To the extent such non-payment or delay in payment is unresolved or
is suspected of being the result of claimant fraud, such receivable is turned
over to the Company's Collections Department for further action.
In addition, the Company acts as the master servicer with respect to its
securitized receivables. As master servicer, the Company is obligated to post
payments, produce reports, and allocate payments for the benefit of certificate
holders. In consideration of its services, the Company collects a servicing fee
equal to one percent of the aggregate receivables balance at the end of each
month. The Company's servicing capacity is supported by EDS, which maintains
detailed computer records pertaining to each of the Company's owned and managed
receivables in its role as 'back-up' servicer.
In connection with its monitoring responsibilities, the standard operating
procedures of the Underwriting Operations Department require placing a telephone
call to an applicable Annuity Provider before an irregularly-scheduled payment
is due in order to make sure that the address for the payment is a lockbox
controlled by the Company. As monthly payments tend to be smaller than non-
monthly payments, no such calls are made to confirm payment instructions with
respect to such receivables. Instead, the Company relies on its ability to
closely track scheduled payments and to initiate rapid enforcement action in the
case of any non-payment due to claimant fraud.
COMPETITION
The secondary market for deferred payment obligations is currently highly
fragmented. In the market for structured settlements, the Company currently
experiences competition from two main groups: specialty finance companies and
independent brokers. The Company also experiences competition from individual
brokers and networks of brokers through whom some of the Company's direct
funding competitors originate much of their business. Because the Company
originates substantially all of its receivables by its retail originations
infrastructure, independent brokers are more likely to broker claims they
identify to the Company's funding-company competitors than they are to refer
them to the Company. In the future, the Company could face competition from a
wide variety of financial services providers, including commercial banks, credit
unions, savings and loans and other consumer and commercial lending
institutions. Many of these existing and potential competitors in the financial
services business are substantially larger and have more capital and other
resources than the Company. The Company believes that it competes for business
based upon the quality of its services, convenience and turnaround time in the
funding process, availability of funding options and price. See 'Risk Factors --
Competition.'
INFORMATION TECHNOLOGY
As part of its ongoing effort to increase efficiency, the Company has
recently installed a call center system combining voice-data integration,
predictive dialing and call and contact management software. The system provides
management with the power to change or update capabilities without the need for
costly customized software code due to its open-architecture design and
easy-to-use application-building software. In addition, the Company purchased a
new general ledger system and upgraded substantially all of its computer
hardware within the last year. The Company intends to continue to look for ways
to improve efficiencies through automation and improved information technology.
The Company believes that its information systems have all capabilities that are
required
44
<PAGE>
to handle the change of the century in a standard and accurate manner, including
any data management problems related to the year 2000.
PROPRIETARY RIGHTS AND LICENCES
The Company has applied for federal trademark protection for its company
name and logo, the name of its newsletter, The National Funding Chronicle, and
the slogan 'An American Financial Rescue.' Although the Company has not received
any response from the Patent and Trademark Office, and does not expect any
adverse office action on the application, there is no assurance that such
trademarks will be issued in a timely fashion, if at all.
GOVERNMENT REGULATION AND LEGISLATION
Although in most states the Company's business is currently not subject to
significant regulation, the Company monitors the progress of regulation and
legislation in each state in which it acquires deferred payment obligations.
Because the business of originating rights to receive payment from structured
settlements has only developed recently, the number of new regulatory
initiatives may increase in the future. For example, the Illinois legislature
recently passed a statute that takes effect on January 1, 1998 that will require
that any assignment of a structured settlement be approved by a court having
jurisdiction over the underlying claim and will prohibit an Annuity Provider
from mailing payments to any party other than the claimant without such court
approval. The Illinois law does not currently specify the standards on which
courts would grant approvals of assignments or the process by which such
approval should be sought. Because of the uncertainty associated with the
Illinois law, the Company did not securitize any receivables purchased from
claimants in Illinois in its most recent securitization.
The Company believes that the pressure on governments to regulate purchases
of structured settlements and other deferred payment obligations will grow as
the market continues to attract new entrants. The Company has led in the
formation of the National Association of Settlement Purchasers ('NASP'), a trade
group, through which it will work to influence the shape of new laws and
regulations to minimize the adverse impact of such legislation. Although the
Company believes that NASP efforts to promote a favorable regulatory environment
will be successful, the ultimate impact of future laws and regulations cannot be
determined. Accordingly, there is no assurance that new regulatory and
legislative initiatives will not have a material adverse effect upon the
Company's financial condition and results of operation. See 'Risk Factors --
Regulation and Legislation.'
LEGAL PROCEEDINGS
The Company initiates legal proceedings in the ordinary course of its
business to collect delinquent payments due to the Company under the terms of
structured settlement purchase agreements entered into with claimants. The goal
of these actions is to obtain a judgment against the claimant and enforce the
judgment by seeking garnishment of payments made by Annuity Providers under the
annuity contracts. See 'Business -- Collections.' None of these proceedings,
considered separately, is material to the Company's business.
Some Annuity Providers, however, have contested the Company's garnishment
actions, by raising a number of claims, allegations or defenses in their
responsive pleadings. The responses typically raise one or more of the following
issues: (i) contractual provisions in the settlement agreements or annuity
contracts prohibit assignment, encumbrance or garnishment of the scheduled
payments; (ii) the settlement purchase agreement between the Company and the
claimant is unenforceable because of fraud, collusion or misrepresentation by
the claimant and the Company; (iii) scheduled payments are exempt from
garnishment under various states' laws regarding insurance contracts and annuity
contracts; and (iv) certain judgments entered against garnishees by the court
clerk or prothonotary should be stricken because such clerk or prothonotary
exceeded its statutory authority. The Company has vigorously contested, and
expects to continue to contest, these claims, allegations and defenses when they
are raised by Annuity Providers. Although to date none of the defenses to the
Company's
45
<PAGE>
garnishment actions brought by Annuity Providers have been successful, to the
extent that a court would accept the validity of such defenses, the collection
efforts of the Company could be materially adversely affected. The Company was
recently served with a complaint by an Annuity Provider that sought a
declaration that such Annuity Provider is not obligated to make scheduled
payments directly to the Company. Although the amount in issue in this
litigation is not material to the Company's business, if the Annuity Provider
were to prevail, other courts could rely on the conclusions of such court and
make it more difficult for the Company to collect payments under structured
settlement receivables. See 'Risk Factors -- Relationships with Annuity
Providers.'
The Company is also party to two actions initiated by claimants, neither of
which is material to the Company.
EMPLOYEES
As of October 1, 1997, the Company had approximately 200 employees. None of
the Company's employees is represented by a labor union. The Company believes
that its relations with its employees is good.
PROPERTIES
The Company's headquarters and underwriting operations are located in
16,043 square feet of leased office space in Philadelphia, Pennsylvania, its
acquisitions and marketing operations are conducted from a 21,520-square foot
leased facility in Fort Lee, New Jersey and SSC leases shared office space in
Wilmington, Delaware. The leases for the Philadelphia and New Jersey facilities
expire in January 2003 and March 2002, respectively, with the Company having
options with respect to additional space in both locations. With this additional
space, the Company believes its existing facilities are adequate for its current
needs, but that additional space will be required by December 1998.
46
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
NAME AGE POSITION
- ----------------------------- --- --------------------------------------------
Gary Veloric................. 37 Chairman of the Board of Directors
James D. Delaney............. 46 President, Chief Executive Officer and
Director
Michael B. Goodman........... 35 Executive Vice President, Chief Operating
Officer and Director
Andrew S. Hillman............ 45 Senior Vice President, General Counsel and
Secretary
James J. O'Malley............ 46 Vice President and Chief Financial Officer
Edward S. Stone.............. 35 Director
Gerald E. Bisbee, Jr......... 55 Director
Philip J. Kendall............ 68 Director
Anthony C. Salvo............. 54 Director
GARY VELORIC serves as the Chairman of the Board of Directors of the
Company. Since founding JGW in 1991, Mr. Veloric has served as a director and in
various capacities as an officer of each of JGW and the General Partners, most
recently as Chairman and, until August 1997, as Chief Financial Officer of each
entity. From 1983 until May 1992, Mr. Veloric served as Senior Vice President of
Development for Geriatric and Medical Companies, Inc., a leading provider of
long-term care based in Philadelphia, Pennsylvania ('GeriMed'). Mr. Veloric also
served as a director of GeriMed.
JAMES D. DELANEY serves as the President and Chief Executive Officer and a
director of the Company. Since co-founding JGW with Mr. Veloric in 1991, Mr.
Delaney has served as a director and in various capacities as an officer of each
of JGW and the General Partners, most recently as President and Chief Executive
Officer of each entity.
MICHAEL B. GOODMAN serves as the Executive Vice President and Chief
Operating Officer and a director of the Company. From March 1994 until October
1997, Mr. Goodman served as Vice President of Marketing of the Company, at which
time Mr. Goodman helped develop the Company's marketing strategy and
originations operations. From 1991 until February 1994, Mr. Goodman was an
independent investor and business consultant.
ANDREW S. HILLMAN serves as the Company's Senior Vice President, General
Counsel and Secretary since joining the Company in October 1997. From September
1994 until he joined the Company, Mr. Hillman was a shareholder at Silverman
Coopersmith Hillman & Frimmer, a Professional Corporation, a law firm based in
Philadelphia, PA, where he specialized in banking and corporate law and
represented the Company in a number of transactions and in certain corporate and
partnership matters. From 1986 until September 1994, Mr. Hillman was a partner
at the law firm of Cohen Shapiro Polisher Shiekman and Cohen in Philadelphia,
Pennsylvania.
JAMES J. O'MALLEY serves as the Company's Vice President and Chief
Financial Officer. From August 1997, Mr. O'Malley served as Chief Financial
Officer of JGW and the General Partners. From 1989 until June 1997, Mr. O'Malley
served in various financial capacities with GeriMed and served as its Vice
President and Chief Financial Officer from June 1992 until it was acquired by
Genesis Health Ventures, Inc. in October 1996.
EDWARD S. STONE serves as a director of the Company. From March 1997 until
October 1997, Mr. Stone served as outside General Counsel to the Company. Mr.
Stone began offering legal and other consulting services to the Company in May
1995 and billed the Company for such services through his legal practice, the
Law Offices of Edward S. Stone, and through Stone International LLC, a
consulting
47
<PAGE>
firm of which Mr. Stone is the principal. Until May 1995, Mr. Stone was a
principal of Settlers' Funding LLC ('Settlers' Funding'), a company that
purchased settlement obligations of the JUA and MTF in competition with the
Company, at which time Mr. Stone ceased his involvement in management of that
firm's affairs. Settlers' Funding ceased business operations in June 1995.
GERALD E. BISBEE, JR. has consented to become a member of the Company's
Board of Directors upon the completion of the Offering. Since January 1990, Mr.
Bisbee has been the Chairman and Chief Executive Officer of APACHE Medical
Systems, Inc., a publicly traded firm specializing in healthcare decision
support services. Mr. Bisbee also is a director of the Cerner Corporation, a
publicly traded software company located in Kansas City, Missouri, and is a
director of Yamaichi, a registered investment company.
PHILIP J. KENDALL has consented to become a member of the Company's Board
of Directors upon the completion of the Offering. Since April 1991, Mr. Kendall
has been Chairman of the Board of Directors of Global Financial Press, a leading
financial printing and document imaging firm ('Global'). Global is providing
financial printing services to the Company in connection with the Offering.
ANTHONY C. SALVO has consented to become a member of the Company's Board of
Directors upon the completion of the Offering. In May 1995, Mr. Salvo co-founded
and became a principal of Rai Capital LLC, a private investment firm located in
New York, NY. From 1988 until December 1994, he was a Vice President with Dillon
Read & Co., Inc., an investment bank that was based in New York, NY.
CLASSIFIED BOARD; COMMITTEES
The Company's Board of Directors is divided into three classes. Each class
holds office until the third annual meeting for the election of directors
following the election of such class, except that the initial terms of the Class
I, Class II and Class III directors expire in 1998, 1999 and 2000, respectively.
Messrs. Goodman and Stone are Class I directors, Mr. Veloric is a Class II
director and Mr. Delaney is a Class III director. It is expected that upon the
completion of the Offering, Mr. Bisbee will be a Class I director, Mr. Kendall
will be a Class II director and Mr. Salvo will be a Class III director.
The Board of Directors intends to establish an Executive Committee, a
Compensation Committee, an Audit Committee and a Corporate Compliance Committee.
The Executive Committee is authorized to exercised the power of the Board of
Directors between meetings. However, the Executive Committee may not: (i) amend
the Certificate of Incorporation or the By-laws of the Company, (ii) adopt an
agreement of merger or consolidation, (iii) recommend to the stockholders the
sale, lease, or exchange of all or substantially all of the Company's property
and assets, (iv) recommend to the stockholders a dissolution of the Company or
revoke a dissolution, (v) elect a director, or (vi) declare a dividend or
authorize the issuance of stock. The Compensation Committee will determine
salaries and bonuses and other compensation matters for officers of the Company,
determine employee health and benefit plans, and administer the Company's 1997
Stock Incentive Plan and any similar plans created in the future. The Audit
Committee will recommend the appointment of the Company's independent public
accountants and will review the scope and results of audits, internal accounting
controls and tax and other accounting related matters. The Corporate Compliance
Committee will ensure that the Company complies with all applicable laws and
regulations.
DIRECTOR COMPENSATION
Each of the Company's non-employee directors will be entitled to receive an
annual fee of $10,000 for service as a director and a fee of $1,000 for each
meeting of the Board of Directors or any committee thereof such director
attends. In addition, each director will be entitled to reimbursement of travel
and other expenses incurred in connection with their service as directors. Each
director, other than the Principals, will also receive options to purchase
10,000 shares of Common Stock concurrently with the completion of the Offering
exercisable at the initial public offering price that will vest on the six-month
anniversary of the Offering.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or accrued by the Company for fiscal 1996 to the Company's
Chief Executive Officer and to the four most highly compensated executive
officers of the Company whose salary and bonus for fiscal 1996 exceeded $100,000
for all services rendered in all capacities to the Company (the 'Named Executive
Officers'):
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2)
- -------------------------------------------------------- -------- ------- ---------------
<S> <C> <C> <C>
James D. Delaney ....................................... $185,256 -0- $ 24,235
President and Chief Executive Officer
Gary Veloric ........................................... $182,814 -0- $ 24,235
Chairman of the Board of Directors
Michael B. Goodman ..................................... $186,288 -0- $ 211,735
Executive Vice President and Chief Operating Officer
</TABLE>
- ------------------
(1) The compensation reported in the above table was not paid by the Company but
by JGW and the Partnerships. For a description of the relationships between
the Partnerships and JGW prior to the formation of the Company, see 'The
Reorganization and Change in Tax Status.'
(2) Consists of commissions of $24,235 paid to each of the Principals as
compensation for services provided in connection with organizing the
business of the Partnerships and approximately $189,500 paid to Mr. Goodman
by MFC as a consulting fee. Amounts do not include $223,000 distributed to
each of Messrs. Delaney and Veloric by MFC and $42,000 distributed to each
of the Principals by SSC in 1996. For additional information regarding
payments made by the Partnerships to the Named Executive Officers and
others, see 'Distributions and Dividend Policy' and 'The Reorganization and
Change in Tax Status.'
EMPLOYMENT AGREEMENTS
In October 1997, the Company entered into employment agreements with the
Principals, each for an initial term of three years. Under the terms of the
employment agreements, the Company will pay each of the Principals a base salary
of $195,000 per year, subject to annual cost of living adjustments and periodic
increases at the discretion of the Compensation Committee of the Board of
Directors. Each year, the executives are entitled to receive a formula bonus in
an amount ranging from 50% to 200% of the executives' base salary. The
percentage used to calculate the amount of the bonus increases on a
straight-line basis with the level of 'return on average equity' (as defined in
the appropriate employment agreement) achieved by the Company for the previous
year. Under the formula, the executives earn no bonus if ROAE is less than 15%
and achieve a maximum bonus of 200% of base salary if the ROAE equals or exceeds
35%. Each of the Principals shall be entitled to participate generally in the
Company's employee benefit plans, including the 1997 Stock Incentive Plan. Under
the terms of the employment agreements each of the Principals will be awarded
options to purchase 50,000 shares of Common Stock upon the completion of the
Offering at the initial public offering price and will vest in four equal annual
installments beginning on the first anniversary of the completion of the
Offering.
Also in October 1997, the Company entered into an employment agreement with
Mr. Hillman for an initial term of one year. Under the terms of this employment
agreement, the Company will pay Mr. Hillman a base salary of $170,000 per year,
subject to annual cost of living adjustments and periodic increases at the
discretion of the Compensation Committee of the Board of Directors. Mr. Hillman
will also be entitled to a formula bonus and to participate generally in the
Company's employee benefit plans on the same terms as the Principals. Mr.
Hillman's employment agreement also provides for an award under the 1997 Stock
Incentive Plan of options to purchase 50,000 shares of Common Stock upon the
completion of the Offering and will vest on the same schedule as the options
49
<PAGE>
to be granted to the Principals, except that upon Mr. Hillman's resignation for
'good reason,' the options shall vest immediately.
According to each employment agreement, if the executive is terminated 'for
cause,' which definition generally includes termination by the Company due to
the executive's willful failure to perform his duties under the employment
agreement, the executive's personal dishonesty, or the executive's breach of his
fiduciary duties or any other provisions of his respective employment agreement,
then the Company is obligated to pay the executive so terminated only his base
salary up to his termination 'for cause.' If any of the Principals are
terminated without cause, or the executive leaves for 'good reason,' the Company
is obligated to pay such executive his base salary, bonus and benefits for the
remaining term of his employment agreement or, in the case of Mr. Hillman, the
greater of the remaining term of his Agreement or six months from the date of
termination. As used in the employment agreements, 'good reason' includes the
executive officer's resignation due to a breach by the Company of his employment
agreement or a change of control, the Company must pay such executive officer
his salary, bonus and benefits for the greater of the remaining term of the
employment agreement and one year after such termination.
1997 STOCK INCENTIVE PLAN
Under the Company's 1997 Stock Incentive Plan (the 'Plan'), a variety of
awards, including stock options, stock appreciation rights and restricted and
unrestricted stock grants may be made to the Company's employees, officers,
consultants and advisors who are expected to contribute to the Company's future
growth and success. 1,500,000 shares of Common Stock are reserved for issuance
under the Plan and the maximum number of shares for which options, SARs or other
rights may be granted to any single individual during one year is 500,000. The
Compensation Committee will administer the Plan and determine the price and
other terms upon which awards shall be made. Stock options may be granted either
in the form of incentive stock options or non-statutory stock options. The
option exercise price of incentive stock options may not be less than the fair
market value of the Common Stock on the date of the grant. While the Company
currently anticipates that most grants under this Plan will consist of stock
options, the Company may grant stock appreciation rights, which represent rights
to receive any excess in value of shares of Common Stock over the exercise
price; restricted stock awards, which entitle recipients to acquire shares of
Common Stock, subject to the right of the Company to repurchase all or a part of
such shares at their purchase price in the event that the conditions specified
in the award are not satisfied; or unrestricted stock awards, which represent
grants of shares to participants free of any restrictions under the plan.
Options or other awards that are granted under the Plan but expire unexercised
are available for future grants. It is expected that prior to the completion of
the Offering options to purchase 650,000 shares of Common Stock will be granted
under the Plan to the employees, officers and directors with an exercise price
equal to the initial public offering price per share. No options to purchase
Common Stock have been granted to date.
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<PAGE>
401(K) SAVINGS PLAN
In January 1997, the Company established a 401(k) Savings Plan (the '401(k)
Plan'), which is intended to comply with Sections 401(a) and 401(k) of the Code,
and the applicable provisions of the Employee Retirement Income Security Act of
1974, as amended. Amounts contributed to the 401(k) Plan are held under a trust
intended to be exempt from income tax pursuant to Section 501(a) of the Code.
All employees of the Company that have completed at least one year of service
and who are at least 21 years old are eligible to participate in the 401(k)
Plan. Participating employees are entitled to make pre-tax contributions to
their accounts, subject to certain maximum annual limits imposed by law ($9,500
in 1996), and certain other limitations.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Offering, the Company has not had a compensation committee or
any other committee of the Board of Directors performing similar functions.
Prior to the Offering, decisions concerning executive compensation were made by
the Principals, all of whom were, and continue to be, executive officers of the
J.G. Wentworth Affiliated Companies and participated in deliberations regarding
executive officer compensation. The Board of Directors of the Company has
established a Compensation Committee. See '-- Classified Board; Committees.'
None of the executive officers of the Company currently serves on the
compensation committee of another entity or any other committee of the board of
directors of another entity performing similar functions. For other related
party transactions, see 'Certain Relationships and Related Party Transactions.'
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of the Common Stock expected as of the completion of the Reorganization and as
adjusted to reflect the Offering by: (i) each of the Company's Named Executive
Officers and directors; (ii) all of the Company's executive officers and
directors as a group; (iii) each person known to the Company to own more than
five percent of the outstanding shares of Common Stock and (iv) each Selling
Stockholder. The information set forth in the table assumes that the initial
public offering price of the Common Stock will be $15.00 per share (the
mid-point of the price range set forth on the cover page of this Prospectus) and
that an aggregate 12,466,367 shares will be issued to Existing Stockholders in
the Reorganization. The calculation of number of shares to be issued to the
Existing Stockholders is governed by the provisions of the Contribution
Agreement. See 'The Reorganization and Change in Tax Status.'
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING NO. OF OFFERING
------------------ SHARES ------------------------------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------- --------- ------ ------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
James D. Delaney........... 2,687,313 21.6% 311,165 2,376,148 14.4%
Gary Veloric............... 2,687,313 21.6% 311,165 2,376,148 14.4%
Michael B. Goodman......... 2,662,223 21.4% 286,075 2,376,148 14.4%
Edward S. Stone............ 975,731 7.8% 83,333 892,398 5.4%
Alpha Nickelberry.......... 526,895 4.2% 45,000 481,895 3.0%
ING........................ 2,927,192 23.5% 250,000 2,677,192 16.3%
All Directors and executive
officers as a group (9
persons)................. 9,012,580 72.3% 991,738 8,020,842 48.7%
</TABLE>
- ------------------
(1) The address of each of Messrs. Delaney, Veloric, Goodman, Stone and
Nickelberry is c/o the Company, The Graham Building, 15th and Ranstead
Streets, 10th Floor, Philadelphia, Pennsylvania 19102. ING's address is 135
East 57th Street, New York, New York 10022.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
RELATIONSHIPS WITH PRINCIPALS
Since founding JGW, Messrs. Delaney and Veloric have operated a number of
businesses not related to the business of the Company both through JGW and
through other corporations and partnerships under their joint control. Since
1991, Messrs. Delaney and Veloric have engaged in a merchant banking business
that specializes in the healthcare industry, performing through JGW and other
entities such activities as advising on strategic transactions and financings
and providing mortgage brokerage services (collectively the 'Healthcare
Business'). In connection with this business, Messrs. Delaney and Veloric formed
J.G. Wentworth Securities, Inc. ('Securities'), a registered broker-dealer in
compliance with the rules of the National Association of Securities Dealers,
Inc. and applicable federal and state regulatory authorities. In October 1996,
the activities related to the Healthcare Business conducted by JGW were assigned
to two partnerships controlled by Messrs. Delaney and Veloric, J. G. Wentworth
Mortgage Funding, L.P. ('Mortgage Funding') and J. G. Wentworth Partners, L.P.
('Partners LP'). Since their formation, Mortgage Funding and Partners LP have
paid management fees to JGW in consideration for the services performed by
Company personnel and for the Company's technological and administrative
resources. JGW billed Partners LP $122,000 in 1996 and an additional $345,000
for the six months ended June 30, 1997 for management and related services and
billed Mortgage Funding a de minimis amount for such services during the same
periods. Since its inception, Securities has not paid any management fees to JGW
or any of the other JGW Affiliated Companies.
Messrs. Delaney and Veloric intend to divest themselves of all interests in
Securities, Mortgage Funding and Partners LP and cease active participation in
the Healthcare Business prior to completion of the Offering; however, if a
suitable buyer is not found such divestment may be delayed. After such
divestiture, all services performed by the Company on behalf of Securities,
Mortgage Funding and Partners LP will be performed under the terms of written
agreements approved by the Company's non-employee directors. In addition, the
Company will enter into agreements with Securities, Mortgage Funding and
Partners LP to permit their use of the Company's name for a limited period after
the completion of the Offering. The Company expects that in connection with such
divestitures, the Company, for the benefit of the purchasers, will make certain
representations and warranties and indemnities and other covenants customary in
transactions of such type. At June 30, 1997, Partners LP was indebted to the
Company for approximately $100,000 in management fees billed by JGW, which
amount represented the largest balance of such fees remaining unpaid since such
fees were charged. All such amounts are booked as related party receivables by
JGW and do not bear interest. At September 30, 1997, the remaining unpaid
balance of such indebtedness was $54,000. The Company expects that all unpaid
balances will be paid in full prior to completion of the Offering.
In January 1996, JGW distributed to a partnership controlled by Messrs.
Delaney and Veloric all of its rights related to its development of a drug
formulary system, its 7.0% interest in a nursing home located in New Jersey and
its rights to be paid an investment banking fee of approximately $200,000. In
April 1996, the Company acquired rights to produce a musical recording and
shortly thereafter transferred such rights to J.G. Wentworth Short-term Funding
Corp., a corporation controlled by the Principals ('Short-term Funding'), for a
payment of $83,000. Prior to completion of the Offering, Short-term Funding will
sell to the Company, through SSC, its rights to payment under several lottery
claims and other financing transactions at their aggregate carrying value of
approximately $200,000. Mortgage Funding also originated a loan transaction
secured by royalty rights for musical recordings and publishing. Prior to
completion of the Offering, Mortgage Funding will transfer its rights under this
loan to the Company for $200,000, its net book value plus accrued interest.
Certain minor personal transactions of the Principals have been conducted
through the offices of the Company. The Company maintained a record of personal
expenses paid through the Company and periodically the Principals reimbursed the
Company for past expenses or deposited personal funds with the Company to
finance anticipated expenses to be paid through the Company. Any indebtedness of
the Principals to the Company is booked as a related party receivable and does
not accrue interest. Neither
53
<PAGE>
Mr. Goodman nor Mr. Veloric has been indebted to the Company for a material sum
since January 1, 1994. In August 1996, the balance of Mr. Delaney's account
showed indebtedness of $124,000 to the Company, the largest balance of such
indebtedness outstanding since the beginning of 1994. At September 30, 1997, no
indebtedness of Mr. Delaney to the Company remains outstanding. The Principals
do not intend to continue the practice of conducting personal transactions
through the Company after completion of the Offering. In addition, the
Principals have personally guaranteed the repayment of all amounts borrowed
under the MFC Facility, which guarantee is expected to be released in connection
with the Offering.
RELATIONSHIP WITH EDWARD S. STONE
In May 1995, Mr. Stone began to provide legal and business consulting
services to the Company. The Law Offices of Edward S. Stone, Mr. Stone's legal
practice, billed the Company an aggregate of $0, $21,490 and $127,904 in 1995,
1996 and the six months ended June 30, 1997, respectively. Mr. Stone also
provided business consulting services to the Company through Stone International
LLC for which such company received $79,792, $115,939 and $36,827 in
compensation in 1995, 1996 and the six months ended June 30, 1997, respectively.
After completion of the Offering, Mr. Stone will continue to offer consulting
services to the Company and shall receive an annual fee of $175,000 in lieu of
legal or other fees otherwise payable to his legal practice or other entities he
controls.
RELATIONSHIP WITH ING
In connection with providing the SSC Facility, ING became a 25% limited
partner in SSC. After completion of the Offering, ING is expected to own 16.3%
of the outstanding Common Stock. An affiliate of ING acts as agent with respect
to the Credit Facilities for both MFC and SSC and acts as placement agent for
the securitizations. The Company paid ING a placement agency fee of $1.2 million
for the June 1997 securitization and a placement agency fee of $1.2 million for
the September and October securitizations. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources' and 'Underwriting.'
ING has a right of first refusal to act as placement agent in connection
with future securitizations of structured settlement receivables of up to an
aggregate of $200.0 million. At October 3, 1997, ING had acted as placement
agent in connection with the securitization of an aggregate of $60.5 million.
Accordingly, ING retains a right of first refusal with respect to $139.5 million
in future securitizations.
OTHER RELATIONSHIPS
Prior to joining the Company in October 1997, Mr. Hillman's law firm served
as outside legal counsel to the Company. For legal services, the Company paid
$168,000, $240,000 and $215,000 to Mr. Hillman's law firm in 1995, 1996 and the
nine months ended September 30, 1997.
TRANSACTIONS IN CONNECTION WITH THE FORMATION
On the date of the Reorganization, pursuant to the terms of a contribution
agreement (the 'Contribution Agreement'), the Principals will contribute all of
their capital stock in JGW, SSC Management and the General Partners and the
Existing Stockholders will contribute 100% of their interests in the
Partnerships to the Company, in exchange for a number of shares of Common Stock
determinable pursuant to a formula set forth in the Contribution Agreement. The
Reorganization will occur immediately prior to the completion of the Offering.
The Common Stock issued pursuant to the Contribution Agreement will constitute
all of the outstanding stock of the Company prior to the completion of the
Offering. The total number of shares distributable to the Existing Stockholders
in the Reorganization will be 12,466,367.
As a result of the Reorganization, JGW and the General Partners, each of
which will become a wholly owned subsidiary of the Company, will be fully
subject to federal and state income taxes, and the Company will record a net
deferred tax liability on its balance sheet. From their formation until the
Reorganization, JGW and the General Partners have been treated as S corporations
for federal income
54
<PAGE>
tax purposes and for certain state corporate income tax purposes. As a result,
the historical earnings of JGW and the General Partners have been taxed directly
to their respective stockholders at their individual federal and state income
tax rates. The amount of the deferred tax liability to be recorded as of the
date of termination of the S corporation status will result principally from
temporary differences between accounting and tax treatment of income earned from
finance receivables and Gain on Sale. The net deferred tax liability will be
recorded as a non-cash charge to the provision for taxes in the quarter in which
the Offering is completed. If the S corporation status of JGW and the General
Partners had been terminated as of June 30, 1997, the amount of the deferred tax
liability would have been approximately $6.2 million. See 'Risk
Factors--Possible Loss in Quarter; Variable Quarterly Earnings;'
'Capitalization' and 'Selected Combined Financial Data.'
Since inception, JGW and the General Partners have paid approximately 92%
of their estimated taxable income, including an estimate for the six months
ended June 30, 1997 to the Principals as S corporation distributions
(approximately $1.2 million was distributed from January 8, 1991 through June
30, 1997). In September 1997, JGW made a distribution of $70,000. From June 30,
1997 through October 8, 1997 the Company distributed $2.1 million to the
Existing Stockholders and intends to distribute an additional $2.0 million to
the Existing Stockholders in October 1997. Such distributions were paid to the
Principals as distributions of a portion of JGW's and the General Partner's
earnings and to pay the Principals' taxes. On October 8, 1997, SSC distributed
$2.0 million to the Existing Stockholders and intends to distribute an
additional $2.0 million to the Existing Stockholders in October 1997. Since
inception through June 30, 1997, the Partnerships paid approximately $4.4
million to the Existing Stockholders. Prior to the Reorganization, JGW will
distribute an estimated $1.2 million Tax Distribution to the Principals. The Tax
Distribution represents the sum of approximately (i) $298,000 in taxes payable
at the applicable statutory rate by the Principals on the estimated net earnings
of JGW and the General Partners for the period from January 1, 1997 to November
30, 1997 and (ii) $939,000 in taxes payable at the applicable statutory rate by
the Principals on the estimated net profits of the Partnerships from January 1,
1997 to November 30, 1997.
The Company, JGW, the General Partners and the Existing Stockholders have
entered into the Tax Agreement relating to their respective income tax
liabilities. Because JGW and the General Partners will be fully subject to
corporate income taxation after the termination of their S corporation status,
the reallocation of income and deductions between the period during which JGW
and the General Partners were treated as S corporations and the period during
which the Company, JGW and the General Partners will be subject to corporate
income taxation may increase the taxable income of one party while decreasing
that of another party. Accordingly, the Tax Agreement is intended to assure that
taxes are borne by the Company on the one hand and the Existing Stockholders on
the other only to the extent that such parties received the related income. The
Tax Agreement generally provides that the Company will indemnify the Existing
Stockholders against any liabilities of the Company after the Reorganization,
and the Existing Stockholders will indemnify the Company against any tax
liabilities of the Existing Stockholders prior to the date of the Reorganization
(in each case such indemnified amounts include interest and penalties and
related costs and expenses). The Company will also indemnify the Existing
Stockholders for all taxes imposed upon them as the result of their receipt of
an indemnification payment under the Tax Agreement. Any payment made by the
Company to the Existing Stockholders pursuant to the Tax Agreement may be
considered by the Internal Revenue Service or state taxing authorities to be
non-deductible by the Company for income tax purposes. The Tax Agreement also
provides that the Company will reimburse the Existing Stockholders for any taxes
that result from the disallowance of deductions taken by the Existing
Stockholders, the result of which is to permit the Company or JGW or the General
Partners to take such disallowed deductions after completion of the
Reorganization. None of the parties' obligations under the Tax Agreement are
secured, and, as such, there can be no assurance that the Existing Stockholders
or the Company will have funds available to make any payments which may become
due under the Tax Agreement. See 'The Reorganization and Change in Tax Status.'
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, and 5,000,000 shares of preferred stock, $.01 par value (the
'Preferred Stock'). Upon giving effect to the Reorganization but before
completion of the Offering, the Company will have 12,466,667 shares of Common
Stock outstanding. Upon completion of the Offering, the Company will have
16,466,667 shares of Common Stock outstanding. No shares of Preferred Stock are
currently outstanding.
COMMON STOCK
The holders of Common Stock are entitled to receive dividends, when and as
declared by the Board of Directors, out of funds legally available therefor and
to receive pro rata the assets of the Company legally available for distribution
upon liquidation after payment to holders of preferred stock having a
liquidation preference over the Common Stock. In addition, holders of Common
Stock are entitled to one vote per share on all matters voted on by stockholders
generally, including the election of directors, and do not have cumulative
voting rights. There are no preemptive, conversion or redemption rights
applicable to the shares of the Common Stock. Accordingly, holders of a majority
of the shares of Common Stock entitled to vote in any election of directors may
elect all of the directors standing for election. The currently outstanding
shares of Common Stock are, and the shares of Common Stock offered by the
Company hereby, upon issuance by the Company against receipt of the purchase
price therefor, will be, fully paid and non-assessable. The Company's
Certificate of Incorporation provides that any action requiring stockholder
approval, other than the election of directors, shall require the affirmative
vote of a majority of the outstanding shares of Common Stock.
PREFERRED STOCK
The Board of Directors is empowered by the Company's Certificate of
Incorporation to designate and issue from time to time one or more classes or
series of Preferred Stock without any action of the stockholders. The Board of
Directors may fix and determine the relative rights, preferences and limitations
of each class or series so authorized. The issuance of, or the ability to issue,
the preferred stock could adversely affect the voting power and other rights of
the holders of the Common Stock or could have the effect of decreasing the
market price of the Common Stock or discouraging or making difficult any attempt
by a person or group to obtain control of the Company, including any attempt
involving a bid for the Common Stock at a premium over the then market price.
The Company does not presently contemplate the issuance of any Preferred Stock.
ANTI-TAKEOVER PROVISIONS
The Company's classified Board of Directors and the authority of the Board
to issue Preferred Stock and to determine the price, rights, preferences and
privileges with respect to those shares without any further vote or action by
the stockholders of the Company could have the effect of delaying, impeding or
discouraging the acquisition of control of the Company in a transaction not
approved by the Board of Directors. The provision of the By-laws classifying the
Board of Directors may be repealed or amended by a vote of stockholders entitled
to cast 66 2/3% of the votes at a meeting of stockholders. In addition, the
Company may obtain stockholder approval for certain actions without calling a
meeting or soliciting proxies because the Certificate of Incorporation and the
Company's By-laws permit actions by written consent of the stockholders without
a meeting.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a 'business combination' with an
'interested stockholder' for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner or unless the interested
stockholder acquired at least 85% of the corporation's voting stock (excluding
shares held by certain designated stockholders) in the transaction in which it
became an interested stockholder. A 'business combination' includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Subject to certain
56
<PAGE>
exceptions, an 'interested stockholder' is a person who, together with
affiliates and associates, owns, or within the previous three years did own, 15%
or more of the corporation's voting stock.
LIMITATIONS OF LIABILITY; INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation and By-laws contain certain
provisions relating to the limitation of liability and indemnification of
directors and officers. The Company's Certificate of Incorporation provides that
directors of the Company may not be held personally liable to the Company or its
stockholders for monetary damages for a breach of fiduciary duty, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, relating to prohibited dividends,
distributions and repurchases or redemptions of stock, or (iv) for any
transaction from which the director derives an improper benefit. However, such
limitation does not limit the availability of non-monetary relief in any action
or proceeding against a director. In addition, the Company's Certificate of
Incorporation and By-laws provide that the Company shall indemnify its directors
and officers to the fullest extent authorized by Delaware law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 16,466,667 shares of
Common Stock outstanding. Of these shares, the 5,286,738 shares of Common Stock
sold in the Offering will be freely tradeable without restriction or
registration under the Securities Act. The remaining 11,179,929 shares of Common
Stock outstanding as of the date of this Prospectus are 'restricted securities'
as defined by Rule 144, all of which are held by the Selling Stockholders.
In general, under Rule 144, a person who has beneficially owned shares for
at least one year, including an 'affiliate,' as that term is defined in the
Securities Act, is entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the then outstanding
shares of Common Stock (approximately 164,667 shares after the completion of the
Offering), or the average weekly trading volume during the four calendar weeks
preceding filing of notice of such sale, subject to certain requirements
concerning availability of public information, manner and notice of sale.
In addition, affiliates must comply with the restrictions and requirements
of Rule 144, other than the one-year holding period requirement, in order to
sell shares of Common Stock which are not restricted securities. Under Rule
144(k), a person who is not an affiliate and has not been an affiliate for at
least three months prior to the sale and who has beneficially owned restricted
shares for at least a two year holding period may resell such shares without
compliance with the foregoing requirements.
The Company, the Selling Stockholders, directors, executive officers and
certain other security holders of the Company, owning upon completion of the
Offering, in the aggregate, 11,179,929 shares of Common Stock, have agreed that,
they will not, directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of any
option to purchase or other sale or disposition) of any shares of Common Stock
or other capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for, any shares of Common Stock, or other capital
stock of the Company, for a period of 180 days from the date of this Prospectus,
without the prior written consent of Prudential Securities Incorporated, on
behalf of the Underwriters, except that such agreement does not prevent the
Company from granting additional options under the Company's stock option plans.
Prudential Securities Incorporated may, in its sole discretion, at any time and
without notice, release all or any portion of the securities subject to such
lock-up agreements.
Upon completion of the Offering, it is expected that there will be 650,000
shares of Common Stock issuable upon exercise of options granted under the 1997
Stock Incentive Plan, which will vest in four equal annual installments
beginning on the first anniversary of the completion of the Offering. Pursuant
to the Underwriting Agreement, the Company has agreed not to file, at any time
prior to the date 180 days from the date of this Prospectus, a registration
statement under the Securities Act covering any of such shares. The Company,
however, intends to file a Form S-8 registration statement covering a portion of
these shares within one year from the date of this Prospectus. The shares
registered under such registration statement will be available for resale in the
open market upon the exercise of vested options, subject to Rule 144 volume
limitations applicable to affiliates.
Prior to the Offering, there has been no public market for the Common
Stock. Sales of substantial amounts of shares of the Common Stock in the public
market following the Offering could adversely affect the market price of the
Common Stock, making it more difficult for the Company to sell equity securities
in the future at a time and price which it deems appropriate.
58
<PAGE>
UNDERWRITING
The underwriters named below (the 'Underwriters'), for whom Prudential
Securities Incorporated, Oppenheimer & Co., Inc. and Furman Selz LLC are acting
as representatives (the 'Representatives'), have severally agreed, subject to
the terms and conditions contained in the Underwriting Agreement to purchase
from the Company and the Selling Stockholders the number of shares of Common
Stock set forth below opposite their respective names:
NUMBER OF
UNDERWRITERS SHARES
- ----------------------------------------- ---------
Prudential Securities Incorporated.......
Oppenheimer & Co., Inc...................
Furman Selz LLC..........................
---------
Total...............................
---------
---------
The Company and the Selling Stockholders are obligated to sell, and the
Underwriters are obligated to purchase, all of the shares of Common Stock
offered hereby, if any are purchased.
The Underwriters, through the Representatives, have advised the Company and
the Selling Stockholders that they propose to offer the Common Stock initially
at the public offering price set forth on the cover page of this Prospectus;
that the Underwriters may allow to selected dealers a concession of $ per
share; and that such dealers may reallow a concession of $ per share to
certain other dealers. After the Offering, the public offering price and the
concessions may be changed by the Representatives.
The Selling Stockholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
793,011 additional shares of Common Stock at the initial public offering price,
less underwriting discounts and commissions, as set forth on the cover page of
this Prospectus. The Underwriters may exercise such option solely for the
purpose of covering over-allotments incurred in the sale of the shares of Common
Stock offered hereby. To the extent such option is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares as the number set forth next to
such Underwriter's name in the preceding table.
The Company, the Selling Stockholders, directors, executive officers and
certain other security holders of the Company have agreed that they will not,
directly or indirectly, offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, pledge, grant of any option to
purchase or other sale or disposition) of any shares of Common Stock or of
equity securities of the Company substantially similar thereto or any securities
convertible into, or exchangeable or exercisable for, any shares of Common Stock
or such similar securities for a period of 180 days after the date of this
Prospectus, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, except that during such
period, shares of Common Stock may be issued upon the exercise of outstanding
stock options and the Company may issue employee stock options which are
exercisable after the 180th day after the date of this Prospectus. Prudential
Securities Incorporated may, in its sole discretion, at any time and without
prior notice, release all or any portion of the shares of Common Stock subject
to such lock-up agreements.
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<PAGE>
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against and contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
The Representatives have informed the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the offering price will be determined through
negotiations between the Company and the Representatives. Among the factors to
be considered in making such determination will be prevailing market conditions,
the Company's financial and operating history and condition, its prospects and
prospects for the industry in general, the management of the Company and the
market prices of securities for companies in businesses similar to that of the
Company.
In connection with the Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the selling
Underwriters by selling more Common Stock in connection with the Offering then
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of the Offering to cover
all or a portion of such short position, up to 793,011 shares of Common Stock,
by exercising the Underwriters' over-allotment option referred to above. In
addition, Prudential Securities Incorporated, on behalf of the Underwriters, may
impose 'penalty bids' under contractual arrangements with the Underwriters
whereby it may reclaim from an Underwriter (or dealer participating in the
Offering) for the account of the other Underwriters, the selling concession with
respect to the Common Stock that is distributed in the Offering but subsequently
purchased for the account of the Underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Common Stock at a level above that which might otherwise prevail in
the open market. None of the transactions described in this paragraph is
required, and, if any is undertaken, it may be discontinued at any time.
Under the Rules of Fair Practice of the National Association of Securities
Dealers ('NASD'), if more than 10% of the net proceeds of a public offering of
securities, not including underwriting compensation, are intended to be paid to
members of the NASD or affiliated or associated persons that are participating
in the distribution of the offering, the initial public offering price at which
the securities are distributed to the public must be no lower than that
recommended by a 'qualified independent underwriter,' as defined in Rule 2720 of
the Conduct Rules of the NASD. ING, an affiliate of Furman Selz LLC, one of the
Representatives, will be participating in the Offering as a Selling Stockholder
and, following completion of the Offering, will own approximately 16.3% of the
outstanding Common Stock. The Company also intends to use a substantial portion
of the net proceeds of the Offering to pay down amounts outstanding on the
Credit Facilities, in connection with which ING serves as agent. Accordingly,
ING is expected to receive in the aggregate more than 10% of the net proceeds of
the Offering. Prudential Securities Incorporated has agreed to act as the
qualified independent underwriter in connection with this Offering. The initial
public offering price of the Common Stock as set forth on the cover of this
Prospectus will not be lower than that recommended by Prudential Securities
Incorporated.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Wolf, Block, Schorr and Solis-Cohen LLP, Philadelphia, Pennsylvania.
Certain legal matters relating to the Offering will be passed upon for the
Underwriters by Stroock & Stroock & Lavan LLP, New York, New York.
EXPERTS
The combined balance sheets as of December 31, 1996 and 1995 and the
combined statements of operations, changes in equity and cash flows for each of
the three years in the period ended December 31, 1996 included in this
Prospectus and the Registration Statement have been included in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
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ADDITIONAL INFORMATION
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement on Form S-1 under the
Securities Act with respect to the shares of Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the shares of Common Stock, reference is hereby made
to the Registration Statement and the exhibits and schedules filed as a part
thereof. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. The Registration Statement, including exhibits and
schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's Regional Offices located at Seven World Trade
Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may also be obtained at prescribed rates from the Public Reference Section of
the Commission, Washington, D.C. 20549. In addition, registration statements and
certain other filings made with the Commission through its Electronic Data
Gathering, Analysis and Retrieval ('EDGAR') systems are publicly available
through the Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.
ANNUAL AND QUARTERLY REPORTS
After the Offering, the Company will be subject to the information
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith will file reports, proxy statements and other information
with the Commission. The Company intends to furnish its stockholders with annual
reports containing financial statements audited by its independent auditors and
quarterly reports for the first three quarters of each fiscal year containing
unaudited condensed financial information.
61
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
INDEX TO COMBINED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants..................................... F-2
Combined Balance Sheets as of December 31, 1995, 1996 and June 30,
1997 (unaudited).................................................... F-3
Combined Statements of Operations for the years ended December 31,
1994, 1995, 1996 and the six months ended June 30, 1996 (unaudited)
and 1997 (unaudited)................................................ F-4
Combined Statements of Changes in Equity (Deficit) for the years ended
December 31, 1994, 1995, 1996 and the six months ended June 30, 1997
(unaudited)......................................................... F-5
Combined Statements of Cash Flows for the years ended December 31,
1994, 1995, 1996 and the six months ended June 30, 1996 (unaudited)
and 1997 (unaudited)................................................ F-6
Notes to Combined Financial Statements................................ F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Partners of
J. G. Wentworth Affiliated Companies:
We have audited the accompanying combined balance sheets of J. G. Wentworth
Affiliated Companies (the 'Company') as of December 31, 1995 and 1996, and the
related combined statements of operations, changes in equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1996. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly in all material respects, the combined financial position of J. G.
Wentworth Affiliated Companies as of December 31, 1995 and 1996, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
September 19, 1997 except for Note 15
as to which the date is October 8, 1997
F-2
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
COMBINED BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30 (UNAUDITED)
DECEMBER 31, --------------------
------------------ PRO FORMA
1995 1996 1997 1997
------- ------- ------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............... $ 1,509 $ 102 $ 611 $ 611
Finance receivables..................... 60,104 90,930 71,757 71,757
Allowance for credit losses............. -- (500) (1,520) (1,520)
Office equipment........................
Net of accumulated depreciation of $73
in 1995, $111 in 1996 and $265 in
June 30, 1997....................... 98 524 2,125 2,125
Servicing asset......................... -- -- 890 890
Retained interests...................... -- -- 5,219 5,219
Restricted cash......................... -- -- 709 709
Other assets............................ 1,276 919 1,654 1,654
------- ------- ------- ---------
Total assets...................... $62,987 $91,975 $81,445 $81,445
------- ------- ------- ---------
------- ------- ------- ---------
LIABILITIES
Notes payable, banks.................... $56,907 $91,858 $75,165 $75,165
Overdraft payable....................... 955 1,457 968 968
Accounts payable........................ 2,299 1,541 1,739 2,945
Accrued expenses........................ 88 798 2,556 2,556
Claims payable.......................... 1,694 724 1,707 1,707
Deferred tax liability.................. -- -- -- 6,200
------- ------- ------- ---------
Total liabilities................. 61,943 96,378 82,135 89,541
Commitments and contingencies (note 11)
EQUITY (DEFICIT)
Common stock............................ 2 2 2 125
Additional paid-in capital.............. 261 261 261 (3,960)
Retained earnings....................... 512 285 1,939 (4,261)
Partner capital (deficit) accounts...... 269 (4,732) (2,861) --
Due from stockholders or partners....... -- (219) (31) --
------- ------- ------- ---------
Total equity (deficit)............ 1,044 (4,403) (690) (8,096)
------- ------- ------- ---------
Total liabilities and equity
(deficit)......................... $62,987 $91,975 $81,445 $81,445
------- ------- ------- ---------
------- ------- ------- ---------
</TABLE>
The accompanying notes are an integral part of
these combined financial statements.
F-3
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
COMBINED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------- --------------------------
1994 1995 1996 1996 1997
------ ------ ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Interest income....................... $2,755 $8,560 $10,426 $ 5,601 $ 8,743
Gain on sale of receivables........... -- 268 576 -- 11,419
Other income.......................... 417 894 785 319 386
------ ------ ------- ----------- -----------
Total revenues...................... 3,172 9,722 11,787 5,920 20,548
------ ------ ------- ----------- -----------
Expenses:
Interest expense...................... 1,541 4,995 6,380 2,820 4,783
Marketing expenses.................... 148 224 3,606 1,010 3,682
Salaries and benefits................. 686 1,509 1,992 697 2,384
Other expense......................... 873 1,350 3,384 2,588 1,800
Provision for credit losses........... -- -- 500 165 1,630
------ ------ ------- ----------- -----------
Total expenses...................... 3,248 8,078 15,862 7,280 14,279
------ ------ ------- ----------- -----------
Income (loss) before extraordinary
loss.................................. (76) 1,644 (4,075) (1,360) 6,269
Extraordinary loss...................... -- (876) -- -- --
------ ------ ------- ----------- -----------
Net income (loss)..................... ($ 76) $ 768 ($4,075) ($1,360) $ 6,269
------ ------ ------- ----------- -----------
------ ------ ------- ----------- -----------
(Unaudited) Pro forma information:
Pro forma (benefit) provision for
taxes................................. ($1,508) $ 2,320
Pro forma net income (loss)............. ($2,567) $ 3,949
Pro forma net income (loss) per share... ($ .20) $ .31
Pro forma number of shares
outstanding........................... 12,549 12,549
</TABLE>
The accompanying notes are an integral part of
these combined financial statements.
F-4
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
COMBINED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PARTNER
ADDITIONAL CAPITAL DUE FROM
COMMON PAID-IN RETAINED (DEFICIT) STOCKHOLDERS
STOCK CAPITAL EARNINGS ACCOUNTS OR PARTNERS TOTAL
------ ---------- --------- --------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994...... $1 $249 $ 53 $ 401 $ -- $ 704
Net income (loss)............. -- -- (256) 180 -- (76)
-- ----- --------- --------- ------ -------
Balance, December 31, 1994.... 1 249 (203) 581 -- 628
Capital contributions......... 1 12 -- 450 -- 463
Distributions and dividends... -- -- (22) (793) -- (815)
Net income.................... -- -- 737 31 -- 768
-- ----- --------- --------- ------ -------
Balance, December 31, 1995.... 2 261 512 269 -- 1,044
Capital contributions......... -- -- -- 762 -- 762
Distributions and dividends... -- -- (285) (1,630) -- (1,915)
Net income (loss)............. -- -- 58 (4,133) -- (4,075)
Receivable from partner....... -- -- -- -- (219) (219)
-- ----- --------- --------- ------ -------
Balance, December 31, 1996.... 2 261 285 (4,732) (219) (4,403)
Repayments (unaudited)........ -- -- -- -- 188 188
Distributions and dividends
(unaudited)................. -- -- (794) (1,950) -- (2,744)
Net income (unaudited)........ -- -- 2,448 3,821 -- 6,269
-- ----- --------- --------- ------ -------
Balance, June 30, 1997
(unaudited)................. $2 $261 $ 1,939 $(2,861) $ (31) $ (690)
-- ----- --------- --------- ------ -------
-- ----- --------- --------- ------ -------
</TABLE>
The accompanying notes are an integral part of
these combined financial statements.
F-5
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ ------------------
1994 1995 1996 1996 1997
------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (76) $ 768 $(4,075) $(1,360) $ 6,269
Adjustments to reconcile net income (loss) to net cash
used in operations:
Amortization and depreciation......................... 632 1,516 1,360 683 1,274
Accretion of unearned income.......................... (2,968) (8,718) (12,303) (5,779) (9,714)
Gain on sale of receivables........................... -- (268) (576) -- (11,419)
Provision for credit losses........................... -- -- 500 165 1,630
Changes in assets and liabilities:
(Increase) decrease in other assets................... (43) (311) 357 125 (735)
Increase (decrease) in accounts payable............... 305 1,656 (743) (1,081) 209
Increase in accrued expenses.......................... -- 17 710 114 1,758
Increase (decrease) in claims payable................. -- 1,506 (970) (1,506) 983
------- -------- ------- ------- -------
Total adjustments................................ (2,074) (4,602) (11,665) (7,279) (16,014)
------- -------- ------- ------- -------
Net cash (used in) operations......................... (2,150) (3,834) (15,740) (8,639) (9,745)
------- -------- ------- ------- -------
Cash flows from investing activities:
Finance receivable collections............................ 4,152 44,328 50,857 24,683 26,067
Finance receivable purchases, including acquisition
costs................................................... (32,721) (62,351) (76,755) (30,398) (51,568)
Proceeds from sale of receivables, net.................... -- -- 6,671 -- 58,269
Increase in restricted cash............................... -- -- -- -- (709)
Proceeds from disposition of equipment.................... -- 44 53 -- 560
Purchase of equipment..................................... (34) (45) (559) (173) (2,316)
------- -------- ------- ------- -------
Net cash (used in) provided by investing activities... (28,603) (18,024) (19,733) (5,888) 30,303
------- -------- ------- ------- -------
Cash flows from financing activities:
Net draws against notes payable, banks.................... 29,572 24,256 34,951 14,232 (16,693)
Partners' capital distributions and dividends to
shareholders............................................ -- (815) (1,915) (1,112) (2,744)
Partners' and stockholders' capital contributions......... 11 463 762 395 --
(Decrease) increase in overdraft payable.................. 981 (355) 502 (79) (489)
Principal payments under capital lease obligation......... (1) (15) (15) (9) (11)
Payments for financing costs.............................. (32) (215) -- (2) (300)
Repayments on amounts due from stockholders or partners... -- -- -- -- 188
Borrowings from stockholders or partners.................. 310 -- (219) -- --
Repayment of investor notes............................... (145) -- -- -- --
------- -------- ------- ------- -------
Net cash provided by (used in) financing activities... 30,696 23,319 34,066 13,425 (20,049)
------- -------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents........ (57) 1,461 (1,407) (1,102) 509
Cash and cash equivalents, beginning of period.............. 105 48 1,509 1,509 102
------- -------- ------- ------- -------
Cash and cash equivalents, end of period.................... $ 48 $ 1,509 $ 102 $ 407 $ 611
------- -------- ------- ------- -------
------- -------- ------- ------- -------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................. $ 1,466 $ 4,333 $ 5,624 $ 2,684 $ 4,674
Noncash transactions:
Gross charge-offs......................................... $ -- $ -- $ -- $ -- $ 610
Refinancing of notes payable.............................. $ -- $ 56,014 $ -- $ -- $ --
Retained interest......................................... $ -- $ -- $ -- $ -- $ 5,219
Servicing asset........................................... $ -- $ -- $ -- $ -- $ 890
</TABLE>
The accompanying notes are an integral part of
these combined financial statements.
F-6
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
The combined financial statements include the accounts of the following
affiliated entities under common management, including: J. G. Wentworth and
Company, Inc. ('JGW'), J.G. Wentworth Structured Settlement Funding Corporation
('SSFC'), J.G. Wentworth S.S.C., Limited Partnership ('SSC'), J.G. Wentworth
Funding Corp. ('FC'), and J.G. Wentworth MFC Associates, L.P. ('MFC'),
(collectively referred to herein as 'J.G. Wentworth Affiliated Companies' or the
'Company'). All significant transactions between the affiliated entities have
been eliminated in the accompanying combined financial statements.
JGW is a Pennsylvania corporation, incorporated on January 8, 1991, whose
primary purpose is to provide management services to the affiliated entities in
connection with the administration of insurance and lottery claims. SSFC is a
Delaware corporation that serves as the General Partner in SSC, a Delaware
limited partnership. Both SSFC and SSC commenced operations on August 25, 1995.
FC is a Pennsylvania corporation that serves as the General Partner in MFC, a
Delaware limited partnership. Both FC and MFC commenced operations on June 11,
1993.
SSC acquires the seller's right to receive payments with respect to settled
insurance company claims and annuities ('structured settlements') and state
lottery winnings ('lottery claims') which are paid to the recipient over a
period of years in return for a discounted lump sum payment to the seller. MFC
acquires settled bodily injury claims ('BI Claims') made to the New Jersey
Automobile Full Insurance Underwriting Association ('JUA'), the New Jersey
Market Transition Facility ('MTF') or other affiliated entities, for which
payment has been deferred twelve or eighteen months. The JUA and MTF pay BI
Claims on a specific date with interest accruing at 6% annually and payable to
MFC. MFC is restricted in its ability to purchase additional BI Claims since the
MTF has discontinued the deferral of claims. Structured settlements, lottery
claims and BI Claims are collectively referred to herein as finance receivables.
Prior to the completion of the initial public offering, the Company will
reorganize (the 'Reorganization') whereby SSC and MFC will contribute all of
their limited partnership interests and SSFC, FC and JGW will contribute all of
their capital stock in exchange for shares of common stock of a newly formed
corporation, entitled J.G. Wentworth & Company, Inc. In connection with the
Reorganization, management plans to account for the exchange of ownership
interests at their historical carry-over basis given that, (i) the affiliated
entities are under common management, (ii) the current ownership distribution of
SSC (the most significant affiliate of the Company) will generally approximate
the ownership percentages of the newly formed company, and (iii) the
reorganization will not have a substantial economic effect on the stockholder
group.
2. UNAUDITED PRO FORMA INFORMATION
The unaudited pro forma combined balance sheet represents the financial
position as of June 30, 1997 adjusted to give effect to the establishment of
$6,200,000 of net deferred tax liabilities that would have been recorded had the
Company been taxed as a C corporation and to give effect to the $1,237,000
distribution to S corporation stockholders and partners. The principal
components of the Company's net deferred tax liabilities relate to the method of
recognizing interest income and the recognition of gain on sale of finance
receivables.
The unaudited pro forma combined net income (loss) represents the results
of operations adjusted to reflect the change in the Company's income tax status
to a C corporation using a pro forma blended federal and state income tax rate
of 37%. The pro forma income (loss) per share is computed based on 12,466,667
shares outstanding before the initial public offering giving effect to the
Reorganization and reflects the issuance of 82,467 shares of Common Stock which
would be needed to generate the cash to fund the S corporation distribution at
the assumed initial public offering price of $15 per share.
F-7
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Finance Receivables
The Company purchases finance receivables at a discount from their maturity
value. This discount is recorded as unearned income and is netted against
finance receivables in the accompanying combined financial statements. Unearned
income on finance receivables is recognized as interest income using the
interest method over the life of the related finance receivables.
Certain direct acquisition costs are capitalized and recognized as an
adjustment to interest income over the contractual lives of the related finance
receivables utilizing the interest method.
Allowance for Credit Losses
The Company maintains an allowance for credit losses at a level that
management considers adequate to provide for potential losses in the finance
receivable portfolio based upon current economic conditions, past experience,
known and inherent risks in the portfolio and other relevant factors. These
credit losses principally result from individual payments not collected on
finance receivables. The Company will charge-off the defaulted payment balance
at the time it determines it to be uncollectible or if there has been no
progress toward restoration of the defaulted payments for a twelve-month period.
The Company calculates the allowance for credit losses in accordance with
Statement of Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan. Management considers the portfolio of structured
settlements to be homogeneous, except finance receivables in excess of $250,000.
Management individually determines the valuation of impairment on large
structured settlements and collectively evaluates the remaining portfolio for
impairment.
Securitizations
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities ('SFAS 125'). SFAS 125, which
is effective for transfers and extinguishments occurring after December 31,
1996, provides consistent standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings.
Gains or losses on securitization transactions are determined based upon
the difference between the proceeds of the receivables sold and the allocation
of recorded investment therein. The Company allocates the recorded investment in
the receivables between the receivables sold, the portion retained, and the
servicing asset based on their respective fair values on the date of sale.
Currently, the Company does not classify finance receivables held for sale.
The Company intends to continue to sell finance receivables in the future based
on eligibility requirements determined at the time of each transaction.
Retained Interests
Retained interests represent subordinated Class B certificates and excess
cash flows from the June 1997 securitization. The amounts are classified as held
to maturity and carried at amortized cost in accordance with Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities, as the underlying cash flows are not subject to
prepayment risk and the Company has both the ability and intent to hold these
securities to maturity.
Servicing Asset
A servicing asset is determined by allocating the finance receivables
previous carrying amount between the servicing asset, the finance receivables
that were sold, and the interest retained, if any, based on their relative fair
values at the date of sale. The fair value of the servicing asset is initially
calculated from market estimates of other servicing arrangements using a
discount rate that
F-8
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
management believes is appropriate. The servicing asset is amortized in
proportion to, and over the period of, estimated net servicing income. The
servicing asset recorded at June 30, 1997 amounted to $890,000.
Impairment of the servicing asset and the retained interests are evaluated
through an assessment of the fair value of the discounted cash flows method
under which the expected cash flows are adjusted to actual and discounted to
present value. The net carrying value is compared to its discounted estimated
cash flow remaining to determine whether adjustments should be made to the
carrying value or amortization schedule.
The net cash flows of the receivables are currently not subject to
prepayment. Impairment of a servicing asset or retained interests is recognized
through a valuation allowance and a charge to current period earnings if it is
considered to be temporary, or, through a direct write-down of the asset and a
charge to current period net income if it is considered other than temporary.
Currently, the Company has not recorded a valuation allowance or a write-down
for these assets.
Restricted Cash
In connection with the June 1997 securitization transaction, the Company is
required to maintain a cash reserve account with the trustee. This amount has
been presented on the combined balance sheet as restricted cash.
Income Taxes
Affiliated entities within the Company are currently taxed as S
corporations or partnerships under the Internal Revenue Code and under
applicable provisions of Pennsylvania law. Accordingly, no provision has been
made for income taxes since all income is taxed and losses and tax credits are
utilized directly by the stockholders or partners.
The affiliated entities will terminate their S corporation status upon the
Reorganization. Subsequent to the Reorganization, the Company intends to file a
consolidated federal income tax return. Upon termination of the tax status and
completion of the Reorganization, the Company will apply SFAS No. 109,
Accounting for Income Taxes ('SFAS 109'), to its arising temporary differences.
Under the asset and liability method prescribed by SFAS 109, deferred tax assets
and liabilities are recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis (temporary differences) using
currently enacted tax rates. The effect on deferred tax assets or liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date of the tax change. Under SFAS 109, deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carryforwards, and then a valuation allowance is established to reduce
that deferred tax asset if it is 'more likely than not' that the related tax
benefits will not be realized.
On a pro forma basis, the net deferred tax liability at June 30, 1997,
resulted primarily from differences in the financial statement and tax treatment
of income earned from the finance receivables and the gain on sale of
receivables. The net deferred tax liability will be recorded as a non-cash
charge to the provision for taxes in the quarter in which the proposed initial
public offering is completed.
Marketing Expenses
The Company's policy is to expense marketing costs as incurred.
Cash Flow Statement
For purposes of the combined statement of cash flows, the Company considers
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. The Company's cash management program
utilizes zero balance accounts. Accordingly, book overdraft balances have been
reclassified to overdraft payable.
F-9
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Recent Accounting Pronouncements
In March 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, Earnings per Share ('SFAS 128') which supersedes Accounting Principles
Board Opinion No. 15, Earnings per Share ('APB 15'), and is effective for the
Company for the year ending December 31, 1997. This statement requires
restatement of all prior-period earnings per share data presented. SFAS 128
establishes standards by simplifying the computation and presentation of
earnings per share ('EPS'), and applies to entities with publicly held common
stock or potential common stock. It replaces the presentation of primary EPS
with a presentation of basic EPS. It also requires dual presentation of basic
and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB 15. If EPS had been calculated in
accordance with SFAS 128, the basic EPS and diluted EPS for the six months ended
June 30, 1997 would have been the same as primary EPS under APB 15.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ('SFAS 130'), which is effective for the
Company for the year ending December 31, 1998, and requires restatement of all
prior-period financial statements presented for comparative purposes. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements and SFAS 130 requires that all items are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. It is anticipated that the
adoption of SFAS 130 will not have a material effect on the combined financial
position or results of operations of the Company.
Use of Estimates
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the combined
financial statements and the amount of revenues and expenses during the reported
period. Actual results may differ from those estimates.
Unaudited Information
In the opinion of management, the unaudited Combined Financial Statements
and related notes as of June 30, 1997 and for the six months ended June 30, 1996
and 1997 reflect all adjustments (which include normal recurring adjustments)
necessary to present fairly the combined statements of operations, cash flows
and balance sheets for the periods presented. The combined results for the
interim periods are not necessarily indicative of combined results to be
expected for the full year.
F-10
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. FINANCE RECEIVABLES
Finance receivables consist of the following:
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
------- -------- -----------
(000's) (000's)
(UNAUDITED)
Structured settlements.................. $13,639 $133,365 $ 119,451
BI claims............................... 56,583 30,668 18,605
Lottery claims.......................... 4,598 2,028 164
------- -------- -----------
Maturity value........................ 74,820 166,061 138,220
Unearned income......................... (15,348) (83,656) (73,448)
Deferred acquisition costs, net......... 632 8,525 6,985
------- -------- -----------
Carrying value........................ $60,104 $ 90,930 $ 71,757
------- -------- -----------
------- -------- -----------
At December 31, 1996 and June 30, 1997, the contractual maturities of
finance receivables were as follows:
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(000's) (000's)
(UNAUDITED)
1997.................. $ 32,048 $ 18,737
1998.................. 8,342 21,950
1999.................. 12,626 15,402
2000.................. 6,897 12,596
2001.................. 17,726 11,480
2002 and thereafter... 88,422 58,055
------------ -----------
$166,061 $ 138,220
------------ -----------
------------ -----------
On June 13, 1997, the Company sold a substantial portion of its structured
settlements (the receivables) to outside investors ('A Certificate Holders')
through a private placement securitization transaction. Proceeds of the
securitization amounted to $59,546,000 which resulted in a gain on sale of
receivables of $11,284,000. The Company sold the receivables for cash, and
retained a subordinate interest (the 'B Certificates') and any remaining cash
flows, after expenses, of the securitized receivables. The A Certificate
Holders' recourse to the Company is limited to the retained interests and the
required cash reserve balance. The Company will service the receivables sold for
a fee.
F-11
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. FINANCE RECEIVABLES -- (CONTINUED)
Changes in the allowance for credit losses during the periods indicated
were as follows:
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
------- -------- -----------
(000's) (000's)
(UNAUDITED)
Balance, beginning of period............ $ -- $ -- $ 500
Provision for credit losses............. -- 500 1,630
Charge-offs............................. -- -- (610)
------- -------- -----------
Balance, end of period.................. $ 0 $ 500 $ 1,520
------- -------- -----------
------- -------- -----------
No finance receivables were individually identified as impaired for the
periods ended December 31, 1995, 1996 and June 30, 1997.
5. OFFICE EQUIPMENT
Office equipment at December 31, 1995 and 1996 were as follows:
DECEMBER 31,
------------
1995 1996
---- ----
(000's)
Equipment............................... $ 65 $109
Furniture............................... 35 193
Data processing systems................. 71 333
---- ----
171 635
Less accumulated depreciation......... (73) (111)
---- ----
$ 98 $524
---- ----
---- ----
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $21,000, $46,000 and $114,000, respectively.
6. NOTES PAYABLE TO BANKS
A summary of Notes Payable to Banks is as follows:
DECEMBER 31,
------------------ JUNE 30,
1995 1996 1997
------- ------- -----------
(000's) (000's)
(UNAUDITED)
Notes Payable-MFC (a)... $49,616 $27,414 $16,783
Notes Payable-SSC (b)... 7,291 64,444 58,382
------- ------- -----------
$56,907 $91,858 $75,165
------- ------- -----------
------- ------- -----------
(A) NOTES PAYABLE, MFC
On May 26, 1995, MFC consummated a $90,000,000 revolving credit agreement
with a lender which replaced the revolving credit and term loan and subordinated
term loan agreements outstanding on December 31, 1994. Pursuant to an amendment
dated March 20, 1996 the credit facility was reduced to $80,000,000. MFC has the
option to convert all or any portion of the loan accruing interest at the Base
Rate Option to a fixed rate loan with a stated maturity date (the 'Fixed Rate
Option'). At December 31, 1996, $25,968,000 has been converted to fixed rates
and with maturities less than 1 year. The credit agreement, as amended in 1997,
was reduced to $20,000,000 and expires on May 20, 1998. Interest is payable
monthly until all principal has been repaid in full at the greater of Chemical
Bank or Citibank's prime rate minus 1.5% or LIBOR plus 1.5% (the 'Base Rate
Option'). The weighted average interest rate on the borrowings under this
agreement were 10.2%, 8.8% and 8.8% in 1994,
F-12
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. NOTES PAYABLE TO BANKS -- (CONTINUED)
1995 and 1996, respectively. Borrowings under this agreement are collateralized
by BI Claims and substantially all other remaining assets of MFC.
In connection with the revolving credit agreement, MFC is obligated to pay
a commitment fee of 1/4% per annum on the average daily unused portion of the
revolving credit agreement. The commitment fee amounted to $91,000, $39,000 and
$42,000 in 1994, 1995, and 1996, respectively.
Under the terms of the revolving credit agreement, the most restrictive
covenant is a minimum net worth requirement, as defined in the agreement.
The MFC notes payable are personally guaranteed by two of the partners of
MFC.
(B) NOTES PAYABLE, SSC
On August 25, 1995, SSC consummated a three-year, $20,000,000 revolving
credit and term loan agreement with a bank that is affiliated with one of the
Limited Partners of SSC. Through December 31, 1996, the agreement was amended
twice and the line increased to $75,000,000. Effective February 1997, the
revolving credit agreement was amended to reflect an increase to $105,000,000
and addition of another bank was added to the facility. Interest is payable
monthly on the average daily borrowings under the revolving credit agreement at
the greater of the lender's prime rate plus .5% or LIBOR plus 3.5%. Principal is
repaid as the underlying finance receivables are collected. The agreement
expires on August 25, 1998 and if not extended will convert to a term loan
arrangement subject to certain conditions. Borrowings under this agreement are
collateralized by structured settlements, lottery claims, and substantially all
other assets of SSC. The weighted average interest rate during 1995 and 1996 was
9.8% and 9.8%, respectively. At December 31, 1996, the interest rate on the
outstanding loan balance was 8.6%.
In connection with the revolving credit agreement SSC is obligated to pay a
commitment fee of 1/2% per annum on the average daily unused portion of the
revolving credit agreement. This fee amounted to $15,000 in 1995 and $45,000 in
1996.
Under the terms of the revolving credit agreement, the most restrictive
covenant relates to the payment of dividends or distribution of assets.
7. OPERATING LEASES
The Company has commitments under long-term operating leases, principally
for building space which are for a five year term. The following summarizes
future minimum lease payments under non-cancelable operating leases.
DECEMBER 31, 1996
-----------------
(000's)
1997......... $ 535
1998......... 550
1999......... 544
2000......... 538
2001......... 538
Thereafter... 331
--------
$ 3,036
--------
--------
Rent expense was approximately $133,000 in 1994, $135,000 in 1995 and
$195,000 in 1996.
F-13
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. GAIN ON SALE OF LOTTERY CLAIMS
From time to time, SSC will enter into an agreement to sell lottery claims.
The sale of the lottery claims resulted in gains of $268,000 in 1995, $576,000
in 1996, and $135,000 at June 30, 1997, which is included in Gain on sale of
receivables in the accompanying Combined Financial Statements. The proceeds from
the sale of the lottery claims were used to pay down the Note Payable-SSC.
9. EXTRAORDINARY ITEM
On March 29, 1995, MFC refinanced all of its outstanding notes payable. The
Company incurred an extraordinary loss in the amount of $876,000 as a result of
the refinancing which has been reported as a separate line item in the
accompanying Combined Statement of Operations. Deferred financing costs in the
amount of $456,000 were recorded as a loss on that date, as well as the
profit-sharing provision of the subordinated loan agreement which amounted to
$420,000.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments, ('SFAS 107') as amended by Statement of
Financial Accounting Standards No. 119, Disclosure About Derivative Financial
Instruments and Fair Value of Financial Instruments, requires disclosure of the
estimated fair value of an entity's assets and liabilities considered to be
financial instruments. The majority of the combined assets and liabilities are
considered financial instruments as defined in SFAS 107. These amounts represent
estimates of fair value of financial instruments at a point-in-time. Significant
estimates using available market information and appropriate valuation
methodologies were used for the purposes of this disclosure. The estimates are
not necessarily indicative of the amounts the Company could realize in a current
market exchange, and the use of different market assumptions or methodologies
could have a material effect on the estimated fair value amounts.
DECEMBER 31, 1995 DECEMBER 31, 1996
---------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ---------- -------- ----------
(000's) (000's)
Assets:
Cash and cash
equivalents............. $ 1,509 $ 1,509 $ 102 $ 102
Finance receivables....... 60,104 60,104 90,930 104,038
Liabilities:
Notes payable............. 56,907 56,907 91,858 91,858
The Company using the following methods and assumptions to estimate fair
value of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents: The carrying value is a reasonable estimate of
fair value.
Finance Receivables: At December 31, 1995, the carrying amount in the
Combined Financial Statements approximates fair value because of the relatively
short period of time between the origination of the receivables and their
expected realization. At December 31, 1996, the fair value is based on the
discounted value of the expected future cash flows from the receivables, using a
discount rate that management believes is appropriate based on aggregate risk
factors.
Notes Payable: The carrying value is a reasonable estimate of fair value
due to the variable rate nature of existing SSC notes and the short-term nature
of the MFC notes.
11. COMMITMENTS AND CONTINGENCIES
The Company currently maintains a contractual relationship with an
independent party whereby the party performs verification, quality control and
collection procedures with respect to finance receivables. The agreement for
lottery claims and other finance receivables will automatically renew for two
successive terms of three years each with subsequent terms of two years each,
unless terminated by either party to the contract.
F-14
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
In the normal course of business, the Company is subject to various legal
proceedings and claims, the resolution of which, in management's opinion, will
not have a material adverse effect on the combined financial position or the
results of operations of the Company.
12. RELATED PARTY TRANSACTIONS
The Company has an agreement with Gemini Media, Inc. ('Gemini') in which
Gemini will provide marketing and advertising services to the Company. An
employee of the Company is the owner of Gemini. Fees paid to Gemini for
marketing services were $0, $0 and $2,362,000 for the years ended December 31,
1994, 1995, and 1996. At December 31, 1996 there was $500,000 of prepaid
expenses to Gemini included in other assets.
The Company receives legal services from a law firm whose general partner
is a limited partner of SSC. Fees paid for legal services by the Company for the
years ended December 31, 1995 and 1996 were $5,000 and $70,000, respectively.
There were no accrued legal expenses for these services as of December 31, 1995
and 1996.
An affiliate of ING Capital Corporation, a 25% owner of SSC, acts as a
lending institution for both MFC and SSC and acts as the private placement agent
in connection with SSC's securitization transactions for SSC. Both MFC and SSC
maintained revolving lines of credit with ING. Interest expense incurred on
Notes payable to banks by the Company for the years ended December 31, 1994,
1995 and 1996 were $1,541,000, $4,995,000, and $6,380,000, respectively. Accrued
interest expense was $51,000 and $476,000 as of December 31, 1995 and 1996.
Commitment fees paid on average daily unused lines of credit are disclosed in
Note 6. There were no bank fees paid or accrued for securitizations in 1994,
1995 and 1996. The Company paid ING a fee of $1,200,000 for the June 13, 1997
securitization.
The Company performs management services for affiliated companies not
included in these combined financial statements. These fees amounted to $0, $0
and $139,000 in 1994, 1995 and 1996, respectively.
In addition, the Company had noninterest bearing receivables from partners
in the amounts of $0 and $219,000 at December 31, 1995 and 1996, respectively.
$188,000 of the receivables were repaid in 1997.
13. EMPLOYEE BENEFIT PLAN
The Company maintains a Savings Plan under section 401(k) of the Internal
Revenue Code (the 'Plan'). The Plan was established effective January 1, 1997
and covers substantially all employees of the Company. Under the plan
contributions are at the discretion of the Board of Directors. No contributions
have been made by the Company to the Plan.
14. RISKS AND UNCERTAINTIES
The Company's finance receivable balances are primarily obligations of
insurance companies, state lottery divisions, and states and municipalities. The
Company's exposure to concentration of credit risk with respect to these
receivables is generally limited due to the large number of insurance companies
comprising the Company's receivable base, their dispersion across geographical
areas, and state insurance guarantee funds. As of June 30, 1997, two insurance
companies comprise approximately 10% of the total originations, respectively,
while three states represent in excess of 10% of the total originations,
respectively. The Company's exposure to credit loss in the event of non-
performance of these entities is represented by the finance receivable balance.
The Company's earnings are dependent upon the level of net interest income
that is earned annually. Accordingly, the earnings are subject to risks and
uncertainties surrounding its exposure to changes in the interest rate
environment and ability to maintain sufficient effective yields in the future.
F-15
<PAGE>
J.G. WENTWORTH AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
14. RISKS AND UNCERTAINTIES -- (CONTINUED)
The Company retains interest rate risk resulting from mismatches between
the fixed discount rates of finance receivables in relation to the variable rate
notes payable to a bank maturing or repricing within a given time period. An
increase in interest rates could significantly affect the Company's net interest
income.
The Company is also subject to numerous risks associated with structured
settlements. The risks include, but are not limited to, restrictions on
assignability of structured settlements, a change in the U.S. tax law, diversion
by a seller of scheduled payments to the Company, insolvency of a seller or
insurance company, and other potential risks of regulation and/or legislation.
The Company has and will continue to experience negative cash flow from
operations. As a result of its anticipated growth, the Company will remain
dependent on its credit facilities and access to the securitization markets.
Significant estimates are made by management in determining the allowance
for credit losses, servicing assets, the fair value of securitized assets
retained and certain deferred acquisition costs. Consideration is given to a
variety of factors in establishing these estimates, including current economic
conditions, the results of internal review processes, delinquencies and the
results of internal time analysis. Since the allowance for credit losses is
dependent on general and other economic conditions beyond the Company's control,
it is at least reasonably possible that the estimates could differ materially
from currently reported values in the term.
15. SUBSEQUENT EVENTS (UNAUDITED)
On September 12, 1997, the Company entered into a sale-leaseback of office
equipment. In connection with transaction this the Company received $1,619,000.
The lease has a term of 48 months.
On September 30, 1997 and October 1, 1997, the Company sold approximately
$20,897,000 and $28,714,000, in carrying value of structured settlement finance
receivables that generated gain on sale of receivables of approximately
$6,833,000 and $8,020,000 respectively. Approximately 35% of the securitized
structured settlements were originated by the Company since June 30, 1997. The
Company plans to continue to perform servicing of these receivables for a fee.
The proceeds from the sale of the receivables were used to pay down the
revolving credit facility. The Company plans to continue to originate structured
settlement finance receivables.
From July 1, 1997 through October 8, 1997, SSC, MFC, and JGW made partner
or stockholder distributions of $2,173,000, $221,000, and $70,000, respectively.
In addition, SSC intends to distribute an estimated additional $2,000,000 to its
partners in October 1997.
F-16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY OF THE SELLING STOCKHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
PAGE
-----
Prospectus Summary.......................................... 3
Risk Factors................................................ 8
The Reorganization and Change in Tax Status................. 18
Use of Proceeds............................................. 20
Distributions and Dividend Policy........................... 20
Capitalization.............................................. 21
Dilution.................................................... 22
Selected Combined Financial Data............................ 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 25
Business.................................................... 34
Management.................................................. 47
Principal and Selling Stockholders.......................... 52
Certain Relationships and Related Party Transactions........ 53
Description of Capital Stock................................ 56
Shares Eligible for Future Sale............................. 58
Underwriting................................................ 59
Legal Matters............................................... 60
Experts..................................................... 60
Additional Information...................................... 61
Annual and Quarterly Reports................................ 61
Index to Combined Financial Statements...................... F-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,286,738 Shares
[LOGO]
J.G. WENTWORTH
&
COMPANY, INC.
Common Stock
------------------------
PROSPECTUS
------------------------
PRUDENTIAL SECURITIES INCORPORATED
OPPENHEIMER & CO., INC.
FURMAN SELZ
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
The following table sets forth expenses in connection with the issuance and
distribution of the securities being registered, all of which are being borne by
the Registrant.
Securities and Exchange Commission registration fee.............. $ 29,477
National Association of Securities Dealers, Inc. fee............. 10,276
Nasdaq Stock Market Inc./National Market listing fee............. 50,000
Printing and engraving expenses.................................. 200,000
Accountants' fees and expenses................................... 225,000
Legal fees and expenses.......................................... 400,000
Blue Sky qualification fees and expenses......................... 8,000
Transfer agent's fees and expenses............................... 10,000
Director's and officer's insurance............................... 10,000
Miscellaneous.................................................... 57,247
----------
TOTAL....................................................... $1,000,000
----------
----------
The foregoing, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. fee, and
the Nasdaq Stock Market fee are estimates.
ITEM 14. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law, as amended, the
Registrant has the power to indemnify directors and officers under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorneys' fees actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which any of them is a party by reason of
his being a director or officer of the Registrant if it is determined that he
acted in accordance with the applicable standard of conduct set forth in such
statutory provision.
Article VIII of the Registrant's Bylaws filed as Exhibit 32 hereby provides
indemnification to directors, officers and other agents of the Registrant
against all expenses, liability and loss incurred as a result of such person's
being a party to, or threatened to be made a party to, any action, suit or
proceeding by reason of the fact that he or she is or was a director or officer
of the Registrant or is or was serving at the request of the Registrant as a
director, officer, employee or agent of another enterprise, to the fullest
extent authorized by the Delaware General Corporation Law. Article VIII further
permits the Registrant to maintain insurance, at its expense, to protect itself
and any such director or officer of the Registrant or another enterprise against
any such expenses, liability or loss, whether or not the Registrant would have
the power to indemnify such person against such expense, liability or loss under
the Delaware General Corporation Law. Amendments, repeals or modifications of
Article VIII can only be prospective and such changes require the affirmative
vote of not less than two-thirds of the outstanding shares of stock of the
Registrant entitled to vote in elections of directors.
The Registrant intends to purchase directors' and officers' liability
insurance.
See Article 7 of the Underwriting Agreement, filed as Exhibit 1 hereto,
pursuant to which the Underwriters agree to indemnify the Registrant, its
directors, officers and controlling persons against certain liabilities,
including liabilities under the Securities Act of 1933.
II-1
<PAGE>
ITEM 15. Recent Sales of Unregistered Securities.
Immediately prior to the completion of the Offering, the Company will issue
to the Existing Stockholders 12,466,367 shares of Common Stock in exchange for
the contribution by the Existing Stockholders of their interests in the J.G.
Wentworth Affiliated Companies.
ITEM 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------------------------
<S> <C>
*1 -- Form of Underwriting Agreement.
*3.1 -- Certificate of Incorporation of the Company.
*3.2 -- By-laws of the Company.
5 -- Opinion of Wolf, Block, Schorr and Solis-Cohen LLP with respect to the legality of the securities
being offered.
*10.1 -- 1997 Stock Incentive Plan.
*10.2 -- Form of Employment Agreement by and between the Company and James D. Delaney.
*10.3 -- Form of Employment Agreement by and between the Company and Gary Veloric.
*10.4 -- Form of Employment Agreement by and between the Company and Michael B. Goodman.
*10.5 -- Employment Agreement by and between the Company and Andrew S. Hillman dated October 13, 1997.
*10.6 -- Form of Contribution Agreement among the Company and the Existing Stockholders.
*10.7 -- Form of Tax Indemnity Agreement among the Company, JGW, the General Partners and the Existing
Stockholders.
*10.8 -- Amended and Restated Credit Agreement, by and between SSC, the Lenders listed therein and ING and a
Bank, dated February 11, 1997.
*10.9 -- Credit Agreement among MFC, the MFC Funding, the Lenders listed therein and ING dated May 26, 1995.
*10.10 -- Master Trust Indenture and Security Agreement between J.G. Wentworth Receivables III LLC
('Receivables III'), JGW and a Bank dated as of September 30, 1997.
*10.11 -- Master Trust Indenture and Security Agreement, Series 1997-A Supplement between Receivables III, JGW
and a Bank dated as of September 30, 1997.
*10.12 -- Purchase and Contribution Agreement between SSC and J.G. Wentworth Receivables II LLC ('Receivables
II') dated as of September 30, 1997.
*10.13 -- Purchase and Contribution Agreement (Issuer-Purchase Agreement) between Receivables II and
Receivables III dated as of September 30, 1997.
*10.14 -- Note Purchase Agreement between the Note Purchasers, named therein, and Receivables III dated as of
September 30, 1997.
*10.15 -- Amended and Restated Collateral Trust and Intercreditor Agreement among ING, a Bank, as Servicing
Agent, other Lender referred to therein, Receivables I, Receivables III, SSC, Receivables II and JGW
dated as of September 30, 1997.
*10.16 -- Collateral Trust and Intercreditor Agreement among ING, a Bank, other Lender referred to therein,
J.G. Wentworth Receivables I LLC ('Receivables I'), SSC and JGW dated as of June 13, 1997.
*10.17 -- Certificate Purchase Agreement among the Purchasers set forth therein, SSC Master Trust I ('Trust
I'), Receivables I and a Bank dated as of June 13, 1997.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------------------------
<S> <C>
*10.18 -- Purchase Agreement between SSC and Receivables I dated as of June 13, 1997.
*10.19 -- Pooling and Servicing Agreement, Series 1997-I Supplement, between Receivables I, JGW and a Bank
dated as of June 13, 1997.
*10.20 -- Pooling and Servicing Agreement, Trust I, between Receivables I, JGW and a Bank dated as of June 13,
1997.
11 -- Statement regarding Computation of Per Share Earnings.
*23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Wolf, Block, Schorr and Solis-Cohen LLP (included as part of Exhibit 5).
*24 -- Power of Attorney (included on signature page of this Registration Statement).
*27 -- Financial Data Schedule
*99.1 -- Consent to be Named as a Proposed Director, for Gerard E. Bisbee, Jr.
*99.2 -- Consent to be Named as a Proposed Director, for Philip J. Kendall.
*99.3 -- Consent to be Named as a Proposed Director, for Anthony C. Salvo.
</TABLE>
- ------------------
* Filed herewith
(b) Financial Statement Schedules
The following Schedules are filed with this Registration Statement.
ITEM 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to Item 14 above, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
- ------------------
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable or the required
information is given in the Combined Financial Statements of the J.G. Wentworth
Affiliated Companies or the Notes thereto, and therefore have been omitted.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Philadelphia, Pennsylvania on the
13th day of October, 1997.
J.G. WENTWORTH & COMPANY, INC.
By: /s/ James D. Delaney
-------------------------------------
James D. Delaney
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James D. Delaney and Gary Veloric, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection herewith, with authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitutes, may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ ---------------------------- ----------------
/s/ Gary Veloric Chairman of the Board of October 13, 1997
- ------------------------------ Directors
Gary Veloric
/s/ James D. Delaney President, Chief Executive October 13, 1997
- ------------------------------ Officer and Director
James D. Delaney (principal executive
officer)
/s/ James J. O'Malley Vice President and Chief October 13, 1997
- ------------------------------ Financial Officer (principal
James J. O'Malley financial and accounting
officer)
/s/ Michael B. Goodman Executive Vice President, October 13, 1997
- ------------------------------ Chief Operating Officer and
Michael B. Goodman Director
/s/ Edward S. Stone Director October 13, 1997
- ------------------------------
Edward S. Stone
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------- ---------------------------------------------------------------------------------------------------- -----------
<S> <C>
*1 -- Form of Underwriting Agreement.
*3.1 -- Certificate of Incorporation of the Company.
*3.2 -- By-laws of the Company.
5 -- Opinion of Wolf, Block, Schorr and Solis-Cohen LLP with respect to the legality of the securities
being offered.
*10.1 -- 1997 Stock Incentive Plan.
*10.2 -- Form of Employment Agreement by and between the Company and James D. Delaney.
*10.3 -- Form of Employment Agreement by and between the Company and Gary Veloric.
*10.4 -- Form of Employment Agreement by and between the Company and Michael B. Goodman.
*10.5 -- Employment Agreement by and between the Company and Andrew S. Hillman dated October 13, 1997.
*10.6 -- Form of Contribution Agreement among the Company and the Existing Stockholders.
*10.7 -- Form of Tax Indemnity Agreement among the Company, JGW, the General Partners and the Existing
Stockholders.
*10.8 -- Amended and Restated Credit Agreement, by and between SSC, the Lenders listed therein and ING and a
Bank, dated February 11, 1997.
*10.9 -- Credit Agreement among MFC, the MFC Funding, the Lenders listed therein and ING dated May 26, 1995.
*10.10 -- Master Trust Indenture and Security Agreement between J.G. Wentworth Receivables III LLC
('Receivables III'), JGW and a Bank dated as of September 30, 1997.
*10.11 -- Master Trust Indenture and Security Agreement, Series 1997-A Supplement between Receivables III, JGW
and a Bank dated as of September 30, 1997.
*10.12 -- Purchase and Contribution Agreement between SSC and J.G. Wentworth Receivables II LLC ('Receivables
II') dated as of September 30, 1997.
*10.13 -- Purchase and Contribution Agreement (Issuer-Purchase Agreement) between Receivables II and
Receivables III dated as of September 30, 1997.
*10.14 -- Note Purchase Agreement between the Note Purchasers, named therein, and Receivables III dated as of
September 30, 1997.
*10.15 -- Amended and Restated Collateral Trust and Intercreditor Agreement among ING, a Bank, as Servicing
Agent, other Lender referred to therein, Receivables I, Receivables III, SSC, Receivables II and JGW
dated as of September 30, 1997.
*10.16 -- Collateral Trust and Intercreditor Agreement among ING, a Bank, other Lender referred to therein,
J.G. Wentworth Receivables I LLC ('Receivables I'), SSC and JGW dated as of June 13, 1997.
*10.17 -- Certificate Purchase Agreement among the Purchasers set forth therein, SSC Master Trust I ('Trust
I'), Receivables I and a Bank dated as of June 13, 1997.
*10.18 -- Purchase Agreement between SSC and Receivables I dated as of June 13, 1997.
*10.19 -- Pooling and Servicing Agreement, Series 1997-I Supplement, between Receivables I, JGW and a Bank
dated as of June 13, 1997.
*10.20 -- Pooling and Servicing Agreement, Trust I, between Receivables I, JGW and a Bank dated as of June 13,
1997.
11 -- Statement regarding Computation of Per Share Earnings.
*23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Wolf, Block, Schorr and Solis-Cohen LLP (included as part of Exhibit 5).
*24 -- Power of Attorney (included on signature page of this Registration Statement).
*27 -- Financial Data Schedule
*99.1 -- Consent to be Named as a Proposed Director, for Gerard E. Bisbee, Jr.
*99.2 -- Consent to be Named as a Proposed Director, for Philip J. Kendall.
*99.3 -- Consent to be Named as a Proposed Director, for Anthony C. Salvo.
</TABLE>
- ------------------
* Filed herewith
<PAGE>
J.G. WENTWORTH & COMPANY, INC.
5,286,738 Shares(1)
Common Stock
UNDERWRITING AGREEMENT
________ ___, 1997
PRUDENTIAL SECURITIES INCORPORATED
OPPENHEIMER & CO., INC.
[FURMAN SELZ LLC]
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Ladies and Gentlemen:
J.G. Wentworth & Company, Inc., a Delaware corporation (the "Company"),
James B. Delaney, Gary Veloric, Michael B. Goodman, Edward S. Stone, Alpha
Nikelberry and ING (each, a "Selling Stockholder," and, together, the "Selling
Stockholders") hereby confirm their respective agreements with the several
underwriters named in Schedule I hereto (the "Underwriters"), for whom you have
been duly authorized to act as representatives (in such capacity, the
"Representatives"), as set forth below. If you are the only Underwriters, all
references herein to the Representatives shall be deemed to be to the
Underwriters.
1. Securities. Subject to the terms and conditions herein contained, the
Company proposes to issue and sell to the several Underwriters an aggregate of
4,000,000 shares (the "Company Firm Securities") of the Company's common stock,
par value $0.01 per share ("Common Stock"). The Selling Stockholders jointly and
severally agree to sell to the several Underwriters an aggregate of 1,286,738
shares (the "Selling Stockholders' Firm Securities," and together with the
Company Firm Securities, the "Firm Securities"), with each Selling Stockholder
selling the number of shares indicated on Schedule II hereto. The Selling
Stockholders also propose to issue and sell to the several Underwriters not more
than 793,011 additional shares of Common Stock if requested by the
Representatives as provided in Section 3 of this Agreement. Any and all shares
of Common Stock to be purchased by the Underwriters pursuant to such option are
referred to herein as the "Option Securities," and the Firm Securities and any
Option Securities are collectively referred to herein as the "Securities."
2. Representations and Warranties of the Company and the Selling
Stockholders. The Company and the Selling Stockholders jointly and severally
represent and
- ----------
1 Plus an option to purchase from the Selling Stockholders up to 793,011
additional shares to cover over-allotments.
<PAGE>
warrant to, and agree with, each of the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-[_________] with
respect to the Securities, including a prospectus subject to completion, has
been filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and one
or more amendments to such registration statement may have been so filed. After
the execution of this Agreement, the Company will file with the Commission
either (i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, either (A) if the
Company relies on Rule 434 under the Act, a Term Sheet (as hereinafter defined)
relating to the Securities, that shall identify the Preliminary Prospectus (as
hereinafter defined) that it supplements containing such information as is
required or permitted by Rules 434, 430A and 424(b) under the Act or (B) if the
Company does not rely on Rule 434 under the Act, a prospectus in the form most
recently included in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement), with such
changes or insertions as are required by Rule 430A under the Act or permitted by
Rule 424(b) under the Act, and in the case of either clause (i)(A) or (i)(B) of
this sentence as have been provided to and approved by the Representatives prior
to the execution of this Agreement, or (ii) if such registration statement, as
it may have been amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration statement, including
a form of prospectus, a copy of which amendment has been furnished to and
approved by the Representatives prior to the execution of this Agreement. The
Company may also file a related registration statement with the Commission
pursuant to Rule 462(b) under the Act for the purpose of registering certain
additional Securities, which registration shall be effective upon filing with
the Commission. As used in this Agreement, the term "Original Registration
Statement" means the registration statement initially filed relating to the
Securities, as amended at the time when it was or is declared effective,
including all financial schedules and exhibits thereto and including any
information omitted therefrom pursuant to Rule 430A under the Act and included
in the Prospectus (as hereinafter defined); the term "Rule 462(b) Registration
Statement" means any registration statement filed with the Commission pursuant
to Rule 462(b) under the Act (including the Registration Statement and any
Preliminary Prospectus or Prospectus incorporated therein at the time such
Registration Statement becomes effective); the term "Registration Statement"
includes both the Original Registration Statement and any Rule 462(b)
Registration Statement; the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any amendment
thereto (including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective); the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Act, the Term Sheet
relating to the Securities that is first filed pursuant to Rule 424(b)(7)
under the Act, together with the Preliminary Prospectus identified therein
that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under the Act, the prospectus
first filed with the Commission pursuant to Rule 424(b) under the Act; or
(C) if the Company does not rely on Rule 434 under the Act and if no
prospectus is
2
<PAGE>
required to be filed pursuant to Rule 424(b) under the Act, the prospectus
included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act. Any reference herein to the "date" of a Prospectus
that includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or suspending use of
any Preliminary Prospectus. When any Preliminary Prospectus was filed with the
Commission it (i) contained all statements required to be stated therein in
accordance with, and complied in all material respects with the requirements of,
the Act and the rules and regulations of the Commission thereunder and (ii) did
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. When the
Registration Statement or any amendment thereto was or is declared effective, it
(i) contained or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus or any Term Sheet that is
a part thereof or any amendment or supplement to the Prospectus is filed with
the Commission pursuant to Rule 424(b) (or, if the Prospectus or part thereof or
such amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such amendment or
supplement to the Prospectus was or is declared effective) and on the Firm
Closing Date and any Option Closing Date (both as hereinafter defined), the
Prospectus, as amended or supplemented at any such time, (i) contained or will
contain all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements of, the
Act and the rules and regulations of the Commission thereunder and (ii) did not
or will not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (b) do not apply to statements or omissions made in
any Preliminary Prospectus, the Registration Statement or any amendment thereto
or the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives specifically for use therein, which information
consists of the information identified in Section 12 hereof.
(c) If the Company has elected to rely on Rule 462(b) and the Rule 462(b)
Registration Statement has not been declared effective (i) the Company has filed
a Rule 462(b) Registration Statement in compliance with and that is effective
upon filing pursuant to Rule 462(b) and has received confirmation of its receipt
and (ii) the Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 promulgated under the Act or
the Commission has received payment of such filing fee.
3
<PAGE>
(d) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware and its subsidiaries,
J.G. Wentworth and Company, Inc., J.G. Wentworth Structured Settlement Funding
Corporation and J.G. Wentworth Funding Corporation (each a "Subsidiary" and
collectively the "Subsidiaries"), have been duly organized and are validly
existing under the laws of their respective jurisdictions of incorporation. The
Subsidiaries are the only subsidiaries, direct or indirect, of the Company. The
Company does not control, directly or indirectly, any corporation (other than
the Subsidiaries), partnership, joint venture, association or other business
organization. The Company and its Subsidiaries are duly qualified to transact
business as foreign corporations and are in good standing under the laws of all
other jurisdictions where the ownership or leasing of their respective
properties or the conduct of their respective businesses requires such
qualification, except where the failure to be so qualified does not amount to a
material liability or disability to the Company and its Subsidiaries. At or
prior to the Firm Closing Date (as hereinafter defined) the Reorganization (as
such term is defined in the Prospectus) shall have occurred in the manner
described in the Prospectus (or, if the Prospectus is not in existence, in the
most recent Preliminary Prospectus) under the caption "The Reorganization and
Termination of Tax Status" and (i) the Selling Stockholders and the Subsidiaries
shall have entered into a tax agreement with the Company in a form reasonably
acceptable to the Representatives (the "Tax Agreement"); (ii) the Selling
Stockholders and the Company shall have entered into a contribution agreement
(the "Contribution Agreement") pursuant to which the Selling Stockholders will
contribute to the Company all of the outstanding capital stock of each of the
Subsidiaries and certain limited partnership interests; (iii) the Subsidiaries
shall have declared a cash dividend payable to the Selling Stockholders; and
(iv) the Company, the Subsidiaries and the Selling Stockholders shall have
entered into all other agreements (the "Ancillary Agreements" and together with
the Tax Agreement and the Contribution Agreement, the "Reorganization
Agreements"), if any necessary to consummate the Reorganization.
(e) Except as disclosed in the Registration Statement and Prospectus, the
Company and each of its Subsidiaries owns or possesses adequate and enforceable
rights, either as owner or licensee, to use all trademarks, trademark
applications, licenses, know-how and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business in all material respects as described in the Registration Statement and
the Prospectus. The Company has not received any notice of, or to its best
knowledge is not aware of, any infringement of or conflict with asserted rights
of others with respect to any Intangibles which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a material
adverse effect upon the condition (financial or otherwise), management, business
prospects, net worth, or results of operations of the Company or any of the
Subsidiaries.
(f) The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate international, federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, or the lack of which would not result in a material adverse change
in the condition (financial or otherwise), management, business prospects, net
worth or results of operations of the Company and any of the Subsidiaries,
except as described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus). Neither the
Company nor any of its Subsidiaries has
4
<PAGE>
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would result in a
material adverse change in the condition (financial or otherwise), management,
business prospects, net worth or results of operations of the Company and the
Subsidiaries, except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(g) The Company and its Subsidiaries have full power (corporate and other)
to own or lease their respective properties and conduct their respective
businesses as described in the Registration Statement and the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus); and
the Company has full power (corporate and other) to enter into this Agreement
and to carry out all the terms and provisions hereof to be carried out by it.
(h) The issued shares of capital stock of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and, except for
directors' qualifying shares and as otherwise set forth in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus),
are, or upon consummation of the Reorganization, will be owned of record owned
beneficially by the Company free and clear of any security interests, liens,
encumbrances, equities or claims.
(i) Upon consummation of the Reorganization, the Company will have an
authorized, issued and outstanding capitalization as set forth in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus). All of the issued shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All of
the shares of capital stock of the Company to be issued to the Selling
Stockholders will have been duly and validly authorized and, after payment
therefor in accordance with the terms of the Contribution Agreement, at the Firm
Closing Date, will be duly and validly issued fully paid and nonassessable. The
Firm Securities and the Option Securities have been duly and validly authorized
and at the Firm Closing Date or the related Option Closing Date (as the case may
be), after payment therefor in accordance herewith, will be duly and validly
issued, fully paid and nonassessable. No holders of outstanding shares of
capital stock of the Company are or will be entitled as such to any preemptive
or other rights to subscribe for or to purchase any of the Securities, and no
holder of securities of the Company has or will have any right which has not
been fully exercised or waived to require the Company to register the offer or
sale of any securities owned by such holder under the Act in the public offering
contemplated by this agreement.
(j) The capital stock of the Company conforms to the description thereof
contained in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(k) Except as disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there are no outstanding (A)
securities or obligations of the Company or its Subsidiaries convertible into or
exchangeable for any capital stock of the Company or its Subsidiaries, (B)
warrants, rights or options to subscribe for or purchase from the Company or its
Subsidiaries any such capital stock or any such convertible or exchangeable
5
<PAGE>
securities or obligations, or (C) obligations of the Company or its Subsidiaries
to issue any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
(l) The combined financial statements and related notes and schedules of
J.G. Wentworth and Company, Inc., J.G. Wentworth Structured Settlement Funding
Corporation, J.G. Wentworth Structured Settlement Corporation, Limited
Partnership, J.G. Wentworth Funding Corporation and J.G. Wentworth MFC
Associates, Limited Partnership (together, the "J.G. Wentworth Affiliated
Companies") included in the Registration Statement and the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus)
fairly present the combined financial position of such Affiliated Entities and
the combined results of operations and changes in financial condition as of the
dates and periods therein specified. Such financial statements and schedules
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise noted
therein) and all adjustments necessary for a fair presentation of results for
such periods have been made. The selected financial data set forth under the
caption "Summary Combined Financial Data" and "Selected Combined Financial Data"
in the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present, on the basis stated in the Prospectus
(or such Preliminary Prospectus), the information included therein.
(m) Coopers & Lybrand LLP, who have certified certain financial statements
of the J.G. Wentworth Affiliated Companies and delivered their report with
respect to the audited combined financial statements and schedules included in
the Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), are independent public
accountants as required by the Act and the applicable rules and regulations
thereunder.
(n) The execution and delivery of this Agreement have been duly authorized
by the Company through all necessary corporate action and this Agreement has
been duly executed and delivered by the Company, and is the valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms; except (i) as enforceability hereof may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and other laws
relating to or affecting creditor's rights generally and by general equitable
principles and (ii) that enforcement of rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or principles of
public policy.
(o) The execution and delivery of each of the Reorganization Agreements
have been duly authorized by each Subsidiary or the Company party thereto and
each of the Reorganization Agreements has been duly executed and delivered by
each Subsidiary and/or the Company party thereto, and is the valid and binding
agreement of each Subsidiary and/or the Company party thereto, enforceable
against each Subsidiary and/or the Company in accordance with its terms; except
(i) as enforceability hereto may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equitable principles and
(ii) that enforcement of rights to indemnity and contribution hereunder may be
limited by federal or state securities laws or principles of public
6
<PAGE>
policy.
(p) No legal or governmental proceedings or other proceedings or
investigations are pending to which the Company or any of its Subsidiaries is a
party or to which the property of the Company or its Subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not described therein (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and no such proceedings have
been threatened against the Company or its Subsidiaries or with respect to any
of their respective properties; and no contract or other document is required to
be described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement that is not described therein (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) or
filed as required under the Act. Assuming due authorization, execution and
delivery by each other party thereto, all such contracts to which the Company or
a Subsidiary is a party constitute valid and binding agreements of the Company
or such Subsidiary, as the case may be.
(q) The issuance, offering and sale of the Securities to the Underwriters
by the Company pursuant to this Agreement, the compliance by the Company or its
Subsidiaries, as the case may be, with the other provisions of this Agreement or
the Reorganization Agreements and the consummation of the other transactions
herein contemplated hereby or thereby do not and will not (i) require the
consent, approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained, such as may be
required under state securities or blue sky laws and, if the registration
statement filed with respect to the Securities (as amended) is not effective
under the Act as of the time of execution hereof, such as may be required (and
shall be obtained as provided in this Agreement) under the Act, or (ii) conflict
with or result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
guarantee, loan agreement, material lease or other agreement or instrument to
which the Company or its any of its Subsidiaries is a party or by which the
Company or its Subsidiaries or any of their respective properties or assets are
bound, or the charter documents or by-laws of the Company or its Subsidiaries,
or any statute or any judgment, decree, order, rule or regulation of any court
or other governmental authority or any arbitrator applicable to the Company or
its Subsidiaries or any of their properties, other than as described in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(r) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), except as described therein
and except for the Reorganization, (i) there has not been any material adverse
change in the condition (financial or otherwise), management, business
prospects, net worth or results of operations of the Company or its
Subsidiaries, whether or not arising from transactions in the ordinary course of
business; (ii) the Company and its Subsidiaries have not sustained any material
loss or interference with its assets, businesses or properties (whether owned or
leased) from fire, explosion, earthquake, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree; (iii) there has not been any
material
7
<PAGE>
adverse change or any development involving a prospective material
adverse change, in the condition (financial or otherwise), management, business
prospects, net worth or results of operations of the Company and the
Subsidiaries; (iv) the Company and the Subsidiaries have not purchased any of
their outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on their capital stock; and (v) there has
not been any material change in the capital stock, short-term debt or long-term
debt of the Company and the Subsidiaries; in the case of each of clauses (i)
through (v) except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(s) The Company has not, directly or indirectly, (i) taken any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) since the filing of the Registration Statement (A) sold, bid
for, purchased, or paid anyone any compensation for soliciting purchases of, the
Securities or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company except for
the sale of Securities by the Selling Stockholders under this Agreement).
(t) The Company has not distributed and, prior to the later of (i) the Firm
Closing Date and (ii) the completion of the distribution of the Securities, will
not distribute any offering material in connection with the offering and sale of
the Securities other than the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or other materials, if any permitted by the Act.
(u) There is no document or contract of a character required to be
described in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as so
required by the Securities Act or the Rules. Neither the Company, nor its
Subsidiaries, to the best of the Company's knowledge, any other party is in
default in the observance or performance of any term or obligation to be
performed by it under any agreement filed as an exhibit to the Registration
Statement, and no event has occurred which with notice or lapse of time or both
would constitute such a default, in any such case where such default or event
would have a material adverse effect on the condition (financial or otherwise),
management, business prospects, net worth or results of operations of the
Company and the Subsidiaries. No default exists, and no event has occurred which
with notice or lapse of time or both would constitute a default, in the due
performance and observance of any term, covenant or condition, by the Company or
its Subsidiaries of any other agreement or instrument to which the Company or
the bank is party or by which it or its properties or business may be bound or
affected which default or event would have a material adverse effect on the
condition (financial or otherwise), management, business prospects, net worth or
results of operations of the Company or the Subsidiaries.
(v) Neither the Company nor any of its Subsidiaries is in violation of any
term or provision of, in the case of the Company, its Articles of Incorporation
(the "Company's Articles") and in the case of the Subsidiaries, its Articles of
Incorporation (the "Subsidiaries' Articles") or
8
<PAGE>
its bylaws (the Company's and the Subsidiaries' bylaws together the "Bylaws") or
of any franchise, license, permit, judgment, ruling, decree, order, statute,
rule or regulation, where the consequences of such violation would have a
material adverse effect on the condition (financial or otherwise), management,
business prospects, net worth or results of operations of the Company or the
Subsidiaries.
(w) Neither the execution, delivery and performance of this Agreement by
the Company nor the consummation of any of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the Company of the
Shares) will (i) violate any provision of the Articles or the Bylaws of the
Company or the Subsidiaries or (ii) give rise to a right to terminate or
accelerate the due date of any payment due under, or conflict with or result in
the breach of any term or provision of, or constitute a default (or an event
which with notice or lapse of time or both would constitute a default) under, or
require any consent or waiver under, or result in the execution or imposition of
any lien, charge or encumbrance upon any properties or assets of the Company or
the Subsidiaries pursuant to the terms of, any indenture, mortgage, deed of
trust or other agreement or instrument to which the Company or the Subsidiaries
is a party or by which the Company or the Subsidiaries or any of their
properties or businesses are bound, or any franchise, license, permit, judgment,
ruling, decree, order, statute, rule or regulation applicable to the Company,
except in the case of this clause (ii) for any such termination, acceleration,
conflict, breach, default, lien, charge or encumbrance which would not,
individually or in the aggregate, have a material adverse affect on the
condition (financial or otherwise), management, business prospects, net worth or
results of operations of the Company or the Subsidiaries, and except for such
consents or waivers which have already been obtained and are in full force and
effect.
(x) The Company and its Subsidiaries have good and marketable title in fee
simple to all items of real property and marketable title to all personal
property owned by each of them, in each case free and clear of any security
interests, liens, encumbrances, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by the
Company or its Subsidiaries, and any real property and buildings held under
lease by the Company or its Subsidiaries are held under valid, subsisting and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such property
and buildings by the Company or its Subsidiaries, in each case except as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(y) No labor dispute with the employees of the Company or its Subsidiaries
exists or, to the knowledge of the Company or the Selling Stockholders, is
threatened or imminent that could reasonably be expected to result in a material
adverse change in the condition (financial or otherwise), management, business
prospects, net worth or results of operations of the Company and its
Subsidiaries, except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(z) The Company and its Subsidiaries are insured by insurers of recognized
financial
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responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which they are engaged; neither the Company
nor its Subsidiaries has been refused any insurance coverage sought or applied
for; and neither the Company nor any of its Subsidiaries has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition (financial or otherwise), management,
business prospects, net worth or results of operations of the Company and its
Subsidiaries, except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(aa) No Subsidiary of the Company is currently, or upon consummation of the
Reorganization will be, prohibited, directly or indirectly, from paying any
dividends to the Company, from making any other distribution on such
Subsidiaries' capital stock, from repaying to the Company any loans or advances
to such Subsidiaries from the Company or from transferring any of such
Subsidiaries' property or assets to the Company, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(bb) The Company will conduct its operations in a manner that will not
subject it to registration as an investment company under the Investment Company
Act of 1940, as amended, and this transaction will not cause the Company to
become an investment company subject to registration under such Act.
(cc) Each of the Company, the Subsidiaries and the Selling Stockholders
have filed all foreign, federal, state and local tax returns that are required
to be filed or has requested extensions thereof (except in any case in which the
failure so to file would not have a material adverse effect on the Company and
its Subsidiaries) and have paid all taxes as shown on said returns required to
be paid and any other assessment, fine or penalty levied, to the extent that any
of the foregoing is due and payable, except for any such assessment, fine or
penalty that is currently being contested in good faith or as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus). There is no tax deficiency that has been or
might be asserted against the Company and that could have a material adverse
effect on the business, properties, business prospects, condition, earnings or
results of operations of the Company or the Subsidiaries, except as described in
the Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) or reserved against in the
combined financial statements of the Company. Effective as of the dates set
forth opposite each Subsidiary on Schedule III hereto, each Subsidiary validly
elected to be treated as an S Corporation (as defined in Section 1361 of the
Internal Revenue Code of 1986, as amended (the "Code") and the corresponding
provision of any prior version of the Code) for Federal and state income tax
purposes and each Subsidiary has continued and will continue to so qualify as an
S Corporation in each such jurisdiction since that date until the day preceding
the Reorganization, at which time each Subsidiary will validly terminate its S
Corporation status.
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(dd) Any certificate signed by any officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty made by the Company to each Underwriter as to the
matters covered thereby and shall be deemed incorporated herein in its entirety
and shall be effective as if such representation and warranty were made herein.
(ee) The Company and its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(ff) No default by the Company or its Subsidiaries exists, and no event has
occurred which, with notice or lapse of time or both, would constitute a default
in the due performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, lease or other agreement or instrument to
which the Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries or any of their respective properties is bound or may be affected
in any material adverse respect with regard to the condition (financial or
otherwise), management, business prospects, net worth or results of operations
of the Company and its Subsidiaries, except for any such default that would be
cured upon application of the proceeds from the sale of the Securities in the
manner described under the caption "Use of Proceeds" in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(gg) The Securities have been duly authorized for quotation on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") National Market
System, subject to official notice of issuance, and a registration statement has
been filed on Form 8-A pursuant to Section 12 of the Exchange Act for the
Securities, which registration statement complies in all material respects with
the Exchange Act.
(hh) No relationship, direct or indirect, exists between or among the
Company or any of the Subsidiaries, on the one hand, and the directors,
officers, Selling Stockholders, customers or suppliers of the Company or any of
the Subsidiaries on the other hand, that is required by the Act or the Exchange
Act, or by the rules and regulations under either of such Acts to be described
in the Registration Statement and the Prospectus that is not so described.
(ii) The Company and each of the Subsidiaries possess all certificates,
consents, authorizations and permits ("Licenses") issued by the appropriate
international, federal, state or foreign regulatory and self-regulatory
authorities necessary to conduct their respective businesses, except for those
of which the failure to obtain would not result in a material adverse change in
the condition (financial or otherwise), management, business prospects, net
worth or results of operations of the Company and the Subsidiaries, and except
as described in or contemplated by the Prospectus (or, if the Prospectus is not
in existence, the most recent
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<PAGE>
Preliminary Prospectus). All Licenses are valid and in full force and effect and
the Company and each of the Subsidiaries are in compliance with all laws,
regulations, orders and decrees applicable to them, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), and except for those, the absence of which,
would not cause a material adverse change in the condition (financial or
otherwise), management, business prospects, net worth or results of operations
of the Company and the Subsidiaries. Neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would result in a
material adverse change in the condition (financial or otherwise), management,
business prospects, net worth or results of operations of the Company and the
Subsidiaries, except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(jj) Neither the Company nor any of the Subsidiaries is in violation of any
federal or state law or regulation relating to occupational safety and health or
to the storage, handling, transportation, treatment or disposal of hazardous or
toxic materials and the Company and the Subsidiaries have received all permits,
licenses or other approvals required of them under applicable federal and state
occupational safety and health and environmental laws and regulations to conduct
their respective businesses, and the Company and each such Subsidiary is in
compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals which would not,
singly or in the aggregate, result in a material adverse change in the condition
(financial or otherwise), management, business prospects, net worth or results
of operations of the Company and the Subsidiaries, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus). Neither the Company nor any of the
Subsidiaries has received any notices or claims that it is a responsible party
or a potentially responsible party in connection with any claim or notice
asserted pursuant to 42 U.S.C. Section 9601 et seq. or any state superfund law
or any similar foreign law; and the disposal by the Company or any Subsidiary of
any of the Company's and each Subsidiary's hazardous substances, hazardous
materials and other waste products has been lawful in all material respects.
[Additional representations and warranties to be added on structured
settlements.]
3. Representations and Warranties of the Selling Stockholders. The Selling
Stockholders severally and not jointly represent and warrant to, and agree with,
each of the several Underwriters that:
(a) The execution and delivery of this Agreement has been duly executed and
delivered by such Selling Stockholder, and is the valid, binding agreement of
such Selling Stockholder, enforceable against such Selling Stockholder in
accordance with its terms; except (i) as enforceability hereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and by general
equitable principles and (ii) that enforcement of rights to indemnity and
contribution
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<PAGE>
hereunder may be limited by federal or state securities laws or principles of
public policy.
(b) Such Selling Stockholder has full legal right to enter into this
Agreement and each Reorganization Agreement to which such Selling Stockholder is
a party. The execution, delivery and performance by each Selling Stockholder of
this Agreement and of each Reorganization Agreement to which such Selling
Stockholder is a party, and the consummation by such Selling Stockholder of the
transactions contemplated hereby and thereby will not conflict with or result in
a breach of any of the terms or provisions, or constitute a default or cause an
acceleration of any obligation under any material license, indenture, lease,
mortgage, deed of trust, bank loan, credit agreement, or other material
agreement or instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder is bound, or to which any of the property or assets of
such Selling Stockholder is subject, or any order of any court or governmental
agency or authority entered into in any proceeding to which such Selling
Stockholder was or is a party or by which such Selling Stockholder is bound, or
violate or conflict with any applicable foreign, federal, state or local law,
rule, administrative regulation or ordinance or administrative or court decree
applicable to such Selling Stockholder or such Selling Stockholder's property.
(c) Other than as permitted by the Act, no Selling Stockholder has
distributed, nor will any Selling Stockholder distribute, any prospectus or
other offering material in connection with the offering and sale of the
Securities.
(d) Neither the Selling Stockholder nor any trustee or beneficiary of the
Selling Stockholder is affiliated as a director, officer, partner, stockholder,
or otherwise with any securities broker or dealer which is a member of the NASD
or any other organization that owns or controls any member of the NASD.
(e) Any certificate signed by the Selling Stockholder and delivered to the
Representatives or to counsel for the Underwriters shall also be deemed a
representation and warranty jointly and severally made by the Selling
Stockholders to each Underwriter as to the matters covered thereby and shall
also be deemed incorporated herein in its entirety and shall be effective as if
such representation and warranty were made herein. No statement, representation,
warranty or covenant made by the Selling Stockholders in this Agreement or made
in any certificate or document required by this Agreement to be delivered to the
Representatives was or will be, when made, inaccurate, untrue or incorrect.
(f) Other than pursuant to this Agreement, the Selling Stockholder has not,
directly or indirectly, (i) taken any action designed to cause or to result in,
or that has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or (ii) since the filing of the
Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Securities or (B) paid or agreed
to pay to any person any compensation for soliciting another to purchase any
other securities of the Company.
(g) Such Selling Stockholder has duly executed and delivered a power of
attorney and custody agreement (with respect to such Selling Stockholder, the
"Power-of-Attorney" and the "Custody Agreement", respectively), each in the form
heretofore delivered to the
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<PAGE>
Representatives, appointing ______________ and _____________, and each of them,
as such Selling Stockholder's attorney-in-fact (the "Attorney-in-Fact") with
authority to execute, deliver and perform this Agreement on behalf of such
Selling Stockholder and appointing ChaseMellon Shareholder Services LLC as
custodian thereunder (the "Custodian"). Certificates in negotiable form,
endorsed in blank or accompanied by blank stock powers duly executed, with
signatures appropriately guaranteed, representing the Securities to be sold by
such Selling Stockholder have been deposited with the Custodian pursuant to the
Custody Agreement for the purpose of delivery under this Agreement. Such Selling
Stockholder specifically agrees that each of the Securities represented by the
certificates on deposit with the Custodian is subject to the interests of the
Underwriters hereunder, that the arrangements made for such custody, the
appointment of the Attorney-in-Fact and the right, power and authority of the
Attorney-in-Fact to execute and deliver this Agreement, to agree on the price at
which the Securities (including such Selling Stockholder's Securities) are to be
sold to the Underwriters, and to carry out the terms of this Agreement, are to
that extent irrevocable and that the obligations of such Selling Stockholder
hereunder shall not be terminated, except as provided in this Agreement or the
Custody Agreement, by any act of such Selling Stockholder, by operation of law
or otherwise, whether in the case of any individual Selling Stockholder by the
death or incapacity of such Selling Stockholder, in the case of a trust or
estate by the death of the trustee or trustees or the executor or executors or
the termination of such trust or estate, or in the case of a corporate or
partnership Selling Stockholder by its liquidation or dissolution or by the
occurrence of any other event. If any individual Selling Stockholder, trustee or
executor should die or become incapacitated or any such trust should be
terminated, or if any corporate or partnership Selling Stockholder shall
liquidate or dissolve, or if any other event should occur, before the delivery
of such Securities hereunder, the certificates for such Securities deposited
with the Custodian shall be delivered by the Custodian in accordance with the
terms and conditions of this Agreement as if such death, incapacity,
termination, liquidation or dissolution or other event had not occurred,
regardless of whether or not the Custodian or the Attorney-in-Fact shall have
received notice thereof.
(h) Such Selling Stockholder is the lawful owner of the Securities to be
sold by such Selling Stockholder hereunder and upon sale and delivery of, and
payment for, such Securities, as provided herein, such Selling Stockholder will
convey and the Underwriters will acquire good, valid and marketable title to
such Securities, free and clear of any security interests, liens, encumbrances,
equities, claims or other defects.
(i) Such Selling Stockholder has reviewed the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) and the
Registration Statement, and (a) the information regarding such Selling
Stockholder set forth therein under the caption "Principal and Selling
Stockholders" is complete and accurate and (b) to the best knowledge of such
Selling Stockholder, each Preliminary Prospectus did conform, and the
Registration Statement and the Prospectus and any amendments or supplements
thereto, when they become effective or are filed with the Commission, as the
case may be, will conform, in all material respects to the requirements of the
Act and the Regulations and did not and will not contain any untrue statement of
material fact or omit to state any material fact necessary in order to make
statements therein not misleading.
(j) The sale of Securities to the Underwriters by such Selling Stockholder
pursuant to
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<PAGE>
this Agreement, the compliance by such Selling Stockholder with the other
provisions of this Agreement and the Custody Agreement and the consummation of
the other transactions herein contemplated do not (i) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained, such as may be
required under state securities or blue sky laws and, if the registration
statement filed with respect to the Securities (as amended) is not effective
under the Act as of the time of execution hereof, such as may be required (and
shall be obtained as provided in this Agreement) under the Act or the Exchange
Act, or (ii) conflict with or result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder or any of such
Selling Stockholder's properties are bound, or the charter documents or by-laws
of such Selling Stockholder or any statute or any judgment, decree, order, rule
or regulation of any court or other governmental authority or any arbitrator
applicable to such Selling Stockholder
(k) There are no outstanding options, warrants, rights or other agreements
or arrangements requiring such Selling Stockholder at any time to transfer any
Securities to be sold hereunder by it.
(l) There is not pending or threatened against such Selling Stockholder any
action, suit, arbitration, claim, governmental or other proceeding or
investigation (domestic or foreign, formal or informal) which (A) questions the
validity of this Agreement or of any action taken or to be taken by it pursuant
to or in connection with this Agreement or (B) is required to be disclosed in
the Registration Statement which is not so disclosed, and such actions, suits,
arbitrations, claims, governmental or other proceedings or investigations as are
summarized in the Registration Statement, if any, are accurately summarized.
(m) On the Firm Closing Date, all stock transfer or other taxes (other than
income taxes) which are required to be paid in connection with the sale and
transfer of the Securities to be sold by such Selling Stockholder to the several
Underwriters hereunder will have been fully paid or provided for by such Selling
Stockholder and all laws imposing such taxes will have been fully complied with.
4. Purchase Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth at a purchase price of $______ per share, (A) the Company agrees to issue
and sell to each of the Underwriters, and each of the Underwriters, severally
and not jointly, agrees to purchase from the Company the number of Firm
Securities set forth opposite the name of such Underwriter in column (1) of
Schedule [___] hereto, and (B) each Selling Stockholder, severally and not
jointly, agrees to sell to each of the Underwriters, and the Underwriters,
severally and not jointly, agrees to purchase from the Selling Stockholders the
total number of Shares set forth opposite the name of such Underwriter in column
(2) of Schedule [____] hereto. One or more certificates in definitive form for
the Firm
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<PAGE>
Securities that the several Underwriters have agreed to purchase hereunder, and
in such denomination or denominations and registered in such name or names as
the Representatives request upon notice to the Company at least 48 hours prior
to the Firm Closing Date, shall be delivered by or on behalf of the Company and
the Custodian to the Representatives for the respective accounts of the
Underwriters, against payment by or on behalf of the Underwriters of the
purchase price therefor by wire transfer in same-day funds (the "Wired Funds")
to the account of the Company or the Custodian, as the case may be. Such
delivery of and payment for the Firm Securities shall be made at the offices of
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038 at 9:30
A.M., New York time, on [__________], 1997, or at such other place, time or date
as the Representatives, the Company and the Custodian may agree upon or as the
Representatives may determine pursuant to Section 9 hereof, such time and date
of delivery against payment being herein referred to as the "Firm Closing Date."
The Company and the Custodian will make such certificate or certificates for the
Firm Securities available for checking and packaging by the Representatives at
the offices in New York, New York of the Company's transfer agent or registrar
or of Prudential Securities Incorporated at least 24 hours prior to the Firm
Closing Date.
(b) For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Securities as contemplated by the Prospectus,
the Selling Stockholders, severally and not jointly, hereby grant to the several
Underwriters an option to purchase, severally and not jointly, the Option
Securities. The purchase price to be paid for any Option Securities shall be the
same price per share as the price per share for the Firm Securities set forth
above in paragraph (a) of this Section 3, plus if the purchase and sale of any
Option Securities takes place after the Firm Closing Date and after the Firm
Securities are trading "ex-dividend," an amount equal to the dividends payable
on such Option Securities. The option granted hereby may be exercised as to all
or any part of the Option Securities from time to time within 30 days after the
date of the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a
holiday, on the next business day thereafter when the New York Stock Exchange is
open for trading). The Underwriters shall not be under any obligation to
purchase any of the Option Securities prior to the exercise of such option. The
Representatives may from time to time exercise the option granted hereby by
giving notice in writing or by telephone (confirmed in writing) to the Selling
Stockholders setting forth the aggregate number of Option Securities as to which
the several Underwriters are then exercising the option and the date and time
for delivery of and payment for such Option Securities. Any such date of
delivery shall be determined by the Representatives but shall not be earlier
than two business days or later than five business days after such exercise of
the option and, in any event, shall not be earlier than the Firm Closing Date.
The time and date set forth in such notice, or such other time on such other
date as the Representatives and the Selling Stockholders may agree upon or as
the Representatives may determine pursuant to Section 9 hereof, is herein called
the "Option Closing Date" with respect to such Option Securities. Upon exercise
of the option as provided herein, the Selling Stockholders shall become
obligated to sell to each of the several Underwriters, and, subject to the terms
and conditions herein set forth, each of the Underwriters (severally and not
jointly) shall become obligated to purchase from the Selling Stockholders, the
same percentage of the total number of the Option Securities as to which the
several Underwriters are then exercising the option as such Underwriter is
obligated to purchase of the aggregate number of Firm Securities, as adjusted by
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<PAGE>
the Representatives in such manner as they deem advisable to avoid fractional
shares. If the option is exercised as to all or any portion of the Option
Securities, one or more certificates in definitive form for such Option
Securities, and payment therefor, shall be delivered on the related Option
Closing Date in the manner, and upon the terms and conditions, set forth in
paragraph (a) of this Section 3, except that reference therein to the Firm
Securities and the Firm Closing Date shall be deemed, for purposes of this
paragraph (b), to refer to such Option Securities and Option Closing Date,
respectively.
(c) Each of the Company and the Selling Stockholders hereby acknowledge
that the wire transfer by or on behalf of the Underwriters of the purchase price
for any Securities does not constitute closing of a purchase and sale of the
Securities. Only execution and delivery of a receipt for Securities by the
Underwriters indicates completion of the closing of a purchase of the Securities
from the Company and the Selling Stockholders. Furthermore, in the event that
the Underwriters wire funds to the Company or the Custodian, as the case may be,
prior to the completion of the closing of a purchase of Securities, the Company
hereby acknowledges that until the Underwriters execute and deliver a receipt
for the Securities, by facsimile or otherwise, neither the Company nor the
Custodian will not be entitled to the wired funds and shall return the wired
funds to the Underwriters as soon as practicable (by wire transfer of same-day
funds) upon demand. In the event that the closing of a purchase of Securities is
not completed and the wired funds are not returned by the Company or the
Custodian, as the case may be, to the Underwriters on the same day the wired
funds were received by the Company, or the Custodian, as the case may be, each
of the Company and the Custodian agrees to pay to the Underwriters in respect of
each day the wired funds are not returned by it, in same-day funds, interest on
the amount of such wire funds in an amount representing the Underwriters' cost
of financing as reasonably determined by Prudential Securities Incorporated.
(d) It is understood that any of you, individually and not as one of the
Representatives, may (but shall not be obligated to) make payment on behalf of
any Underwriter or Underwriters for any of the Securities to be purchased by
such Underwriter or Underwriters. No such payment shall relieve such Underwriter
or Underwriters from any of its or their obligations hereunder.
5. Offering by the Underwriters. Upon your authorization of the release of
the Firm Securities, the several Underwriters propose to offer the Firm
Securities for sale to the public upon the terms set forth in the Prospectus.
6. Covenants of the Company and the Selling Stockholders. The Company
covenants and agrees with each of the Underwriters as to the matters set forth
in subparagraphs (a) through (n) below and each of the Selling Stockholders
covenants and agrees with each of the Underwriters as to the matters set forth
in subparagraphs (o) through (t) that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and any
amendments thereto to become effective as promptly as possible. If required, the
Company will file the Prospectus or any Term Sheet that constitutes a part
thereof and any amendment or supplement thereto with the
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Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. During any time when a prospectus relating to the
Securities is required to be delivered under the Act, the Company (i) will
comply with all requirements imposed upon it by the Act and the rules and
regulations of the Commission thereunder to the extent necessary to permit the
continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and of the Prospectus, as then amended or supplemented, and
(ii) will not file with the Commission the prospectus, Term Sheet or the
amendment referred to in the second sentence of Section 2(a) hereof, any
amendment or supplement to such Prospectus, Term Sheet or any amendment to the
Registration Statement or any Rule 462(b) Registration Statement of which the
Representatives previously have been advised and furnished with a copy for a
reasonable period of time prior to the proposed filing and as to which filing
the Representatives shall not have given their consent. The Company will prepare
and file with the Commission, in accordance with the rules and regulations of
the Commission, promptly upon request by the Representatives or counsel for the
Underwriters, any amendments to the Registration Statement or amendments or
supplements to the Prospectus that may be necessary or advisable in connection
with the distribution of the Securities by the several Underwriters, and will
use its best efforts to cause any such amendment to the Registration Statement
to be declared effective by the Commission as promptly as possible. The Company
will advise the Representatives, promptly after receiving notice thereof, of the
time when the Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto has
been filed and will provide evidence satisfactory to the Representatives of each
such filing or effectiveness.
(b) The Company will advise the Representatives, promptly after receiving
notice or obtaining knowledge thereof, of (i) the issuance by the Commission of
any stop order suspending the effectiveness of the Original Registration
Statement or any Rule 462(b) Registration Statement or any amendment thereto or
any order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, (ii) the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, (iii)
the institution, threatening or contemplation of any proceeding for any such
purpose or (iv) any request made by the Commission for amending the Original
Registration Statement or any Rule 462(b) Registration Statement, for amending
or supplementing the Prospectus or for additional information. The Company will
use its best efforts to prevent the issuance of any such stop order and, if any
such stop order is issued, to obtain the withdrawal thereof as promptly as
possible.
(c) The Company will arrange for the qualification of the Securities for
offering and sale under the securities or blue sky laws of such jurisdictions as
the Representatives may designate and will continue such qualifications in
effect for as long as may be necessary to complete the distribution of the
Securities, provided, however, that in connection therewith the Company shall
not be required to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction.
(d) If, at any time prior to the later of (i) the final date when a
prospectus relating to the Securities is required to be delivered under the Act
or (ii) the Option Closing Date, any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the
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statements therein, in the light of the circumstances under which they were
made, not misleading, or if for any other reason it is necessary at any time to
amend or supplement the Prospectus to comply with the Act or the rules or
regulations of the Commission thereunder, the Company will promptly notify the
Representatives thereof and, subject to Section 5(a) hereof, will prepare and
file with the Commission, at the Company's expense, an amendment to the
Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance.
(e) The Company will, without charge, provide (i) to the Representatives
and to counsel for the Underwriters a conformed copy of the registration
statement originally filed with respect to the Securities and each amendment
thereto (in each case including exhibits thereto) or any Rule 462(b)
Registration Statement, certified by the Secretary or an Assistant Secretary of
the Company to be true and complete copies thereof as filed with the Commission
by electronic transmission, (ii) to each other Underwriter, a conformed copy of
such registration statement or any Rule 462(b) Registration Statement and each
amendment thereto (in each case without exhibits thereto) and (iii) so long as a
prospectus relating to the Securities is required to be delivered under the Act,
as many copies of each Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto as the Representatives may reasonably request; without
limiting the application of clause (iii) of this sentence, the Company, not
later than (A) 6:00 PM, New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to 10:00 A.M.,
New York City time, on such date or (B) 2:00 PM, New York City time, on the
business day following the date of determination of the public offering price,
if such determination occurred after 10:00 A.M., New York City time, on such
date, will deliver to the Underwriters, without charge, as many copies of the
Prospectus and any amendment or supplement thereto as the Representatives may
reasonably request for purposes of confirming orders that are expected to settle
on the Firm Closing Date. The Company will provide or cause to be provided to
each of the Representatives, and to each Underwriter that so requests in
writing, a copy of each report on Form SR filed by the Company as required by
Rule 463 under the Act.
(f) The Company, as soon as practicable, will make generally available to
its securityholders and to the Representatives a consolidated combined earnings
statement of the Company and its Subsidiaries that satisfies the provisions of
Section 11(a) of the Act and Rule 158 thereunder.
(g) The Company will apply the net proceeds from the sale of the Securities
as set forth under "Use of Proceeds" in the Prospectus.
(h) The Company will not, directly or indirectly, without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of any option to purchase or other sale or
disposition) of any shares of Common Stock or any securities convertible into,
or exchangeable or exercisable for, shares of Common Stock for a period of 180
days after the date hereof, except pursuant to this Agreement and except for
issuances pursuant to the exercise of
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employee stock options or warrants outstanding on the date hereof, pursuant to
the Company's dividend reinvestment plan or pursuant to the terms of convertible
securities of the Company outstanding on the date hereof.
(i) The Company will not, directly or indirectly, (i) take any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) (A) sell, bid for, purchase, or pay anyone any compensation
for soliciting purchases of, the Securities or (B) pay or agree to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
(j) The Company will obtain the agreements described in Section 8(f) hereof
prior to the Firm Closing Date.
(k) If at any time during the 25-day period after the Registration
Statement becomes effective or the period prior to the Option Closing Date, any
rumor, publication or event relating to or affecting the Company shall occur as
a result of which in your opinion the market price of the Common Stock has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after notice from you advising the Company to the
effect set forth above, forthwith prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
(l) If the Company elects to rely on Rule 462(b), the Company shall both
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) and pay the applicable fees in accordance with Rule 111 promulgated
under the Act by the earlier of (i) 10:00 P.M. Eastern time on the date of this
Agreement and (ii) the time confirmations are sent or given, as specified by
Rule 462(b)(2).
(m) The Company will cause the Securities to be duly included for quotation
on the Nasdaq Stock Market's National Market (the "Nasdaq National Market")
prior to the Firm Closing Date. The Company will ensure that the Securities
remain included for quotation on the Nasdaq National Market or listed on any
national exchange for a reasonable period of time following the Firm Closing
Date.
(n) The Company will take no action to prevent consummation of the
Reorganization.
(o) [The Selling Stockholder will not, directly or indirectly, without the
prior written consent of Prudential Securities Incorporated on behalf of the
Underwriters, offer, sell, offer to sell, pledge, contract to sell or grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge or grant of any option to purchase, sell
or dispose) of any shares of Common Stock or of any equity securities of the
Company substantially similar thereto or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock for a period of 180 days
after the date hereof, except pursuant to this Agreement (other than transfers
among the Selling Stockholders or by natural persons who are
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Selling Stockholders to their children or to trusts to be established for the
benefit of their children).]
(p) Such Selling Stockholder has full power (corporate and other) to enter
into this Agreement and to sell, assign, transfer and deliver to the
Underwriters the Shares to be sold by such Selling Stockholder hereunder in
accordance with the terms of this Agreement; the execution and delivery of this
Agreement have been duly authorized by all necessary corporate action of such
Selling Stockholder (if a corporation); and this Agreement has been duly
executed and delivered by such Selling Stockholder.
(q) Such Selling Stockholder has duly executed and delivered the Power of
Attorney and the Custody Agreement, each in the form heretofore delivered to the
Representatives. Certificates in negotiable form, endorsed in blank or
accompanied by blank stock powers duly executed, with signatures appropriately
guaranteed, representing the Securities to be sold by such Selling Stockholder
have been deposited with the Custodian pursuant to the Custody Agreement for the
purpose of delivery under this Agreement. Such Selling Stockholder specifically
agrees that each of the Securities represented by the certificates on deposit
with the Custodian is subject to the interests of the Underwriters hereunder,
that the arrangements made for such custody, the appointment of the
Attorney-in-Fact and the right, power and authority of the Attorney-in-Fact to
execute and deliver this Agreement, to agree on the price at which the
Securities (including such Selling Stockholder's Securities) are to be sold to
the Underwriters, and to carry out the terms of this Agreement, are to that
extent irrevocable and that the obligations of such Selling Stockholder
hereunder shall not be terminated, except as provided in this Agreement or the
Custody Agreement, by any act of such Selling Stockholder, by operation of law
or otherwise, whether in the case of any individual Selling Stockholder by the
death or incapacity of such Selling Stockholder, in the case of a trust or
estate by the death of the trustee or trustees or the executor or executors or
the termination of such trust or estate, or in the case of a corporate or
partnership Selling Stockholder by its liquidation or dissolution or by the
occurrence of any other event. If any individual Selling Stockholder, trustee or
executor should die or become incapacitated or any such trust should be
terminated, or if any corporate or partnership Selling Stockholder shall
liquidate or dissolve, or if any other event should occur, before the delivery
of such Securities hereunder, the certificates for such Securities deposited
with the Custodian shall be delivered by the Custodian in accordance with the
terms and conditions of this Agreement as if such death, incapacity,
termination, liquidation or dissolution or other event had not occurred,
regardless of whether or not the Custodian or the Attorney-in-Fact shall have
received notice thereof.
(r) Such Selling Stockholder is the lawful owner of the Securities to be
sold by such Selling Stockholder hereunder and upon sale and delivery of, and
payment for, such Securities, as provided herein, such Selling Stockholder will
convey and the Underwriters will acquire good, valid and marketable title to
such Securities, free and clear of any security interests, liens, encumbrances,
equities, claims or other defects.
(s) Such Selling Stockholder has not, directly or indirectly, since the
filing of the
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Registration Statement (A) sold, bid for, purchased, attempted to induce any
person to purchase, or paid anyone any compensation for soliciting purchases of,
the Securities or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company (except for
the sale of Securities by the Selling Stockholders under this Agreement).
7. Expenses. The Company will pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the printing or other production of documents with respect to the transactions,
including any costs of printing the registration statement originally filed with
respect to the Securities and any amendment thereto, any Rule 462(b)
Registration Statement, any Preliminary Prospectus and the Prospectus and any
amendment or supplement thereto, this Agreement and any blue sky memoranda, (ii)
all arrangements relating to the delivery to the Underwriters of copies of the
foregoing documents, (iii) the fees and disbursements of the counsel, the
accountants and any other experts or advisors retained by the Company, (iv)
preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Securities, including transfer agent's and registrar's fees, (v)
the qualification of the Securities under state securities and blue sky laws,
including filing fees and fees and disbursements of counsel for the Underwriters
relating thereto, (vi) the filing fees of the Commission and the National
Association of Securities Dealers, Inc. relating to the Securities, (vii) any
quotation of the Securities on the Nasdaq National Market, (viii) any meetings
with prospective investors in the Securities (other than as shall have been
specifically approved by the Representatives to be paid for by the Underwriters)
and (ix) advertising relating to the offering of the Securities (other than as
shall have been specifically approved by the Representatives to be paid for by
the Underwriters). If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 9 hereof is not satisfied, because this Agreement is terminated
pursuant to Section 13 hereof or because of any failure, refusal or inability on
the part of the Company to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including counsel fees and
disbursements) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities. The Company shall not in any event
be liable to any of the Underwriters for the loss of anticipated profits from
the transactions covered by this Agreement.
8. Conditions of the Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company and the Selling Stockholders
contained herein as of the date hereof and as of the Firm Closing Date, as if
made on and as of the Firm Closing Date, to the accuracy of the statements of
the Company's officers made pursuant to the provisions hereof, to the
performance by the Company and the Selling Stockholders of their respective
covenants and agreements hereunder and to the following additional conditions:
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<PAGE>
(a) If the Original Registration Statement or any amendment thereto filed
prior to the Firm Closing Date has not been declared effective as of the time of
execution hereof, the Original Registration Statement or such amendment and, if
the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration
Statement shall have been declared effective not later than the earlier of (i)
11:00 A.M., New York time, on the date on which the amendment to the
registration statement originally filed with respect to the Securities or to the
Registration Statement, as the case may be, containing information regarding the
initial public offering price of the Securities has been filed with the
Commission and (ii) the time confirmations are sent or given as specified by
Rule 462(b)(2), or with respect to the Original Registration Statement, or such
later time and date as shall have been consented to by the Representatives; if
required, the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto shall have been filed with the Commission in
the manner and within the time period required by Rules 434 and 424(b) under the
Act; no stop order suspending the effectiveness of the Registration Statement or
any amendment thereto shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of the
Company or the Representatives, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Wolf, Block, Schorr and Solis-Cohen LLP, counsel for the
Company and the Selling Stockholders, to the effect that:
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and
its Subsidiaries have been duly organized and are validly existing under
the laws of its jurisdiction of incorporation. The Company and its
Subsidiaries are duly qualified and in good standing as foreign
corporations in each jurisdiction in which the character or location of
their respective assets or properties (owned, leased or licensed) or the
nature of their respective businesses makes such qualification necessary,
except for such jurisdictions where the failure to so qualify would not
have a material adverse effect on the condition (financial or otherwise),
management, business prospects or results of operations of the Company and
its Subsidiaries;
(ii) the Company and its Subsidiaries have corporate power to own or
lease their respective properties and conduct their respective businesses
as described in the Registration Statement and the Prospectus, and the
Company has corporate power to enter into this Agreement and to carry out
all the terms and provisions hereof to be carried out by it;
(iii) the issued shares of capital stock of the Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable and
except for directors' qualifying shares and except as otherwise set forth
in the Prospectus, are owned beneficially by the Company free and clear of
any perfected security interests or, to the best knowledge of such counsel,
any other security interests, liens, encumbrances, equities or claims;
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<PAGE>
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued shares of
capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, have been issued in compliance with
all applicable federal and state securities laws and were not issued in
violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities; the Firm Securities have been duly
authorized by all necessary corporate action of the Company and, when
issued and delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and nonassessable; the
Securities have been duly included for trading on the Nasdaq National
Market; no holders of outstanding shares of capital stock of the Company
are entitled as such to any preemptive or other rights to subscribe for any
of the Securities; and no holders of securities of the Company are entitled
to have such securities registered under the Registration Statement;
(v) the statements set forth under the heading "Description of Capital
Stock" in the Prospectus, insofar as such statements purport to summarize
certain provisions of the capital stock of the Company, provide a fair
summary of such provisions; and the statements set forth under the headings
"Risk Factors--Insolvency Risks," "Risk Factors--Regulation and
Legislation," "Risk Factors--Risks Relating to Investment Company Act
Registration," [others to be added] in the Prospectus, insofar as such
statements constitute a summary of the legal matters, documents or
proceedings referred to therein, provide a fair summary of such legal
matters, documents and proceedings;
(vi) the execution and delivery of this Agreement have been duly
authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company; except (i)
as enforceability hereof may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium and other laws relating
to or affecting creditor's rights generally and by general equitable
principles and (ii) that enforcement of rights to indemnify and
contribution hereunder may be limited by federal or state securities laws
or principles of public policy;
(vii) the execution and delivery of each of the Reorganization
Agreements have been duly authorized by the Selling Stockholders,
Subsidiaries and the Company (as the case may be) and each of the
Reorganization Agreements has been duly executed and delivered by each
Selling Stockholder, the Subsidiaries and/or the Company party thereto, and
each is the valid and binding agreement of each Selling Stockholder, the
Subsidiaries and the Company as a party thereto, enforceable against such
Selling Stockholder, the Subsidiaries or the Company, as the case may be,
in accordance with its terms except (i) as enforceability hereof may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other laws relating to or affecting creditor's rights
generally and by general equitable principles and (ii) that enforcement of
rights to indemnify and contribution hereunder may be limited by federal or
state securities laws or principles of public policy;
(vii) (A) to the knowledge of such counsel no legal or governmental
proceedings are pending to which the Company or its Subsidiaries is a party
or to which the property of
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the Company or its Subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not
described therein, and, to the best knowledge of such counsel, no such
proceedings have been threatened against the Company or its Subsidiaries or
with respect to any of their respective properties and (B) no contract or
other document is required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement
that is not described therein or filed as required;
(viii) the issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement, the compliance by
the Company with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (A)
require the consent, approval, authorization, registration or qualification
of or with any governmental authority, except such as have been obtained
and such as may be required under state securities or blue sky laws, or (B)
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, lease or other agreement or instrument, known to such counsel, to
which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their respective properties
are bound, or the charter documents or by-laws of the Company or any of its
Subsidiaries, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any arbitrator
known to such counsel and applicable to the Company or any of its
Subsidiaries;
(ix) the Registration Statement is effective under the Act; any
required filing of the Prospectus, or any Term Sheet that constitutes a
part thereof, pursuant to Rules 434 and 424(b) has been made in the manner
and within the time period required by Rules 434 and 424(b); and no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto has been issued, and no proceedings for that purpose have
been instituted or threatened or, to the best knowledge of such counsel,
are contemplated by the Commission;
(x) the Registration Statement originally filed with respect to the
Securities and each amendment thereto, any Rule 462(b) Registration
Statement and the Prospectus (in each case, other than the financial
statements, schedules and other financial information contained therein, as
to which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the rules
and regulations of the Commission thereunder;
(xi) if the Company elects to rely on Rule 434, the Prospectus is not
"materially different," as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time of its
effectiveness or an effective post-effective amendment thereto (including
such information that is permitted to be omitted pursuant to Rule 430A);
(xii) the Company and the Subsidiaries own or possess, or can acquire
on
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reasonable terms, all material patents, patent application, trademarks,
service marks, trade names, licenses, copyrights and proprietary or other
confidential information currently employed by them in connection with
their respective businesses, and neither the Company nor any of the
Subsidiaries has received any notice of infringement of or conflict with
asserted rights of third parties with respect to any of the foregoing
which, simply or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a material adverse change in
the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and the Subsidiaries;
(xiii) the Company is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended;
(xiv) each Selling Stockholder has full power (including corporate or
partnership power, if a corporation or a partnership) to enter into this
Agreement, the Custody Agreement and the Power-of-Attorney and to sell,
transfer and deliver the Securities being sold by such Selling Stockholder
hereunder in the manner provided in this Agreement and to perform its
obligations under the Custody Agreement; the execution and delivery of this
Agreement, the Custody Agreement and the Power-of-Attorney have been duly
authorized by all necessary corporate action of each Selling Stockholder
that is a corporation; this Agreement, the Custody Agreement and the
Power-of-Attorney have been duly executed and delivered by each Selling
Stockholder; assuming due authorization, execution and delivery by the
Custodian, the Custody Agreement and the Power-of-Attorney are the legal,
valid and binding obligation of each Selling Stockholder, enforceable
against each Selling Stockholder in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, conservatorship,
receivership, fraudulent conveyance and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding in
equity or at law);
(xv) upon the delivery by each Selling Stockholder to the several
Underwriters of certificates for the Securities being sold hereunder by
such Selling Stockholder against payment therefor as provided herein, the
several Underwriters will own the Securities sold by the Selling
Stockholders, free and clear of any adverse claim or restriction on
transfer;
(xvi) the sale of Securities to the Underwriters by each Selling
Stockholder pursuant to this Agreement, the compliance by such Selling
Stockholder with the other provisions of this Agreement and the Custody
Agreement and the consummation of the other transactions herein
contemplated do not (A) require the consent, approval, authorization,
registration or qualification of or with any governmental authority, except
such as have been obtained and such as may be required under state
securities or blue sky laws, or (B) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, lease or other agreement or
instrument to which such Selling Stockholder is a party or by which such
Selling Stockholder or any of such Selling Stockholder's properties are
bound, or, in the case of a Selling Stockholder that is a corporation, the
charter documents or bylaws of
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<PAGE>
such Selling Stockholder or any statute or any judgment, decree, order,
rule or regulation of any court or other governmental authority or any
arbitrator applicable to such Selling Stockholder;
(xvii) the statements in the Registration Statement and in the
Prospectus under the caption "Principal and Selling Stockholders," insofar
as such statements constitute a summary of the matters referred to therein,
fairly present the information called for with respect to such matters; and
[Additional opinion points to be added concerning structured settlements]
In rendering any such opinion, each such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company, the Selling Stockholders and public officials.
Wolf, Block, Schorr and Solis-Cohen LLP shall also state that nothing has
come to such counsel's attention which would lead such counsel to believe that
the Registration Statement, as of its effective date, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that the Prospectus, as of its date or the date of such opinion, included or
includes any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
(c) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Stroock & Stroock & Lavan LLP, counsel for the Underwriters,
with respect to the issuance and sale of the Firm Securities, the Registration
Statement and the Prospectus, and such other related matters as the
Representatives may reasonably require, and the Company shall have furnished to
such counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(d) The Representatives shall have received from Coopers & Lybrand LLP a
letter or letters dated, respectively, the date hereof and the Firm Closing
Date, in form and substance satisfactory to the Representatives, to the effect
that:
(i) they are independent accountants with respect to the Company, its
Subsidiaries and the J.G. Wentworth Affiliated Companies within the meaning
of the Act and the applicable rules and regulations thereunder;
(ii) in their opinion, the audited combined financial statements and
schedules examined by them and included in the Registration Statement and
the Prospectus comply in form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
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(iii) at a specific date not more than five business days prior to the
date of such letter, there were any changes in the capital stock or
long-term debt of the Company and its Subsidiaries or any decreases in not
current assets or stockholders' equity of the Company and its Subsidiaries,
in each case compared with amounts shown on the December 31, 1996 balance
sheet included in the Registration Statement and the Prospectus, or for the
period from January 1, 1997 to such specified date there were not any
decreases, as compared with the comparable period of the preceding year, in
sales, net revenues, net income before income taxes or total or per share
amounts of net income of the Company and its Subsidiaries, except in all
instances for changes, decreases or increases set forth in such letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records
of the Company and its consolidated Subsidiaries and are included in the
Registration Statement and the Prospectus under the captions "Summary
Combined Financial Data" and "Selected Combined Financial Data" and in
Exhibit 11 to the Registration Statement, and have compared such amounts,
percentages and financial information with such records of the Company and
its consolidated Subsidiaries and with information derived from such
records and have found them to be in agreement, excluding any questions of
legal interpretation; and
(v) on the basis of a reading of the unaudited pro forma combined
condensed financial statements included in the Registration Statement and
the Prospectus, carrying out certain specified procedures that would not
necessarily reveal matters of significance with respect to the comments set
forth in this paragraph (v), inquiries of certain officials of the Company
and its consolidated Subsidiaries who have responsibility for financial and
accounting matters and proving the arithmetic accuracy of the application
of the pro forma adjustments to the historical amounts in the unaudited pro
forma combined condensed financial statements, nothing came to their
attention that caused them to believe that the unaudited pro forma combined
condensed financial statements do not comply in form in all material
respects with the applicable accounting requirements of Rule 11-02 of
Regulation S-X or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of such statements.
In the event that the letters referred to above set forth any such changes,
decreases or increases, it shall be a further condition to the obligations of
the Underwriters that (A) such letters shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Securities as contemplated by the Registration Statement, as amended as of the
date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (d) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
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Coopers & Lybrand LLP shall also state that, in connection with its audit,
it examined the Subsidiaries' stock books, minutes of meetings of the
Subsidiaries' boards of directors during the year ended December 31, 1996 and
made inquiries of the Subsidiaries' management, tax advisors and outside legal
counsel and, as a result of these procedures, nothing came to its attention with
respect to the ownership of the Subsidiaries that caused it to believe that the
Subsidiaries failed to comply with the ownership requirements for S Corporation
status during the year ended December 31, 1996.
(e) The Representatives shall have received a certificate, dated the Firm
Closing Date, from James D. Delaney, President and Chief Executive Officer of
the Company, and James J. O'Malley and Chief Financial Officer of the Company,
to the effect that:
(i) the representations and warranties of the Company in this Agreement
are true and correct as if made on and as of the Firm Closing Date; the
Registration Statement, as amended as of the Firm Closing Date, does not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading, and
the Prospectus, as amended or supplemented as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
the Company has performed all covenants and agreements contained in this
Agreement and satisfied all conditions contained in this Agreement on its
part to be performed or satisfied at or prior to the Firm Closing Date; and
no condition precedent to the Reorganization has not been waived or
satisfied other than the sale of the Securities under this Agreement;
(ii) no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto has been issued, and no proceedings for
that purpose have been instituted or threatened or are contemplated by the
Commission; and
(iii) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, neither the Company
nor any of its Subsidiaries has sustained any material loss or interference
with their respective businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any labor dispute or any legal or governmental proceeding, and there has
not been any material adverse change, or any development involving a
prospective material adverse change, in the condition (financial or
otherwise), management, business prospects, net worth or results of
operations of the Company or its Subsidiaries, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment
or supplement thereto).
(f) The Representatives shall have received a certificate, dated the Firm
Closing Date, executed by an Attorney-in-Fact on behalf of each Selling
Stockholder to the effect that representations and warranties of such Selling
Stockholder in this Agreement are true and correct as if made on and as of the
Firm Closing Date; the Registration Statement, as amended as of the Firm Closing
Date, does not include any untrue statement of a material fact or omit to state
any
29
<PAGE>
material fact necessary to make the statements therein not misleading, and
the Prospectus, as amended or supplemented as of the Firm Closing Date, does not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; the Selling
Stockholder has performed all covenants and agreements contained in this
Agreement and satisfied all conditions contained in this Agreement on their part
to be performed or satisfied hereunder at or prior to the Firm Closing Date; and
no condition precedent to the Reorganization has not been waived or satisfied
other than the sale of the Securities under this Agreement.
(g) The Representatives shall have received a certificate, dated the Firm
Closing Date, executed by an Attorney-in-Fact on behalf of each Selling
Stockholder to the effect that such Selling Stockholder does not have the right,
and that to its knowledge no such person has the right, contractual or
otherwise, to request that the Company register pursuant to the Act shares of
capital stock of the Company held by such Selling Stockholder or by any such
person, upon the issuance and sale of the Securities to the Underwriters
hereunder, except to the extent that (A) such shares are included in the
Registration Statement, (B) such rights were waived or not exercised or (C) such
person was excluded from including any such shares in the Registration
Statement.
(h) [The Representatives shall have received from each Selling Stockholder,
each person who is a director or officer of the Company or who owns five percent
or more of the Common Stock, an agreement to the effect that such person will
not, directly or indirectly, without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, offer, sell, offer to
sell, pledge, contract to sell or grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, or grant of any option to purchase, sell or dispose) of any shares of
Common Stock or of equity securities of the Company substantially similar
thereto or any securities convertible into, or exchangeable or exercisable for,
shares of Common Stock for a period of 180 days after the date hereof, except
pursuant to this Agreement (other than transfers among the Selling Stockholders
or by natural persons who are Selling Stockholders to their children or to
trusts to be established for the benefit of their children).]
(i) The Reorganization shall have been consummated.
(j) On or before the Firm Closing Date, the Representatives and counsel for
the Underwriters shall have received such further certificates, documents or
other information as they may have reasonably requested from the Company.
(k) Prior to the commencement of the offering of the Securities, the
Securities shall have been included for trading on the Nasdaq National Market.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
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<PAGE>
The respective obligations of the several Underwriters to purchase and pay
for any Option Securities shall be subject, in their discretion, to each of the
foregoing conditions to purchase the Firm Securities, except that all references
to the Firm Securities and the Firm Closing Date shall be deemed to refer to
such Option Securities and the related Option Closing Date, respectively.
9. Indemnification and Contribution.
(a) The Company and the Selling Stockholders, jointly and severally, agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Securities Exchange Act of 1934 (the "Exchange Act"), against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by the
Company or the Selling Stockholders in Sections 2 and 3 of this Agreement,
(ii) any untrue statement or alleged untrue statement of any material
fact contained in (A) the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Securities under the securities or
blue sky laws thereof or filed with the Commission or any securities
association or securities exchange (each an "Application"),
(iii) the omission or alleged omission to state in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or
(iv) any untrue statement or alleged untrue statement of any material
fact contained in any audio or visual materials used in connection with the
marketing of the Securities, including without limitation, slides, videos,
films, tape recordings,
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company and the Selling
Stockholders will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or any
Application in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein; and provided, further, that the Company
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<PAGE>
and the Selling Stockholders will not be liable to any Underwriter or any person
controlling such Underwriter with respect to any such untrue statement or
omission made in any Preliminary Prospectus that is corrected in the Prospectus
(or any amendment or supplement thereto) if the person asserting any such loss,
claim, damage or liability purchased Securities from such Underwriter but was
not sent or given a copy of the Prospectus (as amended or supplemented) at or
prior to the written confirmation of the sale of such Securities to such person
in any case where such delivery of the Prospectus (as amended or supplemented)
is required by the Act, unless such failure to deliver the Prospectus (as
amended or supplemented) was a result of noncompliance by the Company with
Section 5(d) and (e) of this Agreement. This indemnity agreement will be in
addition to any liability which the Company may otherwise have. Neither the
Company nor the Selling Stockholders will not, without the prior written consent
of the Underwriter or Underwriters purchasing, in the aggregate, more than fifty
percent (50%) of the Securities, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not any
such Underwriter or any person who controls any such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a party to
such claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of all of the Underwriters and such
controlling persons from all liability arising out of such claim, action, suit
or proceeding.
(b) Each Underwriter, severally and not jointly, will indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or any such director, officer, controlling person or Selling
Stockholder may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives specifically for use therein: and, subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person or Selling Stockholder in connection with
investigating or defending any such loss, claim, damage, liability or any action
in respect thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of
32
<PAGE>
the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section
8, notify the indemnifying party of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under this Section 8. In
case any such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by such indemnified party
of counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 8 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel) in any
one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the Representatives in the case of paragraph (a) of this Section
8, representing the indemnified parties under such paragraph (a) who are parties
to such action or actions) or (ii) the indemnifying party does not promptly
retain counsel satisfactory to the indemnified party or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. After such notice from the indemnifying party
to such indemnified party, the indemnifying party will not be liable for the
costs and expenses of any settlement of such action effected by such indemnified
party without the consent of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided for in the
preceding paragraphs of this Section 8 is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable contribution, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Securities or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in
33
<PAGE>
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion (i) with respect to the Company, the total proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters and (ii)
with respect to the Selling Stockholders, the sum of (x) the aggregate principal
amount of the S corporation distribution received from the offering proceeds
plus (y) the total proceeds from the offering (before deducting expenses)
received by the Selling Stockholders, to the total underwriting discounts and
commissions received by the Underwriters. The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and the
Selling Stockholders or the Underwriters, the parties' relative intents,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate in the
circumstances. The Company, the Selling Stockholders and the Underwriters agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to above
in this paragraph (d). Notwithstanding any other provision of this paragraph
(d), no Underwriter shall be obligated to make contributions hereunder that in
the aggregate exceed the total public offering price of the Securities purchased
by such Underwriter under this Agreement, less the aggregate amount of any
damages that such Underwriter has otherwise been required to pay in respect of
the same or any substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute hereunder are
several in proportion to their respective underwriting obligations and not
joint, and contributions among Underwriters shall be governed by the provisions
of the Prudential Securities Incorporated Master Agreement Among Underwriters.
For purposes of this paragraph (d), each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, each Selling Stockholder and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, shall have the same rights to contribution as the Company
10. Default of Underwriters. If one or more Underwriters default in their
obligations to purchase Firm Securities or Option Securities hereunder and the
aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or Option
34
<PAGE>
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase. If one or more Underwriters so default with respect to an aggregate
number of Securities that is more than ten percent of the aggregate number of
Firm Securities or Option Securities, as the case may be, to be purchased by all
of the Underwriters at such time hereunder, and if arrangements satisfactory to
the Representatives are not made within 36 hours after such default for the
purchase by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Securities with respect to
which such default occurs, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company other than as provided
in Section 10 hereof. In the event of any default by one or more Underwriters as
described in this Section 9, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may be,
established as provided in Section 3 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the purchase and delivery of the Firm Securities or Option
Securities, as the case may be. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 9. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
11. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, its officers, the
Selling Stockholders and the several Underwriters set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company, any of its officers or directors, the Selling
Stockholders, any Underwriter or any controlling person referred to in Section 8
hereof and (ii) delivery of and payment for the Securities. The respective
agreements, covenants, indemnities and other statements set forth in Sections 6
and 8 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
12. Termination.
(a) This Agreement may be terminated with respect to the Firm Securities or
any Option Securities in the sole discretion of the Representatives by notice to
the Company given prior to the Firm Closing Date or the related Option Closing
Date, respectively, in the event that the Company shall have failed, refused or
been unable to perform all obligations and satisfy all conditions on its part to
be performed or satisfied hereunder at or prior thereto or, if at or prior to
the Firm Closing Date or such Option Closing Date, respectively,
(i) the Company and its Subsidiaries shall have, in the sole judgment
of the Representatives, sustained any material loss or interference with
their respective businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any labor dispute or any legal or governmental proceeding or there shall
have been any material adverse change, or any development involving a
prospective material adverse change (including without limitation a change
in management or control of the Company), in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and its Subsidiaries, except in each case as described in or
contemplated by the Prospectus (exclusive of any amendment or supplement
thereto);
35
<PAGE>
(ii) trading in the Common Stock shall have been suspended by the
Commission or the Nasdaq National Market or trading in securities generally
on the Nasdaq National Market shall have been suspended or minimum or
maximum prices shall have been established on such exchange or for such
market system;
(iii) a banking moratorium shall have been declared by either federal
or state authorities; or
(iv) there shall have been (A) an outbreak or escalation of hostilities
between the United States and any foreign power, (B) an outbreak or
escalation of any other insurrection or armed conflict involving the United
States or (C) any other calamity or crisis or material adverse change in
general economic, political or financial conditions having an effect on the
U.S. financial markets that, in the sole judgment of the Representatives,
makes it impractical or inadvisable to proceed with the public offering or
the delivery of the Securities as contemplated by the Registration
Statement, as amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 11 shall be
without liability of any party to any other party except as provided in Section
10 hereof.
13. Information Supplied by Underwriters. The statements set forth in the
last paragraph on the front cover page and under the heading "Underwriting" in
any Preliminary Prospectus or the Prospectus (to the extent such statements
relate to the Underwriters) constitute the only information furnished by any
Underwriter through the Representatives to the Company for the purposes of
Sections 2(b) and 8 hereof. The Underwriters confirm that such statements (to
such extent) are correct.
14. Notices. All communications hereunder shall be in writing and, if sent
to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Equity
Transactions Group; and if sent to the Company, shall be delivered or sent by
mail, telex or facsimile transmission and confirmed in writing to the Company at
The Graham Building, 15th and Ranstead Streets, 10th Floor, Philadelphia,
Pennsylvania 19102, Attention: James D. Delaney.
15. Successors. This Agreement shall inure to the benefit of and shall be
binding upon the several Underwriters, the Selling Stockholders, the Company and
their respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company and the Selling Stockholders contained in Section
8 of this Agreement shall also be for the benefit of any person or persons who
control any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act and (ii) the indemnities of the Underwriters contained in
Section 8 of this Agreement shall also be for the benefit of the
36
<PAGE>
directors of the Company, the officers of the Company who have signed the
Registration Statement, the Selling Stockholders and any person or persons who
control the Company within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act. No purchaser of Securities from any Underwriter shall be
deemed a successor or assigned because of such purchase.
16. Applicable Law. The validity and interpretation of this Agreement, and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
provisions relating to conflicts of laws.
17. Consent to Jurisdiction and Service of Process. All judicial
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of New York, and
by execution and delivery of this Agreement, the Selling Stockholder accepts for
itself and in connection with its properties, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and waives any defense of
forum non conveniens and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. The Selling Stockholder designates
and appoints __________________, and such other persons as may hereafter be
selected by the Selling Stockholder irrevocably agreeing in writing to so serve,
as its agent to receive on its behalf service of all process in any such
proceedings in any such court, such service being hereby acknowledged by the
Selling Stockholder to be effective and binding service in every respect. A copy
of any such process so served shall be mailed by registered mail to the Selling
Securityholder at its address provided in Section 13 hereof; provided, however,
that, unless otherwise provided by applicable law, any failure to mail such copy
shall not affect the validity of service of such process. If any agent appointed
by the Selling Stockholder refuses to accept service, the Selling Stockholder
hereby agrees that service of process sufficient for personal jurisdiction in
any action against the Selling Stockholder in the State of New York may be made
by registered or certified mail, return receipt requested, to the Selling
Stockholder at its address provided in Section 13 hereof, and the Selling
Stockholder hereby acknowledges that such service shall be effective and binding
in every respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any Underwriter to
bring proceedings against the Selling Stockholder in the courts of any other
jurisdiction.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company and each of the
several Underwriters.
Very truly yours,
J.G. WENTWORTH & COMPANY, INC.
37
<PAGE>
By: ________________________
Name:
Title:
----------------------------
James B. Delaney
-----------------------------
Gary Veloric
------------------------------
Michael Goodman
------------------------------
Edward S. Stone
------------------------------
Alpha Nikelberry
ING
By:____________________________
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
PRUDENTIAL SECURITIES INCORPORATED
OPPENHEIMER & CO., INC.
[FURMAN SELZ LLC]
By: PRUDENTIAL SECURITIES INCORPORATED
By: _____________________
38
<PAGE>
Jean-Claude Canfin
Managing Director
For itself and on behalf of the Representatives.
39
<PAGE>
SCHEDULE I
SELLING STOCKHOLDERS
Name
- ----
40
<PAGE>
SCHEDULE II
UNDERWRITERS
<TABLE>
<CAPTION>
Column (2)
Column (1) Number of Firm
Number of Firm Securities to be Securities to be Column (3)
Purchased from the Purchased from the Total Number of Firm
Underwriter Company Selling Stockholders Securities
- ----------- ------- -------------------- ----------
<S> <C> <C> <C>
Prudential Securities
Incorporated
Oppenheimer & Co., Inc.
[Furman Selz LLC]
[other Underwriters]
Total________________ _____________________
</TABLE>
41
<PAGE>
SCHEDULE III
SUBSIDIARIES
Name Jurisdiction of Incorporation
- ---- -----------------------------
42
<PAGE>
J. G. WENTWORTH & COMPANY, INC.
Public Offering of Common Stock
CUSTODY AGREEMENT
ChaseMellon Shareholder Services LLC
[Address]
Ladies and Gentlemen:
There are delivered to you herewith on behalf of the undersigned one or
more common stock certificates in negotiable form representing the aggregate
number of shares of common stock, $.01 par value (the "Common Stock") of J. G.
Wentworth & Company, Inc., a Delaware corporation (the "Company"), set forth
opposite the name of the undersigned on Exhibit A attached hereto. Each Common
Stock certificate so delivered by the undersigned is duly endorsed in blank by
the undersigned, with signature guaranteed by a commercial bank or trust company
or by a member firm of the New York or American Stock Exchange or of the
National Association of Securities Dealers, Inc. (or accompanied by appropriate
stock powers separate from such certificates executed in blank with signatures
so guaranteed). Subject to the terms and conditions of the underwriting
agreement referred to below, the undersigned intends to sell to the underwriters
to be named therein (the "Underwriters") the number of shares of Common Stock
set forth opposite the name of the undersigned on Exhibit A hereto (the
aggregate number of shares of Common Stock for all selling shareholders as set
forth on Exhibit A hereto being referred to herein as the "Firm Shares" or
"Shares"). The Shares delivered to and held by you hereunder are to be held and
disposed of by you as custodian for the undersigned in accordance with and
pursuant to the provisions of this Custody Agreement.
Concurrently with the execution and delivery of this Custody Agreement,
the undersigned is executing and delivering a Power of Attorney appointing
<PAGE>
[________________________________________] as attorneys-in-fact (individually,
an "Attorney-in-Fact" and collectively the "Attorneys-in-Fact") with full power
of substitution, to act on behalf of the undersigned in connection with the sale
of the Shares pursuant to the Offering, such Power of Attorney to be
substantially in the form delivered to you herewith.
An underwriting agreement substantially in the form delivered to you
herewith is expected to be entered into among the Company, the undersigned and
certain other selling shareholders (collectively, together with the undersigned,
the "Selling Shareholders") and Prudential Securities Incorporated, Oppenheimer
& Co., Inc. and [Furman Selz LLC] (the "Representatives") of the Underwriters
(such Underwriting Agreement as executed being hereinafter referred to as the
"Underwriting Agreement"), pursuant to which, among other things, the
undersigned will agree to sell, and the Underwriters severally will agree to
purchase, subject to the terms and conditions therein set forth, the Shares
described herein.
As custodian you are hereby authorized and directed as follows:
1. You shall hold the certificates (and any separate stock
powers) delivered herewith in your custody and, subject to execution of
the Underwriting Agreement and immediately prior to the Firm Closing
Date as specified in or determined pursuant to Section 4 of the
Underwriting Agreement, you shall cause such certificates to be
transferred on the books of the Company and exchanged for certificates
representing the Shares to be sold by the undersigned on such date
pursuant to the Underwriting Agreement. (The term "Firm Closing Date"
shall have the meaning as defined in Section Four of the Underwriting
Agreement.)
2. On the Firm Closing Date, you shall transfer the
certificates evidencing the Shares into the names specified by the
Underwriters (for which purpose you have been furnished with a duly
executed stock power), cancel such certificates and deliver to the
Underwriters certificates evidencing the Shares of Common Stock to be
sold by the undersigned on such date pursuant to the Underwriting
Agreement, in such
-2-
<PAGE>
denominations and registered in such names as the Representatives may
request at least 72 hours prior to the Firm Closing Date, all against
receipt by you, on behalf of the undersigned, of payment of the
purchase price of the Shares then being sold by the undersigned in
accordance with the provisions of the Underwriting Agreement, which
payment shall be by wire of same-day funds. You shall cause the new
certificates to be issued to the Underwriters to be made available for
checking and packaging by the Representatives prior to their issuance
in accordance with the Underwriting Agreement at least 24 hours prior
to the Firm Closing Date.
3. The funds received by you from the Company and the
Underwriters shall be deposited by you into an account in your name as
Custodian and shall be distributed by you by wire transfer on the
following business day in accordance with written instructions of the
Selling Stockholders to be furnished to you prior to the Firm Closing
Date.
4. Except as herein otherwise provided, you are hereby
authorized and directed to follow any additional instructions received
from the Attorney(s)-in-Fact.
You will act as custodian hereunder without charge to the Selling
Shareholders. If for any reason the Shares to be delivered by you to the
Underwriters pursuant hereto shall not have been so delivered prior to December
31, 1997, you are authorized and directed to return to the undersigned the
shares deposited herewith by the undersigned and this Custody Agreement shall
thereupon terminate.
The undersigned agrees that the shares held in custody under this
Agreement will be held for the benefit of, coupled with and subject to the
interests of the Underwriters under the Underwriting Agreement, that the
arrangements made by the undersigned for such custody are to that extent
irrevocable and that the obligations of the undersigned and the provisions of
the Power of Attorney shall not be terminated by any act of the undersigned or
by operation of law,
-3-
<PAGE>
whether by dissolution or liquidation of the undersigned or the occurrence of
any other event. Accordingly, notwithstanding any such dissolution or
liquidation or the occurrence of any such other event before the delivery of the
Shares to the Underwriters pursuant to the Underwriting Agreement, you are
authorized and directed to deal with the Shares deposited hereunder in
accordance with the terms and conditions hereof as if such dissolution,
liquidation or other event had not occurred, regardless of whether or not you
shall have received notice thereof.
Until payment in full for the Shares to be delivered by you hereunder
has been made to you, on behalf of the undersigned, by or for the account of the
Underwriters, the undersigned shall remain the owner of such Shares and shall
have the right to vote such Shares and to receive all dividends and
distributions thereon.
This instrument constitutes a representation of the authority of the
undersigned to enter into this Custody Agreement and the Underwriting Agreement
and to sell the Shares to be delivered by you thereunder for the account of the
undersigned.
The undersigned agrees that the following provisions shall control your
rights, duties, liabilities, privileges and immunities hereunder:
1. You are authorized to accept this Custody Agreement and to
take any and all actions hereunder as you shall, in your discretion,
determine to be appropriate to effectuate the provisions of this
Custody Agreement; you assume no responsibility or liability to the
undersigned or to any other persons, other than to deal with the shares
and instruments delivered herewith as set forth herein; you shall act
hereunder as a custodian only, and you shall not be responsible or
liable in such capacity in any manner whatsoever for the sufficiency,
correctness, genuineness or validity of the shares delivered herewith,
or for the form or execution thereof, or for the identity or authority
of any person executing or depositing such shares; and the undersigned,
subject to paragraphs 4 and 6 below, agrees to indemnify you and hold
you harmless in connection with all costs and expenses, including
litigation expenses, actually and reasonably incurred
-4-
<PAGE>
with respect to any action taken by you in good faith in any and all
matters covered by this Custody Agreement in accordance with the
foregoing instructions.
2. In your capacity as Custodian, you are not a party to, and
are not bound by, or charged with notice of, any agreement, other than
the Power of Attorney referred to above. In particular, in your
capacity as Custodian, you are not bound by or charged with notice of
the Underwriting Agreement, whether or not copies of forms of such
agreement have been delivered to you.
3. You shall be protected in acting upon any written notice,
request, waiver, consent, certificate, receipt, authorization,
power-of-attorney or other paper or document which you believe in good
faith to be genuine and what it purports to be.
4. You shall not be liable for anything which you may do or
refrain from doing in connection herewith, except as a result of your
own gross negligence or willful misconduct.
5. You may confer with legal counsel in the event of any
dispute or question as to the construction of any of the provisions
hereof or your duties hereunder, and you shall incur no liability and
shall be fully protected in acting in accordance with the opinion and
instructions of such counsel.
6. In the event that you are in good faith in doubt as to what
action should be taken hereunder, you may, at your option, refuse to
comply with any claims or demands made to you, or you may refuse to
take any other action hereunder, so long as such doubt exists, and you
shall not be liable in any way for your failure or refusal to act as a
result of such doubt until (i) the rights of all parties shall have
been fully and finally adjudicated by a court of competent
jurisdiction, or (ii) all differences shall have been adjusted and all
doubt resolved by agreement among all of the interested persons, and
you shall have been notified thereof in writing signed by or on behalf
of all such persons. Your rights under this paragraph are cumulative of
all other rights which you may have by law or otherwise.
-5-
<PAGE>
All notices, requests, communications and mailings hereunder shall be in
writing and, if to the undersigned or the Attorney-in-Fact, shall be deemed to
have been duly given at the time of delivery or mailing if delivered or mailed
by first class mail, postage prepaid and addressed to each person included in
the term "Attorney(s)-in-Fact" at the address of such person set forth in the
Power of Attorney referred to above. Notices, requests or other communications
to you shall not be deemed given until actually received at your address set
forth above.
This Custody Agreement shall be governed by and construed in accordance
with the substantive laws of the State of New York without regard to conflict of
laws provisions.
Your acceptance hereof by the execution of this Custody Agreement shall
constitute an acknowledgment by you of receipt of the certificates described
opposite the name of the undersigned on Exhibit A hereto, the other enclosures
and attachments hereinbefore referred to, shall constitute the acceptance by you
of the authorizations herein conferred, and shall evidence your agreement to
carry out and perform this Custody Agreement in accordance with the provisions
hereof.
IN WITNESS WHEREOF, the undersigned has set the undersigned's signature
hereto this ___ day of _______ 19___.
SIGNED by, for and on behalf
of James D. Delaney
in the presence of:
By:___________________________
Name:
Title:
SIGNED by, for and on behalf
of Gary Veloric
in the presence of:
-6-
<PAGE>
By:___________________________
Name:
Title:
SIGNED, by, for and on behalf
of Michael B. Goodman
in the presence of
By:___________________________
Name
Title:
SIGNED by, for and on behalf
of Edward S. Stone
in the presence of:
By:___________________________
Name:
Title:
SIGNED by, for and on behalf
of Alpha Nikelberry
in the presence of:
By:___________________________
Name:
Title:
SIGNED by, for and on behalf
of ING (U.S.) Capital Corporation
in the presence of:
By:___________________________
Name:
Title:
Accepted as of the date
above stated.
CHASEMELLON SHAREHOLDER
SERVICES LLC
By: ________________________
Name:
Title:
By: ________________________
Name:
Title:
-7-
<PAGE>
Exhibit A
<TABLE>
<CAPTION>
Number of Shares of Common Number Number
Stock Represented by of of
Selling Stockholder Certificates Deposited Shares to be sold Shares to be Returned
------------------- ---------------------- ----------------- ---------------------
<S> <C> <C> <C>
James D. Delaney
Gary Veloric
Michael B. Goodman
Edward S. Stone
Alpha Nikelberry
ING (U.S.) Capital Corporation
</TABLE>
-8-
<PAGE>
J.G. WENTWORTH & COMPANY, INC.
Public Offering of Common Stock
IRREVOCABLE POWER OF ATTORNEY OF SELLING STOCKHOLDER
_____________ __, 1997
Ladies and Gentlemen:
The undersigned investor in J.G. Wentworth & Company, Inc., a Delaware
corporation (the "Company"), understands that it is contemplated that certain
investors in the Company, including the undersigned (collectively, together with
the undersigned, the "Selling Stockholders"), will sell shares of Common Stock,
$.01 par value (the "Common Stock"), of the Company to certain underwriters (the
"Underwriters") to be named in the underwriting agreement referred to below for
whom Prudential Securities Incorporated, Oppenheimer & Co., Inc. and [Furman
Selz LLC] have been duly authorized to act as representatives (the
"Representatives"), which Underwriters propose to offer and sell such shares to
the public. The undersigned also understands that, in connection with such offer
and sale, the Company has filed a Registration Statement on Form S-1 (File No.
333-_______) (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") to register the shares of Common Stock to be
offered under the Securities Act of 1933, as amended. The undersigned hereby
acknowledges receipt of a copy of the Registration Statement, as declared
effective by the Commission, and a copy of the proposed form of underwriting
agreement to be entered into among the Company, the Selling Stockholders and the
Underwriters (such agreement, in the form in which executed, the "Underwriting
Agreement").
Concurrently with the execution and delivery of this Power of Attorney,
the undersigned is also executing and delivering a Custody Agreement (the
"Custody Agreement") pursuant to which certificates for the number of shares of
Common Stock to be sold by the undersigned as set forth at the end of this
instrument are being deposited with ChaseMellon Shareholder Services LLC, as
custodian ("Custodian").
1. In connection with the foregoing, the undersigned hereby
irrevocably constitutes and appoints [ ] as attorneys-in-fact (individually,
an "Attorney-in-Fact" and collectively the "Attorneys-in-Fact") of the
undersigned, each with full power and authority to act together or alone,
including full power of substitution, in the name of and for and on behalf of
the undersigned, with respect to all matters arising in connection with the sale
of shares of Common Stock by the undersigned to the Underwriters, including, but
not limited to, the power and authority to take any and all of the following
actions:
(a) to sell, assign and transfer to the
Underwriters pursuant to the Underwriting Agreement the maximum number of shares
of Common Stock to be sold by the undersigned (specified below), at a purchase
price per share to be paid by the Underwriters, as
<PAGE>
determined by negotiation among the Company and the Representatives, but in no
event less than $_____ per share, and at the same price per share to be paid by
the Underwriters to each of the other Selling Stockholders and to the Company
for shares of Common Stock issued and sold by it;
(b) for the purpose of effecting such sale, to
make, execute, deliver, and perform the undersigned's obligations under the
Underwriting Agreement substantially in the form furnished to the undersigned
prior to the execution hereof, with such additions to or changes in the terms,
provisions and conditions thereof as the Attorneys-in-Fact, or any one of them,
in their, his or her sole discretion shall determine to be necessary or
appropriate, including, subject to the limitations set forth in paragraph 1(a)
hereof, the purchase price per share to be paid by the Underwriters and
including any additions to or changes in the terms, provisions and conditions
thereof relating to the public offering of such shares by the Underwriters (the
execution and delivery of the Underwriting Agreement by the Attorneys-in-Fact,
or any of them, to be conclusive evidence of the approval thereof);
(c) to give such orders and instructions to the
Custodian and the transfer agent for the Common Stock as the Attorneys-in-Fact,
or any one of them, in their, his or her sole discretion shall determine, with
respect to (i) the transfer on the stock record books of the Company of the
shares of Common Stock to be sold by the undersigned to the Underwriters in
order to effect such sale, including giving the name in which new certificates
for such shares are to be issued and the denominations thereof, (ii) the
delivery to or for the account of the Underwriters of certificates for such
shares against receipt by the Custodian of the purchase price to be paid
therefor, (iii) the payment by the Custodian out of the proceeds of such sale of
any expenses of the registration, offer, sale and delivery of such shares that,
by agreement between the undersigned and the Company, are to be borne by the
undersigned in connection with such offer, sale and delivery, (iv) the
remittance to the undersigned of the balance of the proceeds from any sale of
such shares sold by the undersigned, and (v) the return to the undersigned of
new certificates representing that number of shares of Common Stock, if any,
represented by the certificates deposited with the Custodian that is in excess
of the number of shares sold by the undersigned to the Underwriters;
(d) to retain legal counsel in connection with
any and all matters referred to herein;
(e) to execute and deliver any amendment to the
Custody Agreement; provided, however, that no such amendment shall increase the
number of shares of Common Stock to be sold by the undersigned above the number
of shares of Common Stock to be sold to the Underwriters specified below;
(f) to endorse (in blank or otherwise) on
behalf of the undersigned the certificate or certificates representing the
shares of Common Stock to be sold by the undersigned, or a stock power or powers
attached to such certificate or certificates;
(g) to exercise any power conferred upon, and
to take any action authorized or required to be taken by, the Selling
Stockholders pursuant to the Underwriting Agreement;
(h) to make, execute, acknowledge and deliver
all such contracts, powers of attorney, orders, receipts, notices, requests,
consents, instructions, certificates, letters and other writings, including
communications to the Commission and state securities
-2-
<PAGE>
commissions, and amendments to the Underwriting Agreement, and in general to do
all things and to take all actions, that the Attorneys-in-Fact, or any one of
them, in their, his or her sole discretion may consider necessary or appropriate
in connection with or to carry out the aforesaid sale of shares of Common Stock
to the Underwriters and the public offering thereof, as fully as the undersigned
could if personally present and acting; and
(i) to make payment, on behalf and for the
account of the undersigned, of all costs and expenses that, by agreement between
the undersigned and the Company, are payable by the undersigned in connection
with the sale of shares of Common Stock, including any applicable stock transfer
taxes chargeable to the undersigned, out of and to the extent of funds available
from the sale of such shares, provided that the Attorneys-in-Fact shall have no
personal liability to make such payments out of other funds, all in the sole and
absolute discretion of the Attorneys-in-Fact or any one of them (the undersigned
hereby expressly promising to repay the Attorneys-in-Fact for any such payments
made on behalf and for the account of the undersigned).
2. This Power of Attorney and all authority conferred hereby
are granted and conferred subject to the interests of the Underwriters and in
consideration of those interests, and for the purpose of completing the
transactions contemplated by the Underwriting Agreement and this Power of
Attorney, and such Power of Attorney and all authority conferred hereby shall be
irrevocable and is coupled with an interest and shall not be terminated by any
act of the undersigned or by operation of law, whether by death or incapacity,
or the dissolution or liquidation, of the undersigned or the occurrence of any
other event. If any event described in the preceding sentence shall occur before
the delivery of the shares of Common Stock to be sold by the undersigned under
the Underwriting Agreement, certificates for such shares shall be delivered by
or on behalf of the undersigned in accordance with the terms and conditions of
the Underwriting Agreement and the Custody Agreement, and all other actions
required to be taken under the Underwriting Agreement and the Custody Agreement
shall be taken, and action taken by the Attorneys-in-Fact, or any one of them,
pursuant to this Power of Attorney shall be as valid as if such event had not
occurred, whether or not the Custodian or the Attorneys-in-Fact, or any one of
them, shall have received notice of such event.
Notwithstanding the foregoing, if the Underwriting Agreement
shall not be entered into, or the transactions contemplated thereby consummated
prior to December 31, 1997, then from and after such date the undersigned shall
have the power to revoke all authority hereby conferred by giving written notice
to each of the Attorneys-in-Fact, with a copy to the Custodian, that this Power
of Attorney has been terminated; subject, however, to all lawful action done or
performed by the Attorneys-in-Fact, or any one of them, pursuant to this Power
of Attorney prior to the actual receipt of such notice.
3. The undersigned ratifies all that the
Attorneys-in-Fact, or any one of them, shall do pursuant to paragraphs 1 and 2
of this Power of Attorney.
4. The Attorneys-in-Fact shall be entitled to act and rely
upon any statement, request, notice or instructions respecting this Power of
Attorney given to the Attorneys-in-Fact by the undersigned; provided, however,
that the Attorneys-in-Fact shall not be entitled to act on any statement or
notice to the Attorneys-in-Fact with respect to the Firm Closing Date as defined
in Section 4 of the Underwriting Agreement, or with respect to the termination
of the Underwriting Agreement, or advising that the Underwriting Agreement has
not been executed and delivered, unless such statement or notice shall have been
confirmed in writing to the Attorneys-in-Fact by one of the Representatives.
-3-
<PAGE>
5. The undersigned agrees to hold the Attorneys-in-Fact
harmless from any and all loss, damage or liability that they, or any one of
them, may sustain as a result of any action taken hereunder except to the extent
such loss, damage or liability results from the gross negligence or willful
misconduct of said Attorney-in-Fact. It is understood that the Attorneys-in-Fact
shall serve without compensation.
6. In acting hereunder, the Attorneys-in-Fact may rely
on the representations, warranties and agreements of the undersigned made in the
Custody Agreement.
7. This Power of Attorney shall be governed by, and
construed in accordance with, the substantive laws of the State of New York
without regard to conflict of laws provisions.
Date: __________ __, 1997
Number of Shares of
Common Stock to be Sold
to the Underwriters:
__________ Shares
By: ___________________________*
Name:
Signature guaranteed by:
By: _________________________________________
Name:
(Note: The signatures must be guaranteed by a
commercial bank or trust company or by a
member firm of the New York or American Stock
Exchange or of the National Association of
Security Dealers.)
- --------------------
* To be signed in exactly the same manner as the shares are registered.
-4-
<PAGE>
CERTIFICATE OF INCORPORATION
OF
J.G. WENTWORTH & COMPANY, INC.
FIRST: The name of the Corporation is:
J.G. Wentworth & Company, Inc.
SECOND: The address of its registered office in the State of Delaware
is: Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware, 19801. The name of its registered agent at such address is: THE
CORPORATION TRUST COMPANY.
THIRD: The nature of the business or purposes to be conducted or
promoted is:
To have unlimited power to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law
of the State of Delaware.
FOURTH:
Section 1. Capital Stock Authorized. The total number of shares
of stock which the Corporation shall have authority to issue is 35,000,000
consisting of: (i) 30,000,000 shares of Common Stock, par value $.01 per share;
and (ii) 5,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock").
Section 2. Provisions Applicable to All Classes and Series of
Preferred Stock. Shares of Preferred Stock may be issued from time to time in
one or more classes or series. The Board of Directors of the Corporation is
hereby expressly granted authority to fix, by resolution or resolutions adopted
prior to the issuance of any shares of a particular class or series of Preferred
Stock, the designations, preferences and relative, participating, optional and
other special rights, or the qualifications, limitations or restrictions
thereof, of such class or series.
Section 3. Provisions Applicable to Common Stock
(a) After the requirements with respect to preferential
dividends upon the Preferred Stock of all classes
-1-
<PAGE>
and series thereof shall have been met and after the Corporation shall have
complied with all requirements, if any, with respect to the setting aside of
sums as a sinking fund or redemption or purchase account for the benefit of any
class or series thereof, then, and not otherwise, the holders of Common Stock
shall be entitled to receive such dividends as may be declared from time to time
by the Board of Directors.
(b) After distribution in full of the preferential amounts
to be distributed to the holders of all classes and series thereof of Preferred
Stock then outstanding in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Common Stock
shall be entitled to receive all the remaining assets of the Corporation
available for distribution to its stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(c) Each holder of Common Stock shall have one vote in
respect of each share of such stock held by him.
FIFTH: The name and mailing address of the incorporator is as follows:
Name Address
---- -------
Jennifer L. Dombrowski Twelfth Floor Packard Building
111 South 15th Street
Philadelphia, PA 19102-2678
SIXTH: The Board of Directors is expressly authorized to make, alter or
repeal the by-laws of the Corporation; provided that the Board of Directors
shall not be permitted to amend Section 2-7, Section 3-1, Section 3-10 or
Article X of the by-laws without the affirmative vote of shares entitled to cast
two thirds (2/3) of all votes entitled to be cast in an election of directors
(whether or not holders of such shares are present in person or represented by
proxy at the meeting).
SEVENTH: Elections of directors need not be by written ballot.
EIGHTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the
-2-
<PAGE>
Corporation under the provisions of Section 291 of Title 8 of the Delaware Code
or on the application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
NINTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that this shall not exempt a director
from liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware, or (iv) for
any transaction from which a director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is hereafter amended to
authorize the further elimination or limitation of liability of directors, then
the liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be eliminated or limited to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
October 1997.
--------------------------
Jennifer L. Dombrowski
-3-
<PAGE>
BY-LAWS
OF
J.G WENTWORTH & COMPANY, INC.
(a Delaware corporation)
<PAGE>
BY-LAWS OF
J.G. WENTWORTH & COMPANY, INC.
ARTICLE I - OFFICES
Section 1-1. Registered Office and Registered Agent. The Corporation
shall maintain a registered office and registered agent within the State of
Delaware, which may be changed by the Board of Directors from time to time.
Section 1-2. Other Offices. The Corporation may also have offices at
such other places, within or without the State of Delaware, as the Board of
Directors may from time to time determine.
ARTICLE II - STOCKHOLDERS' MEETINGS
Section 2-1. Place of Stockholders' Meetings. Meetings of stockholders
may be held at such place, either within or without the State of Delaware, as
may be designated by the Board of Directors from time to time. If no such place
is designated by the Board of Directors, meetings of the stockholders shall be
held at the principal executive offices of the Corporation.
Section 2-2. Annual Meeting. A meeting of the stockholders of the
Corporation shall be held in each calendar year, commencing with the year 1998,
at such date and time as shall be designated by the Board of Directors.
-2-
<PAGE>
At such annual meeting, there shall be held an election for a Board of
Directors to serve for the ensuing year and until their respective successors
are elected and qualified, or until their earlier resignation or removal.
Section 2-3. Special Meetings. Except as otherwise specifically
provided by law, special meetings of the stockholders may be called at any time:
(a) By the Board of Directors; or
(b) By the Chairman or President of the Corporation.
Upon the written request of any person entitled to call a special
meeting, which request shall set forth the purpose for which the meeting is
desired, it shall be the duty of the Secretary to give prompt written notice of
such meeting to be held at such time as the Secretary may fix, subject to the
provisions of Section 2-4 hereof. If the Secretary shall fail to fix such date
and give notice within ten (10) days after receipt of such request, the person
or persons making such request may do so.
Section 2-4. Notice of Meetings and Adjourned Meetings. Written notice
stating the place, date and hour of any meeting shall be given, to the extent
required by law, not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting. If
mailed, notice is given when deposited in the United States
-3-
<PAGE>
Mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation. Such notice may be given by or at the
direction of the person or persons authorized to call the meeting.
When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2-5. Quorum. The presence, in person or by proxy, of
the holders of a majority of the outstanding shares entitled to vote shall
constitute a quorum. The stockholders present at a duly organized meeting can
continue to do business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum. If a meeting cannot be
organized because of the absence of a quorum, those present may, except as
otherwise provided by law, adjourn the meeting to such time and place as they
may determine. In the case of any meeting for the election of Directors, those
stockholders who attend the second of such adjourned meetings, although less
than a quorum as fixed in this Section, shall nevertheless constitute a quorum
for the purpose of electing Directors.
-4-
<PAGE>
Section 2-6. Voting List; Proxies. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Upon the willful neglect or refusal of the Directors to produce such a
list at any meeting for the election of Directors, they shall be ineligible to
serve in any office at such meeting.
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy in any manner
permitted by law. All proxies shall be filed with the Secretary of the
Corporation not later than the day on which exercised. No proxy shall be
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voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period.
Section 2-7. Action at Meetings. When a quorum is present at any
meeting or adjournment thereof, action on any matter properly before the
meeting, other than the election of directors, shall be by the affirmative vote
of shares entitled to cast a majority of all votes entitled to be cast at the
meeting (whether or not holders of such shares are present in person or
represented by proxy at the meeting), unless the matter is one upon which by
express provision of law, the Certificate of Incorporation or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such matter. Directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors.
Except for the election of directors and as otherwise specifically
provided by law, all other votes may be taken by voice unless a stockholder
demands that it be taken by ballot, in which latter event the vote shall be
taken by written ballot.
Section 2-8. Business at Meetings of Stockholders. Except as otherwise
provided by law (including but not limited to Rule 14a-8 of the Securities and
Exchange Act of 1934, as amended, or any successor provision thereto) or in
these By-laws, the business which shall be conducted at any meeting of the
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stockholders shall (a) have been specified in the written notice of the meeting
(or any supplement thereto) given by the Corporation, or (b) be brought before
the meeting at the direction of the Board of Directors, or (c) be brought before
the meeting by the presiding officer of the meeting unless a majority of the
Directors then in office object to such business being conducted at the meeting,
or (d) have been specified in a written notice given to the Secretary of the
Corporation, by or on behalf of any stockholder who shall have been a
stockholder of record on the record date for such meeting and who shall continue
to be entitled to vote thereat (the "Stockholder Notice"), in accordance with
all of the following requirements:
(1) Each Stockholder Notice must be delivered to, or mailed and
received at, the offices of the Corporation (i) in the case of an annual meeting
that is called for a date that is within 30 days before or after the anniversary
date of the immediately preceding annual meeting of stockholders, not less than
120 days prior to the anniversary of the date the Corporation's proxy statement
was released to stockholders in connection with the Corporation's immediately
preceding annual meeting, and (ii) in the case of an annual meeting that is
called for a date that is not within 30 days before or after the anniversary
date of the immediately preceding annual meeting, not later than the close of
business on the tenth day following the day on which notice of the date of
meeting was mailed or public
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disclosure of the date of the meeting was made, whichever occurs first, except
that, for the 1998 Annual Meeting of Stockholders, the Stockholder Notice must
be received by the Corporation not later than the close of business on February
1, 1998.
(2) Each such Stockholder Notice must set forth: (i) the name and
address of the stockholder who intends to bring the business before the meeting;
(ii) the general nature of the business which such stockholder seeks to bring
before the meeting and, if a specific action is to be proposed, the text of the
resolution or resolutions which the proposing stockholder proposes that the
stockholders adopt; and (iii) a representation that the stockholder is a holder
of record of the stock of the Corporation entitled to vote at such meeting and
intends to bring the business specified in the notice before the meeting. The
presiding officer of the meeting may, in his or her sole discretion, refuse to
acknowledge any business proposed by a stockholder not made in compliance with
the foregoing procedure.
Section 2-9. Informal Action by Stockholders. Unless otherwise
provided by the Certificate of Incorporation, any action required to be taken at
any annual or special meeting of stockholders, or any action which may be taken
at any annual or special meeting of stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of
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votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted.
ARTICLE III - BOARD OF DIRECTORS
Section 3-1. Number. The entire Board shall consist of that number of
Directors, not less than one (1) nor more than nine (9), as may from time to
time be prescribed by the Board. The number of Directors shall initially consist
of that number of directors serving at the time of adoption of this Section 3-1.
No decrease in the number of authorized Directors constituting the entire Board
of Directors shall shorten the term of any incumbent Director.
The Directors shall be classified, with respect to the time for which
they severally hold office, into three classes as nearly equal in number as
reasonably possible and shall consist of:
(a) Class I directors who shall serve until the 1998 annual
meeting of stockholders and until their successors are duly elected and
qualified and thereafter shall be elected to a three year term;
(b) Class II directors who shall serve until the 1999 annual
meeting of stockholders and until their successors are duly elected and
qualified and thereafter shall be elected to a three year term; and
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(c) Class III directors who shall serve until the 2000 annual
meeting of stockholders and until their successors are duly elected and
qualified and thereafter shall be elected to a three-year term.
The Board of Directors shall increase or decrease the number of
Directors in one or more classes as may be appropriate whenever it increases or
decreases the number of Directors pursuant to this Section 3-1 of these by-laws,
in order to ensure that the three classes shall be as nearly equal in number as
reasonably possible.
Section 3-2. Place of Meeting. Meetings of the Board of Directors may
be held at such place either within or without the State of Delaware, as a
majority of the Directors may from time to time designate or as may be
designated in the notice calling the meeting.
Section 3-3. Regular Meetings. A regular meeting of the Board of
Directors shall be held annually, immediately following the annual meeting of
stockholders, at the place where such meeting of the stockholders is held or at
such other place, date and hour as a majority of the newly elected Directors may
designate. At such meeting the Board of Directors shall elect officers of the
Corporation. In addition to such regular meeting, the Board of Directors shall
have the power to fix, by resolution, the place, date and hour of other regular
meetings of the Board.
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Section 3-4. Special Meetings. Special meetings of the Board of
Directors shall be held whenever ordered by the President, by a majority of the
members of the executive committee, if any, or by a majority of the Directors in
office.
Section 3-5. Notices of Meetings of Board of Directors.
(a) Regular Meetings. No notice shall be required to be given of
any regular meeting, unless the same be held at other than the time or place for
holding such meetings as fixed in accordance with Section 3-3 of these by-laws,
in which event one (1) day's notice shall be given of the time and place of such
meeting.
(b) Special Meetings. At least one (1) day's notice shall be
given of the time, place and purpose for which any special meeting of the Board
of Directors is to be held.
Section 3-6. Quorum. A majority of the total number of Directors shall
constitute a quorum for the transaction of business, and the vote of a majority
of the Directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors. If there be less than a quorum present, a
majority of those present may adjourn the meeting from time to time and place to
place and shall cause notice of each such adjourned meeting to be given to all
absent Directors.
Section 3-7. Informal Action by the Board of Directors. Any action
required or permitted to be taken at any
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meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 3-8. Powers.
(a) General Powers. The Board of Directors shall have all powers
necessary or appropriate to the management of the business and affairs of the
Corporation, and, in addition to the power and authority conferred by these
by-laws, may exercise all powers of the Corporation and do all such lawful acts
and things as are not by statute, these by-laws or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
(b) Specific Powers. Without limiting the general powers
conferred by the last preceding clause and the powers conferred by the
Certificate of Incorporation and by-laws of the Corporation, it is hereby
expressly declared that the Board of Directors shall have the following powers:
(i) To confer upon any officer or officers of the
Corporation the power to choose, remove or suspend assistant officers, agents or
servants.
(ii) To appoint any person, firm or corporation to accept
and hold in trust for the Corporation any property belonging to the Corporation
or in which it is
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interested, and to authorize any such person, firm or corporation to execute any
documents and perform any duties that may be requisite in relation to any such
trust.
(iii) To appoint a person or persons to vote shares of
another corporation held and owned by the Corporation.
(iv) To designate, by resolution adopted by a majority of
the full Board of Directors, one (1) or more of its number to constitute an
executive committee which, to the extent provided in such resolution, subject to
the limitations of applicable law, shall have and may exercise the power of the
Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed.
(v) To designate, by resolution adopted by a majority of
the full Board of Directors, one (1) or more additional committees, each to
consist of one (1) or more Directors, to have such duties, powers and authority
as the Board of Directors shall determine. All committees of the Board of
Directors, including the executive committee, shall have the authority to adopt
their own rules of procedure. Absent the adoption of specific procedures, the
procedures applicable to the Board of Directors shall also apply to committees
thereof.
(vi) To fix the place, time and purpose of meetings of
stockholders.
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(vii) To purchase or otherwise acquire for the Corporation
any property, rights or privileges which the Corporation is authorized to
acquire, at such prices, on such terms and conditions and for such consideration
as it shall from time to time see fit, and, at its discretion, to pay any
property or rights acquired by the Corporation, either wholly or partly in money
or in stocks, bonds, debentures or other securities of the Corporation.
(viii) To create, make and issue mortgages, bonds, deeds of
trust, trust agreements and negotiable or transferable instruments and
securities, secured by mortgage or otherwise, and to do every other act and
thing necessary to effectuate the same.
(ix) To appoint and remove or suspend such subordinate
officers, agents or servants, permanently or temporarily, as it may from time to
time think fit, and to determine their duties, and fix, and from time to time
change, their salaries or emoluments, and to require security in such instances
and in such amounts as it thinks fit.
(x) To determine who shall be authorized on the
Corporation's behalf to sign bills, notes, receipts, acceptances, endorsements,
checks, releases, contracts and documents.
Section 3-9. Compensation of Directors. Compensation of Directors and
reimbursement of their expenses incurred in
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connection with the business of the Corporation, if any, shall be as determined
from time to time by resolution of the Board of Directors.
Section 3-10. Removal of Directors by Stockholders. The entire Board of
Directors or any individual Director may be removed from office, only for cause,
and only by the holders of shares entitled to cast two thirds (2/3) of all votes
entitled to be cast at a meeting duly called for that purpose (whether or not
holders of such shares are present in person or represented by proxy at the
meeting). In case the Board of Directors or any one (1) or more Directors be so
removed, new Directors may be elected at the same time.
Section 3-11. Resignations. Any Director may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation unless another time be
fixed in the resignation, in which case it shall become effective at the time so
fixed. The acceptance of a resignation shall not be required to make it
effective.
Section 3-12. Vacancies. Vacancies and new created directorships
resulting from any increase in the authorized number of Directors elected by all
of the stockholders having the right to vote as a single class may be filled by
a majority of the Directors then in office, although less than a quorum, or by a
sole remaining Director, and each person so elected shall be a
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Director until his successor is elected and qualified or until his earlier
resignation or removal.
Section 3-13. Participation by Conference Telephone. Directors may
participate in regular or special meetings of the Board by telephone or similar
communications equipment by means of which all other persons participating in
the meeting can hear each other, and such participation shall constitute
presence at the meeting.
Section 3-14. Nominations. Notwithstanding the provisions of Section
2-8 of these by-laws (dealing with business at meetings of stockholders),
nominations for the election of Directors may be made by the Board of Directors,
a committee appointed by the Board of Directors or by any stockholder of record
entitled to vote on the election of Directors who is a stockholder at the record
date of the meeting and also on the date of the meeting at which Directors are
to be elected; provided, however, that with respect to a nomination made by a
stockholder, which stockholder must provide timely written notice to the
Secretary of the Corporation, in accordance with the following requirements:
(1) To be timely, a stockholder's written notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation (i) in the case of an annual meeting that is called for a date that
is within 30 days before or after the anniversary date of the immediately
preceding annual
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meeting of stockholders, not less than 120 days prior to the anniversary of the
date that the Corporation's proxy statement was released to shareholders in
connection with the Corporation's immediately preceding annual meeting, and (ii)
in the case of an annual meeting that is called for a date that is not within 30
days before or after the anniversary date of the immediately preceding annual
meeting, or in the case of a special meeting of stockholders called for the
purpose of electing Directors, not later than the close of business on the tenth
day following the day on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever occurs first,
except that for the 1998 Annual Meeting of Stockholders, such notice must be
received by the Corporation no later than the close of business of February 1,
1998; and
(2) Each such written notice must set forth: (i) the name and
address of the stockholder who intends to make the nomination; (ii) the name and
address of the person or persons to be nominated; (iii) a representation that
the stockholder is a holder of record of the stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (iv) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (v)
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such other information regarding each nominee proposed by such stockholder as
would have been required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, by the Board of Directors, and (vi) the
consent of each nominee to serve as a Director of the Corporation if so elected.
The presiding officer of the meeting may refuse, in his or her sole discretion,
to acknowledge the nomination of any persons as not made in compliance with the
foregoing procedure.
ARTICLE IV - OFFICERS
Section 4-1. Election and Office. The Corporation shall have a
President, a Secretary and a Treasurer who shall be elected by the Board of
Directors. The Board of Directors may elect such additional officers as it may
deem proper, including a Chairman and a Vice Chairman of the Board of Directors,
one (1) or more Vice Presidents, and one (1) or more assistant or honorary
officers. Any number of offices may be held by the same person.
Section 4-2. Term. The President, the Secretary and the Treasurer shall
each serve for a term of one (1) year and until their respective successors are
chosen and qualified, unless removed from office by the Board of Directors
during their respective tenures. The term of office of any other officer shall
be as specified by the Board of Directors.
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Section 4-3. Powers and Duties of the President. Unless otherwise
determined by the Board of Directors, the President shall have the usual duties
of an executive officer with general supervision over and direction of the
affairs of the Corporation. In the exercise of these duties and subject to the
limitations of the laws of the State of Delaware, these by-laws, and the actions
of the Board of Directors, he may appoint, suspend and discharge employees and
agents, shall preside at all meetings of the stockholders at which he shall be
present, and, unless there is a Chairman of the Board of Directors, shall
preside at all meetings of the Board of Directors and, unless otherwise
specified by the Board of Directors, shall be a member of all committees. He
shall also do and perform such other duties as from time to time may be assigned
to him by the Board of Directors.
Unless otherwise determined by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend and
to act and to vote at any meeting of the stockholders of any corporation in
which the Corporation may hold stock, and, at any such meeting, shall possess
and may exercise any and all of the rights and powers incident to the ownership
of such stock and which, as the owner thereof, the Corporation might have
possessed and exercised.
Section 4-4. Powers and Duties of the Secretary. Unless otherwise
determined by the Board of Directors, the
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Secretary shall record all proceedings of the meetings of the Corporation, the
Board of Directors and all committees, in books to be kept for that purpose, and
shall attend to the giving and serving of all notices for the Corporation. He
shall have charge of the corporate seal, the certificate books, transfer books
and stock ledgers, and such other books and papers as the Board of Directors may
direct. He shall perform all other duties ordinarily incident to the office of
Secretary and shall have such other powers and perform such other duties as may
be assigned to him by the Board of Directors.
Section 4-5. Powers and Duties of the Treasurer. Unless otherwise
determined by the Board of Directors, the Treasurer shall have charge of all the
funds and securities of the Corporation which may come into his hands. When
necessary or proper, unless otherwise ordered by the Board of Directors, he
shall endorse for collection on behalf of the Corporation checks, notes and
other obligations, and shall deposit the same to the credit of the Corporation
in such banks or depositories as the Board of Directors may designate and shall
sign all receipts and vouchers for payments made to the Corporation. He shall
sign all checks made by the Corporation, except when the Board of Directors
shall otherwise direct. He shall enter regularly, in books of the Corporation to
be kept by him for that purpose, a full and accurate account of all moneys
received and paid by him on account of the Corporation. Whenever required by the
Board of
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Directors, he shall render a statement of the financial condition of the
Corporation. He shall at all reasonable times exhibit his books and accounts to
any Director of the Corporation, upon application at the office of the
Corporation during business hours. He shall have such other powers and shall
perform such other duties as may be assigned to him from time to time by the
Board of Directors. He shall give such bond, if any, for the faithful
performance of his duties as shall be required by the Board of Directors and any
such bond shall remain in the custody of the President.
Section 4-6. Powers and Duties of the Chairman of the Board of
Directors. Unless otherwise determined by the Board of Directors, the Chairman
of the Board, if any, shall preside at all meetings of Directors. The Chairman
of the Board shall have such other powers and perform such further duties as may
be assigned to such officer by the Board of Directors. To be eligible to serve,
the Chairman of the Board must be a Director of the Corporation.
Section 4-7. Powers and Duties of Vice Presidents and Assistant
Officers. Unless otherwise determined by the Board of Directors, each Vice
President and each assistant officer shall have the powers and perform the
duties of his respective superior officer. Vice Presidents and assistant
officers shall have such rank as shall be designated by the Board of Directors
and each, in the order of rank, shall act for such superior officer in his
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absence, or upon his disability or when so directed by such superior officer or
by the Board of Directors. Vice Presidents may be designated as having
responsibility for a specific aspect of the Corporation's affairs, in which
event each such Vice President shall be superior to the other Vice Presidents in
relation to matters within his aspect. The President shall be the superior
officer of the Vice Presidents. The Treasurer and the Secretary shall be the
superior officers of the Assistant Treasurers and Assistant Secretaries,
respectively.
Section 4-8. Delegation of Office. The Board of Directors may delegate
the powers or duties of any officer of the Corporation to any other officer or
to any Director from time to time.
Section 4-9. Vacancies. The Board of Directors shall have the power to
fill any vacancies in any office occurring from whatever reason.
Section 4-10. Resignations. Any officer may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation, unless another time
be fixed in the resignation, in which case it shall become effective at the time
so fixed. The acceptance of a resignation shall not be required to make it
effective.
ARTICLE V - CAPITAL STOCK
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Section 5-1. Stock Certificates. Shares of the Corporation shall be
represented by certificates signed by or in the name of the Corporation by (a)
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and (b) the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. If such certificate is countersigned (i) by a
transfer agent other than the Corporation or its employee, or (ii) by a
registrar other than the Corporation or its employee, the signatures of the
officers of the Corporation may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.
Section 5-2. Determination of Stockholders of Record. The Board of
Directors may fix, in advance, a record date to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action. Such date shall be not more than sixty (60) nor less than
ten (10) days
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before the date of any such meeting, nor more than sixty (60) days prior to any
other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 5-3. Transfer of Shares. Transfer of shares shall be made on
the books of the Corporation only upon surrender of the share certificate, duly
endorsed and otherwise in proper form for transfer, which certificate shall be
canceled at the time of the transfer. No transfer of shares shall be made on the
books of this Corporation if such transfer is in violation of a lawful
restriction noted conspicuously on the certificate.
Section 5-4. Lost, Stolen or Destroyed Share Certificates. The
Corporation may issue a new certificate of
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stock or uncertified shares in place of any certificate therefore issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation may require
the owner of the lost, stolen, or destroyed certificate, or his legal
representative to give the Corporation a bond sufficient to indemnify it against
claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate or
uncertificated shares.
ARTICLE VI - NOTICES
Section 6-1. Contents of Notice. Whenever any notice of a meeting is
required to be given pursuant to these by-laws or the Certificate of
Incorporation or otherwise, the notice shall specify the place, day and hour of
the meeting and, in the case of a special meeting of stockholders or where
otherwise required by law, the purpose or purposes for which such meeting is
called.
Section 6-2. Method of Notice. All notices shall be given to each
person entitled thereto, either personally or by sending a copy thereof through
the mail or by telegraph or telecopier, charges prepaid, to his address as it
appears on the records of the Corporation, or supplied by him to the Corporation
for the purpose of notice. If notice is sent by mail, telegraph or telecopier,
it shall be deemed to have been given to the person entitled thereto when
deposited in the United States Mail or with the telegraph office for
transmission or when confirmation of receipt by telecopier is received. If no
address
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for a stockholder appears on the books of the Corporation and such stockholder
has not supplied the Corporation with an address for the purpose of notice,
notice deposited in the United States Mail addressed to such stockholder care of
General Delivery in the city in which the principal office of the Corporation is
located shall be sufficient.
Section 6-3. Waiver of Notice. Whenever notice is required to be given
under any provision of law or of the Certificate of Incorporation or by-laws of
the Corporation, a written waiver, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders, Directors, or members of a committee of Directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation.
ARTICLE VII - INDEMNIFICATION OF DIRECTORS AND
OFFICERS AND OTHER PERSONS
Section 7-1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a
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"proceeding")(other than an action by or in the right of the Corporation), by
reason of the fact that he or she, or a person for whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer of the Corporation, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exist or may hereafter be amended (but, in the case of any such
amendment, the rights of indemnification provided hereby shall continue as
theretofore notwithstanding such amendment unless such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors,
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administrators and personal representatives, provided, however, that the
Corporation shall indemnify any such indemnitees in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Section shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of the Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
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Section 7-2. Right of Claimant to Bring Suit. A claimant may bring suit
against the Corporation under Section 7-1 only if the Corporation fails to pay
in full within 30 days of its receipt of a written claim for payment hereunder.
If successful in whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim (including, but not limited to,
attorneys' fees). It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant has not met
the standards of conduct that make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of providing such defense shall be on the Corporation.
Neither the failure of the Corporation (including the Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including the Board of Directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct,
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shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 7-3. Non-Exclusivity of Rights. The right to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any other
right that any person may have or hereafter acquire under any statute, provision
of the Certificate of Incorporation, by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 7-4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
ARTICLE VIII - SEAL
The form of the seal of the Corporation,
called the corporate seal of the Corporation, [Form of Seal]
shall be as im- pressed adjacent hereto.
ARTICLE IX - FISCAL YEAR
The fiscal year of the Corporation shall end on December 31.
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ARTICLE X - AMENDMENTS
These or other by-laws may be adopted, amended or repealed by the
affirmative vote of shares entitled to cast two-thirds (2/3) of all votes
entitled to be cast at any regular or special meeting of the stockholders
(whether or not holders of such shares are present in person or represented by
proxy at such meeting). Notwithstanding the foregoing, the Board of Directors
shall have the power to adopt, amend or repeal these or other by-laws, except
that the Board of Directors shall not have the power to amend Section 2-7,
Section 3-1, Section 3-10 or Article X of these by-laws unless such amendment is
adopted by the stockholders in accordance with the previous sentence. The fact
that such power has been so conferred upon the Board of Directors shall not
divest the stockholders of the power nor limit their power to adopt, amend or
repeal by-laws.
ARTICLE XI - INTERPRETATION OF BY-LAWS
All words, terms and provisions of these by-laws shall be interpreted
and defined by and in accordance with the General Corporation Law of the State
of Delaware, as amended, and as amended from time to time hereafter. Any
determination involving interpretation or application of these by-laws made in
good faith by the Board of Directors in a manner consistent with the previous
sentence shall be final, binding and conclusive on all parties in interest.
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J.G. WENTWORTH & COMPANY, INC.
1997 STOCK INCENTIVE PLAN
1. Purpose. J.G. Wentworth and Company, Inc., a Delaware corporation (the
"Company"), hereby adopts the J.G. Wentworth & Company, Inc. 1997 Stock
Incentive Plan (the "Plan"). The Plan is intended to recognize the contributions
made to the Company by employees (including employees who are members of the
Board of Directors) of the Company or any Affiliate, to provide such persons
with additional incentive to devote themselves to the future success of the
Company or an Affiliate, and to improve the ability of the Company or an
Affiliate to attract, retain, and motivate individuals upon whom the Company's
sustained growth and financial success depend, by providing such persons with an
opportunity to acquire or increase their proprietary interest in the Company
through receipt of rights to acquire the Company's Common Stock, $.01 par value
(the "Common Stock"), and through the transfer or issuance of Common Stock. In
addition, the Plan is intended as an additional incentive to directors of the
Company who are not employees of the Company or an Affiliate to serve on the
Board of Directors and to devote themselves to the future success of the Company
by providing them with an opportunity to acquire or increase their proprietary
interest in the Company through the receipt of rights to acquire Common Stock.
Furthermore, the Plan may be used to encourage consultants and advisors of the
Company to further the success of the Company.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" shall mean a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning of Section
424(e) or (f) of the Code.
"Award" shall mean a transfer of Common Stock made pursuant to the
terms of the Plan.
"Award Agreement" shall mean the agreement between the Company and a
Grantee with respect to an Award made pursuant to the Plan.
"Board of Directors" shall mean the Board of Directors of the Company.
"Change of Control" shall have the meaning as set forth in Section 9 of
the Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall have the meaning set forth in Section 3 of the Plan.
<PAGE>
"Common Stock" shall have the meaning set forth in Section 1 of the
Plan.
"Company" shall mean J.G. Wentworth and Company, Inc., a Delaware
corporation.
"Disability" shall have the meaning set forth in Section 22(e)(3) of
the Code.
"Employee" shall mean an employee of the Company or an Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall have the meaning set forth in Subsection 8(b)
of the Plan.
"Grantee" shall mean a person to whom an Award has been granted
pursuant to the Plan.
"ISO" shall mean an Option granted under the Plan which is intended to
qualify as an "incentive stock option" within the meaning of Section 422(b) of
the Code.
"Non-Employee Director" shall mean a member of the Board of Directors
of the Company who is a "non-employee" of the Company within the meaning of Rule
16b-3.
"Non-qualified Stock Option" shall mean an Option granted under the
Plan which is not intended to qualify, or otherwise does not qualify, as an
"incentive stock option" within the meaning of Section 422(b) of the Code.
"Option" shall mean either an ISO or a Non-qualified Stock Option
granted under the Plan.
"Optionee" shall mean a person to whom an Option has been granted under
the Plan, which Option has not been exercised and has not expired or terminated.
"Option Document" shall mean the document described in Section 8 of the
Plan, as applicable, which sets forth the terms and conditions of each grant of
Options.
"Option Price" shall mean the price at which Shares may be purchased
upon exercise of an Option, as calculated pursuant to Subsection 8(b) of the
Plan.
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"Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange Act.
"SAR" shall have the meaning set forth in Section 11 of the Plan.
"Section 16 Person" shall mean any person who is an "officer" or
"director" within the meaning of Rule 16a-1(f) promulgated under the Exchange
Act or any successor rule.
"Shares" shall mean the shares of Common Stock of the Company which are
the subject of Options or granted as Awards under the Plan.
3. Administration of the Plan. The Board of Directors may administer the
Plan itself or may designate a committee or committees composed of two or more
of members of the Board of Directors. At the discretion of the Board of
Directors, a separate committee may be designated consisting of two or more
Non-Employee Directors to operate and administer the Plan with respect to only
Section 16 Persons, while appointing another committee or itself to administer
the Plan with respect to all other persons eligible to participate in the Plan.
Any such committee or committees designated by the Board of Directors, and the
Board of Directors itself in its administrative capacity with respect to the
Plan, is referred to as the "Committee."
(a) Meetings. The Committee shall hold meetings at such times and
places as it may determine, shall keep minutes of its meetings, and shall adopt,
amend and revoke such rules or procedures as it may deem proper; provided,
however, that it may take action only upon the agreement of a majority of the
whole Committee. Any action which the Committee shall take through a written
instrument signed by a majority of its members shall be as effective as though
it had been taken at a meeting duly called and held.
(b) Indemnification. Service on the Committee shall constitute service
as a member of the Board of Directors of the Company. Each member of the
Committee shall be entitled, without further act on his or her part, to
indemnity from the Company and limitation of liability to the fullest extent
provided by applicable law and by the Company's Certificate of Incorporation
and/or By-laws in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan or the granting of
Options thereunder in which he or she may be involved by reason of his or her
being or having been a member of the Committee, whether or not he or she
continues to be such member of the Committee at the time of the action, suit or
proceeding.
(c) Interpretation. The Committee shall have the power and authority to
interpret the Plan and to adopt rules and regulations for its administration
that are not inconsistent with the express terms of the Plan. Any such actions
by the Committee shall be final, binding and conclusive on all parties in
interest.
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4. Grants under the Plan. Grants under the Plan may be in the form of a
Non-qualified Stock Option, an ISO or a combination thereof, at the discretion
of the Committee.
5. Eligibility. All Employees, members of the Board of Directors and
consultants and advisors to the Company shall be eligible to receive Options and
Awards hereunder. Consultants and advisors shall be eligible only if they render
bona fide services to the Company unrelated to the offer or sale of securities;
provided, however, that the limitation contained in this sentence shall not
apply to the extent that the inapplicability of such limitation will not
disqualify the Common Stock from being eligible for registration on Form S-8 (or
any successor form) under the Act. The Committee, in its sole discretion, shall
determine whether an individual qualifies as an employee.
6. Shares Subject to Plan. The aggregate maximum number of Shares for which
Awards or Options may be granted pursuant to the Plan is One Million Five
Hundred Thousand (1,500,000). The number of Shares which may be issued under the
Plan shall be further subject to adjustment in accordance with Section 10. The
Shares shall be issued from authorized and unissued Common Stock or Common Stock
held in or hereafter acquired for the treasury of the Company. If an Option
terminates or expires without having been fully exercised for any reason or if
Shares subject to an Award have been conveyed back to the Company pursuant to
the terms of an Award Agreement, the Shares for which the Option was not
exercised or the Shares that were conveyed back to the Company may again be the
subject of one or more Options or Awards granted pursuant to the Plan.
7. Term of the Plan. The Plan is effective as of October 13, 1997, the
date on which it was adopted by the Board of Directors and approved by its
stockholders. No ISO may be granted under the Plan after October 13, 2007.
8. Option Documents and Terms. Each Option granted under the Plan shall be
a Non-qualified Stock Option unless the Option shall be specifically designated
at the time of grant to be an ISO for Federal income tax purposes. If any Option
designated an ISO is determined for any reason not to qualify as an incentive
stock option within the meaning of Section 422 of the Code, such Option shall be
treated as a Non-qualified Stock Option for all purposes under the provisions of
the Plan. Options granted pursuant to the Plan shall be evidenced by the Option
Documents in such form as the Committee shall from time to time approve, which
Option Documents shall comply with and be subject to the following terms and
conditions and such other terms and conditions as the Committee shall from time
to time require which are not inconsistent with the terms of the Plan.
(a) Number of Option Shares. Each Option Document shall state the
number of Shares to which it pertains. An Optionee may receive more than one
Option, which may include Options which are intended to be ISO's and Options
which are not intended to be ISO's, but only on the terms and subject to the
conditions and restrictions of the Plan. Notwithstanding anything herein to the
contrary, no Optionee shall be granted Options during
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one fiscal year of the Company for more than Six Hundred Thousand (600,000) such
number to be subject to adjustment in accordance with Section 10.
(b) Option Price. Each Option Document shall state the Option Price
which, for a Non-qualified Stock Option, may be less than, equal to, or greater
than the Fair Market Value of the Shares on the date the Option is granted and,
for an ISO, shall be at least 100% of the Fair Market Value of the Shares on the
date the Option is granted as determined by the Committee in accordance with
this Subsection 8(b); provided, however, that if an ISO is granted to an
Optionee who then owns, directly or by attribution under Section 424(d) of the
Code, shares possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or an Affiliate, then the Option Price
shall be at least 110% of the Fair Market Value of the Shares on the date the
Option is granted. If the Common Stock is traded in a public market, then the
Fair Market Value per share shall be, if the Common Stock is listed on a
national securities exchange or included in the NASDAQ System, the last reported
sale price thereof for the "Valuation Date" (as hereinafter defined), or, if the
Common Stock is not so listed or included, the mean between the last reported
"bid" and "asked" prices thereof on the Valuation Date, as reported on NASDAQ
or, if not so reported, as reported by the National Daily Quotation Bureau, Inc.
or as reported in a customary financial reporting service, as applicable and as
the Committee determines. If the Common Stock is not traded in a public market,
Fair Market Value shall be determined in good faith by the Committee. For
purposes of the determination of Fair Market Value under this Section 8(b), the
Valuation Date shall be the immediately preceding business day unless the
transaction with respect to which Fair Market Value is being determined occurs
following the closing of the exchange, the NASDAQ System, NASDAQ or the
financial reporting service, as applicable, in which case the Valuation Date
shall be the date on which the transaction occurs.
(c) Exercise. No Option shall be deemed to have been exercised prior to the
receipt by the Company of written notice of such exercise and (unless
arrangements satisfactory to the Company have been made for payment through a
broker in accordance with procedures permitted by Regulation P of the Federal
Reserve Board) of payment in full of the Option Price for the Shares to be
purchased. Each such notice shall specify the number of Shares to be purchased
and shall (unless the Shares are covered by a then current registration
statement or a Notification under Regulation A under the Act), contain the
Optionee's acknowledgment in form and substance satisfactory to the Company that
(a) such Shares are being purchased for investment and not for distribution or
resale (other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act), (b) the Optionee has been advised and understands that
(i) the Shares have not been registered under the Act and are "restricted
securities" within the meaning of Rule 144 under the Act and are subject to
restrictions on transfer and (ii) the Company is under no obligation to register
the Shares under the Act or to take any action which would make available to the
Optionee any exemption from such registration, (c) such Shares may not be
transferred without compliance with all applicable federal and state securities
laws, and (d) an appropriate legend referring to the foregoing restrictions on
transfer and any other restrictions imposed under the Option Documents may be
endorsed on the certificates. Notwithstanding the foregoing, if the
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Company determines that issuance of Shares should be delayed pending (A)
registration under federal or state securities laws, (B) the receipt of an
opinion of counsel satisfactory to the Company that an appropriate exemption
from such registration is available, (C) the listing or inclusion of the Shares
on any securities exchange or an automated quotation system or (D) the consent
or approval of any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such Shares, the Company may defer
exercise of any Option granted hereunder until any of the events described in
this sentence has occurred.
(d) Medium of Payment. Subject to the terms of the applicable Option
Document, an Optionee shall pay for Shares (i) in cash, (ii) by certified or
cashier's check payable to the order of the Company, or (iii) by such other mode
of payment as the Committee may approve, including payment through a broker in
accordance with procedures permitted by Regulation P of the Federal Reserve
Board. The Optionee may also exercise the Option in any manner contemplated by
Section 11. Furthermore, the Committee may provide in an Option Document that
payment may be made in whole or in part in shares of the Company's Common Stock
held by the Optionee. If payment is made in whole or in part in shares of the
Company's Common Stock, then the Optionee shall deliver to the Company
certificates registered in the name of such Optionee representing the shares
owned by such Optionee, free of all liens, claims and encumbrances of every kind
and having an aggregate Fair Market Value on the date of delivery that is at
least as great as the Option Price of the Shares (or relevant portion thereof)
with respect to which such Option is to be exercised by the payment in shares of
Common Stock, endorsed in blank or accompanied by stock powers duly endorsed in
blank by the Optionee. In the event that certificates for shares of the
Company's Common Stock delivered to the Company represent a number of shares in
excess of the number of shares required to make payment for the Option Price of
the Shares (or relevant portion thereof) with respect to which such Option is to
be exercised by payment in shares of Common Stock, the stock certificate or
certificates issued to the Optionee shall represent (i) the Shares in respect of
which payment is made, and (ii) such excess number of shares. Notwithstanding
the foregoing, the Committee may impose from time to time such limitations and
prohibitions on the use of shares of the Common Stock to exercise an Option as
it deems appropriate.
(e) Termination of Options.
(i) No Option shall be exercisable after the first to occur of the
following:
(A) Expiration of the Option term specified in the Option
Document, which, in the case of an ISO, shall not occur after (1) ten years from
the date of grant, or (2) five years from the date of grant if the Optionee on
the date of grant owns, directly or by attribution under Section 424(d) of the
Code, shares possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of an Affiliate;
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(B) Except to the extent otherwise provided in an Optionee's
Option Document, a finding by the Committee, after full consideration of the
facts presented on behalf of both the Company and the Optionee, that the
Optionee has been engaged in disloyalty to the Company or an Affiliate,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of the Optionee's employment or
service, or has disclosed trade secrets or confidential information of the
Company or an Affiliate. In such event, in addition to immediate termination of
the Option, the Optionee shall automatically forfeit all Shares for which the
Company has not yet delivered the share certificates upon refund by the Company
of the Option Price. Notwithstanding anything herein to the contrary, the
Company may withhold delivery of share certificates pending the resolution of
any inquiry that could lead to a finding resulting in a forfeiture;
(C) The date, if any, set by the Board of Directors as an
accelerated expiration date in the event of the liquidation or dissolution of
the Company;
(D) The occurrence of such other event or events as may be set
forth in the Option Document as causing an accelerated expiration of the Option;
or
(E) Except as otherwise set forth in the Option Document and
subject to the foregoing provisions of this Subsection 8(e), three months after
the Optionee's employment or service with the Company or its Affiliates
terminates for any reason other than Disability or death or one year after such
termination due to Optionee's Disability or death. With respect to this
Subsection 8(e)(i)(E), the only Options that may be exercised during the
three-month or one-year period, as the case may be, are Options which were
exercisable on the last date of such employment or service and not Options
which, if the Optionee were still employed or rendering service during such
three-month or one-year period, would become exercisable, unless the Option
Document specifically provides to the contrary. The terms of an executive
severance agreement or other agreement between the Company and an Optionee,
approved by the Committee, whether entered into prior or subsequent to the grant
of an Option, which provide for Option exercise dates later than those set forth
in Subsection 8(e)(i) shall be deemed to be Option terms approved by the
Committee and consented to by the Optionee.
(ii) Notwithstanding the foregoing, the Committee may extend the
period during which all or any portion of an Option may be exercised to a date
no later than the Option term specified in the Option Document pursuant to
Subsection 8(e)(i)(A), provided that any change pursuant to this Subsection
8(e)(ii) which would cause an ISO to become a Non-qualified Stock Option may be
made only with the consent of the Optionee.
(iii) Notwithstanding anything to the contrary contained in the
Plan or an Option Document, an ISO shall be treated as a Non-qualified Stock
Option to the extent such ISO is exercised at any time after the expiration of
the time period permitted under the Code for the exercise of an ISO.
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(f) Transfers. No Option granted under the Plan may be transferred,
except by will or by the laws of descent and distribution except as otherwise
set forth in the Option Document or to the extent that the Committee otherwise
determines.
(g) Limitation on ISO Grants. To the extent that the aggregate fair
market value of the shares of Common Stock (determined at the time the ISO is
granted) with respect to which ISO's under all incentive stock option plans of
the Company or its Affiliates are exercisable for the first time by the Optionee
during any calendar year exceeds $100,000, such ISO's shall, to the extent of
such excess, be treated as Non-qualified Stock Options.
(h) Other Provisions. Subject to the provisions of the Plan, the Option
Documents shall contain such other provisions including, without limitation,
provisions authorizing the Committee to accelerate the exercisability of all or
any portion of an Option granted pursuant to the Plan, additional restrictions
upon the exercise of the Option or additional limitations upon the term of the
Option, as the Committee shall deem advisable.
(i) Amendment. Subject to the provisions of the Plan, the Committee
shall have the right to amend any Option Document or Award Agreement issued to
an Optionee or Award holder, subject to the Optionee's or Award holder's consent
if such amendment is not favorable to the Optionee or Award holder, or if such
amendment has the effect of changing an ISO to a Non-Qualified Stock Option,
except that the consent of the Optionee or Award holder shall not be required
for any amendment made pursuant to Subsection 8(e)(i)(C) or Section 9 of the
Plan, as applicable.
9. Change of Control. In the event of a Change of Control, the Committee
may take whatever actions it deems necessary or desirable with respect to any of
the Options outstanding which need not be treated identically, including,
without limitation, accelerating (a) the expiration or termination date in the
respective Option Documents to a date no earlier than thirty (30) days after
notice of such acceleration is given to the Optionees, and/or (b) the
exercisability of the Option.
A "Change of Control" shall be deemed to have occurred upon the
earliest to occur of the following events:
(i) any "person" as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company, any subsidiary of the Company, any
"person" (as hereinabove defined) acting on behalf of the Company as underwriter
pursuant to an offering who is temporarily holding securities in connection with
such offering, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any "person" (as hereinabove defined)
who, on the date the Plan is effective, shall have been the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of or have voting control over
shares of capital stock of the Company possessing more than twenty-five percent
(25%) of the
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combined voting power of the Company's then outstanding securities) is or
becomes the "beneficial owner" (as hereinabove defined), directly or indirectly,
of securities of the Company representing twenty-five percent (25%) or more of
the combined voting power of the Company's then outstanding securities;
(ii) during any period of not more than two consecutive years (not
including any period prior to the date the Plan is effective), individuals who
at the beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a "person" (as hereinabove
defined) who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this Section 9) whose
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation or other legal entity, other than (1) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (2) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) (other than a "person" who, on the
date the Plan is effective, shall have been the "beneficial owner" (as
hereinabove defined) of or have voting control over shares of capital stock of
the Company possessing more than twenty five percent (25%) of the combined
voting power of the Company's then outstanding securities) acquires more than
twenty-five percent (25%) of the combined voting power of the Company's then
outstanding securities;
(iv) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets (or any transaction having a
similar effect); or
(v) a "change of control" (as may hereinafter be defined by the Board of
Directors for the express purposes of this Plan) has occurred.
10. Adjustments on Changes in Capitalization.
(a) In the event that the outstanding Shares are changed by reason of a
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination or exchange of shares and the like (not including the
issuance of Common Stock on
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the conversion of other securities of the Company which are convertible into
Common Stock) or dividends payable in Shares, an equitable adjustment shall be
made by the Committee in the aggregate number of shares available under the Plan
and in the number of Shares and price per Share subject to outstanding Options.
Unless the Committee makes other provisions for the equitable settlement of
outstanding Options, if the Company shall be reorganized, consolidated, or
merged with another corporation or other legal entity, or if all or
substantially all of the assets of the Company shall be sold or exchanged, an
Optionee shall at the time of issuance of the stock under such corporate event
be entitled to receive upon the exercise of his or her Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as he or she would have been entitled to receive upon the occurrence of any such
corporate event as if he or she had been, immediately prior to such event, the
holder of the number of Shares covered by his or her Option.
(b) Any adjustment under this Section 10 in the number of Shares
subject to Options shall apply proportionately to only the unexercised portion
of any Option granted hereunder. If fractions of a Share would result from any
such adjustment, the adjustment shall be revised to the next lower whole number
of Shares.
(c) The Committee shall have authority to determine the adjustments to
be made under this Section, and any such determination by the Committee shall be
final, binding and conclusive.
11. Stock Appreciation Rights (SARs).
(a) In General. Subject to the terms and conditions of the Plan, the
Committee may, in its sole and absolute discretion, grant to an Optionee the
right to surrender an Option to the Company, in whole or in part, and to receive
in exchange therefor payment by the Company of an amount equal to the excess of
the Fair Market Value of the shares of Common Stock subject to such Option, or
portion thereof, so surrendered (determined in the manner described in section
8(b) as of the date the SARs are exercised) over the exercise price to acquire
such shares (which right shall be referred to as an "SAR"). Except as may
otherwise be provided in an Option Document, such payment may be made, as
determined by the Committee in accordance with subsection 11(c) below and set
forth in the Option Document, either in shares of Common Stock or in cash or in
any combination thereof.
(b) Grant. Each SAR shall relate to a specific Option granted under the
Plan and shall be granted to the Optionee concurrently with the grant of such
Option by inclusion of appropriate provisions in the Option Document pertaining
thereto. The number of SARs granted to an Optionee shall not exceed the number
of shares of Common Stock which such Optionee is entitled to purchase pursuant
to the related Option. The number of SARs held by an Optionee shall be reduced
by (i) the number of SARs exercised under the provisions of the
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Option Document pertaining to the related Option, and (ii) the number of shares
of Common Stock purchased pursuant to the exercise of the related Option.
(c) Payment. The Committee shall have sole discretion to determine
whether payment in respect of SARs granted to any Optionee shall be made in
shares of Common Stock, or in cash, or in a combination thereof. If payment is
made in Common Stock, the number of shares of Common Stock which shall be issued
pursuant to the exercise of SARs shall be determined by dividing (i) the total
number of SARs being exercised, multiplied by the amount by which the Fair
Market Value (as determined under section 8(b)) of a share of Common Stock on
the exercise date exceeds the exercise price for shares covered by the related
Option, by (ii) the Fair Market Value of a share of Common Stock on the exercise
date of the SARs. No fractional share of Common Stock shall be issued on
exercise of an SAR; cash may be paid by the Company to the individual exercising
an SAR in lieu of any such fractional share. If payment on exercise of an SAR is
to be made in cash, the individual exercising the SAR shall receive in respect
of each share to which such exercise relates an amount of money equal to the
difference between the Fair Market Value of a share of Common Stock on the
exercise date and the exercise price for shares covered by the related Option.
(d) Limitations. SARs shall be exercisable at such times and under such
terms and conditions as the Committee, in its sole and absolute discretion,
shall determine; provided, however, that an SAR may be exercised only at such
times and by such individuals as the related Option under the Plan and the
Option Agreement may be exercised.
12. Terms and Conditions of Awards. Awards granted pursuant to the Plan
shall be evidenced by written Award Agreements in such form as the Committee
shall from time to time approve, which Award Agreements shall comply with and be
subject to the following terms and conditions and such other terms and
conditions which the Committee may from time to time require which are not
inconsistent with the terms of the Plan.
(a) Number of Shares. Each Award Agreement shall state the number of
shares of Common Stock to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify the purchase
price, if any, which applies to the Award. If the Board specifies a purchase
price, the Grantee shall be required to make payment on or before the date
specified in the Award Agreement. A Grantee shall pay for Shares (i) in cash,
(ii) by certified check payable to the order of the Company, or (iii) by such
other mode of payment as the Committee may approve.
(c) Grant. In the case of an Award which provides for a grant of Shares
without any payment by the Grantee, the grant shall take place on the date
specified in the Award Agreement. In the case of an Award which provides for a
payment, the grant shall take place on the date the initial payment is delivered
to the Company, unless the Committee or the Award Agreement otherwise specifies.
Stock certificates evidencing Shares granted pursuant to
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<PAGE>
an Award shall be issued in the sole name of the Grantee. Notwithstanding the
foregoing, as a precondition to a grant, the Company may require an
acknowledgment by the Grantee as required with respect to Options under Section
8.
(d) Conditions. The Committee may specify in an Award Agreement any
conditions under which the Grantee of that Award shall be required to convey to
the Company the Shares covered by the Award. Upon the occurrence of any such
specified condition, the Grantee shall forthwith surrender and deliver to the
Company the certificates evidencing such Shares as well as completely executed
instruments of conveyance. The Committee, in its discretion, may provide that
certificates for Shares transferred pursuant to an Award be held in escrow by
the Company or an officer of the Company until such time as each and every
condition has lapsed and that the Grantee be required, as a condition of the
Award, to deliver to such escrow agent or Company officer stock powers covering
the Award Shares duly endorsed by the Grantee. Unless otherwise provided in the
Award Agreement, distributions made on Shares held in escrow will be deposited
in escrow, to be distributed to the party becoming entitled to the Shares on
which the distribution was made. Stock certificates evidencing Shares subject to
conditions shall bear a legend to the effect that the Common Stock evidenced
thereby is subject to repurchase or conveyance to the Company in accordance with
an Award made under the Plan and that the Shares may not be sold or otherwise
transferred.
(e) Lapse of Conditions. Upon termination or lapse of each and every
forfeiture condition, if any, the Company shall cause certificates without the
legend referring to the Company's repurchase right (but with any other legends
that may be appropriate) evidencing the Shares covered by the Award to be issued
to the Grantee upon the Grantee's surrender of the legended certificates held by
him or her to the Company.
(f) Rights as Stockholder. Upon payment of the purchase price, if any,
for Shares covered by an Award and compliance with the acknowledgment
requirement of subsection 12(c), the Grantee shall have all of the rights of a
stockholder with respect to the Shares covered thereby, including the right to
vote the Shares and receive all dividends and other distributions paid or made
with respect thereto, except to the extent otherwise provided by the Committee
or in the Award Agreement.
13. Amendment of the Plan. The Board of Directors of the Company may amend
the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an ISO or increase the maximum number of Shares
as to which Options may be granted or the maximum number of Shares as to which
Options may be granted to any one employee during one fiscal year of the Company
without obtaining approval, within twelve months before or after such action, by
the stockholders in the manner required by applicable state law. Notwithstanding
anything herein to the contrary, the Committee may, at its sole discretion,
amend the Plan and any outstanding Option or Award to (i) eliminate any
provision it determines is no longer
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required to comply with Rule 16b-3 as a result of revisions to Rule 16b-3 which
are generally effective after the date the Plan is effective or (ii) provide the
holder of the Option or Award an exemption from potential liability under
Section 16(b) of the Exchange Act and the rules and regulations thereunder.
14. No Commitment to Retain. The grant of an Option or Award pursuant to
the Plan shall not be construed to imply or to constitute evidence of any
agreement, express or implied, on the part of the Company or any Affiliate to
retain the Optionee or Grantee as an employee, consultant or advisor of the
Company or any Affiliate, as a member of the Board of Directors or in any other
capacity.
15. Withholding of Taxes. In connection with any event relating to an
Option or Award, the Company shall have the right to (a) require the recipient
to remit or otherwise make available to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements prior to
the delivery or transfer of any certificate or certificates for such Shares or
(b) take whatever other action it deems necessary to protect its interests with
respect to tax liabilities. The Company's obligations under the Plan shall be
conditioned on the Optionee's or Grantee's compliance, to the Company's
satisfaction, with any withholding requirement.
16. Interpretation. The Plan is intended to enable transactions under the
Plan with respect to directors to satisfy the conditions of Rule 16b-3; to the
extent that any provision of the Plan would cause a conflict with such
conditions or would cause the administration of the Plan as provided in Section
3 to fail to satisfy the conditions of Rule 16b-3, such provision shall be
deemed null and void to the extent permitted by applicable law. This section
shall not be applicable if no class of the Company's equity securities is then
registered pursuant to Section 12 of the Exchange Act.
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EMPLOYMENT AGREEMENT
This EMPOLOYMENT AGREEMENT is made as of the 13th day of October 1997
by and between J.G. WENTWORTH & COMPANY, INC., a Delaware corporation (the
"Corporation"), and James D. Delaney (the "Executive").
W I T N E S S E T H :
The Corporation wishes to continue to employ Executive and Executives
wishes to continue in the employ of the Corporation on the terms and conditions
contained in this Agreement.
NOW THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Corporation
and Executive agree as follows:
1. Position and Responsibilities.
1.1. The Executive shall serve in an executive capacity as
President and Chief Executive Officer of the Corporation. The Executive shall
perform such functions and undertake such responsibilities as are customarily
associated with such capacity. The Executive shall hold such directorships and
executive officerships in the Corporation and any subsidiary to which, from time
to time, he may be elected or appointed during the term of this Agreement.
1.2. The Executive shall devote his full time and best efforts
to the business and affairs of the Corporation and to the promotion of its
interests.
1.3. The principal executive offices of the Corporation shall
be maintained in Philadelphia, Pennsylvania and the Executive shall not be
required to relocate outside Philadelphia, Pennsylvania, without his prior
consent.
2. Term of Employment.
2.1. The term of employment shall be three (3) years,
commencing with the date hereof, unless sooner terminated as provided in this
Agreement. The initial term of employment and any extension thereof is herein
referred to as the "Term."
2.2. Notwithstanding the provisions of Section 2.1 hereof, the
Corporation shall have the right, on written notice to the Executive, to
terminate the Executive's employment for Cause, such termination to be effective
as of the date on which notice is given or as of such later date otherwise
specified in the notice.
<PAGE>
2.3. For purposes of this Agreement, the term "Cause" shall
mean any of the following actions by the Executive: (a) failure to comply with
any of the material terms of this Agreement, which shall not be cured within 30
days after written notice; (b) engagement in gross misconduct injurious to the
Corporation which shall not be cured within 30 days after written notice; (c)
knowing and willful neglect or refusal to attend to the material duties
reasonably assigned to him by the Board of Directors of the Corporation, which
shall not be cured within 30 days after written notice; (d) intentional
misappropriation of property of the Corporation to the Executive's own use; (e)
the commission by the Executive of an act of embezzlement; (f) Executive's
conviction for a felony or (g) Executive's engaging in any activity which would
constitute a material conflict of interest with the Corporation, which shall not
be cured within 30 days after written notice. If the provisions contained in
subsections (a),(b), (c) or (g) above cannot be cured within 30 days due to the
nature of the breach, the cure period shall then be extended for a reasonable
period of time; provided, however, the Executive undertakes and continues in
good faith to cure the same.
2.4. No later than six (6) months prior to the end of the
Term, the Corporation and the Executive shall meet to discuss the terms and
conditions of an extension of the Term. If the Term of this Agreement shall not
be extended, at the end of the Term the Corporation shall pay as severance pay
to Executive his salary at the rate in effect as of the termination for a period
of six months after the termination in accordance with the Corporation's normal
payroll practices;
2.5. If the Executive's employment with the Corporation shall
be terminated (a) by the Corporation other than pursuant to Sections 2.2, 4.1 or
4.2 hereof or (b) by the Executive for Good Reason (as defined herein), then the
Corporation shall continue to provide or pay to the Executive for the balance of
the Term of this Agreement, the salary, bonus and benefits received by the
Executive prior to such termination. The Executive shall have the right for a
period of 30 days after the occurrence of a Good Reason event to terminate this
Agreement for Good Reason.
2.6. For purposes of this Agreement, the term "Good Reason"
shall mean any of the following: (a) the assignment to the Executive by the
Corporation of duties inconsistent with, or a material reduction in the nature
of, Executive's responsibilities hereunder; (b) a reduction by the Corporation
in the Executive's base salary as in effect on the later of the date of this
Agreement or the last date on which base salary is increased; (c) a relocation
of the Executive's place of employment outside of Philadelphia, Pennsylvania
without Executive's prior consent; (d) a reduction in amount of bonus which may
be earned by the Executive; (e) (i) prior to a Change in Control, failure of the
Corporation to continue to maintain the same medical benefit plans covering the
Executive as are made available to other senior executives of the Corporation or
(ii) after a Change in Control, failure of the Corporation to continue to
maintain at least the same medical benefits covering the Executive as were made
available to him immediately prior to the Change in Control; or (f) failure by
the Corporation to comply with any of the material terms of this Agreement,
which shall not have been cured within 30 days after
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<PAGE>
written notice thereof.
3. Compensation.
3.1. The Corporation shall pay or cause J.G. Wentworth and
Company, Inc., a Pennsylvania corporation ("JGW"), to pay to the Executive for
the services to be rendered by the Executive hereunder a salary at the rate of
$195,000 per annum. The salary shall be payable in equal installments in
accordance with the Corporation's normal payroll practices. Such salary will be
reviewed at least annually and shall be increased (but not decreased) by the
Compensation Committee of the Board of Directors of the Corporation in such
amount as determined in its sole discretion. In addition, the salary each year
shall be increased by the percentage increase in the United States Consumer
Price Index for all Urban Consumers (for Philadelphia-Atlantic City- Wilmington,
PA-NJ-DE CSMA)- All Items (1982-84=100) published by the United States
Department of Labor, Bureau of Labor Statistics (or if such index is not
available, a comparable index published by the United States Department of
Labor) for the year preceding such year over the prior year.
3.2 The Corporation shall pay or cause JGW to pay to Executive
an annual bonus calculated in accordance with Schedule A attached hereto. The
bonus shall be payable to Executive in a single lump sum no later than 90 days
after the end of each fiscal year.
3.3. The Executive shall be entitled to participate in, and
receive benefits from, any insurance, medical, disability, bonus, incentive
compensation or other employee benefit plan, if any are adopted, of the
Corporation or any subsidiary which may be in effect at any time during the
course of his employment by the Corporation and which shall be generally
available to the Executive on terms no less favorable than to other senior
executives of the Corporation or its subsidiaries. At the option of Executive,
in lieu of participation the Corporation's group medical plan, the Executive
shall be entitled to reimbursement for the full cost of the medical and
disability insurance plans of the Executive's choice, provided that the costs
incurred by the Corporation for such reimbursement shall not exceed $25,000 per
annum in excess of the normal costs of Executive's participation in the
Corporation's group benefit plans.
3.4. Within ninety (90) days after the date of this Agreement,
the Corporation shall issue to Executive, under the terms of the Company's 1997
Stock Incentive Plan, stock options to purchase 50,000 shares of the
Corporation's Common Stock at an exercise price equal to the fair market value
of the Common Stock on the date of grant.
3.5. The Corporation agrees to reimburse the Executive for all
reasonable and necessary business expenses incurred by him on behalf of the
Corporation in the course of his duties hereunder upon the presentation by the
Executive of appropriate vouchers therefor.
3.6. The Executive will be entitled each year of this
Agreement to a paid vacation of four weeks, no more than half of which may be
carried forward to future years.
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<PAGE>
3.7. The Corporation agrees to reimburse the Executive for all
reasonable costs and expenses incurred by Executive related to any one or more
of the following: (i) health and fitness club membership fees and dues; (ii)
country club annual membership fees and dues; and (iii) all costs and expenses
related to the purchase, maintenance and operation of, including without
limitation maintenance of insurance related to, one motor vehicle of Executive's
choice.
3.8. In addition to any rights of Executive to indemnification
and reimbursement of costs of litigation set forth in the Corporation's by-laws
or by separate agreement, Executive shall have the right, in connection any
proceeding giving rise to such right of indemnification, to reimbursment from
the Corporation for the reasonable fees and expenses of separate counsel of the
Executive's choice, such counsel being reasonably acceptable to the Corporation.
3.9. Upon termination of this Agreement for Cause or due to
the death or incapacity of the Executive (as defined in Section 4.1), the
Executive (or his estate) shall be entitled to all compensation (including pro
rata bonus) and benefits accrued and unpaid up to the date of termination.
3.10. The Executive shall not be required to mitigate damages
or the amount of any payment provided to him under this Agreement by seeking
other employment or otherwise, except as provided in Section 2.4 hereof.
4. Death
4.1. In the event of the death of the Executive during the
term hereof, the employment hereunder shall terminate on the date of death of
the Executive.
4.2. In the event the employment of Executive is terminated by
the Corporation as the result of the death of the Executive, the Corporation
agrees to continue to pay the Executive (or his estate) his then rate of salary
for a period of one year after such termination.
5. Other Activities During Employment; Non-Competition; Solicitation.
5.1. The Executive shall not during the term of this Agreement
undertake or engage in any other employment, occupation or business enterprise.
Subject to compliance with the provisions of this Agreement, the Executive may
engage in charitable, civic, fraternal and trade activities and reasonable
activities with respect to personal investments of the Executive and may serve
as a director of other corporations provided that such service as director shall
not entail any management duties and that any such activities or services shall
not materially interfere with the performance of Executive's duties hereunder.
5.2. During Executive's employment, neither the Executive nor
any entity in which he may be interested as a partner, trustee, director,
officer, employee, shareholder,
4
<PAGE>
option holder, lender of money, guarantor or consultant shall be engaged
directly or indirectly in any business engaged in by the Corporation in any area
where the Corporation, or any subsidiary, conducts such business at any time
during this Agreement; provided, however, that the foregoing shall not be deemed
to prevent the Executive from investing in securities if such class of
securities in which the investment is so made is listed on a national securities
exchange or is issued by a company registered under Section 12(g) of the
Securities Exchange Act of 1934, so long as such investment holdings do not, in
the aggregate, constitute more than 5% of the voting stock of any company's
securities.
5.3. The Executive will not at any time during his employment
with the Corporation, solicit (or assist or encourage the solicitation of) any
employee of the Corporation or any of its subsidiaries or affiliates to work for
Executive or for any business, firm, corporation or other entity in which the
Executive, directly or indirectly, in any capacity described in Section 5.2
hereof, participates or engages (or expects to participate or engage) or has (or
expects to have) a financial interest or management position.
5.4. The Executive shall not at any time during this Agreement
or for a period of one year after the termination hereof directly or indirectly
divulge, furnish, use, publish or make accessible to any person or entity any
Confidential Information (as hereinafter defined). Any records of Confidential
Information prepared by the Executive or which come into Executive's possession
during this Agreement are and remain the property of the Corporation and upon
termination of Executive's employment all such records and copies thereof shall
be either left with or returned to the Corporation.
5.5. The term "Confidential Information" shall mean
information disclosed to the Executive or known, learned, created or observed by
him as a consequence of or through his employment by the Corporation, not
generally known in the relevant trade or industry, about the Corporation's
business activities, services and processes, including but not limited to
information concerning advertising, sales promotion, publicity, sales data,
research, finances, accounting, methods, processes, business plans, broker or
correspondent lists and records and potential broker or correspondent lists and
records.
6. Assignment. The Corporation shall require any successor or assign to
all or substantially all the assets of the Corporation (whether by merger or by
acquisition of stock, assets or otherwise) prior to consummation of any
transaction therewith, to expressly assume and agree to perform in writing this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession or assignment had taken place.
This Agreement shall inure to the benefit of and be binding upon the
Corporation, its successors and assigns, and upon the Executive and his heirs,
executors, administrators and legal representatives. This Agreement shall not be
assignable by the Executive.
7. Change in Control. Upon the occurrence of a "Change in Control" (as
hereinafter defined) of the Corporation, Executive may at his election, at any
time within six
5
<PAGE>
months thereafter, terminate this Agreement, and Executive shall be entitled to
the following compensation, in lieu of any other compensation and bonuses
provided herein:
(a) The Corporation shall pay as severance pay to Executive,
no later than the fifth day following the termination, a lump sum severance
payment equal to (i) 100% of Executive's salary for the greater of two (2) years
or the balance of the Term, at the rate in effect as of the termination, and
(ii) any bonuses due to the Executive pursuant to Section 3.1. through the end
of the fiscal quarter in which such termination was so effective.
(b) For 18 months after such termination, the Corporation
shall use its best efforts to arrange to provide Executive with group health
benefits substantially similar to those which Executive was receiving
immediately prior to the termination. Benefits otherwise receivable by the
Executive pursuant to this paragraph (b)shall be reduced to the extent
comparable benefits are actually received by Executive during such period.
(c) Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking employment or otherwise.
(d) In the event that any payment or benefit received or to be
received by Executive in connection with a Change in Control of the Corporation
or the termination of Executive's employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Corporation,
any person whose actions result in a Change in Control or any person affiliated
with the Corporation or such person) (collectively the "Total Payments") would
not be deductible (in whole or in part) as a result of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), by the Corporation, an
affiliate or other person making such payment or providing such benefit, the
payments or benefits shall be so reduced until no portion of the Total Payments
is not deductible. Executive shall be entitled to elect which payments or
benefits shall be so reduced. For purposes of this limitation, (1) no portion of
the Total Payments the receipt or enjoyment of which Executive shall have
effectively waived in writing prior to the date of payment shall be taken into
account, (2) no portion of the Total Payments shall be taken into account which
in the opinion of tax counsel selected by the Corporation's independent auditors
and acceptable to Executive does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, and (3)the value of any noncash
benefit or any deferred payment or benefit included in the Total Payments shall
be determined by the Corporation's independent auditors in accordance with the
principles of Sections 280(d)(3) and (4) of the Code.
(e) For purposes hereof, a "Change in Control" shall be deemed
to have occurred if (a) Executive, Michael B. Goodman, Edward S. Stone and Gary
Veloric (collectively, the "Principal Stockholders") shall cease to be the
owners of at least 25% of the outstanding shares of common stock of the
Corporation, (b) if the Corporation shall sell all or substantially all its
assets, or (c) if the Corporation shall merge or consolidate with another entity
and as a result thereof the Principal Stockholders cease to be the owners,
either directly or
6
<PAGE>
indirectly, of at least 25% of the outstanding shares of common stock of the
entity surviving the merger or consolidation.
(f) The Company shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
on, after or in connection with a Change in Control as statements therefor are
received (whether or not the Executive is successful) as a result of (a) the
Executive's termination or non-renewal of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any such termination
or non-renewal of employment), (b) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company under which the Executive is or may be
entitled to receive benefits or (c) in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder.
8. No Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement, except as provided in Section 6 hereof.
9. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
10. Interpretation. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held by a court of competent
jurisdiction to be unenforceable because it is excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.
11. Notices. All notices under this Agreement shall be in writing and
shall be deemed to have been given at the time when mailed by registered or
certified mail, addressed to the address below stated of the party to which
notice is given, or to such changed address as such party may have fixed by
notice:
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To the Corporation:
J.G. Wentworth & Company, Inc.
The Graham Building, 10th Floor
15th and Ranstead Streets
Philadelphia, PA 19102
Attn: President
- copy to -
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
111 South 15th Street
Philadelphia, PA 19102-2678
Attn: Robert C. Jacobs, Esq.
To the Executive:
James D. Delaney
533 Misty Hollow Court
Bryn Mawr, PA 19010
provided, however, that any notice of change of address shall be effective only
upon receipt.
12. Waivers. If either party should waive any breach of any provision
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
13. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, canceled or discharged except by written instrument
executed by both parties hereto.
14. Equitable Remedies. The Executive acknowledges that he has been
employed for his unique talents and that his leaving the employ of the
Corporation would seriously hamper the business of the Corporation and that the
Corporation will suffer irreparable damage if any provisions of Section 5 hereof
are not performed strictly in accordance with their terms or are otherwise
breached. The Executive hereby expressly agrees that the Corporation shall be
entitled as a matter of right to injunctive or other equitable relief, in
addition to all other remedies permitted by law, to prevent a breach or
violation by the Executive and to secure enforcement of the provisions of
Section 5. Resort to such equitable relief, however, shall not constitute a
waiver or any other rights or remedies which the Corporation may have.
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<PAGE>
15. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
J.G. WENTWORTH & COMPANY, INC.
By:
-----------------------------------------
Name:
Title:
-----------------------------------------
James D. Delaney
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EMPLOYMENT AGREEMENT
This EMPOLOYMENT AGREEMENT is made as of the 13th day of October 1997
by and between J.G. WENTWORTH & COMPANY, INC., a Delaware corporation (the
"Corporation"), and Gary Veloric (the "Executive").
W I T N E S S E T H :
The Corporation wishes to continue to employ Executive and Executive
wishes to continue in the employ of the Corporation on the terms and conditions
contained in this Agreement.
NOW THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Corporation
and Executive agree as follows:
1. Position and Responsibilities.
1.1. The Executive shall serve in an executive capacity as
Chairman of the Board of Directors of the Corporation. The Executive shall
perform such functions and undertake such responsibilities as are customarily
associated with such capacity. The Executive shall hold such directorships and
executive officerships in the Corporation and any subsidiary to which, from time
to time, he may be elected or appointed during the term of this Agreement.
1.2. The Executive shall devote his full time and best efforts
to the business and affairs of the Corporation and to the promotion of its
interests.
1.3. The principal executive offices of the Corporation shall
be maintained in Philadelphia, Pennsylvania and the Executive shall not be
required to relocate outside Philadelphia, Pennsylvania, without his prior
consent.
2. Term of Employment.
2.1. The term of employment shall be three (3) years,
commencing with the date hereof, unless sooner terminated as provided in this
Agreement. The initial term of employment and any extension thereof is herein
referred to as the "Term."
2.2. Notwithstanding the provisions of Section 2.1 hereof, the
Corporation shall have the right, on written notice to the Executive, to
terminate the Executive's employment for Cause, such termination to be effective
as of the date on which notice is given or as of such later date otherwise
specified in the notice.
<PAGE>
2.3. For purposes of this Agreement, the term "Cause" shall
mean any of the following actions by the Executive: (a) failure to comply with
any of the material terms of this Agreement, which shall not be cured within 30
days after written notice; (b) engagement in gross misconduct injurious to the
Corporation which shall not be cured within 30 days after written notice; (c)
knowing and willful neglect or refusal to attend to the material duties
reasonably assigned to him by the Board of Directors of the Corporation, which
shall not be cured within 30 days after written notice; (d) intentional
misappropriation of property of the Corporation to the Executive's own use; (e)
the commission by the Executive of an act of embezzlement; (f) Executive's
conviction for a felony or (g) Executive's engaging in any activity which would
constitute a material conflict of interest with the Corporation, which shall not
be cured within 30 days after written notice. If the provisions contained in
subsections (a),(b), (c) or (g) above cannot be cured within 30 days due to the
nature of the breach, the cure period shall then be extended for a reasonable
period of time; provided, however, the Executive undertakes and continues in
good faith to cure the same.
2.4. No later than six (6) months prior to the end of the
Term, the Corporation and the Executive shall meet to discuss the terms and
conditions of an extension of the Term. If the Term of this Agreement shall not
be extended, at the end of the Term the Corporation shall pay as severance pay
to Executive his salary at the rate in effect as of the termination for a period
of six months after the termination in accordance with the Corporation's normal
payroll practices;
2.5. If the Executive's employment with the Corporation shall
be terminated (a) by the Corporation other than pursuant to Sections 2.2, 4.1 or
4.2 hereof or (b) by the Executive for Good Reason (as defined herein), then the
Corporation shall continue to provide or pay to the Executive for the balance of
the Term of this Agreement, the salary, bonus and benefits received by the
Executive prior to such termination. The Executive shall have the right for a
period of 30 days after the occurrence of a Good Reason event to terminate this
Agreement for Good Reason.
2.6. For purposes of this Agreement, the term "Good Reason"
shall mean any of the following: (a) the assignment to the Executive by the
Corporation of duties inconsistent with, or a material reduction in the nature
of, Executive's responsibilities hereunder; (b) a reduction by the Corporation
in the Executive's base salary as in effect on the later of the date of this
Agreement or the last date on which base salary is increased; (c) a relocation
of the Executive's place of employment outside of Philadelphia, Pennsylvania
without Executive's prior consent; (d) a reduction in amount of bonus which may
be earned by the Executive; (e) (i) prior to a Change in Control, failure of the
Corporation to continue to maintain the same medical benefit plans covering the
Executive as are made available to other senior executives of the Corporation or
(ii) after a Change in Control, failure of the Corporation to continue to
maintain at least the same medical benefits covering the Executive as were made
available to him immediately prior to the Change in Control; or (f) failure by
the Corporation to comply with any of the material terms of this Agreement,
which shall not have been cured within 30 days after
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written notice thereof.
3. Compensation.
3.1. The Corporation shall pay or cause J.G. Wentworth and
Company, Inc., a Pennsylvania corporation ("JGW"), to pay to the Executive for
the services to be rendered by the Executive hereunder a salary at the rate of
$195,000 per annum. The salary shall be payable in equal installments in
accordance with the Corporation's normal payroll practices. Such salary will be
reviewed at least annually and shall be increased (but not decreased) by the
Compensation Committee of the Board of Directors of the Corporation in such
amount as determined in its sole discretion. In addition, the salary each year
shall be increased by the percentage increase in the United States Consumer
Price Index for all Urban Consumers (for Philadelphia-Atlantic City- Wilmington,
PA-NJ-DE CSMA) - All Items (1982-84=100) published by the United States
Department of Labor, Bureau of Labor Statistics (or if such index is not
available, a comparable index published by the United States Department of
Labor) for the year preceding such year over the prior year.
3.2 The Corporation shall pay or cause JGW to pay to Executive
an annual bonus calculated in accordance with Schedule A attached hereto. The
bonus shall be payable to Executive in a single lump sum no later than 90 days
after the end of each fiscal year.
3.3 Within ninety (90) days after the date of this Agreement,
the Corporation shall issue to Executive, under the terms of the Company's 1997
Stock Incentive Plan, stock options to purchase 50,000 shares of the
Corporation's Common Stock.
3.4. The Executive shall be entitled to participate in, and
receive benefits from, any insurance, medical, disability, bonus, incentive
compensation or other employee benefit plan, if any are adopted, of the
Corporation or any subsidiary which may be in effect at any time during the
course of his employment by the Corporation and which shall be generally
available to the Executive on terms no less favorable than to other senior
executives of the Corporation or its subsidiaries. At the option of Executive,
in lieu of participation the Corporation's group medical plan, the Executive
shall be entitled to reimbursement for the full cost of the medical and
disability insurance plans of the Executive's choice, provided that the costs
incurred by the Corporation for such reimbursement shall not exceed $25,000 per
annum in excess of the normal costs of Executive's participation in the
Corporation's group benefit plans.
3.5. The Corporation agrees to reimburse the Executive for all
reasonable and necessary business expenses incurred by him on behalf of the
Corporation in the course of his duties hereunder upon the presentation by the
Executive of appropriate vouchers therefor.
3.6. The Executive will be entitled each year of this
Agreement to a paid vacation of four weeks, no more than half of which may be
carried forward to future years.
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3.7. The Corporation agrees to reimburse the Executive for all
reasonable costs and expenses incurred by Executive related to any one or more
of the following: (i) health and fitness club membership fees and dues; (ii)
country club annual membership fees and dues; and (iii) all costs and expenses
related to the purchase, maintenance and operation of, including without
limitation maintenance of insurance related to, one motor vehicle of Executive's
choice.
3.8. In addition to any rights of Executive to indemnification
and reimbursement of costs of litigation set forth in the Corporation's by-laws
or by separate agreement, Executive shall have the right, in connection any
proceeding giving rise to such right of indemnification, to reimbursment from
the Corporation for the reasonable fees and expenses of separate counsel of the
Executive's choice, such counsel being reasonably acceptable to the Corporation.
3.9. Upon termination of this Agreement for Cause or due to
the death or incapacity of the Executive (as defined in Section 4.1), the
Executive (or his estate) shall be entitled to all compensation (including pro
rata bonus) and benefits accrued and unpaid up to the date of termination.
3.10. The Executive shall not be required to mitigate damages
or the amount of any payment provided to him under this Agreement by seeking
other employment or otherwise, except as provided in Section 2.4 hereof.
4. Death
4.1. In the event of the death of the Executive during the
term hereof, the employment hereunder shall terminate on the date of death of
the Executive.
4.2. In the event the employment of Executive is terminated by
the Corporation as the result of the death of the Executive, the Corporation
agrees to continue to pay the Executive (or his estate) his then rate of salary
for a period of one year after such termination.
5. Other Activities During Employment; Non-Competition; Solicitation.
5.1. The Executive shall not during the term of this Agreement
undertake or engage in any other employment, occupation or business enterprise.
Subject to compliance with the provisions of this Agreement, the Executive may
engage in charitable, civic, fraternal and trade activities and reasonable
activities with respect to personal investments of the Executive and may serve
as a director of other corporations provided that such service as director shall
not entail any management duties and that any such activities or services shall
not materially interfere with the performance of Executive's duties hereunder.
5.2. During Executive's employment, neither the Executive nor
any entity in which he may be interested as a partner, trustee, director,
officer, employee, shareholder,
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option holder, lender of money, guarantor or consultant shall be engaged
directly or indirectly in any business engaged in by the Corporation in any area
where the Corporation, or any subsidiary, conducts such business at any time
during this Agreement; provided, however, that the foregoing shall not be deemed
to prevent the Executive from investing in securities if such class of
securities in which the investment is so made is listed on a national securities
exchange or is issued by a company registered under Section 12(g) of the
Securities Exchange Act of 1934, so long as such investment holdings do not, in
the aggregate, constitute more than 5% of the voting stock of any company's
securities.
5.3. The Executive will not at any time during his employment
with the Corporation, solicit (or assist or encourage the solicitation of) any
employee of the Corporation or any of its subsidiaries or affiliates to work for
Executive or for any business, firm, corporation or other entity in which the
Executive, directly or indirectly, in any capacity described in Section 5.2
hereof, participates or engages (or expects to participate or engage) or has (or
expects to have) a financial interest or management position.
5.4. The Executive shall not at any time during this Agreement
or for a period of one year after the termination hereof directly or indirectly
divulge, furnish, use, publish or make accessible to any person or entity any
Confidential Information (as hereinafter defined). Any records of Confidential
Information prepared by the Executive or which come into Executive's possession
during this Agreement are and remain the property of the Corporation and upon
termination of Executive's employment all such records and copies thereof shall
be either left with or returned to the Corporation.
5.5. The term "Confidential Information" shall mean
information disclosed to the Executive or known, learned, created or observed by
him as a consequence of or through his employment by the Corporation, not
generally known in the relevant trade or industry, about the Corporation's
business activities, services and processes, including but not limited to
information concerning advertising, sales promotion, publicity, sales data,
research, finances, accounting, methods, processes, business plans, broker or
correspondent lists and records and potential broker or correspondent lists and
records.
6. Assignment. The Corporation shall require any successor or assign to
all or substantially all the assets of the Corporation (whether by merger or by
acquisition of stock, assets or otherwise) prior to consummation of any
transaction therewith, to expressly assume and agree to perform in writing this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession or assignment had taken place.
This Agreement shall inure to the benefit of and be binding upon the
Corporation, its successors and assigns, and upon the Executive and his heirs,
executors, administrators and legal representatives. This Agreement shall not be
assignable by the Executive.
7. Change in Control. Upon the occurrence of a "Change in Control" (as
hereinafter defined) of the Corporation, Executive may at his election, at any
time within six
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months thereafter, terminate this Agreement, and Executive shall be entitled to
the following compensation, in lieu of any other compensation and bonuses
provided herein:
(a) The Corporation shall pay as severance pay to Executive,
no later than the fifth day following the termination, a lump sum severance
payment equal to (i) 100% of Executive's salary for the greater of two (2) years
or the balance of the Term, at the rate in effect as of the termination, and
(ii) any bonuses due to the Executive pursuant to Section 3.1. through the end
of the fiscal quarter in which such termination was so effective.
(b) For 18 months after such termination, the Corporation
shall use its best efforts to arrange to provide Executive with group health
benefits substantially similar to those which Executive was receiving
immediately prior to the termination. Benefits otherwise receivable by the
Executive pursuant to this paragraph (b)shall be reduced to the extent
comparable benefits are actually received by Executive during such period.
(c) Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking employment or otherwise.
(d) In the event that any payment or benefit received or to be
received by Executive in connection with a Change in Control of the Corporation
or the termination of Executive's employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Corporation,
any person whose actions result in a Change in Control or any person affiliated
with the Corporation or such person) (collectively the "Total Payments") would
not be deductible (in whole or in part) as a result of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), by the Corporation, an
affiliate or other person making such payment or providing such benefit, the
payments or benefits shall be so reduced until no portion of the Total Payments
is not deductible. Executive shall be entitled to elect which payments or
benefits shall be so reduced. For purposes of this limitation, (1) no portion of
the Total Payments the receipt or enjoyment of which Executive shall have
effectively waived in writing prior to the date of payment shall be taken into
account, (2) no portion of the Total Payments shall be taken into account which
in the opinion of tax counsel selected by the Corporation's independent auditors
and acceptable to Executive does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, and (3 )the value of any noncash
benefit or any deferred payment or benefit included in the Total Payments shall
be determined by the Corporation's independent auditors in accordance with the
principles of Sections 280(d)(3) and (4) of the Code.
(e) For purposes hereof, a "Change in Control" shall be deemed
to have occurred if (a) Executive, James D. Delaney, Michael B. Goodman and
Edward S. Stone (collectively, the "Principal Stockholders") shall cease to be
the owners of at least 25% of the outstanding shares of common stock of the
Corporation, (b) if the Corporation shall sell all or substantially all its
assets, or (c) if the Corporation shall merge or consolidate with another entity
and as a result thereof the Principal Stockholders cease to be the owners,
either directly or
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indirectly, of at least 25% of the outstanding shares of common stock of the
entity surviving the merger or consolidation.
(f) The Company shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
on, after or in connection with a Change in Control as statements therefor are
received (whether or not the Executive is successful) as a result of (a) the
Executive's termination or non-renewal of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any such termination
or non-renewal of employment), (b) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company under which the Executive is or may be
entitled to receive benefits or (c) in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder.
8. No Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement, except as provided in Section 6 hereof.
9. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
10. Interpretation. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held by a court of competent
jurisdiction to be unenforceable because it is excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.
11. Notices. All notices under this Agreement shall be in writing and
shall be deemed to have been given at the time when mailed by registered or
certified mail, addressed to the address below stated of the party to which
notice is given, or to such changed address as such party may have fixed by
notice:
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To the Corporation:
J.G. Wentworth & Company, Inc.
The Graham Building, 10th Floor
15th and Ranstead Streets
Philadelphia, PA 19102
Attn: President
- copy to -
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
111 South 15th Street
Philadelphia, PA 19102-2678
Attn: Robert C. Jacobs, Esq.
To the Executive:
Gary Veloric
[Address]
provided, however, that any notice of change of address shall be effective only
upon receipt.
12. Waivers. If either party should waive any breach of any provision
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
13. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, canceled or discharged except by written instrument
executed by both parties hereto.
14. Equitable Remedies. The Executive acknowledges that he has been
employed for his unique talents and that his leaving the employ of the
Corporation would seriously hamper the business of the Corporation and that the
Corporation will suffer irreparable damage if any provisions of Section 5 hereof
are not performed strictly in accordance with their terms or are otherwise
breached. The Executive hereby expressly agrees that the Corporation shall be
entitled as a matter of right to injunctive or other equitable relief, in
addition to all other remedies permitted by law, to prevent a breach or
violation by the Executive and to secure enforcement of the provisions of
Section 5. Resort to such equitable relief, however, shall not constitute a
waiver or any other rights or remedies which the Corporation may have.
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15. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
J.G. WENTWORTH & COMPANY, INC.
By:
-----------------------------------------
Name:
Title:
-----------------------------------------
Gary Veloric
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EMPLOYMENT AGREEMENT
This EMPOLOYMENT AGREEMENT is made as of the 13th day of October 1997
by and between J.G. WENTWORTH & COMPANY, INC., a Delaware corporation (the
"Corporation"), and Michael B. Goodman (the "Executive").
W I T N E S S E T H :
The Corporation wishes to continue to employ Executive and Executives
wishes to continue in the employ of the Corporation on the terms and conditions
contained in this Agreement.
NOW THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Corporation
and Executive agree as follows:
1. Position and Responsibilities.
1.1. The Executive shall serve in an executive capacity as
Executive Vice President and Chief Operating Officer of the Corporation. The
Executive shall perform such functions and undertake such responsibilities as
are customarily associated with such capacity. The Executive shall hold such
directorships and executive officerships in the Corporation and any subsidiary
to which, from time to time, he may be elected or appointed during the term of
this Agreement.
1.2. The Executive shall devote his full time and best efforts
to the business and affairs of the Corporation and to the promotion of its
interests.
1.3. The principal executive offices of the Corporation shall
be maintained in Philadelphia, Pennsylvania and the Executive shall not be
required to relocate outside Philadelphia, Pennsylvania, without his prior
consent.
2. Term of Employment.
2.1. The term of employment shall be three (3) years,
commencing with the date hereof, unless sooner terminated as provided in this
Agreement. The initial term of employment and any extension thereof is herein
referred to as the "Term."
2.2. Notwithstanding the provisions of Section 2.1 hereof, the
Corporation shall have the right, on written notice to the Executive, to
terminate the Executive's employment for Cause, such termination to be effective
as of the date on which notice is given or as of such later date otherwise
specified in the notice.
<PAGE>
2.3. For purposes of this Agreement, the term "Cause" shall mean any of
the following actions by the Executive: (a) failure to comply with any of the
material terms of this Agreement, which shall not be cured within 30 days after
written notice; (b) engagement in gross misconduct injurious to the Corporation
which shall not be cured within 30 days after written notice; (c) knowing and
willful neglect or refusal to attend to the material duties reasonably assigned
to him by the Board of Directors of the Corporation, which shall not be cured
within 30 days after written notice; (d) intentional misappropriation of
property of the Corporation to the Executive's own use; (e) the commission by
the Executive of an act of embezzlement; (f) Executive's conviction for a felony
or (g) Executive's engaging in any activity which would constitute a material
conflict of interest with the Corporation, which shall not be cured within 30
days after written notice. If the provisions contained in subsections (a),(b),
(c) or (g) above cannot be cured within 30 days due to the nature of the breach,
the cure period shall then be extended for a reasonable period of time;
provided, however, the Executive undertakes and continues in good faith to cure
the same.
2.4. No later than six (6) months prior to the end of the
Term, the Corporation and the Executive shall meet to discuss the terms and
conditions of an extension of the Term. If the Term of this Agreement shall not
be extended, at the end of the Term the Corporation shall pay as severance pay
to Executive his salary at the rate in effect as of the termination for a period
of six months after the termination in accordance with the Corporation's normal
payroll practices;
2.5. If the Executive's employment with the Corporation shall
be terminated (a) by the Corporation other than pursuant to Sections 2.2, 4.1 or
4.2 hereof or (b) by the Executive for Good Reason (as defined herein), then the
Corporation shall continue to provide or pay to the Executive for the balance of
the Term of this Agreement, the salary, bonus and benefits received by the
Executive prior to such termination. The Executive shall have the right for a
period of 30 days after the occurrence of a Good Reason event to terminate this
Agreement for Good Reason.
2.6. For purposes of this Agreement, the term "Good Reason"
shall mean any of the following: (a) the assignment to the Executive by the
Corporation of duties inconsistent with, or a material reduction in the nature
of, Executive's responsibilities hereunder; (b) a reduction by the Corporation
in the Executive's base salary as in effect on the later of the date of this
Agreement or the last date on which base salary is increased; (c) a relocation
of the Executive's place of employment outside of Philadelphia, Pennsylvania
without Executive's prior consent; (d) a reduction in amount of bonus which may
be earned by the Executive; (e) (i) prior to a Change in Control, failure of the
Corporation to continue to maintain the same medical benefit plans covering the
Executive as are made available to other senior executives of the Corporation or
(ii) after a Change in Control, failure of the Corporation to continue to
maintain at least the same medical benefits covering the Executive as were made
available to him immediately prior to the Change in Control; or (f) failure by
the Corporation to comply with any of the material terms of this Agreement,
which shall not have been cured within 30 days after
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written notice thereof.
3. Compensation.
3.1. The Corporation shall pay or cause J.G. Wentworth and
Company, Inc., a Pennsylvania corporation ("JGW"), to pay to the Executive for
the services to be rendered by the Executive hereunder a salary at the rate of
$195,000 per annum. The salary shall be payable in equal installments in
accordance with the Corporation's normal payroll practices. Such salary will be
reviewed at least annually and shall be increased (but not decreased) by the
Compensation Committee of the Board of Directors of the Corporation in such
amount as determined in its sole discretion. In addition, the salary each year
shall be increased by the percentage increase in the United States Consumer
Price Index for all Urban Consumers (for Philadelphia-Atlantic City- Wilmington,
PA-NJ-DE CSMA) - All Items (1982-84=100) published by the United States
Department of Labor, Bureau of Labor Statistics (or if such index is not
available, a comparable index published by the United States Department of
Labor) for the year preceding such year over the prior year.
3.2 The Corporation shall pay or cause JGW to pay to Executive
an annual bonus calculated in accordance with Schedule A attached hereto. The
bonus shall be payable to Executive in a single lump sum no later than 90 days
after the end of each fiscal year.
3.3 Within ninety (90) days after the date of this Agreement,
the Corporation shall issue to Executive, under the terms of the Company's 1997
Stock Incentive Plan, stock options to purchase 50,000 shares of the
Corporation's Common Stock.
3.4. The Executive shall be entitled to participate in, and
receive benefits from, any insurance, medical, disability, bonus, incentive
compensation or other employee benefit plan, if any are adopted, of the
Corporation or any subsidiary which may be in effect at any time during the
course of his employment by the Corporation and which shall be generally
available to the Executive on terms no less favorable than to other senior
executives of the Corporation or its subsidiaries. At the option of Executive,
in lieu of participation the Corporation's group medical plan, the Executive
shall be entitled to reimbursement for the full cost of the medical and
disability insurance plans of the Executive's choice, provided that the costs
incurred by the Corporation for such reimbursement shall not exceed $25,000 per
annum in excess of the normal costs of Executive's participation in the
Corporation's group benefit plans.
3.5. The Corporation agrees to reimburse the Executive for all
reasonable and necessary business expenses incurred by him on behalf of the
Corporation in the course of his duties hereunder upon the presentation by the
Executive of appropriate vouchers therefor.
3.6. The Executive will be entitled each year of this
Agreement to a paid vacation of four weeks, no more than half of which may be
carried forward to future years.
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3.7. The Corporation agrees to reimburse the Executive for all
reasonable costs and expenses incurred by Executive related to any one or more
of the following: (i) health and fitness club membership fees and dues; (ii)
country club annual membership fees and dues; and (iii) all costs and expenses
related to the purchase, maintenance and operation of, including without
limitation maintenance of insurance related to, one motor vehicle of Executive's
choice.
3.8. In addition to any rights of Executive to indemnification
and reimbursement of costs of litigation set forth in the Corporation's by-laws
or by separate agreement, Executive shall have the right, in connection any
proceeding giving rise to such right of indemnification, to reimbursment from
the Corporation for the reasonable fees and expenses of separate counsel of the
Executive's choice, such counsel being reasonably acceptable to the Corporation.
3.9. Upon termination of this Agreement for Cause or due to
the death or incapacity of the Executive (as defined in Section 4.1), the
Executive (or his estate) shall be entitled to all compensation (including pro
rata bonus) and benefits accrued and unpaid up to the date of termination.
3.10. The Executive shall not be required to mitigate damages
or the amount of any payment provided to him under this Agreement by seeking
other employment or otherwise, except as provided in Section 2.4 hereof.
4. Death.
4.1. In the event of the death of the Executive during the
term hereof, the employment hereunder shall terminate on the date of death of
the Executive.
4.2. In the event the employment of Executive is terminated by
the Corporation as the result of the death of the Executive, the Corporation
agrees to continue to pay the Executive (or his estate) his then rate of salary
for a period of one year after such termination.
5. Other Activities During Employment; Non-Competition; Solicitation.
5.1. The Executive shall not during the term of this Agreement
undertake or engage in any other employment, occupation or business enterprise.
Subject to compliance with the provisions of this Agreement, the Executive may
engage in charitable, civic, fraternal and trade activities and reasonable
activities with respect to personal investments of the Executive and may serve
as a director of other corporations provided that such service as director shall
not entail any management duties and that any such activities or services shall
not materially interfere with the performance of Executive's duties hereunder.
5.2. During Executive's employment, neither the Executive nor
any entity in which he may be interested as a partner, trustee, director,
officer, employee, shareholder,
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option holder, lender of money, guarantor or consultant shall be engaged
directly or indirectly in any business engaged in by the Corporation in any area
where the Corporation, or any subsidiary, conducts such business at any time
during this Agreement; provided, however, that the foregoing shall not be deemed
to prevent the Executive from investing in securities if such class of
securities in which the investment is so made is listed on a national securities
exchange or is issued by a company registered under Section 12(g) of the
Securities Exchange Act of 1934, so long as such investment holdings do not, in
the aggregate, constitute more than 5% of the voting stock of any company's
securities.
5.3. The Executive will not at any time during his employment
with the Corporation, solicit (or assist or encourage the solicitation of) any
employee of the Corporation or any of its subsidiaries or affiliates to work for
Executive or for any business, firm, corporation or other entity in which the
Executive, directly or indirectly, in any capacity described in Section 5.2
hereof, participates or engages (or expects to participate or engage) or has (or
expects to have) a financial interest or management position.
5.4. The Executive shall not at any time during this Agreement
or for a period of one year after the termination hereof directly or indirectly
divulge, furnish, use, publish or make accessible to any person or entity any
Confidential Information (as hereinafter defined). Any records of Confidential
Information prepared by the Executive or which come into Executive's possession
during this Agreement are and remain the property of the Corporation and upon
termination of Executive's employment all such records and copies thereof shall
be either left with or returned to the Corporation.
5.5. The term "Confidential Information" shall mean
information disclosed to the Executive or known, learned, created or observed by
him as a consequence of or through his employment by the Corporation, not
generally known in the relevant trade or industry, about the Corporation's
business activities, services and processes, including but not limited to
information concerning advertising, sales promotion, publicity, sales data,
research, finances, accounting, methods, processes, business plans, broker or
correspondent lists and records and potential broker or correspondent lists and
records.
6. Assignment. The Corporation shall require any successor or assign to
all or substantially all the assets of the Corporation (whether by merger or by
acquisition of stock, assets or otherwise) prior to consummation of any
transaction therewith, to expressly assume and agree to perform in writing this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession or assignment had taken place.
This Agreement shall inure to the benefit of and be binding upon the
Corporation, its successors and assigns, and upon the Executive and his heirs,
executors, administrators and legal representatives. This Agreement shall not be
assignable by the Executive.
7. Change in Control. Upon the occurrence of a "Change in Control" (as
hereinafter defined) of the Corporation, Executive may at his election, at any
time within six
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months thereafter, terminate this Agreement, and Executive shall be entitled to
the following compensation, in lieu of any other compensation and bonuses
provided herein:
(a) The Corporation shall pay as severance pay to Executive,
no later than the fifth day following the termination, a lump sum severance
payment equal to (i) 100% of Executive's salary for the greater of two (2) years
or the balance of the Term, at the rate in effect as of the termination, and
(ii) any bonuses due to the Executive pursuant to Section 3.1. through the end
of the fiscal quarter in which such termination was so effective.
(b) For 18 months after such termination, the Corporation
shall use its best efforts to arrange to provide Executive with group health
benefits substantially similar to those which Executive was receiving
immediately prior to the termination. Benefits otherwise receivable by the
Executive pursuant to this paragraph (b)shall be reduced to the extent
comparable benefits are actually received by Executive during such period.
(c) Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking employment or otherwise.
(d) In the event that any payment or benefit received or to be
received by Executive in connection with a Change in Control of the Corporation
or the termination of Executive's employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Corporation,
any person whose actions result in a Change in Control or any person affiliated
with the Corporation or such person) (collectively the "Total Payments") would
not be deductible (in whole or in part) as a result of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), by the Corporation, an
affiliate or other person making such payment or providing such benefit, the
payments or benefits shall be so reduced until no portion of the Total Payments
is not deductible. Executive shall be entitled to elect which payments or
benefits shall be so reduced. For purposes of this limitation, (1) no portion of
the Total Payments the receipt or enjoyment of which Executive shall have
effectively waived in writing prior to the date of payment shall be taken into
account, (2) no portion of the Total Payments shall be taken into account which
in the opinion of tax counsel selected by the Corporation's independent auditors
and acceptable to Executive does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, and (3 )the value of any noncash
benefit or any deferred payment or benefit included in the Total Payments shall
be determined by the Corporation's independent auditors in accordance with the
principles of Sections 280(d)(3) and (4) of the Code.
(e) For purposes hereof, a "Change in Control" shall be deemed
to have occurred if (a) Executive, James D. Delaney, Edward S. Stone and Gary
Veloric (collectively, the "Principal Stockholders") shall cease to be the
owners of at least 25% of the outstanding shares of common stock of the
Corporation, (b) if the Corporation shall sell all or substantially all its
assets, or (c) if the Corporation shall merge or consolidate with another entity
and as a result thereof the Principal Stockholders cease to be the owners,
either directly or
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indirectly, of at least 25% of the outstanding shares of common stock of the
entity surviving the merger or consolidation.
(f) The Company shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
on, after or in connection with a Change in Control as statements therefor are
received (whether or not the Executive is successful) as a result of (a) the
Executive's termination or non-renewal of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any such termination
or non-renewal of employment), (b) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company under which the Executive is or may be
entitled to receive benefits or (c) in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder.
8. No Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement, except as provided in Section 6 hereof.
9. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
10. Interpretation. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held by a court of competent
jurisdiction to be unenforceable because it is excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.
11. Notices. All notices under this Agreement shall be in writing and
shall be deemed to have been given at the time when mailed by registered or
certified mail, addressed to the address below stated of the party to which
notice is given, or to such changed address as such party may have fixed by
notice:
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To the Corporation:
J.G. Wentworth & Company, Inc.
The Graham Building, 10th Floor
15th and Ranstead Streets
Philadelphia, PA 19102
Attn: President
- copy to -
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
111 South 15th Street
Philadelphia, PA 19102-2678
Attn: Robert C. Jacobs, Esq.
To the Executive:
Michael B. Goodman
320 McKendiman Road
Medford, NJ 08055
provided, however, that any notice of change of address shall be effective only
upon receipt.
12. Waivers. If either party should waive any breach of any provision
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
13. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, canceled or discharged except by written instrument
executed by both parties hereto.
14. Equitable Remedies. The Executive acknowledges that he has been
employed for his unique talents and that his leaving the employ of the
Corporation would seriously hamper the business of the Corporation and that the
Corporation will suffer irreparable damage if any provisions of Section 5 hereof
are not performed strictly in accordance with their terms or are otherwise
breached. The Executive hereby expressly agrees that the Corporation shall be
entitled as a matter of right to injunctive or other equitable relief, in
addition to all other remedies permitted by law, to prevent a breach or
violation by the Executive and to secure enforcement of the provisions of
Section 5. Resort to such equitable relief, however, shall not constitute a
waiver or any other rights or remedies which the Corporation may have.
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<PAGE>
15. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
J.G. WENTWORTH & COMPANY, INC.
By:
-----------------------------------------
Name:
Title:
-----------------------------------------
Michael B. Goodman
9
EX-10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of the 13th day of October 1997 by and
between J.G. WENTWORTH & COMPANY, INC., a Delaware corporation (the
"Corporation"), and Andrew S. Hillman (the "Executive").
W I T N E S S E T H :
The Corporation wishes to continue to employ Executive and Executives
wishes to continue in the employ of the Corporation on the terms and conditions
contained in this Agreement.
NOW THEREFORE, in consideration of the facts, mutual promises and covenants
contained herein and intending to be legally bound hereby, Corporation and
Executive agree as follows:
1. Position and Responsibilities.
1.1. The Executive shall serve in an executive capacity as Senior Vice
President and General Counsel of the Corporation. The Executive shall perform
such functions and undertake such responsibilities as are customarily associated
with such capacity. The Executive shall hold such directorships and executive
officerships in the Corporation and any subsidiary to which, from time to time,
he may be elected or appointed during the term of this Agreement.
1.2. The Executive shall devote his full time and best efforts to the
business and affairs of the Corporation and to the promotion of its interests.
1.3. The principal executive offices of the Corporation shall be
maintained in Philadelphia, Pennsylvania and the Executive shall not be required
to relocate outside Philadelphia, Pennsylvania, without his prior consent.
2. Term of Employment.
2.1. The term of employment shall be one (1) year, commencing with the
date hereof, unless sooner terminated as provided in this Agreement. The initial
term of employment and any extension thereof is herein referred to as the
"Term."
2.2. Notwithstanding the provisions of Section 2.1 hereof, the
Corporation shall have the right, on written notice to the Executive, to
terminate the Executive's employment for Cause, such termination to be effective
as of the date on which notice is given or as of such later date otherwise
specified in the notice.
<PAGE>
2.3. For purposes of this Agreement, the term "Cause" shall mean any of
the following actions by the Executive: (a) failure to comply with any of the
material terms of this Agreement, which shall not be cured within 30 days after
written notice; (b) engagement in gross misconduct injurious to the Corporation
which shall not be cured within 30 days after written notice; (c) knowing and
willful neglect or refusal to attend to the material duties reasonably assigned
to him by the Board of Directors of the Corporation, which shall not be cured
within 30 days after written notice; (d) intentional misappropriation of
property of the Corporation to the Executive's own use; (e) the commission by
the Executive of an act of embezzlement; (f) Executive's conviction for a felony
or (g) Executive's engaging in any activity which would constitute a material
conflict of interest with the Corporation, which shall not be cured within 30
days after written notice. If the provisions contained in subsections (a),(b),
(c) or (g) above cannot be cured within 30 days due to the nature of the breach,
the cure period shall then be extended for a reasonable period of time;
provided, however, the Executive undertakes and continues in good faith to cure
the same.
2.4. No later than three (3) months prior to the end of the Term, the
Corporation and the Executive shall meet to discuss the terms and conditions of
an extension of the Term. If the Term of this Agreement shall not be extended,
at the end of the Term the Corporation shall pay as severance pay to Executive
his salary at the rate in effect as of the termination for a period of six
months after the termination in accordance with the Corporation's normal payroll
practices;
2.5. If the Executive's employment with the Corporation shall be
terminated (a) by the Corporation other than pursuant to Sections 2.2, 4.1 or
4.2 hereof or (b) by the Executive for Good Reason (as defined herein), then the
Corporation shall continue to provide or pay to the Executive a period of time
equal to the period for which Executive is entitled to severence pursuant to
Section 2.4 above or for the balance of the Term of this Agreement, whichever is
longer, the salary, bonus and benefits received by the Executive prior to such
termination. The Executive shall have the right for a period of 30 days after
the occurrence of a Good Reason event to terminate this Agreement for Good
Reason.
2.6. For purposes of this Agreement, the term "Good Reason" shall mean
any of the following: (a) the assignment to the Executive by the Corporation of
duties inconsistent with, or a material reduction in the nature of, Executive's
responsibilities hereunder; (b) a reduction by the Corporation in the
Executive's base salary as in effect on the later of the date of this Agreement
or the last date on which base salary is increased; (c) a relocation of the
Executive's place of employment outside of Philadelphia, Pennsylvania without
Executive's prior consent; (d) a reduction in amount of bonus which may be
earned by the Executive; (e) (i) prior to a Change in Control, failure of the
Corporation to continue to maintain the same medical benefit plans covering the
Executive as are made available to other senior executives of the Corporation or
(ii) after a Change in Control, failure of the Corporation to continue to
maintain at least the same medical benefits covering the Executive as were made
available to him
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<PAGE>
immediately prior to the Change in Control; or (f) failure by the Corporation to
comply with any of the material terms of this Agreement, which shall not have
been cured within 30 days after written notice thereof.
3. Compensation.
3.1. The Corporation shall pay or cause J.G. Wentworth & Company, Inc.,
a Pennsylvania corporation ("JGW"), to pay to the Executive for the services to
be rendered by the Executive hereunder a salary at the rate of $170,000 per
annum. The salary shall be payable in equal installments in accordance with the
Corporation's normal payroll practices. Such salary will be reviewed at least
annually and shall be increased (but not decreased) by the Compensation
Committee of the Board of Directors of the Corporation in such amount as
determined in its sole discretion.
3.2 The Corporation shall pay or cause JGW to pay to Executive an annual
bonus calculated in accordance with Schedule A attached hereto. The bonus shall
be payable to Executive in a single lump sum no later than 90 days after the end
of each fiscal year.
3.3 Within ninety (90) days after the date of this Agreement, the
Corporation shall issue to Executive, under the terms of the Company's 1997
Stock Incentive Plan, stock options to purchase 50,000 shares of the
Corporation's Common Stock. The vesting of such options shall accelerate upon
Executive terminating his employment for "Good Reason."
3.4. The Executive shall be entitled to participate in, and receive
benefits from, any insurance, medical, disability, bonus, incentive compensation
or other employee benefit plan (regardless of any special insurance rating
Executive may have), if any are adopted, of the Corporation or any subsidiary
which may be in effect at any time during the course of his employment by the
Corporation and which shall be generally available to the Executive on terms no
less favorable than (i) to other senior executives of the Corporation or its
subsidiaries or (ii) those which Executive enjoyed in his immediate prior
employment, whichever are more valuable.
3.5. The Corporation agrees to reimburse the Executive for all
reasonable and necessary business expenses incurred by him on behalf of the
Corporation in the course of his duties hereunder upon the presentation by the
Executive of appropriate vouchers therefor.
3.6. The Executive will be entitled each year of this Agreement to a
paid vacation of two (2) weeks, no more than half of which may be carried
forward to future years.
3.7. The Corporation agrees to reimburse the Executive for all
reasonable costs and expenses incurred by Executive related to any one or more
of the following: (i) health and fitness club membership fees and dues; (ii)
country club annual membership fees and dues and monthly usage charges; (iii)
professional license and bar association dues and costs for
3
<PAGE>
mandatory continuing legal education; and (iv) all reasonable costs and
expenses, including, without limitation, lease payments, maintenance of required
insurance, of the motor vehicle used primarily by Executive in connection with
the performance of his duties hereunder.
3.8. In addition to the benefit conferred in Section 4.4 hereof, uUpon
termination of this Agreement for Cause or due to the death or incapacity of the
Executive (as defined in Section 4.1), the Executive (or his estate) shall be
entitled to all compensation (including pro rata bonus) and benefits accrued and
unpaid up to the date of termination.
3.9. The Executive shall not be required to mitigate damages or the
amount of any payment provided to him under this Agreement by seeking other
employment or otherwise, except as provided in Section 2.4 hereof.
4. Death; Incapacity.
4.1. If, during the period of employment hereunder, because of illness
or other incapacity, the Executive shall fail for a period of 120 consecutive
days, or for shorter periods aggregating more than 120 days during any twelve
month period, to render the services contemplated hereunder, then the
Corporation, at its option, may terminate the term of employment hereunder upon
not less than 10 days written notice from the Corporation to the Executive,
effective on the 10th day after giving of such notice; provided, however, that
no such termination will be effective if prior to the 10th day after giving such
notice, the Executive's illness or incapacity shall have terminated and he shall
be physically and mentally able to perform the services required hereunder and
shall be performing such services.
4.2. In the event of the death of the Executive during the term hereof,
the employment hereunder shall terminate on the date of death of the Executive.
4.3. The Corporation (or its designee) shall have the right to obtain
for its benefit an appropriate life insurance policy on the life of the
Executive, naming the Corporation (or its designee) as the beneficiary. If
requested by the Corporation, the Executive agrees to cooperate with the
Corporation in obtaining such policy.
4.4. In the event the employment of Executive is terminated by the
Corporation as the result of the death or incapacity of the Executive, the
Corporation agrees to continue to pay the Executive (or his estate) his then
rate of salary for a period of one year after such termination.
5. Other Activities During Employment; Non-Competition; Solicitation.
5.1. The Executive shall not during the term of this Agreement,
undertake or engage in any other employment, occupation or business enterprise.
Subject to compliance with the provisions of this Agreement, the Executive may
engage in charitable, civic, fraternal,
4
<PAGE>
professional and trade activities (including all required time for mandatory
continuing legal education) and reasonable activities with respect to personal
investments of the Executive and may serve as a director of other corporations
provided that such service as director shall not entail any management duties
and that any such activities or services shall not materially interfere with the
performance of Executive's duties hereunder.
5.2. During Executive's employment, and for an additional one year
period after the termination of such employment (for any reason), neither the
Executive nor any entity in which he may be interested as a partner, trustee,
director, officer, employee, shareholder, option holder, lender of money,
guarantor or consultant shall be engaged directly or indirectly in any business
engaged in by the Corporation in any area where the Corporation, or any
subsidiary, conducts such business at any time during this Agreement; provided,
however, that the foregoing shall not be deemed to prevent the Executive from
investing in securities if such class of securities in which the investment is
so made is listed on a national securities exchange or is issued by a company
registered under Section 12(g) of the Securities Exchange Act of 1934, so long
as such investment holdings do not, in the aggregate, constitute more than 5% of
the voting stock of any of such company's securities.
5.3. The Executive will not at any time during his employment with the
Corporation and for an additional one year period after the termination of such
employment (for any reason), solicit (or assist or encourage the solicitation
of) any employee of the Corporation or any of its subsidiaries or affiliates to
work for Executive or for any business, firm, corporation or other entity in
which the Executive, directly or indirectly, in any capacity described in
Section 5.2 hereof, participates or engages (or expects to participate or
engage) or has (or expects to have) a financial interest or management position.
5.4. The Executive shall not at any time during this Agreement or for a
period of one year after the termination hereof directly or indirectly divulge,
furnish, use, publish or make accessible to any person or entity any
Confidential Information (as hereinafter defined). Any records of Confidential
Information prepared by the Executive or which come into Executive's possession
during this Agreement are and remain the property of the Corporation and upon
termination of Executive's employment all such records and copies thereof shall
be either left with or returned to the Corporation.
5.5. The term "Confidential Information" shall mean information
disclosed to the Executive or known, learned, created or observed by him as a
consequence of or through his employment by the Corporation, not generally known
in the relevant trade or industry, about the Corporation's business activities,
services and processes, including but not limited to information concerning
advertising, sales promotion, publicity, sales data, research, finances,
accounting methods, processes, business plans, broker or correspondent lists and
records and potential broker or correspondent lists and records. Confidential
Information shall not include information disclosed in response to subpoena,
legal process or other legal requirement, or in connection with the payment and
reporting of income taxes.
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<PAGE>
6. Assignment. The Corporation shall require any successor or assign to all
or substantially all the assets of the Corporation (whether by merger or by
acquisition of stock, assets or otherwise) prior to consummation of any
transaction therewith, to expressly assume and agree to perform in writing this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession or assignment had taken place.
This Agreement shall inure to the benefit of and be binding upon the
Corporation, its successors and assigns, and upon the Executive and his heirs,
executors, administrators and legal representatives. This Agreement shall not be
assignable by the Executive.
7. Change in Control. Upon the occurrence of a "Change in Control" (as
hereinafter defined) of the Corporation, Executive may at his election, at any
time within six months thereafter, terminate this Agreement, and Executive shall
be entitled to the following compensation, in lieu of any other compensation and
bonuses provided herein:
(a) The Corporation shall pay as severance pay to Executive, no
later than the fifth day following the termination, a lump sum severance payment
equal to (i) 100% of Executive's salary for the greater of one year or the
balance of the Term, at the rate in effect as of the termination, and (ii) any
bonuses due to the Executive pursuant to Section 3.1. through the end of the
fiscal quarter in which such termination was so effective.
(b) For 12 months after such termination, the Corporation shall
use its best efforts to arrange to provide Executive with group health benefits
substantially similar to those which Executive was receiving immediately prior
to the termination. Benefits otherwise receivable by the Executive pursuant to
this paragraph (b) shall be reduced to the extent comparable benefits are
actually received by Executive during such period.
(c) Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 by seeking employment or otherwise.
(d) In the event that any payment or benefit received or to be
received by Executive in connection with a Change in Control of the Corporation
or the termination of Executive's employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Corporation,
any person whose actions result in a Change in Control or any person affiliated
with the Corporation or such person) (collectively the "Total Payments") would
not be deductible (in whole or in part) as a result of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), by the Corporation, an
affiliate or other person making such payment or providing such benefit, the
payments or benefits shall be so reduced until no portion of the Total Payments
is not deductible. Executive shall be entitled to elect which payments or
benefits shall be so reduced. For purposes of this limitation, (1) no portion of
the Total Payments the receipt or enjoyment of which Executive shall have
effectively waived in writing prior to the date of payment shall be taken into
account, (2) no portion of the Total Payments shall be taken into account which
in the opinion of tax counsel selected by the Corporation's independent auditors
and acceptable to Executive does not constitute a "parachute
6
<PAGE>
payment" within the meaning of Section 280G(b)(2) of the Code, and (3) the value
of any noncash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Corporation's independent auditors in
accordance with the principles of Sections 280(d)(3) and (4) of the Code.
(e) For purposes hereof, a "Change in Control" shall be deemed to
have occurred if (a) James D Delaney, Michael B. Goodman, Edward S. Stone and
Gary Veloric (collectively, the "Principal Stockholders") shall cease to be the
owners of at least 25% of the outstanding shares of common stock of the
Corporation, (b) if the Corporation shall sell all or substantially all its
assets, or (c) if the Corporation shall merge or consolidate with another entity
and as a result thereof the Principal Stockholders cease to be the owners,
either directly or indirectly, of at least 25% of the outstanding shares of
common stock of the entity surviving the merger or consolidation.
(f) The Company shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the Executive
on, after or in connection with a Change in Control as statements therefor are
received (whether or not the Executive is successful) as a result of (a) the
Executive's termination or non-renewal of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any such termination
or non-renewal of employment), (b) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company under which the Executive is or may be
entitled to receive benefits or (c) in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder.
8. No Third Party Beneficiaries. This Agreement does not create, and shall
not be construed as creating, any rights enforceable by any person not a party
to this Agreement, except as provided in Section 6 hereof.
9. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
10. Interpretation. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held by a court of competent
jurisdiction to be unenforceable because it is excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.
7
<PAGE>
11. Notices. All notices under this Agreement shall be in writing and shall
be deemed to have been given at the time when mailed by registered or certified
mail, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Corporation:
J.G. Wentworth & Company, Inc.
The Graham Building, 10th Floor
15th and Ranstead Streets
Philadelphia, PA 19102
Attn: President
- copy to -
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
111 South 15th Street
Philadelphia, PA 19102-2678
Attn: Robert C. Jacobs, Esq.
To the Executive:
Andrew S. Hillman
50 Ridings Way
Ambler, PA 19002
provided, however, that any notice of change of address shall be effective only
upon receipt.
12. Waivers. If either party should waive any breach of any provision of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
13. Complete Agreement; Amendments. The foregoing is the entire agreement
of the parties with respect to the subject matter hereof and may not be amended,
supplemented, canceled or discharged except by written instrument executed by
both parties hereto.
14. Equitable Remedies. The Executive acknowledges that he has been
employed for his unique talents and that his leaving the employ of the
Corporation would seriously hamper the business of the Corporation and that the
Corporation will suffer irreparable damage if any provisions of Section 5 hereof
are not performed strictly in accordance with their terms or are otherwise
breached. The Executive hereby expressly agrees that the Corporation
8
<PAGE>
shall be entitled as a matter of right to injunctive or other equitable relief,
in addition to all other remedies permitted by law, to prevent a breach or
violation by the Executive and to secure enforcement of the provisions of
Section 5. Resort to such equitable relief, however, shall not constitute a
waiver or any other rights or remedies which the Corporation may have.
15. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of law.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
J.G. WENTWORTH & COMPANY, INC.
By:_____________________________________________________
Name: James D. Delaney
Title: President and Chief Executive Officer
_____________________________________________________
Andrew S. Hillman
10
<PAGE>
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT is made this day of October, 1997,
by and among, J.G. WENTWORTH & COMPANY, INC., a Delaware corporation (the
"Company"), James D. Delaney ("Delaney"), Michael G. Goodman ("Goodman"), ING
(U.S.) CAPITAL CORPORATION, a corporation ("ING"), Alpha Nickelberry
("Nickelberry"), Edward S. Stone ("Stone"), and Gary Veloric ("Veloric," and
together with Delaney, Goodman, ING, Nickelberry and Stone, each a "Contributing
Holder" and collectively the "Contributing Holders").
W I T N E S S E T H
WHEREAS, the Contributing Holders own in the aggregate all of
the limited partnership interest in J.G. Wentworth S.S.C. Limited Partnership, a
Delaware limited partnership ("SSC");
WHEREAS, Delaney and Veloric own in the aggregate all of the
limited partnership interest in J.G. Wentworth MFC Associates, L.P., a
Pennsylvania limited partnership ("MFC" and together with SSC, the
"Partnerships");
WHEREAS, Delaney, Goodman and Veloric own all of the issued
and outstanding capital stock of J.G. Wentworth Structured Settlement Funding
Corporation, a Delaware corporation and the sole general partner of SSC ("SSC
GP") and SSC Management Company, Inc., a Pennsylvania corporation ("SSC
Management");
WHEREAS, Delaney and Veloric own all of the issued and
outstanding capital stock of J.G. Wentworth Funding Corp., a Pennsylvania
corporation and sole general partner of MFC ("MFC GP" and together with SSC GP,
the "General Partners"), and J.G. Wentworth & Company, Inc., a Pennsylvania
corporation ("JGW");
WHEREAS, each of the Contributing Holders wishes to contribute
all of such Contributing Holder's interests in the Partnerships, the General
Partners, SSC Management and JGW, as the case may be, to the Company and receive
in exchange shares of Common Stock of the Company in a transaction qualifying as
a tax-free contribution under Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code");
WHEREAS, in connection with the transactions contemplated in
this Agreement, the Company proposes to file with the U.S. Securities and
Exchange Commission (the "SEC") a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), to register the sale of shares of its Common Stock, par value
$.01 per share (the "Common Stock") in connection with an underwritten public
offering of such shares of Common Stock (the "Offering");
<PAGE>
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
CONTRIBUTION OF SECURITIES
1.1. Contribution of Interests and Stock by Contributing
Holders.
(a) Subject to the terms and conditions of this
Agreement, on the Closing Date (as defined below) each of the Contributing
Holders shall contribute, assign, transfer and set over to the Company all of
such Contributor's right, title and interest in and to such Contributor's
limited partnership interests in SSC (the "SSC Interests"), free and clear of
any and all liens and encumbrances;
(b) Subject to the terms and conditions of this
Agreement, on the Closing Date, each of Delaney and Veloric shall contribute,
assign, transfer and set over to the Company all of such Contributor's right,
title and interest to such Contributor's limited partnership interests in MFC
(the "MFC Interests" and, together with the SSC Interests, the "Partnership
Interests") free and clear of any and all liens and encumbrances;
(c) Subject to the terms and conditions of this
Agreement, on the Closing Date each of Delaney and Veloric shall contribute,
assign, transfer and set over to the Company all of such Contributor's right,
title and interest to the shares of capital stock of JGW, SSC Management MFC GP
and SSC GP (the "Founders' Stock"), each free and clear of any and all liens and
encumbrances.
(d) Subject to the terms and conditions of this
Agreement, on the Closing Date, Goodman shall contribute, assign, transfer and
set over to the Company all of his right, title and interest to the shares of
capital stock of SSC GP and SSC Management (the "Goodman Stock" and, together
with the Founders' Stock, the "Corporation Stock"), free and clear of any and
all liens and encumbrances.
1.2. Issuance of Common Stock
(a) In consideration of the transfer, assignment and
conveyance of the Partnership Interests and the Corporation Stock, the Company
shall issue to each Contributing Holder the number of fully paid and
non-assessable shares of Common Stock calculated as set forth on Schedule A
attached hereto (the "Company Shares").
(b) The Company shall be responsible for any sales,
use, income or other taxes imposed by reason of the transfer of the Partnership
Interests or the Corporation Stock and the shares of Common Stock provided
herein and any deficiency asserted with respect thereto.
<PAGE>
ARTICLE II
CLOSING
2.1 Closing. Subject to the conditions set forth in Section
2.2 of this Agreement, the closing and the delivery of Company Shares (the
"Closing"), shall be held at 10:00 a.m. at the offices of Wolf, Block, Schorr
and Solis-Cohen LLP, Twelfth Floor Packard Building 111 South 15th Street,
Philadelphia, PA 19102-2678, on such date as shall be fixed by the Company (the
"Closing Date"), but in no event prior to the effective date of the Registration
Statement (the "Effective Date") no later than the closing date of the Offering.
2.2 Conditions to Closing.
(a) The Company's obligation to close hereunder shall
be subject to the satisfaction of the following conditions:
(i) The representations and warranties made
by the Contributing Holders in this Agreement shall be true and correct, in all
material respects, when made, and shall be true and correct, in all material
respects, on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
(ii) The Contributing Holders shall have
performed, in all material respects, all covenants, obligations and conditions
herein required to be performed or observed by them on or prior to the Closing
Date.
(iii) All material consents, approvals and
waivers from third parties, governmental entities and other parties necessary to
permit the Contributing Holders to transfer, and the Company to acquire, the
Partnership Interests and the Corporation Stock as contemplated by this
Agreement shall have been obtained.
(iv) No action by any governmental entity
shall have been instituted or threatened which questions the validity or
legality of the transactions contemplated in this Agreement and which could
reasonably be expected to have a material effect on the right or ability of the
Company to own the Partnership Interests or the Corporation Stock after the
Closing or materially to damage the Company, JGW, the Partnerships or the
General Partners if the transactions contemplated under this Agreement are
consummated.
(v) Delivery by each of the Contributing
Holders of instruments of transfer in a form acceptable to counsel to the
Company effecting the transfer of the Partnership Interests to the Company, free
and clear of liens, charges and encumbrances.
(vi) Delivery by Delaney, Goodman and
Veloric of certificates representing all of the issued and outstanding shares of
Corporation Stock, duly endorsed for transfer or with stock powers attached duly
executed in blank.
(b) The Contributing Holders' obligations to close
hereunder shall be subject to the satisfaction of the following conditions:
<PAGE>
(i) The representations and warranties made
by the Company in this Agreement shall be true and correct, in all material
respects, when made, and shall be true and correct, in all material respects, on
the Closing Date with the same force and effect as if they had been made on and
as of the Closing Date.
(ii) The Company shall have performed, in
all material respects, all covenants, obligations and conditions herein required
to be performed or observed by it on or prior to the Closing Date.
(iii) All material consents, approvals and
waivers from third parties, governmental entities and other parties necessary to
permit the Contributing Holders to transfer, and the Company to acquire, the
Partnership Interests and the Corporation Stock as contemplated by this
Agreement shall have been obtained.
(iv) No action by any governmental entity
shall have been instituted or threatened which questions the validity or
legality of the transactions contemplated in this Agreement and which could
reasonably be expected to have a material effect on the right or ability of the
Company to own the Partnership Interests or the Corporation Stock after the
Closing or materially to damage the Company, JGW, the Partnerships or the
General Partners if the transactions contemplated under this Agreement are
consummated.
(v) Delivery by the Company of duly executed
stock certificates registered in the name of each Contributing Holder for the
number of shares of Common Stock issuable to such Contributing Holder in
accordance with Schedule A attached hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE CONTRIBUTING HOLDERS
Each Contributing Holder, solely with respect to such
Contributing Holder and not with respect to any other Contributing Holder,
hereby represents and warrants to the Company as follows:
3.1 Authorization. Each Contributing Holder has the legal
right, power and authority to execute, deliver and perform his, her or its
obligations under this Agreement and each other agreement, document or
instrument contemplated hereby to which he, she or it is a party. This Agreement
has been duly executed and delivered by each such Contributing Holder and is a
legal, valid and binding obligation of each such Contributing Holder enforceable
against each such Contributing Holder in accordance with its terms, except as
limited by the effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto.
3.2 Ownership of Corporation Stock and Partnership Interests.
All of the Corporation Stock and the Partnership Interests owned by each
Contributing Holder are owned by such Contributing Holder free and clear of all
encumbrances.
<PAGE>
3.3 Organization and Subsidiaries. To the knowledge of the
Contributing Holders, each of JGW, SSC Management, the Partnerships and the
General Partners is duly organized, validly subsisting or existing in good
standing under the laws of its state of incorporation or organization as a
limited partnership, has full corporate or partnership power and authority to
conduct its business as it is presently being conducted and to own, lease and
operate its properties and assets. JGW is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
ownership of property or nature of its business requires such qualification.
Each jurisdiction in which JGW is qualified to do business as a foreign
corporation is listed on Schedule B to this Agreement. A true, complete and
accurate list of all subsidiaries of each of JGW, the Partnerships and the
General Partners is set forth on Schedule B to this Agreement.
3.4 No Conflict or Violation. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby by the Contributing Holders will result in (i) a violation or breach of,
conflict with or default under any term or provision of any contract, agreement,
indebtedness, lease, encumbrance, commitment, license, franchise, permit,
authorization or concession to which any Contributing Holder or, to the
knowledge of the Contributing Holder, any of JGW, SSC Management, the
Partnerships or the General Partners is a party or by which any Contributing
Holder or, to the knowledge of the Contributing Holders, any of JGW, SSC
Management, the Partnerships or the General Partners is bound or affected or
(ii) a violation by any Contributing Holder or, to the knowledge of the
Contributing Holders, any of JGW SSC Management, the Partnerships or the General
Partners of any statute, rule, regulation, ordinance, code, action or award
applicable to him, her or it.
3.5 Restrictive Documents. No Contributing Holder is subject
to, or a party to, any mortgage, lien, lease, license, permit, agreement,
contract or instrument, or to any law, rule, ordinance, regulation, action or
any other restriction of any kind or character, which would have a material
adverse effect on the execution, delivery and performance by such Contributing
Holder of this Agreement and consummation by such Contributing Holder of the
transactions contemplated hereby. To the knowledge of the Contributing Holders,
neither JGW, SSC Management, the Partnerships nor the General Partners is
subject to, or party to, any mortgage, lien, lease, license, permit, agreement,
contract or instrument, or to any law, rule ordinance, regulation, action or any
other restriction of any kind or character, which would have a material adverse
affect on the performance of this Agreement by the Contributing Holders and the
consummation by the Contributing Holders of the transactions contemplated
hereby.
3.6 Consents and Approvals; Licenses. No consent, approval,
authorization, license, order or permit of, or declaration, filing or
registration with, any governmental entity, or any other person or entity, is
required to be made or obtained by any Contributing Holder in connection with
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby.
3.8 Investment Representations. Each Contributing Holder is
acquiring shares of Common Stock for such Contributing Holder's own account, for
investment and not with a view to the sale or distribution thereof or with any
present intention of selling or distributing any thereof, except in conformity
with the Securities Act. Each Contributing Holder understands and
<PAGE>
acknowledges that, except for the Registered Shares (as defined below), the
Company Shares are not registered under the Securities Act and will not be
transferable except (i) pursuant to an effective registration statement under
the Securities Act and the Company has no obligation to file a registration
statement relating to such shares except as provided in Section 5.3 of this
Agreement and that such Contributing Holder hereby waives any registration
rights relating to the Company Shares it may have under any other agreement,
(ii) pursuant to Rule 144 or any successor rule under the Securities Act, (iii)
pursuant to a no-action letter issued by the SEC to the effect that a proposed
transfer of the Shares may be made without registration under the Securities Act
or (iv) pursuant to an opinion of counsel for or reasonably acceptable to the
Company to the effect that the proposed transfer is exempt from registration or
qualification under the Securities Act and relevant state securities laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Contributing
Holders as follows:
4.1 Organization of the Company. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has full corporate power and authority to conduct its business as it
is presently being conducted and to own, lease and operate its properties and
assets. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the ownership of property or
nature of its business requires such qualification and where failure to be so
qualified would have a material adverse effect on the Company. The Company was
incorporated on October , 1997 and has done no business and incurred no
obligations except with respect to the transactions contemplated hereby and by
the Registration Statement.
4.2 Authorization. The Company has all necessary corporate
power and authority and has taken all corporate action necessary to enter into
this Agreement to consummate the transactions contemplated hereby and to perform
its obligations hereunder. This Agreement has been duly executed and delivered
by the Company and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as limited
by the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors rights generally and court
decisions with respect thereto.
4.3 No Conflict or Violation. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will result in (i) a violation of or a conflict with any provision of the
certificate of incorporation or bylaws of the Company, (ii) a breach of, or a
default under, any term or provision of any contract, agreement, indebtedness,
lease, encumbrance, commitment, license, franchise, permit, authorization or
concession to which the Company is a party or by which the Company is bound or
affected which breach or default would have a material adverse effect on the
business or financial condition of the Company or its ability to consummate the
transactions contemplated hereby or (iii) a violation by the Company of any
statute, rule, regulation, ordinance, code, order, judgment, writ, injunction,
decree, action or award applicable to the Company, which violation
<PAGE>
would have a material adverse effect on the business or financial condition of
the Company or its ability to consummate the transactions contemplated hereby.
4.4 Consents and Approvals. No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
entity, or any other person or entity is required to be made or obtained by the
Company in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
4.5 Issuance of Company Shares. The authorized capital stock
of the Company consists of 30,000,000 shares of Common Stock and 5,000,000
shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"). As
of the date hereof, no shares of Common Stock or of Preferred Stock are
outstanding. Upon the issuance of the Company Shares as provided herein, the
Company Shares will be duly and validly issued, fully paid and non-assessable.
Except as contemplated by the Underwriting Agreement by and among the Company
and Prudential Securities Incorporated, Oppenheimer & Co., Inc. and Furman Selz,
as representatives of the several Underwriters listed on Schedule [I] thereto,
to be entered into on the Effective Date (the "Underwriting Agreement"), and the
1997 Stock Incentive Plan proposed to be adopted by the Company, there are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of the Company.
4.6 Investment Representations. The Company is acquiring the
Corporation Stock and the Partnership Interests for its own account for
investment and not with a view to the sale or distribution thereof or with any
present intention of selling or distributing any thereof. The Company
understands and acknowledges that neither the Corporation Stock nor the
Partnership Interests are registered under the Securities Act nor will they be
transferable except (i) pursuant to an effective registration statement under
the Securities Act, (ii) pursuant to Rule 144 or any successor rule under the
Securities Act, (iii) pursuant to a no-action letter issued by the SEC to the
effect that a proposed transfer of the Corporation Stock or the Partnership
Interests, as the case may be, may be made without registration under the
Securities Act or (iv) pursuant to an opinion of counsel for the Company to the
effect that the proposed transfer is exempt from registration or qualification
under the Securities Act and relevant state securities laws.
<PAGE>
ARTICLE V
COVENANTS OF THE CONTRIBUTING HOLDERS
AND THE COMPANY
The Contributing Holders, on the one hand, and the Company, on
the other hand, covenant with each other as follows:
5.1 Maintenance of Business Prior to Closing. During the
period from the date hereof through the Closing Date, the Contributing Holders
shall cause JGW, the Partnerships and the General Partners to continue to carry
on their businesses in the ordinary course and in accordance with past practice
and not to take any action inconsistent therewith or with the consummation of
the Closing.
5.2 Consents and Best Efforts. As soon as practicable, the
Contributing Holders will commence all reasonable action required hereunder to
obtain all applicable licenses, consents, approvals and agreements of, and to
give all notices and make all filings with, any third parties as may be
necessary to authorize, approve or permit the full and complete transfer,
conveyance, assignment and delivery of the Partnership Interests and the
Corporation Stock by a date early enough to allow the transactions hereunder to
be consummated by the Closing Date.
5.3 Registration of Certain Company Shares. The Company shall
cause to be registered under the Securities Act the number of Company Shares set
forth opposite the Contributing Holders' names on Schedule C to this Agreement
(the "Registered Shares") by inclusion of such shares on the Registration
Statement, and shall use its best efforts to cause the Registered Shares to be
included for sale under the Underwriting Agreement and each Contributing Holder
shall execute and deliver a power of attorney and custody agreement in customary
form, reasonably agreed to by counsel to the Company.
5.4 Share Legend. All Company Shares to be issued to the
Contributing Holders pursuant to this Agreement shall be subject to the
provisions of this Agreement, and, except for the Registered Shares, the
certificates representing such Company Shares shall bear the following legend:
"The shares of J.G. Wentworth & Company, Inc. (the
"Corporation") represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be distributed or transferred except (A)
pursuant to an effective registration statement under the Act,
(B) pursuant to an opinion of counsel for or reasonably
acceptable to the Corporation to the effect that the proposed
transfer is exempt from registration or qualification under
the Act and relevant state securities laws or (C) pursuant to
a no-action letter issued by the Securities and Exchange
Commission to the effect that a proposed transfer hereof may
be made without registration under the Act."
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.1 Indulgences, Etc. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence.
6.2 Controlling Law. This Agreement and all questions relating
to its validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
and without the aid of any canon, custom or rule of law requiring construction
against the draftsman.
6.3 Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received when personally
delivered, when deposited with an overnight courier service such as Federal
Express, for delivery to the intended addressee or when deposited in the United
States mails, first class postage prepaid, addressed as set forth below:
(i) If to the Company:
J.G. Wentworth & Company, Inc.
The Graham Building, 10th Floor
15th and Ranstead Streets
Philadelphia, PA 19102
Attention: General Counsel
with a copy, given in the manner prescribed
above, to:
Robert C. Jacobs, Esq.
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
111 S. 15th Street
Philadelphia, PA 19102-2678
(ii) If to any of the Contributing Holders, to
the most current residence address of such
Contributing Holder in the books and records
of the Company
In addition, notice by mail shall be by air mail if
posted outside of the continental United States.
<PAGE>
Any party may alter the address to which
communications or copies are to be sent by giving notice of such change of
address in conformity with the provisions of this paragraph for the giving of
notice.
6.4 Exhibits. All Exhibits and schedules attached hereto are
hereby incorporated by reference into, and made a part of, this Agreement.
6.5 Binding Nature of Agreement; Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
Notwithstanding the foregoing, no party may assign or transfer its right or
obligations under this Agreement, except that the Company may assign all its
rights and obligations under this Agreement to a subsidiary or subsidiaries of
the Company or to a successor to the business of the Company; provided, however,
that such assignment shall not release the Company with respect to any such
obligations or liabilities.
6.6 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
6.7 Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
6.8 Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
6.9 Paragraph Headings. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
6.10 Gender, Etc. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
6.11 Number of Days. In computing the number of days for
purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday or holiday on which
<PAGE>
federal banks are or may elect to be closed, then the final day shall be deemed
to be the next day which is not a Saturday, Sunday or such holiday.
6.12 Expenses of the Parties. Except as otherwise specified
herein, each party hereto shall pay its own legal, accounting, out-of-pocket and
other expenses incident to this Agreement and to any action taken by such party
in preparation for carrying this Agreement into effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
The Company: J.G. WENTWORTH & COMPANY, INC.
By:
----------------------------
Name:
Title
The Contributing Holders:
-------------------------------
James D. Delaney
-------------------------------
Michael B. Goodman
ING (U.S.) CAPITAL CORPORATION
By:
----------------------------
Name:
Title:
-------------------------------
Alpha Nickelberry
-------------------------------
Edward S. Stone
-------------------------------
Gary Veloric
<PAGE>
SCHEDULE "A"
1. Based on their relative ownership interests in SSC and SSC
GP, each Contributing Holder shall be entitled to the number of Company Shares
("Initial Shares") set forth beside such Contributing Holder's name below,
subject to reallocation as set forth in Paragraph 2 below.
Name # of Initial Shares
- ---- -------------------
James D. Delaney 2,583,370
Gary Veloric 2,583,370
Michael B. Goodman 2,583,370
Edward S. Stone 1,038,899
Alpha Nickelberry 501,000
ING 3,116,667
2. Messrs. Delaney, Goodman and Veloric (the "Principals")
shall be entitled to be reallocated from the other Contributing Holders (pro
rata based upon the number of Initial Shares issuable to each Contributing
Holder as a percentage of all Initial Shares issuable other than those issuable
to the Principals) the aggregate number of Company Shares shall equal a
fraction, the numerator of which will be $4 million and the denominator of which
shall be the initial public offering price per share in the Offering (after
deducting underwriters' discounts and commissions). If such total market
capitalization of the Company after the Offering (calculated by multiplying
"price to public" on the front cover of the final prospectus in the Offering
by 16,466,667) (the "Total Market Capitalization") will not exceed $100
million, the numerator of such fraction shall be reduced from $4 million by $.04
for each dollar that the Total Market Capitalization is less than $100 million.
Veloric and Delaney shall be entitled to be issued 36.25%, and Michael Goodman
shall be entitled to 27.50% of the aggregate number of Initial Shares
reallocated to all of the Principals in accordance with this paragraph.
<PAGE>
SCHEDULE "B"
Subsidiaries of JGW, the Partnerships and the General Partners
<PAGE>
SCHEDULE "C"
Name # of Registered Shares
- ---- ----------------------
James D. Delaney 311,165
Gary Veloric 311,165
Michael B. Goodman 286,075
Edward S. Stone 83,333
Alpha NickelBerry 45,000
ING 250,000
<PAGE>
TAX INDEMNIFICATION AGREEMENT
This Tax Indemnification Agreement (this "Agreement"), is
entered into this ___ day of ____________, 1997, by and between J.G. WENTWORTH &
COMPANY, INC., a Delaware corporation, ("the Company"), J.G. WENTWORTH &
COMPANY, INC., a Pennsylvania corporation ("JGW"), J.G. WENTWORTH FUNDING CORP.,
a Pennsylvania corporation ("MFC GP"), J.G. WENTWORTH STRUCTURED SETTLEMENT
FUNDING CORPORATION, a Delaware corporation ("SSC GP" and together with MFC
Funding and JGW, the "Corporations"), and each of James D. Delaney ("Delaney"),
Michael B. Goodman ("Goodman"), ING (U.S.) Capital Corporation, Alpha
Nickelberry, Edward S. Stone and Gary Veloric ("Veloric") (collectively, the
"Contributing Holders").
W I T N E S S E T H:
WHEREAS, immediately prior to the date of this Agreement,
Delaney and Veloric collectively held all of the issued and outstanding capital
stock of JGW and SSC GP and all of the limited partnership interests in J.G.
Wentworth MFC Associates, L.P., a Pennsylvania limited partners ship ("MFC");
WHEREAS, immediately prior to the date of this Agreement,
Delaney, Goodman and Veloric collectively held all of the issued and outstanding
capital stock of SSC GP;
WHEREAS, the Contributing Holders collectively own all of the
limited partnership interest in J.G. Wentworth S.S.C. Limited Partnership, a
Delaware limited partnership ("SSC" and, together with MFC, the "Partnerships");
WHEREAS, each of the Corporations was an S corporation within
the meaning of Section 1361 of the Internal Revenue Code of 1986, as amended
(the "Code"), and the corresponding provisions of state income tax law,
effective from its date of incorporation through the day preceding the date of
this Agreement (the "S Period");
WHEREAS, each of the Partnerships has been and will continue
to be taxed as a partnership for federal and state income tax purposes;
WHEREAS, concurrently with the execution of this Agreement,
pursuant to the Contribution Agreement between the Contributing Holders and the
Company dated October , 1997, the Contributing Holders have contributed all of
their shares of capital stock of the Corporations and all of their limited
partnership interests in MFC and SSC held by them to the Company in exchange for
the issuance to the Contributing Holders shares of its common stock, $.01 par
value per share (the "Reorganization");
<PAGE>
WHEREAS, each of the corporations will be C corporations
within the meaning of Section 1361 of the Code and the corresponding provisions
of state income tax law from the date of this Agreement and thereafter;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements contained herein, the parties hereto agree as follows:
1. Representations and Warranties of the Parties.
The Contributing Holders jointly and severally
represent and warrant to the Company and the Corporations that:
(a) During the S Period, the Contributing Holders
duly and timely filed all tax reports and returns required to be filed by them
("Shareholder Tax Returns").
(b) The Contributing Holders have duly included, or
will duly include, in their Shareholder Tax Returns their allocable share of the
Corporation's taxable income from all sources through and including the last
business day of the S Period (the "S Corporation Taxable Income"), except for
amounts owed with respect to the Corporation's Pennsylvania state corporate net
income tax, which has been paid by the Corporations ("Pennsylvania CNI").
(c) There are no audits, inquiries, investigations or
examinations relating to any of the Shareholder Tax Returns pending, and there
are no claims which have been asserted relating to any of the Shareholder Tax
Returns which if determined adversely would result in the assertion by any
entity of the federal government or State government of any federal or state
income tax ("Tax") deficiency against the Company or the Corporations.
2. Indemnifications and Reimbursement.
(a) Except as set forth in subparagraph (c) below,
the Contributing Holders severally, but not jointly, shall be responsible for
and shall indemnify and save and hold harmless the Company and the Corporations
against all Tax (other than any amounts owed by the Corporations with respect to
Pennsylvania CNI) imposed on the Company or the Corporations resulting from the
business or operations of the Corporations or the Partnerships prior to the
consummation of the Reorganization.
(b) The Company shall indemnify and save and hold
harmless each Contributing Holder from and against all Tax imposed on such
Contributing Holder resulting from the business and operations of the Company
after the consummation of the Reorganization. Further, the Company shall
indemnify and hold harmless the Contributing Holders from and against Tax
incurred by such Contributing Holders resulting from the receipt of any
indemnification payments made to such Contributing Holders pursuant to the
foregoing sentence.
<PAGE>
(c) In the event that any federal or state authority
takes any action that results in any deductions from gross income from the
Partnerships and the Corporations taken by the Contributing Holders in the
Shareholder Tax Returns being disallowed and the effect of such disallowance is
to permit the Company or the Corporations to take such disallowed deductions or
deduction from its gross income after the consummation of the Reorganization,
the Company shall reimburse to the Contributing Holders an amount in cash equal
to the liability for the additional Tax (and all interest and penalties owed
with respect thereto) owed by the Contributing Holders resulting from such
disallowance.
(d) The Contributing Holders or the Company, as the
case may be, shall make any payment required under this Agreement within thirty
(30) days after receipt of notice from the other party that a payment is due by
such party to the appropriate authority.
(e) If a Tax audit is commenced with respect to the S
Period or any Tax is claimed for which the Contributing Holders would be
required to indemnify the Company, written notice thereof shall be given to the
Contributing Holders as promptly as practicable; provided, however, that the
failure to give timely notice shall not affect rights to indemnification
hereunder except to the extent that the Contributing Holders demonstrate actual
damage caused by such failure. After such notice, if the Contributing Holders
shall acknowledge in writing to the Company that they are obligated under the
terms of their indemnity hereunder in connection with such audit or claim, then
the Contributing Holders shall be entitled, if they so elect, to take control of
the defense and investigation of such audit or claim and to employ and engage
attorneys of their own choice to handle and defend the same, at the Contributing
Holders' cost, risk and expense provided that the Contributing Holders and their
counsel shall proceed with diligence and in good faith with respect thereto. If
the Tax audit relates to the activities of the Company, the Company shall pay
all costs and expenses related to, or in connection with, such audit. The
Company shall cooperate in all reasonable respects with the Contributing Holders
and such attorneys in the defense and investigation of such audit or claim and
any appeal arising therefrom, and shall not enter into any agreement with any
tax authority with respect to such audit or claim without the prior consent of
the Contributing Holders; provided, however, that the Company may, subject to
the Contributing Holders' control of the defense and investigation of such audit
or claim, at its own cost, participate in the defense and investigation of such
audit or claim and any appeal arising therefrom.
3. Deferred Tax Liability.
Notwithstanding the foregoing, the Contributing
Holders shall not be responsible for any portion of any deferred tax liability
which may be recorded on the balance sheet of the Corporations or the Company
upon termination of the S corporation status.
<PAGE>
4. Notice.
All notices and other communications made in
connection with this Agreement shall be in writing and shall be deemed given
when delivered personally or sent by facsimile transmission to the numbers
indicated below (if physical confirmation of transmission is retained) or on the
third succeeding business day after being mailed by registered or certified
mail, deposited in the United States mail, postage prepaid, return receipt
requested, to the appropriate party at its, his or her address below or at such
other address for such party (as shall be specified by written notice when in
fact delivered pursuant hereto):
If to the Company at:
J.G. Wentworth & Company, Inc.
The Graham Building
15th and Ranstead Streets
10th Floor
Philadelphia, PA 19102
If to the Contributing Holders, at:
the address of such
Contributing Holder
as last appears in the books
and records of the Company
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement,
as of this day of ___________________, 1997.
J.G. WENTWORTH & COMPANY, INC.,
a Delaware corporation
Name:
Title:
J.G. WENTWORTH & COMPANY, INC.,
a Pennsylvania corporation
By:
--------------------------------------
Name:
Title:
J.G. WENTWORTH FUNDING CORP.,
a Pennsylvania corporation
By:
--------------------------------------
Name:
Title:
J.G. STRUCTURED SETTLEMENT FUNDING CORP.,
a Delaware corporation
By:
--------------------------------------
Name:
Title:
[signatures contained on following page]
<PAGE>
[signatures continued from previous page]
The Contributing Holders:
--------------------------------------
James D. Delaney
--------------------------------------
Michael B. Goodman
ING (U.S.) CAPITAL CORPORATION
By
-----------------------------------
Name:
Title:
--------------------------------------
Alpha Nickelberry
--------------------------------------
Edward S. Stone
--------------------------------------
Gary Veloric
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
BY AND BETWEEN
J.G. WENTWORTH S.S.C. LIMITED PARTNERSHIP,
as Borrower
THE INSTITUTIONS FROM TIME TO TIME PARTY HERETO AS LENDERS,
ING (U.S.) CAPITAL CORPORATION,
as Agent
AND
PNC BANK, NATIONAL ASSOCIATION,
as Servicing Agent
- --------------------------------------------------------------------------------
Dated as of February 11, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. CERTAIN DEFINITIONS......................................................................2
SECTION 1.1 Certain Definitions..........................................................2
SECTION 1.2 Construction................................................................23
SECTION 1.3 Accounting Principles.......................................................23
SECTION 1.4 Reference to and Effect of the Existing Credit Agreement....................23
ARTICLE 2. AMOUNTS AND TERMS OF THE ADVANCES.......................................................24
SECTION 2.1 The Advances................................................................24
SECTION 2.2 The Settlement Advances and Settlement Differential Advances; Use of
Proceeds....................................................................24
SECTION 2.3 [INTENTIONALLY OMITTED].....................................................25
SECTION 2.4 [INTENTIONALLY OMITTED].....................................................25
SECTION 2.5 Overhead Expenses...........................................................25
SECTION 2.6 Making the Advances.........................................................25
SECTION 2.7 Fees........................................................................30
SECTION 2.8 Reduction of the Commitment.................................................30
SECTION 2.9 Revolving Loan Notes; Repayment of the Advances.............................31
SECTION 2.10 Optional Prepayments........................................................34
SECTION 2.11 Mandatory Prepayments.......................................................35
SECTION 2.12 Interest....................................................................35
SECTION 2.13 (a) Funding Indemnification.................................................37
SECTION 2.14 Payments and Computations...................................................37
SECTION 2.15 Payment on Non-Business Days................................................39
SECTION 2.16 Pro Rata Treatment of Lenders...............................................39
ARTICLE 3. CONDITIONS OF LENDING...................................................................39
SECTION 3.1 Condition Precedent to Initial Advance......................................39
SECTION 3.2 Conditions Precedent to All Advances........................................41
ARTICLE 4. REPRESENTATIONS AND WARRANTIES..........................................................42
SECTION 4.1 Representations and Warranties of the Borrower..............................42
SECTION 4.2 Additional Representations and Warranties of the Borrower with Respect to
Settlements.................................................................45
ARTICLE 5. COVENANTS OF THE BORROWER...............................................................47
SECTION 5.1 Affirmative Covenants.......................................................47
SECTION 5.2 Negative Covenants..........................................................52
ARTICLE 6. EVENTS OF DEFAULT.......................................................................55
SECTION 6.1 Events of Default...........................................................55
SECTION 6.2 Remedies....................................................................57
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 7. MISCELLANEOUS...........................................................................58
SECTION 7.1 Amendments, Etc.............................................................58
SECTION 7.2 Notices, Etc................................................................59
SECTION 7.3 No Waiver; Remedies.........................................................59
SECTION 7.4 Accounting Terms............................................................60
SECTION 7.5 Costs, Expenses and Taxes; Indemnification..................................60
SECTION 7.6 Right of Set-off; Ratable Payments; Relations Among Lenders.................61
SECTION 7.7 Binding Effect..............................................................61
SECTION 7.8 Effect on Limited Partners..................................................62
SECTION 7.9 GOVERNING LAW...............................................................62
SECTION 7.10 Section Headings............................................................62
SECTION 7.11 Tax Characterization........................................................62
SECTION 7.12 Execution...................................................................62
ARTICLE 8. THE AGENT...............................................................................63
SECTION 8.1 Appointment; Nature of Relationship.........................................63
SECTION 8.2 Powers......................................................................63
SECTION 8.3 General Immunity............................................................63
SECTION 8.4 No Responsibility for Advances, Creditworthiness, Collateral, Recitals, Etc.63
SECTION 8.5 Action on Instructions of Lenders...........................................64
SECTION 8.6 Employment of Agents and Counsel............................................64
SECTION 8.7 Reliance on Documents; Counsel..............................................64
SECTION 8.8 The Agent's Reimbursement and Indemnification...............................64
SECTION 8.9 Rights as a Lender..........................................................65
SECTION 8.10 Lender Credit Decision......................................................65
SECTION 8.11 Successor Agent.............................................................65
SECTION 8.12 Collateral Documents........................................................66
ARTICLE 9. THE SERVICING AGENT.....................................................................66
SECTION 9.1 Appointment; Nature of Relationship.........................................66
SECTION 9.2 Powers......................................................................66
SECTION 9.3 General Immunity............................................................66
SECTION 9.4 No Responsibility for Advances, Creditworthiness, Collateral, Recitals, Etc.66
SECTION 9.5 Action on Instructions of Lenders...........................................67
SECTION 9.6 Employment of Agents and Counsel............................................67
SECTION 9.7 Reliance on Documents; Counsel..............................................67
SECTION 9.8 The Servicing Agent's Reimbursement and Indemnification.....................67
SECTION 9.9 Rights as a Lender..........................................................68
SECTION 9.10 Successor Servicing Agent...................................................68
</TABLE>
ii
<PAGE>
SCHEDULES
---------
Schedule I -- Lock Boxes, Lock-Box Banks, and Collection Accounts
Schedule II -- Material Contracts and Other Commitments of the Borrower
Schedule III -- Closing Costs
Schedule IV -- Closing Date Advances
Schedule V -- Designated Annuity Funding Companies
Schedule VI -- Benefit Plans
EXHIBITS
--------
EXHIBIT A -- Form of Notice of Purchase
EXHIBIT B -- Form of Notice of Direction of Payment
EXHIBIT C -- Form of Notice of Borrowing
EXHIBIT D -- Form of Notice of Continuation/Conversion
EXHIBIT E -- Eligible Settlement Purchase Procedures
EXHIBIT F -- Form of Borrowing Base Certificate
EXHIBIT G -- Form of Lock-Box Agreement
EXHIBIT H -- Form of Amended and Restated Revolving Loan Note
EXHIBIT I -- Form of Amended and Restated Security Agreement
EXHIBIT J -- Form of Purchase Agreement
EXHIBIT K -- Commitments
EXHIBIT L -- Form of Servicing Agent Note
EXHIBIT M -- Form of Monthly Report
iii
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (the, "Agreement") is
made as of February 11, 1997 by and between J.G. WENTWORTH S.S.C. LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Borrower"), the institutions
from time to time party hereto as Lenders, ING (U.S.) CAPITAL CORPORATION ("ING
Capital"), in its capacity as contractual representative for itself and the
other Lenders (the "Agent"), and PNC BANK, NATIONAL ASSOCIATION ("PNC"), as
servicing agent (the "Servicing Agent").
RECITALS
WHEREAS, the Borrower and ING Baring (U.S.) Capital Markets, Inc. (formerly
known as Internationale Nederlanden (U.S.) Capital Markets, Inc., the "Original
Lender") entered into that certain Revolving Credit Agreement dated as of August
25, 1995 (as amended, restated, supplemented or otherwise modified from time to
time prior to the date hereof, the "Existing Credit Agreement"), pursuant to
which the Original Lender agreed to make loans and other financial
accommodations to the Borrower to facilitate the Borrower's purchases of
Settlements (as hereinafter defined);
WHEREAS, the Original Lender has assigned all of its rights and obligations
with respect to the Existing Credit Agreement to the Agent, and the Agent has
agreed to assume all such rights and obligations with respect to the Existing
Credit Agreement, pursuant to the Assignment Agreement;
WHEREAS, the Borrower, the Agent, the Servicing Agent and the Lenders have
agreed to enter into this Agreement in order, among other things, (i) to amend,
restate and consolidate the Existing Credit Agreement in its entirety and (ii)
to set forth the terms and conditions under which the Lenders will hereafter
extend loans and make other financial accommodations to or for the benefit of
the Borrower;
WHEREAS, it is the intent of the Borrower, the Agent, the Servicing Agent
and the Lenders that this Agreement set forth new terms for the repayment and
performance of the Borrower's obligations under the Existing Credit Agreement
and this Agreement, it being the intent of the parties hereto that, from and
after the satisfaction of the conditions precedent set forth in Section 3.1
hereof, such obligations shall be governed by this Agreement; and
WHEREAS, it is the intent of the Borrower, the Agent, the Servicing Agent
and the Lenders that this Agreement be merely an amendment, restatement and
consolidation of the Existing Credit Agreement and not constitute a novation of
the indebtedness thereunder;
NOW, THEREFORE, in consideration of the premises set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
ARTICLE 1. CERTAIN DEFINITIONS
SECTION 1.1 Certain Definitions. In addition to terms defined elsewhere in
this Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable to the singular and plural forms of the terms
defined):
"Adjusted Base Rate" shall mean on any date, the Base Rate plus the Base
Rate Spread.
"Advance" shall mean any advance by any Lender, or by the Servicing Agent
on behalf of any Lender to the Borrower, whether a Settlement Advance or a
Settlement Differential Advance, made pursuant to Article 2 of this Agreement or
Article II of the Existing Credit Agreement (including without limitation, a
Settlement Advance and a Settlement Differential Advance), consisting of a
Fixed-Rate Advance and/or a Floating-Rate Advance (each of which shall be a
"Type" of Advance).
"Advance Documents" shall mean this Agreement, the Revolving Loan Notes,
the Security Agreement, the Lock-Box Agreements, the Fee Letter and any other
instruments, certificates or documents delivered or contemplated to be delivered
hereunder or thereunder or in connection herewith or therewith, as the same may
be supplemented or amended from time to time hereafter in accordance herewith or
therewith, and "Advance Document" shall mean any of the Advance Documents.
"Affiliate" as to any Person shall mean any other Person (i) which directly
or indirectly controls, is controlled by, or is under common control with, such
Person, (ii) which beneficially owns or holds 10% or more of any class of the
voting stock (or, in the case of a Person that is not a corporation, 10% or more
of the equity interest) of such Person, or (iii) 10% or more of the voting stock
(or, in the case of a Person that is not a corporation, 10% or more of the
equity interest) of which is beneficially owned or held, directly or indirectly,
by such Person. Control, as used herein, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities,
partnership interests, membership, voting rights, governing boards, committees,
divisions or other bodies, including the power to elect a majority of the
directors or trustees of a corporation or trust, as the case may be.
"Agent" shall mean ING Capital in its capacity as contractual
representative for itself, the Servicing Agent and the Lenders pursuant to
Article 8 hereof and any successor Agent appointed pursuant to Article 8 hereof.
"Agent's Account" shall mean the Agent's bank account at The Chase
Manhattan Bank, ABA No. 021-000-021, Account No. 9301035763, for the account of
ING (U.S.) Capital Corporation, or such other account as may be designated by
the Agent from time to time by notice to the Borrower and the Servicing Agent.
2
<PAGE>
"Agreement" shall mean this Amended and Restated Credit Agreement, as the
same may be amended, restated, supplemented or otherwise modified from time to
time hereafter, including all schedules and exhibits hereto.
"Agreement of Limited Partnership" shall mean the Agreement of Limited
Partnership of J.G. Wentworth S.S.C. Limited Partnership among James Delaney,
Gary Veloric, Michael Goodman, ING Capital (as successor by assignment to
Internationale Nederlanden (U.S.) Capital Markets, Inc.), Stone International,
LLC, and the General Partner, as the same may be amended, restated, supplemented
or otherwise modified from time to time hereafter.
"A.M. Best" shall mean the A.M. Best Company or its successor.
"Approved Working Capital Budget" has the meaning assigned to such term in
Section 2.5.
"Approved Asset Securitization Transaction" shall mean any Asset
Securitization Transaction arranged, agented, sponsored or approved by ING
Capital.
"Asset Securitization Transaction" shall mean any financing arrangement
entered into by the Borrower or any of its Affiliates (other than under this
Agreement) pursuant to which the Borrower is required to sell or pledge any
interests in a material portion of the Collateral hereunder to secure or provide
for the payment of amounts owing by the Borrower or such Affiliate to the
provider of such credit or in respect of securities issued by the Borrower, such
Affiliate or any other third-party credit provider and backed by such
Collateral.
"Assignment Agreement" shall mean that certain Assignment and Acceptance,
dated as of February 11, 1997, between ING Baring (U.S.) Capital Markets, Inc.
(formerly known as Internationale Nederlanden (U.S.) Capital Markets, Inc.) and
ING (U.S.) Capital Corporation and acknowledged by the General Partner, James
Delaney, Gary Veloric, Michael Goodman, and Stone International, LLC.
"Authorized Officer" shall mean any of Gary Veloric, James Delaney, Al
Kelly and/or Stanley Moskowitz.
"Base Rate" shall mean, on any date, a fluctuating rate of interest per
annum equal to the higher of (i) the Chemical Bank Prime Rate and (ii) the
Citibank Prime Rate.
"Base Rate Spread" shall mean the rate of interest per annum referred to in
the definition of "Adjusted Base Rate" and set forth in the Fee Letter.
"Borrower's Account" shall mean the Borrower's bank account at PNC Bank,
National Association, ABA No. 8611078428, Account No. 031000053 for the account
of the Borrower or such other account as may be designated by the Borrower from
time to time by notice to the Servicing Agent, the Agent and the Lenders.
3
<PAGE>
"Borrowing Base" shall mean, on any date of determination, (a) the
aggregate for all Purchased Settlements which are Eligible Settlements of (i)
the Value of each Purchased Settlement which is an Eligible Settlement on such
date minus (ii) the Settlement Concentration Amount with respect to such
Purchased Settlement, minus (b) the aggregate of the Designated Annuity Funding
Company Concentration Amounts on such date, minus (c) the Post-Asset
Securitization Annuity Provider Concentration Amount on such date.
"Borrowing Base Certificate" shall mean the certificate in the form of
Exhibit F hereto delivered with each Notice of Borrowing and at the times
specified in Sections 3.1, 3.2 and 5.1(c).
"Borrowing/Conversion Date" shall mean, with respect to any Advance, the
date of the making of such Advance or the Continuation or Conversion of the
same, which date shall in any case be a Business Day.
"Breakage Costs" shall mean, with respect to (a) any voluntary or mandatory
prepayment of any Fixed-Rate Advance pursuant to Section 2.10 or Section 2.11 or
(b) a failure by the Borrower, for any reason, to borrow any proposed Fixed-Rate
Advance on the date specified in the applicable Notice of Borrowing (including
without limitation, as a result of the Borrower's failure to satisfy any
conditions precedent to such borrowing), the resulting loss, cost or expense
incurred by any Lender, the Agent or the Servicing Agent, including, but not
limited to, any loss, cost or expense incurred in liquidating or employing
deposits from third parties; provided, however, that any such Lender, the Agent
or the Servicing Agent shall use its best efforts to minimize such loss or
expense and shall have delivered to the Borrower a certificate as to the amount
of such loss or expense, which certificate shall be conclusive in the absence of
manifest error.
"Business Day" shall mean any day other than a Saturday or Sunday or other
day upon which banks are authorized or required to close in New York City;
provided, however, that when used with respect to the ING CoF, the term
"Business Day" shall be deemed to mean a day of the year on which dealings are
carried on in the London interbank market and banks are open in London and not
authorized or required to be closed in New York City.
"Capitalization Rate" shall mean, with respect to any Settlement, at the
time of purchase of such Settlement by the Borrower, the Purchase Yield for such
Settlement minus the Rate Differential.
"Chemical Bank Base Rate" shall mean the rate designated by Chemical Bank
from time to time as its prime rate in the United States, such rate to change as
when such designated rate changes. The Chemical Bank Base Rate is not
necessarily the lowest rate of interest charged by Chemical Bank in connection
with extensions of credit to its customers.
"Citibank Base Rate" shall mean the rate designated by Citibank, N.A. from
time to time as its prime rate in the United States, such rate to change as when
such designated rate
4
<PAGE>
changes. The Citibank Base Rate is not necessarily the lowest rate of interest
charged by Citibank, N.A. in connection with extensions of credit to its
customers.
"Claim Group" shall mean either the Base Rate Claim Group, the Matched
Claim Group or the Unmatched Claim Group.
"Closing Costs" shall mean, with respect to a Settlement, the estimate of
closing costs and expenses in respect thereof set forth in Schedule III hereto,
including, but not limited to, broker commissions, overnight mail charges,
courier fees, legal fees, expenses related to credit reports, and UCC filing
fees.
"Closing Date" shall mean February 11, 1997.
"Collateral" shall mean the property of the Borrower in which security
interests are granted to the Agent pursuant to the Security Agreement.
"Collection Account" shall mean a bank account described in Schedule I
hereto and/or any other bank account from time to time hereafter designated by
the Borrower as a Collection Account in accordance with the terms hereof and of
the Security Agreement and in respect of which a Lock-Box Agreement executed by
all of the parties thereto shall have been delivered to the Agent in accordance
with the terms hereof and thereof.
"Collection Period" shall mean the calendar month immediately preceding a
Monthly Payment Date.
"Collections" shall mean, with respect to any Purchased Settlement, all
cash collections and other cash proceeds thereof, including, but not limited to,
any interest earned on such amounts while on deposit in the Collection Account.
"Collections" shall be deemed to include any amounts payable to the Borrower
under any interest rate swap agreement, cap, collar, or floor agreement or other
interest rate management device entered into in connection with this Agreement.
"Commitment" shall mean, for each Lender, the obligation of such Lender to
fund Advances pursuant to Article 2 not exceeding the amount set forth on
Exhibit K to this Agreement opposite its name thereon, as such amount may be
modified from time to time pursuant to the terms of this Agreement. As of the
Closing Date, the aggregate amount of the Commitments of the Lenders shall be
equal to $105,000,000.
"Commitment Termination Date" shall mean the earliest to occur of (i) the
date of the reduction of the Commitments of all of the Lenders to zero or the
termination of all of the Lenders' Commitment, in either case, pursuant to
Section 2.8, (ii) the declaration or automatic occurrence of the Commitment
Termination Date or the Facility Termination Date pursuant to Section 6.2(a), or
(iii) August 25, 1998.
5
<PAGE>
"Continue," "Continuation," and "Continued" each refers to the continuation
of an Advance of one Type as an Advance of that same Type pursuant to Section
2.6(b).
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any Subsidiary, are treated
as a single employer under Section 414(b) or 414(c) of the Internal Revenue Code
of 1986, as amended from time to time.
"Convert", "Conversion" and "Converted" each refers to a conversion of an
Advance of one Type into an Advance of another Type pursuant to Section 2.6(b).
"Credit Report" shall mean a consumer credit report in respect of a Person
based upon such Person's social security number, from such firms or institutions
as the Agent may from time to time select and notify to the Borrower.
"Daily Settlement Option" shall have the meaning assigned to such term in
Section 2.6(d) hereof.
"Default Rate" shall mean, as of any date of determination, a rate of
interest per annum equal to (a) with respect to any outstanding Advance, the
Interest Rate otherwise then applicable to such Advance plus two percent (2.0%),
and (b) with respect to any other outstanding Obligations hereunder, the
Adjusted Base Rate then in effect plus two percent (2.0%).
"Delaware ULPA" shall mean the Delaware Uniform Limited Partnership Act (6
Del. C. (section) 17-101, et seq.), as the same may be amended or supplemented
from time to time, and any successor statute.
"Delinquency Ratio" shall mean with respect to Settlements, the ratio
(expressed as a percentage) computed as of the last day of each calendar month
by dividing (i) the aggregate of the Values of all Purchased Settlements that
were Delinquent Settlements on such date, by (ii) the aggregate of the Values on
such date of all Purchased Settlements.
"Delinquent Settlement" shall mean any Settlement as to which any payment
of a Periodic Payment thereunder remains unpaid sixty (60) days after the day
such Periodic Payment is due.
"Designated Annuity Funding Company" shall mean an Insurer issuing an
annuity contract related to a Purchased Settlement described under the caption
"Background" in the Purchase Agreement.
"Designated Annuity Funding Company Concentration Amount" shall mean, for
any Designated Annuity Funding Company, the excess, if any, of the Values of all
of the Purchased Settlement that are Eligible Settlements related to such
Designated Annuity Funding Company over the Designated Annuity Funding Company
Concentration Limit for such Designated Annuity Funding Company.
6
<PAGE>
"Designated Annuity Funding Company Concentration Limit" shall mean, for
any Designated Annuity Funding Company, (a) in the case of a Designated Annuity
Funding Company listed on Schedule V hereto, the lesser of (x) $15,000,000 and
(y) twenty percent (20%) of the aggregate Value of all Purchased Settlements
which are Eligible Settlements, and (b) in the case of any other Designated
Annuity Funding Company, $5,000,000. The Agent (with the consent of the
Supermajority Lenders, which consent shall not unreasonably be withheld) is
hereby irrevocably authorized to amend Schedule V from time to time in its
commercially reasonable discretion; provided, however, that in the event that
the Agent elects to remove any Designated Annuity Funding Company listed
thereon, the Designated Annuity Funding Company Concentration Limit with respect
to such Designated Annuity Funding Company shall be equal to the lesser of (i)
$15,000,000 and (ii) the aggregate Values of all Purchased Settlements that are
Eligible Settlements related to such Designated Annuity Funding Company at such
time.
"Discretionary Non-Ratable Advance" has the meaning assigned to such term
in Section 2.6(c)(iii) (it being understood and agreed that the Servicing Agent
shall not make any Discretionary Non-Ratable Advance except in the event one or
more Lenders have notified the Servicing Agent of its intent to fund the
aggregate amount of any such requested Discretionary Non- Ratable Advance, such
determination to fund any requested Discretionary Non-Ratable Advance to be made
in the sole discretion of each such Lender).
"Discretionary Non-Ratable Advance Borrowing Base" shall mean at any time,
the aggregate Values of all Purchased Settlements purchased with the proceeds of
any Discretionary Non-Ratable Advance.
"Dollar", "Dollars", "U.S. Dollars" and the symbol "$" shall mean the
lawful currency of the United States of America.
"Duration" shall mean as of the date of determination for any Settlement,
an amount equal to (x) the sum of the products for each future payment of such
Settlement of (i) the present value of such payment discounted at the applicable
Capitalization Rate to such date of determination, multiplied by (ii) the number
of years (or portions thereof calculated on a basis of a 360 day year) preceding
such payment, divided by (y) the aggregate present value of all payments
scheduled under such Settlement discounted by the applicable Capitalization
Rates to such date of determination.
"Eligible Settlement" shall mean a Settlement:
(i) which is not a Delinquent Settlement;
(ii) the Purchase Price of which does not exceed its Value at the time
of purchase;
(iii) which is based on an actual and bona fide personal injury or
physical sickness claim;
7
<PAGE>
(iv) which is denominated and payable only in U.S. Dollars;
(v) which is a "general intangible" within the meaning of the UCC of
the state in which the Seller has its principal place of business, or is a
right to payment under a policy of insurance or proceeds thereof, and is
not evidenced by any instrument or chattel paper;
(vi) which is payable by an Obligor, whether or not funded with a
Qualified Annuity and (A) if funded with a Qualified Annuity, the
Designated Annuity Funding Company, or (B) if not funded with a Qualified
Annuity, the Obligor, shall not, in either case, be the subject of any
Insolvency Event;
(vii) in the event the Insurer or other Person obligated to make
Periodic Payments thereunder has purchased an annuity contract to fund the
payment obligations of such Insurer or other Person, as the case may be,
such annuity contract was issued by a Designated Annuity Funding Company;
(viii) which is not subject to court approval, does not arise from a
court judgment and is not subject to appeal;
(ix) in the event the Seller was married at the time the Settlement
Agreement was executed, the Purchased Settlement, the Purchase Agreement
and any related documents are signed by such Seller's spouse;
(x) with respect to which there is no payor that is primarily liable
on such Purchased Settlement other than the Obligors identified as such by
the Seller;
(xi) which is not the subject of any action, suit, investigation,
proceeding or dispute (pending or threatened), rescission, recoupment,
set-off, counterclaim, defense, abatement, suspension, deferment,
deductible, reduction or termination by any Obligor, any Settlement
Counterparty, the Seller, or any Designated Annuity Funding Company related
to such Settlement or any other person;
(xii) which is not governed by the law of a state which restricts per
se the assignability of proceeds of settlements or insurance policies
obtained in connection with settlements;
(xiii) which neither the Borrower nor the Servicer has compromised,
adjusted or modified (including by extension of time of payment or the
granting of any discounts, allowances or credits, other than in the
ordinary course of Borrower's business consistent with past practices or as
otherwise approved by the Agent and the Supermajority Lenders in writing in
each of the foregoing's respective commercially reasonable discretion);
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(xiv) neither the terms of which or the assignment of which
contravenes in any material respect any laws, rules or regulations
applicable thereto and as to which no party thereto is in violation of any
such law, rule or regulation in any material respect;
(xv) which complies with such other criteria and requirements as the
Agent may from time to time in its commercially reasonable credit judgment
specify (with the prior consent of the Supermajority Lenders) to the
Borrower following thirty (30) days' notice, which other criteria and
requirements shall be based on the existence or occurrence of any factors
to be specified by the Agent (with the prior consent of the Supermajority
Lenders), in such notice, which, in the commercially reasonably credit
judgment of the Agent materially impair the composition, quality or the
prospects of collection of such Settlement;
(xvi) as to which at the time of acquisition by the Borrower the Agent
has not notified the Borrower that the Agent has determined, in its sole
commercially reasonable discretion, that such Settlement is unacceptable
for purchase by the Borrower;
(xvii) with respect to which, all of the conditions precedent set
forth in the Purchase Agreement have been satisfied;
(xviii) with respect to which, all of the Eligible Settlement Purchase
Procedures have been completed;
(xix) any Obligor of which, or, if funded by a Qualified Annuity, the
Designated Annuity Funding Company, at the time of the purchase of such
Settlement by the Borrower, is rated at least "Baa3" by Moody's, "BBB-" by
S&P or "A-" by A.M. Best, or the Borrower's purchase of which has been
pre-approved by the Agent, and the Supermajority Lenders on written notice
from the Borrower given by telephone, confirmed in writing (whether by
telecopy, telex or otherwise) in substantially the form of a Notice of
Purchase;
(xx) as to which (a) the Borrower has obtained a good and indefeasible
ownership interest in the rights of the Seller to receive Periodic Payments
with respect thereto, subject to no other Liens (other than in favor of the
Agent or the Lenders pursuant hereto and the Security Agreement) and (b)
the Agent has obtained a first priority perfected security interest in the
Borrower's rights therein;
(xxi) with respect to which all documents required to be contained in
the related Settlement Package have been received by the Servicer (such
receipt to be confirmed by the Servicer by notice thereof to the Agent), in
satisfactory form and in compliance with the requirements of this
Agreement;
(xxii) in the event such Settlement is a Non-Guaranteed Settlement,
the Borrower shall have complied with the requirements of Section 4.2(o);
provided, however, that with respect to any Non-Guaranteed Settlement that
does not comply with the
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requirement of Section 4.2(o)(ii), the non-guaranteed Periodic Payments
portion of such Non-Guaranteed Settlement shall be deemed ineligible
pursuant to this clause (xxii); and
(xxiii) with respect to which Collections have been directed to (x) a
Lock-Box or Lock-Box Account in respect of which a Lock-Box Agreement shall
have been obtained or (y) the Collection Account, in each case, pursuant to
the terms hereof and of the Security Agreement.
"Eligible Settlement Purchase Procedures" shall mean the procedures set
forth in Exhibit E hereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended or supplemented from time to time, and any successor
statute, and the rules and regulations thereunder, as from time to time in
effect.
"ERISA Affiliate" shall mean any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Borrower, (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Borrower, or (iii)
member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as the Borrower, any corporation described
in clause (i) above or any partnership, trade or business described in clause
(ii) above.
"Event of Default" shall mean any of the Events of Default described in
Section 6.1.
"Existing Credit Agreement" shall have the meaning assigned to such term in
the Recitals to this Agreement.
"Facility Termination Date" shall mean the earlier to occur of (i) the
declaration or automatic occurrence of the Facility Termination Date pursuant to
Section 6.2(a) and (ii) the Projected Collection Date.
"Fee Letter" shall mean that certain amended and restated letter agreement,
dated as of February 11, 1997, between the Borrower and the Agent, as the same
may be amended, restated, supplemented or otherwise modified from time to time
hereafter.
"Fixed Rate" shall mean, for any Fixed-Rate Advance, with respect to the
related Fixed-Rate Interest Period, a fixed rate of interest per annum equal to
the ING CoF for such period, plus the Fixed-Rate Spread. The Fixed Rate for any
Fixed-Rate Interest Period for a Fixed-Rate Advance shall be determined by the
Agent two (2) Business Days prior to the first day of such period.
"Fixed-Rate Advance" shall mean an Advance which bears interest as provided
in 2.12(a)(ii).
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"Fixed-Rate Interest Period" shall mean, with respect to any Settlement
Advance, the period commencing on the date on which such Advance is made or is
Converted or Continued as a Fixed-Rate Advance and ending on such date as shall
be selected by the Borrower and agreeable to the Agent, in each case, subject to
the following provisions:
(i) If the Interest Rate at which such Advance is to accrue interest
is determined by reference to the LIBOR, such Fixed-Rate Interest Period
shall be any number of months not exceeding 12;
(ii) If a Fixed-Rate Interest Period would otherwise expire on a day
other than a Business Day, the last day of such Fixed-Rate Interest Period
shall be extended to occur on the immediately succeeding Business Day;
provided, however, that if the next succeeding Business Day occurs in the
following calendar month, then the last day of such Fixed-Rate Interest
Period shall be deemed to occur on the immediately preceding Business Day;
(iii) If the Interest Rate at which such Advance is to accrue interest
is determined by reference to LIBOR and such Fixed-Rate Interest Period
commences on the last Business Day in a calendar month or on a day for
which there is no numerically corresponding day in the calendar month in
which such Fixed-Rate Interest Period is to expire, the last day of such
Fixed-Rate Interest Period shall be deemed to occur on the last Business
Day of the calendar month in which such Fixed-Rate Interest Period is to
expire; and
(iv) No Fixed-Rate Interest Period may be scheduled to expire later
than the Projected Collection Date.
"Fixed-Rate Spread" shall mean the rate of interest per annum which is
referred to in the definition of "Fixed Rate" as set forth in the Fee Letter.
"Floating-Rate Advance" shall mean an Advance which bears interest as
provided in Section 2.12(a)(i).
"GAAP" shall mean generally accepted accounting principles as are in effect
from time to time and applied on a consistent basis (except for changes in
application in which the Borrower's independent certified public accountants and
the Agent concur) both as to classification of items and amounts.
"General Partner" shall mean the Person or Persons then acting as the
general partner or general partners of the Borrower. As of the Closing Date, the
"General Partner" is J.G. Wentworth Structured Settlement Funding Corporation.
"Governmental Authority" shall mean any national, federal, state, local or
other government or political subdivision or any agency, authority, bureau,
central bank, commission,
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<PAGE>
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Indebtedness" shall mean as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money; (ii)
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments; (iii) amounts raised under or liabilities in respect of any
note purchase or acceptance credit facility; (iv) reimbursement obligations
under any letter of credit, currency swap agreement, interest rate swap, cap,
collar or floor agreement or other interest rate management device (other than
in connection with this Agreement); (v) obligations of such Person to pay the
deferred purchase price of property or services; (vi) obligations of such Person
as lessee under leases which have been or should be in accordance with GAAP
recorded as capital leases; (vii) any other transaction (including without
limitation forward sale or purchase agreements, capitalized leases and
conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements, and whether structured as a borrowing, sale and leaseback or a
sale of assets for accounting purposes; (viii) any guaranty or endorsement of,
or responsibility for, any Indebtedness of the types described in this
definition; (ix) liabilities secured by any Lien on property owned or acquired,
whether or not such a liability shall have been assumed; or (x) unvested pension
obligations.
"ING Capital" shall mean ING (U.S.) Capital Corporation, and its successors
and assigns.
"ING CoF" shall mean, with respect to a Fixed-Rate Advance, (a) the
Fixed-Rate Interest Period of which is greater than one year, the applicable
Swap Rate, and (b) in all other cases, LIBOR, as applicable.
"Insolvency Event" shall mean, with respect to any Person, (i) such Person
generally shall not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against such Person seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law related to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property; or (ii)
such Person shall take any action to authorize any of the actions set forth in
clause (i) herein.
"Insurer" shall mean, with respect to any Settlement, any insurance company
or other Person which is qualified to underwrite insurance and is under an
obligation to make Periodic Payments with respect to such Settlement and any
assignee of such obligations pursuant to a Qualified Assignment.
"Interest Rate" shall mean, unless the context otherwise requires, the
Adjusted Base Rate or a Fixed Rate.
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"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
the same may be amended or supplemented from time to time, or any successor
statute, and the rules and regulations thereunder, as the same are from time to
time in effect.
"Issuing Vehicle" has the meaning assigned to such term in Section
5.2(a)(4).
"Issuing Vehicle Securities" has the meaning assigned to such term in
Section 5.2(a)(4).
"Law" shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Governmental Authority.
"Lenders" shall mean the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"LIBOR" shall mean, with respect to a Fixed-Rate Advance with a Fixed-Rate
Interest Period no greater than one year, the rate of interest per annum
determined by the Derivatives and Treasury Department of the Agent's New York
office and communicated to the Servicing Agent to be equal to the rate for
deposits in Dollars in a principal amount approximating the principal amount of
such Advance for a period approximating the related Fixed-Rate Interest Period
as quoted on the Reuters Screen LIBO Page as of 11:00 A.M. (London time) and
adjusted to reflect subsequent changes in prevailing interest rates; provided,
if the related Fixed-Rate Interest Period is in excess of three months, such
rate shall be adjusted by the Agent to account for the quarterly payment of
interest on the unpaid principal amount of the Advance by the Borrower as
required by Section 2.12(b).
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including, but not
limited to, any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and any filed financing statement or other notice of any of the
foregoing (whether or not a lien or other encumbrance is created or exists at
the time of the filing).
"Life Insurance Carrier" shall mean any insurance carrier providing the
required life insurance policy pursuant to the requirements of Section 4.2(o)
hereof.
"List of Closing Documents" shall mean a list of agreements, documents, and
instruments related to the initial Advance under this Agreement which has been
agreed upon by the Borrower and Lender.
"Lock-Box" shall mean a Lock-Box described in Schedule I hereto and/or any
other lock-box from time to time hereafter designated by the Borrower as a
Lock-Box in accordance with the terms hereof and of the Security Agreement and
in respect of which a Lock-Box Agreement
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<PAGE>
executed by all of the parties thereto shall have been delivered to the Agent in
accordance with the terms hereof and thereof.
"Lock-Box Agreement" shall mean an agreement substantially in the form of
Exhibit G hereto by and among the Borrower, the Agent, and a depositary
institution acceptable to the Agent.
"Lock-Box Bank" shall mean the bank(s) described in Schedule I hereto at
which any Lock-Box or the Collection Account is maintained or any other bank
from time to time hereafter designated by the Borrower as a Lock-Box Bank in
accordance with the terms hereof and of the Security Agreement and which has
executed and delivered a Lock-Box Agreement to the Agent with respect to all
such Lock-Boxes and/or the Collection Account maintained with it as required
pursuant hereto and/or to the Security Agreement.
"Match Funded" shall mean, with respect to any Fixed-Rate Advance, that the
last day of the Fixed Rate Interest Period to which such Advance is allocated
shall be scheduled to occur no more than two weeks prior to the date the final
Periodic Payment in respect of the Purchased Settlement relating to such Advance
is scheduled to be made.
"Matched Claim Group" shall mean, at any time, those Purchased Settlements
with respect to which the cash flows have been allocated to Fixed-Rate Interest
Periods ending within five (5) days of the final scheduled Periodic Payment of
such Purchased Settlements.
"Material Adverse Change" shall mean any set of circumstances or events
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of, or the Borrower's
ability to perform its obligations under, this Agreement or any other Advance
Document, (b) is or could reasonably be expected to be material and adverse to
the businesses, properties, assets, financial condition, results of operations
or prospects of the Borrower, (c) impairs materially or could reasonably be
expected to impair materially the ability of the Borrower to duly and punctually
pay or perform its Obligations hereunder and under the other Advance Documents,
(d) impairs materially or could reasonably be expected to impair materially the
ability of the Agent, to the extent permitted, to enforce its legal remedies
pursuant to this Agreement or any other Advance Document or (e) impairs or could
reasonably be expected to impair materially the collectibility of any
Settlement.
"Material Adverse Effect" shall mean any circumstance or event that could
result in a Material Adverse Change.
"Monthly Payment Date" shall mean the tenth (10th) day of each month, or if
such day is not a Business Day, the next succeeding Business Day.
"Monthly Payment Period" shall mean any period commencing on a Monthly
Payment Date and ending on the day immediately preceding the following Monthly
Payment Date.
"Monthly Report" shall have the meaning assigned such term in Section
5.1(c)(i).
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"Moody's" shall mean Moody's Investors Service, Inc. or its successor.
"Multiemployer Plan" shall mean a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"Net Pool Weighted Average Yield" shall mean as of the date of
determination, with respect to Settlements which are Eligible Settlements, a
rate of interest per annum equal to the weighted average on such date of the
Capitalization Rates based on the Values of such Settlements minus one-tenth of
one percent (0.10%).
"Non-Guaranteed Settlement" shall mean any Settlement in respect of which
any portion of the Periodic Payments purchased under any Purchase Agreement are
scheduled to be made after any guaranteed payment period pursuant to the
applicable Settlement Agreement.
"Notice of Borrowing" has the meaning assigned to such term in Section
2.6(a).
"Notice of Continuation/Conversion" has the meaning assigned to such term
in Section 2.6(b).
"Notice of Direction of Payment" shall mean a notice of direction of
payment executed by the Seller with respect to a Settlement in substantially the
form of Exhibit B hereto, pursuant to which the Seller notifies its related
Obligors, or, if funded with a Qualified Annuity, the related Designated Annuity
Funding Company, as applicable, by certified mail or reputable overnight courier
of the redirection of payments to be made in accordance with the Settlement.
"Notice of Purchase" shall mean a notice substantially in the form of
Exhibit A hereto.
"Obligations" shall mean and include all loans, advances, debts,
liabilities, obligations, covenants and duties owing to the Agent, the Servicing
Agent, or any Lender by the Borrower of any kind or nature, present or future,
arising under this Agreement, the Existing Credit Agreement, the Revolving Loan
Notes, the Security Agreement, the Fee Letter, any of the other Advance
Documents, or other instruments, documents or agreements executed and/or
delivered in connection with any of the foregoing and to which the Borrower is a
party, whether or not for the payment of money, whether arising by reason of an
extension of credit, the issuance of a letter of credit, a loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising. The term includes, without limitation, the
principal amount of all Advances, together with interest, charges, expenses,
fees, attorneys' and paralegals' fees and expenses, any other sums chargeable to
the Borrower under this Agreement or any other Advance Document pursuant to
which it arose.
"Obligor" shall mean any party obligated to make Periodic Payments under
any Settlement Agreement (including any Qualified Assignment or any other
assignment thereof),
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including, without limitation, any Settlement Counterparty, any Qualified
Assignee, and any Life Insurance Carrier obligated in respect of a
Non-Guaranteed Settlement.
"Original Lender" shall have the meaning assigned to such term in the
Recitals hereto.
"Overhead Expenses" has the meaning assigned to such term in Section 2.5.
"Partner" has the meaning assigned to such term in the Delaware ULPA.
"Payment Contracts" has the meaning assigned to such term in Section
5.2(a)(1).
"Payment Contracts Buyer" has the meaning assigned to such term in Section
5.2(a)(3).
"Payment Contracts Seller" has the meaning assigned to such term in Section
5.2(a)(2).
"Periodic Payments" shall mean, with respect to a Settlement, all payments
from time to time due to be paid by an Obligor or a Designated Annuity Funding
Company on behalf of each Obligor pursuant to the terms of such Settlement.
"Permitted Indebtedness" shall mean:
(a) Indebtedness under the Advance Documents; and
(b) Other Indebtedness incurred in the ordinary course of the
Borrower's business but not to exceed $1,000,000 at any time outstanding
and otherwise permitted to be incurred pursuant to Section 5.2.
"Permitted Liens" shall mean:
(a) Liens for taxes, assessments or similar charges, incurred in the
ordinary course of business and which are not yet due and payable;
(b) pledges or deposits made in the ordinary course of business and to
the extent required by Law to secure payment of worker's compensation, or
to participate in any fund in connection with worker's compensation,
unemployment insurance, old-age pensions or other social security programs;
(c) Liens in favor of the Agent; and
(d) purchase money security interests on the equipment of the Borrower
securing no more than 100% of the purchase price of the equipment purchased
with the proceeds of
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any purchase money Indebtedness, to the extent such Indebtedness is
Permitted Indebtedness hereunder.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint-stock company, trust, unincorporated organization or
association, joint venture, government or political subdivision or agency
thereof, or any other entity.
"Plan" shall mean an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Internal Revenue Code as to which the Borrower or any Subsidiary may have
any liability.
"Pool Weighted Average Duration" shall mean as of the date of
determination, an amount equal to the sum of the following amounts calculated
for each Eligible Settlement as follows: for each Eligible Settlement, the
Duration of such Settlement, multiplied by (x) the sum of all future payments
scheduled under such Settlement, divided by (y) the sum of all future payments
scheduled under each Eligible Settlement.
"Post-Asset Securitization Annuity Provider Concentration Amount" shall
mean, at any time, the amount by which (i) the aggregate Values of all Eligible
Settlements the Designated Annuity Funding Company related to which is neither a
Tier One Designated Annuity Funding Company nor a Tier Two Designated Annuity
Funding Company exceeds (ii) the Post-Asset Securitization Annuity Provider
Concentration Limit, in each case, at such time.
"Post-Asset Securitization Annuity Provider Concentration Limit" shall
mean, at any time from and after the date upon which the Borrower shall enter
into any Asset Securitization Transaction, an amount equal to the lesser of (i)
ten percent (10%) of the aggregate Value of all Purchased Settlements that are
Eligible Settlements at such time and (ii) the Tangible Net Worth of the
Borrower at such time.
"Potential Default" shall mean any event or condition which with notice,
passage of time or both would constitute an Event of Default.
"Present Value Differential" shall mean as of the date of determination, in
respect of each Purchased Settlement that is an Eligible Settlement, an amount
equal to (a) the Value of such Settlement on such date minus (b) the Purchase
Price of such Settlement.
"Projected Collection Date" shall mean as of any date of determination, the
scheduled date of the last scheduled Periodic Payment in which the Borrower has
acquired an interest in respect of all Purchased Settlements.
"Purchase Agreement" shall mean, with respect to a Settlement, each
agreement in the form of Exhibit J hereto entered into between a Seller and the
Borrower pursuant to which the Seller sells, assigns and conveys all of its
right, title and interest in the Settlement to which it is a party, and all
amounts due with respect thereto, to the Borrower.
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"Purchased Settlement" shall mean any Settlement (together with the Notice
of Direction of Payment executed by the Seller with respect thereto) that has
been or will be acquired by the Borrower with the proceeds of an Advance
pursuant to the procedure described in Section 2.6.
"Purchase Price" shall mean, with respect to any Purchased Settlement, the
aggregate amount paid by the Borrower for the Settlement to the Seller from whom
such Settlement was purchased plus the amount of the Closing Costs.
"Purchase Yield" shall mean, with respect to any Purchased Settlement, as
calculated as of the date of purchase of such Settlement on a per annum basis,
the discount rate at which the Borrower has determined the present value of all
Periodic Payments under such Settlement to be paid (until the final date
specified in the related Purchase Agreement) equals the Purchase Price for such
Settlement.
"Qualified Annuity" shall mean an annuity contract which qualifies as a
"qualified funding asset" under Section 130(d) of the Internal Revenue Code.
"Qualified Assignee" shall mean the Person to which the obligation to make
payments under a Settlement has been assigned pursuant to a Qualified
Assignment.
"Qualified Assignment" shall mean an assignment of the obligation to make
Periodic Payments pursuant to a Settlement which satisfies Section 130(c) of the
Internal Revenue Code.
"Ratable Share" shall mean, for any Lender, (a) with respect to any Advance
(other than a Discretionary Non-Ratable Advance), a fraction (x) the numerator
of which shall be equal to such Lender's Commitment minus the aggregate amount
of such Lender's Advances with respect to Discretionary Non-Ratable Advances,
and (y) the denominator of which shall be equal to the aggregate amount of all
of the Lenders' Commitments minus the aggregate amount of all Discretionary Non-
Ratable Advances; (b) with respect to the making of any Discretionary
Non-Ratable Advance, the proportion such Lender's Commitment bears to the
aggregate of the Commitments of those Lenders electing to make such
Discretionary Non-Ratable Advance, and (c) with respect to payments in respect
of any Discretionary Non-Ratable Advance, a fraction (x) the numerator of which
shall be equal to the amount of such Lender's funded portion of such
Discretionary Non-Ratable Advance, and (y) the denominator of which shall be
equal to the aggregate amount of such Discretionary Non-Ratable Advance.
"Rate Differential" shall be equal to 4.0%.
"Related Security" has the meaning assigned to such term in Section
5.2(a)(2).
"Reportable Event" shall mean a reportable event as defined in Section 4043
of ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the Pension Benefit Guaranty
Corporation by regulation or by public notice
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waived the requirement of Section 4043(a) of ERISA that it be notified within
thirty (30) days of the occurrence of such event, provided that a failure to
meet the minimum funding standard of Section 412 of the Internal Revenue Code
and of Section 302 of ERISA shall be a Reportable Event regardless of the
issuance of any such waivers in accordance with either Section 4043(a) of ERISA
or Section 412(d) of the Internal Revenue Code.
"Required Lenders" shall mean those Lenders whose Commitments aggregate at
least 51% of the Commitments of all of the Lenders.
"Revolving Loan Note" shall mean each of the Amended and Restated Revolving
Loan Notes of the Borrower in the form of Exhibit H hereto, payable to the order
of each Lender in the aggregate face amount of such Lender's Commitment
evidencing the aggregate indebtedness of the Borrower to such Lender resulting
from Advances made by such Lender.
"S&P" shall mean Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc. (or its predecessor or successors in interest).
"Scheduled Maturity Date" shall mean with respect to any Settlement, the
original date scheduled for the payment by the Obligor thereof of the last
scheduled Periodic Payment with respect thereto.
"Security Agreement" shall mean the Amended and Restated Security Agreement
in the form of Exhibit I hereto, of even date herewith executed and delivered by
the Borrower in favor of the Agent, for the benefit of itself, the Servicing
Agent and the Lenders.
"Seller" shall mean, with respect to any Settlement, a claimant under a
Settlement who agrees to sell his/her interest in such Settlement to the
Borrower pursuant to a Purchase Agreement.
"Seller's Questionnaire" shall mean, with respect to any Settlement, the
questionnaire completed by the related Seller at the request of the Borrower.
"Servicer" shall mean Electronic Data Systems Corporation, a Texas
corporation, in its capacity as the provider of services under the Servicing
Agreement and/or any other Person or entity performing similar services for the
Borrower which has been approved by the Agent and the Servicing Agent in
accordance with the terms of this Agreement.
"Servicer Default" shall mean any breach by the Servicer of any of the
terms or provisions of the Servicing Agreement.
"Servicing Agent" shall mean PNC Bank, National Association in its capacity
as contractual representative as servicing agent for itself, the Agent and the
Lenders pursuant to Article 9 hereof and any successor Agent appointed pursuant
to Article 9 hereof.
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"Servicing Agent Account" shall mean the bank account at PNC Bank, National
Association, Account No. 8611078428, or such other account as may be designated
by the Servicing Agent from time to time by notice to the Borrower, the Agent
and the Lenders.
"Servicing Agent Advances" shall have the meaning assigned to such term in
Section 2.6(c)(ii)(A) hereof.
"Servicing Agent Fee" shall have the meaning set forth in Section 2.7(c).
"Servicing Agent Note" shall mean that certain revolving loan note of the
Borrower in the form of Exhibit L hereto payable to the order of the Servicing
Agent in the aggregate principal amount of all of the Lenders' Commitments
evidencing the aggregate indebtedness of the Borrower to the Servicing Agent
resulting from Servicing Agent Advances made by the Servicing Agent.
"Servicing Agreement" shall mean the Servicing Agreement between the
Borrower, the Servicer and the Agent (as successor to the Original Lender and
ING Capital) dated as of August 25, 1995, as the same has been amended pursuant
to that certain Acknowledgment of Assignment and Amendment No. 1 to the
Agreement for Settlements Servicing dated as of the date hereof and as the same
may be further amended, restated, supplemented and modified from time to time
hereafter.
"Servicing Fee" has the meaning assigned to such term in Section 2.7(b).
"Settlement" shall mean the right to Periodic Payments due or to become due
in connection with, and all other rights (but not obligations or liabilities)
under a Settlement Agreement, including, without limitation all rights to
receive such Periodic Payments from any assignee Insurer pursuant to a Qualified
Assignment and all rights to receive any payments under any Qualified Annuity
purchased by any Obligor (or its assignee) to fund its payment obligations under
such Settlement Agreement.
"Settlement Agreement" shall mean a settlement agreement entered into by a
Seller and a Settlement Counterparty evidencing, among other things, the
indebtedness of the Settlement Counterparty to such Seller and the right of the
Seller to receive future payments thereunder as compensation.
"Settlement Advance" has the meaning assigned to such term in Section
2.2(b).
"Settlement Amount" shall mean, with respect to any Settlement, the total
consideration agreed to be paid by the Settlement Counterparty to the Seller for
the settlement of the claim of the Seller; provided, however, that such amount
shall only include the amount of the consideration scheduled to be paid through
and including the final payment date specified in the related Purchase
Agreement.
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"Settlement Concentration Amount" shall mean, for any Purchased Settlement
that is an Eligible Settlement, the excess, if any, of the Value of such
Purchased Settlement over the Settlement Concentration Limit for such Purchased
Settlement.
"Settlement Concentration Limit" shall mean, for any Purchased Settlement
that is an Eligible Settlement (a) if the Designated Annuity Funding Company in
respect of such Purchased Settlement is a Tier One Designated Annuity Funding
Company, $350,000, (b) if the Designated Annuity Funding Company in respect of
such Purchased Settlement is a Tier Two Designated Annuity Funding Company,
$230,000, or (c) if the Designated Annuity Funding Company in respect of such
Purchased Settlement is neither a Tier One Designated Annuity Funding Company or
a Tier Two Designated Annuity Funding Company, the lesser of (i) $120,000 or
(ii) the maximum amount available under the insurance guaranty funds maintained
by the state where such Designated Annuity Funding Company is located if such
Designated Annuity Funding Company is an Insurer.
"Settlement Counterparty" shall mean the Person that entered into a
Settlement with a Seller and is obligated to make payments to the Seller
thereunder.
"Settlement Differential Advance" has the meaning assigned to such term in
Section 2.2(b).
"Settlement Package" shall mean, as it relates to any Purchased Settlement,
fully executed copies of all documentation related to the purchase of any and
all Settlements by the Borrower, and shall include, without limitation, (i) the
original Purchase Agreement related to a Settlement and all documents required
to be delivered to the Borrower pursuant thereto, (ii) the original Settlement,
(iii) the original Notice of Direction of Payment, and (iv) any notifications or
acknowledgments received by the Borrower related to a Purchased Settlement,
including acknowledgments of releases and payment obligations.
"Single Employer Plan" shall mean a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group, but excluding any Multiemployer Plan.
"Subsidiary" shall mean, with respect to any Person at any time, (a) any
corporation or trust of which 50% or more (by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's subsidiaries, or any partnership of which such Person is a
general partner or of which 50% or more of the partnership interests is at the
time directly or indirectly owned by such Person or one or more of such Person's
subsidiaries, and (b) any corporation, trust, partnership or other entity which
is controlled or capable of being controlled by such Person or one or more of
such Person's subsidiaries.
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"Supermajority Lenders" shall mean those Lenders whose Commitments
aggregate at least 75% of the Commitments of all of the Lenders.
"Swap Rate" shall mean, with respect to a Fixed-Rate Advance with a
Fixed-Rate Interest Period originally greater than one year, the rate of
interest per annum determined by the Agent to be applicable to the related
Fixed-Rate Interest Period by interpolation (on a straight-line basis) between
the average zero-coupon bond swap rates offered to major financial institutions
(as quoted by the Derivatives and Treasury Department of the Agent's New York
office or, in the event that the Borrower selects any other provider of
derivatives that issues similar securities and has a long-term unsecured senior
debt rating of at least "A" from S&P, such provider of derivatives, which rate
quote is then communicated to the Servicing Agent) for notional amounts of not
less than $500,000 for the two periods most closely approximating such period;
provided, such rate shall be adjusted by the Agent to account for the quarterly
payment of interest on the unpaid principal amount of the Advance by the
Borrower as required by Section 2.12(b).
"Swap Rate Advance" shall mean any Settlement Advance that is a Fixed-Rate
Advance and for which the applicable Fixed Rate is based on a Swap Rate.
"Tangible Net Worth" shall mean at any time, the greater of (i) tangible
net worth of the Borrower calculated in accordance with generally accepted
accounting principles applied on a consistent basis and (ii) the discounted
present value of the Borrower's tangible assets calculated on the basis of a
discount rate equal to LIBOR plus 7.5% minus the sum of total liabilities of the
Borrower.
"Tier One Designated Annuity Funding Company" shall mean a Designated
Annuity Funding Company which is rated at least "A3" or better by Moody's, or at
least "A-" or better by S&P, or at least "A+" or better by A.M. Best.
"Tier Two Designated Annuity Funding Company" shall mean an Designated
Annuity Funding Company (other than a Tier One Designated Annuity Funding
Company) which is rated at least "Baa3" or better by Moody's, or at least "BBB-"
or better by S&P, or at least "A-" or better by A.M. Best.
"UCC" shall mean the Uniform Commercial Code (or any successor statute) as
in effect from time to time in the State of New York or any other jurisdiction
the laws of which are required by Section 9-103 thereof to be applied in
connection with the issue of the perfection of security interests.
"Unfunded Liabilities" of a Plan shall mean the amount (if any) by which
the present value of all vested pension benefit obligations under such Plan
exceeds the fair market value of all Plan assets allocable to such benefits, all
determined in accordance with GAAP, including, without limitation, Financial
Accounting Standards Board Statement No. 87, "Employers' Accounting for
Pensions".
"United States" shall mean the United States of America.
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"Unmatched Claim Group" shall mean, at any time, the Purchased Settlements
which are not included in the Matched Claim Group.
"Unused Commitment Fee" has the meaning assigned to such term in Section
2.7(a).
"Value" shall mean, on any date of determination, with respect to any
Settlement, the present value of the remaining Periodic Payments in respect of
the Settlement Amount thereof, discounted at the applicable Capitalization Rate.
"Weekly Settlement Date" shall mean, with respect to any week ending prior
to the election of the Daily Settlement Option, Wednesday of the immediately
succeeding week, or, if such Wednesday is not a Business Day, the next Business
Day thereafter.
"Weighted Average Forward Rate" shall mean for any day, as reported in the
most recent Monthly Report (or, until the first such report shall have been
delivered, on the Closing Date) and confirmed by the Agent, a per annum rate
equal to the forward Fixed Rate which (as of the date of calculation,
interpolated on a straight line basis for the applicable number of days thereof)
would be applicable to a Fixed-Rate Interest Period having a duration equal to
the Weighted Average Maturity of the Purchased Settlements allocated to the
Unmatched Claim Group (as such Weighted Average Maturity is calculated as of the
last day of the month covered by such Monthly Report). The Weighted Average
Forward Rate as set forth in any Monthly Report shall remain in effect until the
delivery of a succeeding Monthly Report.
"Weighted Average Maturity" shall mean on any date as reported in the most
recent Monthly Report with respect to any specified group of Purchased
Settlements, the weighted average of the maturities (determined by reference to
the Scheduled Maturity Dates) of all of such outstanding Purchased Settlements
in such group as of the last day of the month covered by such Monthly Report.
SECTION 1.2 Construction. Unless the context of this Agreement otherwise
clearly requires, references to the plural shall include the singular,
references to the singular shall include the plural, references to the part
shall include the whole and references to any masculine, feminine or neuter
pronoun shall include all other genders. References in this Agreement to
"determination" of or by the Agent or the Servicing Agent shall be deemed to
include good faith estimates by the Agent or the Servicing Agent, as applicable,
(in the case of quantitative determinations) and good faith beliefs by the Agent
or the Servicing Agent, as applicable, (in the case of qualitative
determinations). The words "hereof," "herein," "hereunder" and similar terms in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Any references herein to Articles, Sections,
Exhibits or Schedules are references to Articles, Sections, Exhibits and
Schedules of or to this Agreement unless otherwise expressly specified. All
other undefined terms used herein shall, unless the context otherwise requires,
have the meanings provided for by the UCC to the extent the same are used or
defined therein. The Section and other headings contained in this Agreement and
the Table of Contents preceding this
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Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
SECTION 1.3 Accounting Principles. Except as otherwise provided in this
Agreement, all computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to this Agreement
shall be made and prepared in accordance with GAAP (including principles of
consolidation where appropriate), and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP.
SECTION 1.4 Reference to and Effect of the Existing Credit Agreement. The
Borrower, the Agent, the Servicing Agent and each of the Lenders agree that,
upon the execution and delivery of this Agreement by each of the parties hereto,
the terms and provisions of the Existing Credit Agreement shall be and hereby
are amended, superseded and restated in their entirety by the terms and
provisions of this Agreement. This Agreement is not intended to and does not
constitute a novation of the indebtedness under the Existing Credit Agreement.
All outstanding Advances made under the Existing Credit Agreement which are
outstanding on the Closing Date and which are set forth on Schedule IV hereto
shall continue as Advances under and shall be governed by the terms of this
Agreement. Upon and after the Closing Date, all interest, fees, charges and
other amounts accruing and payable by the Borrower to Original Lender under the
terms of the Existing Credit Agreement shall be payable by the Borrower in
accordance with the terms of this Agreement; provided, however, that the amount
of all such interest, fees, charges and other amounts accruing prior to the
Closing Date shall be payable in the full amount thereof (and shall not be
reduced or increased by operation of the incorporation of the Existing Credit
Agreement hereby) at the times set forth herein for the payment of such amounts.
All Settlements acquired by the Borrower under the Existing Credit Agreement
which are owned by the Borrower on the Closing Date and which are set forth on
Schedule IV hereto shall continue to constitute Purchased Settlements under and
shall be governed by the terms of this Agreement.
ARTICLE 2. AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.1 The Advances. (a) Upon the terms and subject to the conditions
hereinafter set forth, each Lender, severally and not jointly with any other
Lender, agrees to make to the Borrower, from time to time during the period from
the date hereof to, but not including, the Commitment Termination Date, Advances
in an aggregate principal amount up to such Lender's Commitment (except for a
Lender in its capacity as the Servicing Agent with respect to any Servicing
Agent Advance, which advance may, in the absolute discretion of the Servicing
Agent, exceed such Commitment); provided, however, that the aggregate
outstanding principal balance of all Advances (including any outstanding
Servicing Agent Advances) shall at no time exceed the aggregate of the Lenders'
Commitments; provided, further, that the aggregate outstanding principal balance
of all Advances (other than Advances with respect to Discretionary Non-Ratable
Advances, but including any outstanding Servicing Agent Advances) shall at no
time exceed the lesser of (i) the aggregate of all of the Lenders' Commitments,
as such amount may be reduced pursuant to Section 2.8, minus the aggregate
amount of all outstanding Discretionary Non-Ratable Advances or (ii) the
Borrowing Base at such time. Within such limits of time and amount and
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subject to the other provisions of this Agreement, the Borrower may borrow,
repay without premium or penalty, except as provided in Sections 2.6, 2.10 and
2.11, and reborrow pursuant to this Section 2.1.
SECTION 2.2 The Settlement Advances and Settlement Differential Advances;
Use of Proceeds. (a) Each Settlement Advance shall be a Fixed-Rate Advance or a
Floating-Rate Advance, subject to Conversion as described in Section 2.6(e) and
subject to Section 2.9(c). No Settlement Advance shall exceed the sum of the
Purchase Prices of such Eligible Settlements as set forth in the applicable
Notice of Borrowing to be acquired with the proceeds of such Settlement Advance,
nor shall any Settlement Advance that is a Discretionary Non-Ratable Advance
exceed the sum of the Purchase Price of all Settlements as set forth in the
applicable Notice of Borrowing to be acquired with the proceeds of such
Discretionary Non-Ratable Advance. Proceeds of Settlement Advances (other than
Settlement Advances that are Discretionary Non-Ratable Advances) shall only be
used by the Borrower to purchase Eligible Settlements. Proceeds of Settlement
Advances that are Discretionary Non-Ratable Advances shall only be used by the
Borrower to purchase Settlements that do not meet the requirements of Section
4.2.
(b) The Agent, the Servicing Agent and each Lender agrees, subject to the
limitations set forth below and to the satisfaction of all other conditions to
the making of Advances under this Agreement, that on any Business Day, the
Borrower may request in writing, subject to the procedures set forth in Section
2.6, an advance (a "Settlement Differential Advance"; any other Advance made
pursuant to the terms of this Agreement being a "Settlement Advance") for the
payment of then due and payable Overhead Expenses, Obligations of the Borrower,
Servicing Fees, and certain expenses of the Borrower approved by the Agent. Each
Settlement Differential Advance shall be a Floating-Rate Advance. The amount of
each such Settlement Differential Advance may not exceed the aggregate of the
Present Value Differentials minus the aggregate principal amount of Settlement
Differential Advances then outstanding. The proceeds of Settlement Differential
Advances may only be used by the Borrower to pay (i) Obligations of the
Borrower, (ii) Servicing Fees and (iii) due and payable Overhead Expenses and
certain other expenses of the Borrower approved by the Agent in an aggregate
amount not to exceed during any month (when aggregated with all other such
amounts previously paid by the Borrower during such month) 125% of the Approved
Working Capital Budget for such month.
SECTION 2.3 [INTENTIONALLY OMITTED]
SECTION 2.4 [INTENTIONALLY OMITTED]
SECTION 2.5 Overhead Expenses. Not later than thirty (30) days prior to the
beginning of each six-month period following the initial six-month period after
the effectiveness of this Agreement, the Borrower will present to the Agent, for
its approval, an estimate of the monthly marketing, interest, overhead, and
other operating expenses ("Overhead Expenses") to be incurred by the Borrower in
connection with the purchase of Eligible Settlements by the Borrower during each
subsequent six-month period. Overhead expenses may include the Borrower's pro
rata share
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of the salaries of employees of Affiliates of the Borrower who are providing
services to the Borrower. The amount of each approved monthly estimate
(excluding interest) (an "Approved Working Capital Budget") is subject to
periodic adjustment at the commercially reasonable discretion of the Agent. This
amount includes a minimum monthly base salary of $12,500 (or such higher amount
as shall be based on the reports prepared by an executive compensation
consulting firm to be retained by the Borrower, subject to the commercially
reasonable approval of the Agent, and the Supermajority Lenders (it being
understood that Towers, Perrin or Haye Associates is acceptable) for each of
James Delaney, Gary Veloric, and Michael Goodman. Such salary amounts shall only
be paid on each Monthly Payment Date, and amounts in excess of $12,500 shall
only be paid if the Borrower shall have paid all other Overhead Expenses due and
payable in such month. When any of Messrs. Delaney, Veloric or Goodman shall
cease to be an officer of the Borrower's general partner, such person shall no
longer be entitled to any salary pursuant to this Section 2.5, with the
exception of any amounts already payable or otherwise accrued.
SECTION 2.6 Making the Advances. (a) Except as otherwise provided herein,
the Borrower may from time to time prior to the Commitment Termination Date
request the Lenders to make Advances to the Borrower by the delivery to the
Servicing Agent, the Agent and the Lenders, not later than 10:00 A.M. (New York
City time) (i) three (3) Business Days prior to the proposed borrowing date of a
Fixed-Rate Advance or Discretionary Non-Ratable Advance and (ii) on the proposed
borrowing date of a Floating-Rate Advance, in either case, of a duly completed
notice of borrowing (a "Notice of Borrowing") therefor, or a request by
telephone immediately confirmed in writing (including by any tele-transmission)
signed by an Authorized Officer in such notice, in substantially the form of
Exhibit C hereto. The Servicing Agent shall have no duty to verify the
authenticity of the signature appearing on any Notice of Borrowing and, with
respect to any telephonic request for an Advance, the Servicing Agent shall have
no duty to verify the identity of any individual representing himself as an
Authorized Officer. Any Notice of Borrowing received by the Servicing Agent
after the time specified in the immediately preceding sentence shall be deemed
to have been received by the Servicing Agent on the next Business Day, and the
date specified in any such Notice of Borrowing as the proposed Borrowing Date of
an Advance shall be deemed to be the Business Day immediately succeeding the
proposed Borrowing Date of such Advance specified in such Notice of Borrowing.
(b) Each Notice of Borrowing shall be (x) irrevocable, (y) shall specify
(i) the date and the aggregate amount of the proposed Advance which, in the case
of a Fixed-Rate Advance shall be in a minimum amount of $500,000, (ii) the Type
of Advance, (iii) the sum of the Purchase Price(s), the sum of the Settlement
Amount(s), and the individual Purchase Yields of the Eligible Settlement(s) to
be acquired therewith, (iv) the sum of the Purchase Price(s), the sum of the
Settlement Amount(s), and the individual Purchase Yields of any other Settlement
that does not meet the requirements of Section 4.2 and that the Borrower
proposes to be acquired therewith, (v) the aggregate amount and type of Overhead
Expenses and the aggregate amount of Servicing Fees to be paid with the proceeds
of any Settlement Differential Advance, and (vi) the date of such purchase or
payment of such fees or expenses, as applicable, and (z) shall be accompanied by
a fully completed Borrowing Base Certificate. In the case of any proposed
Advance which the related Notice of Borrowing specifies is to be a Fixed-Rate
Advance, the Borrower shall reimburse the Servicing Agent and each Lender on
demand for any Breakage Costs incurred by the Servicing
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Agent or such Lender as a result of such proposed Advance not being made on the
date specified in such Notice of Borrowing for any reason whatsoever.
(c) (i) Upon the receipt by the Servicing Agent of a Notice of Borrowing
from the Borrower, the Servicing Agent shall, in its absolute discretion (except
as provided below with respect to a requested Fixed-Rate Advance), elect (1) to
have the terms of Section 2.6(c)(iii) hereof apply to such requested Advance, or
(2) to the extent the Agent shall not have previously exercised its Daily
Settlement Option, to make a Servicing Agent Advance with respect to such
requested Advance under the terms of Section 2.6(c)(ii) hereof, except that no
Servicing Agent Advance shall be made (A) in respect of any requested Fixed-Rate
Advance or (B) in respect of any Discretionary Non-Ratable Advance, and the
terms of Section 2.6(c)(iii) hereof shall apply to such requested Fixed-Rate
Advance or Discretionary Non-Ratable Advance, as applicable.
(ii) (A) If the Servicing Agent shall have elected under Section
2.6(c)(i) hereof to make a Servicing Agent Advance with respect to a
requested Floating-Rate Advance, then, subject to the satisfaction of the
conditions precedent set forth in Sections 3.1 and 3.2 hereof, the
Servicing Agent shall fund such requested Advance (any such advance solely
by the Servicing Agent to the Borrower being hereinafter referred to as a
"Servicing Agent Advance" and all such outstanding advances to the Borrower
being hereinafter referred to collectively as "Servicing Agent Advances")
by transferring the amount requested in the Notice of Borrowing (subject to
the maximum amounts specified in Section 2.1(a) hereof), in U.S. Dollars
and immediately available funds, to the Borrower's Account prior to 2:00
P.M.( New York City time) on the date specified or deemed specified in such
Notice of Borrowing. Each Servicing Agent Advance is an Advance hereunder
and shall be evidenced by the Servicing Agent Note in favor of the
Servicing Agent and subject to all of the terms and conditions and entitled
to all of the benefits applicable to all Advances hereunder except that all
payments thereon shall be payable to the Servicing Agent solely for its own
account until such time as such Servicing Agent Advance is repaid in
accordance with Sections 2.6(c)(ii)(B)(1) or 2.6(c)(ii)(B)(2).
(B) (1) The Servicing Agent shall request settlement with respect to
the previous week's Servicing Agent Advances by notifying the Agent and the
Lenders by telecopy, telephone or other similar form of transmission no
later than 11:00 a.m. (New York City time) on the Weekly Settlement Date
applicable to such Servicing Agent Advances of the amount due from such
Lender. Each Lender (except the Lender which made the Servicing Agent
Advances with respect to which settlement is requested in its capacity as
Servicing Agent) shall make such Lender's Ratable Share (calculated on the
basis of all Lenders, including the Lender that made the Servicing Agent
Advance) of the outstanding principal amount of the previous week's
Servicing Agent Advances, minus any amounts received by the Servicing Agent
as payment or prepayment of the Advances prior to such Weekly Settlement
Date, to the Servicing Agent, in same day funds, to the Servicing Agent
Account not later than 2:00 p.m. (New York City time) on such Weekly
Settlement Date. Such amounts made available to the Servicing Agent shall
be applied against the amount of the applicable Servicing Agent Advances
and shall constitute the Advances of such Lenders making such payments.
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(2) If any Lender fails under Section 2.6(c)(ii)(B)(1) hereof to make
available to the Servicing Agent its Ratable Share of such applicable
Servicing Agent Advance on the applicable Weekly Settlement Date, such
defaulting Lender shall be liable to pay the Servicing Agent the
amount thereof immediately upon the Servicing Agent's demand therefor,
together with interest thereon from the date such amount is advanced
until paid in full at a rate equal to the Base Rate. Until such amount
is paid to the Servicing Agent by such Lender or by the Borrower (the
interest rate applicable thereto if paid by the Borrower being that
selected by the Borrower in the applicable Notice of Borrowing, and
not the Base Rate), such advance shall be deemed for all purposes to
be an Advance made by the Servicing Agent to the Borrower, and the
Servicing Agent shall for all purposes hereunder be deemed a "Lender"
and shall be entitled to all rights, remedies and benefits as such
hereunder and under the other Advance Documents. Upon the payment of
the principal and interest of any such Servicing Agent Advance by such
Lender to the Servicing Agent, such payment shall be treated (to the
extent of the principal amount thereof) as the payment of the
Servicing Agent Advance under Section 2.6(c)(ii)(B)(1) hereof. No such
payment by the Borrower shall prejudice its rights in respect of any
default by such Lender hereunder. The failure of any Lender to fulfill
its Commitment to fund any Advance or to pay the related Servicing
Agent Advance on any Weekly Settlement Date shall not relieve any
other Lender of its Commitment to fund any such Advance or to pay its
Ratable Share of the Servicing Agent Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to
fulfill such Commitment of any other Lender.
(iii) If either (w) the Borrower shall have requested a Fixed-Rate Advance,
or (x) the Servicing Agent shall have elected under Section 2.6(c)(i) to have
the terms of this Section 2.6(c)(iii) apply to a requested Floating Rate
Advance, or (y) the Agent shall have exercised its Daily Settlement Option, or
(z) in the event that the Borrower has requested a Settlement Advance to
purchase a Settlement that does not meet all of the requirements of purchase
under this Agreement (each such Settlement Advance, a "Discretionary Non-Ratable
Advance"), the Servicing Agent shall promptly (but in any event by 11:00 A.M.
(New York City time) on the date of its deemed receipt of a Notice of Borrowing
for an Advance) notify the Agent and the Lenders of its receipt of such Notice
of Borrowing and shall specify: (A) the proposed date and the time and method of
disbursement of such Advance as set forth in such Notice of Borrowing; (B) the
amount of such Advance and the allocation of all tranches thereof among the
applicable Fixed-Rate Interest Periods and/or interest periods as provided in
Section 2.12(a)(i) as requested by the Borrower in such Notice of Borrowing; and
(C) whether such Advance shall be a Discretionary Non-Ratable Advance and the
amount of such requested Discretionary Non-Ratable Advance and (D) with respect
to any Advance other than a Discretionary Non-Ratable Advance, each Lender's
Ratable Share of such Advance. With respect to any Discretionary Non-Ratable
Advance, on or before 11:00 A.M. (New York City time) on the Business Day after
each Lender's receipt of notice of the Borrower's request for such Discretionary
Non-Ratable Advance from the Servicing Agent, each Lender shall deliver written
notice to the Servicing Agent as to whether such Lender elects to fund such
Advance, at which time the Servicing Agent shall promptly notify all applicable
Lenders electing to make such Advance of each Lender's respective Ratable Share
of such Advance. Each Lender shall, subject to the satisfaction of the
conditions precedent set forth in Sections 3.1 and 3.2 hereof, remit its Ratable
Share of the principal amount of each Advance to the Servicing Agent
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Account by no later than 1:00 P.M. (New York City time) on the
Borrowing/Conversion date specified or deemed specified in such Notice of
Borrowing, and the Servicing Agent shall upon fulfillment of the applicable
conditions set forth in Article 3 notify the Borrower of the Fixed-Rate Interest
Period, and to the extent the Lenders have made funds available to it for such
purpose, fund such Advance to the Borrower in U.S. Dollars and immediately
available funds to the Borrower's Account prior to 2:00 P.M. (New York City
time) on the Borrowing/Conversion Date specified or deemed specified in such
Notice of Borrowing; provided, that if any Lender fails to remit such funds to
the Servicing Agent in a timely manner, the Servicing Agent may, but shall not
be required to, advance on behalf of any such Lender, such Lender's Ratable
Share of the Advances (other than Discretionary Non-Ratable Advances) on the
applicable Borrowing/Conversion Date unless such Lender shall have notified the
Servicing Agent and the Agent prior to such Borrowing/Conversion Date that it
does not intend to make available its Ratable Share of such Advance on such
date. If the Servicing Agent makes such Advance, each of the Borrower and such
defaulting Lender severally, but not jointly, shall be liable to repay the
Servicing Agent the amount thereof immediately upon the Servicing Agent's demand
therefor, together with interest thereon from the date such amount is advanced
until repaid in full at a rate equal to, in the case of such Lender, the Base
Rate and, in the case of the Borrower, the interest rate applicable to such Type
of Advance. Until such amount is repaid to the Servicing Agent by such Lender or
the Borrower, such Advance shall be deemed for all purposes to be an Advance
made by the Servicing Agent to the Borrower, and the Servicing Agent shall for
all purposes hereunder be deemed a "Lender" and shall be entitled to all rights,
remedies and benefits as such hereunder and under the other Advance Documents.
Upon the repayment of the principal and interest of any such Advance by such
Lender to the Servicing Agent, such repayment shall be treated (to the extent of
the principal amount thereof) as the funding of such Lender's Ratable Share of
the Advances to which such amounts relate. No such repayment or payment by the
Borrower shall prejudice its rights in respect of any default by such Lender
hereunder. The failure of any Lender to fulfill its Commitment to fund any
Advance on any Borrowing/Conversion Date shall not relieve any other Lender of
its Commitment to fund any such Advance on such date, but no Lender shall be
responsible for the failure of any other Lender to fulfill such Commitment of
any other Lender.
(d) At any time upon notice by the Agent (either on its own or at the
direction of the Required Lenders) to the Servicing Agent, the Agent may, at its
option (the "Daily Settlement Option") declare that the Servicing Agent shall
cease to make Servicing Agent Advances and that the provisions of Section
2.6(c)(ii) shall cease to be applicable, whereupon all settlements and fundings
as among the Lenders, the Agent, and the Servicing Agent, and any requested
Borrowing hereunder shall be governed by the terms of Section 2.6(c)(iii).
(e) Prior to the Facility Termination Date, the Borrower shall have the
option with respect to each Advance, and with the Servicing Agent's prior
written consent, (i) to Continue all or a portion of a Settlement Advance which
is a Fixed-Rate Advance or (ii) to Convert all or a portion of a Settlement
Advance which is a Fixed-Rate Advance to a Floating-Rate Advance or which is a
Floating- Rate Advance to a Fixed-Rate Advance; provided, however, that (x) any
such Conversion or Continuation of any Advance as a Fixed-Rate Advance shall be
in an aggregate amount not less than the lesser of $100,000 or the aggregate
outstanding principal balance of all Settlement Advances and (y) any such
Continuation of a Fixed-Rate Advance may only be effected on the last
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scheduled day of the applicable preceding Fixed-Rate Interest Period and on such
date any accrued interest to such date shall be paid.
(i) The Borrower's right to Convert or Continue Advances pursuant to this
Section 2.6(e) shall be understood to include the right (i) to divide
any Advance into two or more Advances having aggregate principal equal
to the aggregate principal of such original Advance or (ii) to combine
any two or more Advances into a single Advance having aggregate
principal equal to the aggregate principal of such original Advances;
provided, that with respect to any Advance accruing interest at the
Fixed-Rate, such divisions or combinations may only be made upon the
expiration of the Fixed-Rate Interest Period to which such Advance is
allocated; provided further, that no Conversion shall occur except on
a Weekly Settlement Date; provided, further, that the Borrower shall
not have the right to combine any Discretionary Non-Ratable Advance
with any other Advance.
(ii) To Convert or Continue any Advance under this Section 2.6(e), the
Borrower shall deliver a written notice ("Notice of
Continuation/Conversion"), substantially in the form of Exhibit D
hereto, signed by an Authorized Officer or telephonic notice
(confirmed immediately thereafter in writing (including by any
tele-transmission) signed by an Authorized Officer in such form) to
the Servicing Agent and the Agent, and each Lender not later than
10:00 A.M. (New York City time) (i) on the third Business Day prior to
the proposed Borrowing/Conversion Date with respect to the proposed
Conversion or Continuation if the Advance is to be Converted into or
Continued as a Fixed-Rate Advance and (ii) on the proposed
Borrowing/Conversion Date with respect to a proposed Conversion from a
Fixed-Rate Advance to a Floating-Rate Advance and, in either case,
such Borrowing/Conversion Date must also be a Weekly Settlement Date.
The Servicing Agent shall then give the Agent and each Lender prompt
(and in any event not later than 11:00 A.M. on such day) notice
thereof by telephone, facsimile or telex. Each such notice by the
Borrower shall specify (i) the Advances to be Continued or Converted,
(ii) the portion of the principal balance of the Advance to be
Continued or Converted, (iii) the date of the proposed Conversion or
Continuation (which date shall be a Weekly Settlement Date) and (iv)
the proposed Fixed-Rate Interest Period with respect to the proposed
Conversion or Continuation. Any Notice of Continuation/Conversion (or
telephonic notice thereof) shall be irrevocable, and the Borrower
shall be bound to Convert or to Continue the Advances in accordance
therewith. The Servicing Agent shall have no duty to verify the
authenticity of the signature appearing on any Notice of
Continuation/Conversion and, with respect to any telephonic request
for a Conversion/Continuation, the Servicing Agent shall have no duty
to verify the identity of any individual representing himself as an
Authorized Officer. Any Notice of Continuation/Conversion received by
the Servicing Agent after the time specified in the immediately
preceding sentence shall be deemed to have been received by the
Servicing Agent on the next Business Day. An Advance may be Continued
any number of times, subject to the terms and limitations of this
Agreement. With respect to any Advance Continued or
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Converted as a Fixed-Rate Advance, the Agent will promptly notify the
Borrower of the Fixed-Rate Interest Period applicable to such Advance.
If the Borrower shall fail to deliver a Notice of
Conversion/Continuation with respect to any Settlement Advance which
is a Fixed- Rate Advance or the Borrower and the Agent shall fail to
agree on a Fixed-Rate Interest Period, in either case, prior to the
time specified above, such Advance shall become a Floating-Rate
Advance until such time, if any, as such Advance is Converted to a
Fixed-Rate Advance pursuant to the terms of this Section 2.6(e).
(f) Upon the occurrence of the Commitment Termination Date, the Servicing
Agent shall cease to make any further Servicing Agent Advances to the Borrower.
SECTION 2.7 Fees. (a) The Borrower agrees to pay to the Agent, for the
account of the Lenders, in such proportion as the Agent and each such Lender
shall agree, a fee (the "Unused Commitment Fee"), payable on each Monthly
Payment Date during the term of the Agreement and on the Commitment Termination
Date, on the average daily unused portion of the aggregate of all of the
Lenders' Commitments during the immediately preceding Monthly Payment Period at
the related rate per annum set forth in the Fee Letter.
(b) The Borrower shall pay to the Servicer a servicing fee (the "Servicing
Fee") at the times and in the amounts set forth in the Servicing Agreement.
(c) The Borrower shall pay the Servicing Agent a fee (the "Servicing Agent
Fee") equal to $5000 per calendar quarter during which any Obligations are
outstanding hereunder (such amount to be payable in arrears and to be pro rated
for any shorter period for which such amount is payable), payable on the first
Business Day of each January, April, July and October and on the date occurring
after the Commitment Termination Date upon which all the Obligations shall have
been paid in full.
SECTION 2.8 Reduction of the Commitment. The Borrower may, on any Business
Day, upon written notice given to the Agent, the Servicing Agent and each of the
Lenders not later than thirty (30) Business Days prior to the date of the
proposed action, terminate in whole or reduce in part the "Unused Portion of the
Commitments" (as hereinafter defined); provided, however, that any partial
reduction shall be in the amount of $500,000 or an integral multiple thereof;
provided, further, that any such notice given by the Borrower to the Agent, the
Servicing Agent and the Lenders shall be irrevocable when given. As used in this
Section 2.8, the "Unused Portion of the Commitments" shall mean the excess of
(i) the aggregate of all of the Lenders' Commitments at such time, over (ii) the
sum of the outstanding principal balance of the Advances at such time. Any such
reduction in the Unused Portion of the Commitments pursuant to this Section 2.8
shall reduce the Commitment of each Lender in accordance with its respective
Ratable Share.
SECTION 2.9 Revolving Loan Notes; Repayment of the Advances. (a) The
Advances shall be evidenced by the Revolving Loan Notes executed by the Borrower
payable to the order of each Lender in a maximum principal face amount equal to
the Commitment of such
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Lender and delivered to each Lender pursuant to Article 3. A Fixed-Rate Advance
shall be due and payable, or Converted or Continued, on the last day of the
related Fixed-Rate Interest Period. Notwithstanding any other provision to the
contrary, the Advances and the other Obligations owing under this Agreement
shall be due and payable, if not due and payable earlier, on the Facility
Termination Date.
(b) On or prior to the occurrence of the Commitment Termination Date, the
Agent and the Servicing Agent, in consultation with the Borrower, shall agree on
an amortization schedule (the "Amortization Schedule", delineated separately for
Discretionary Non-Ratable Advances and all other Advances), which shall be
effective following the occurrence of the Commitment Termination Date, to be
based upon projected monthly Periodic Payments and mutually agreeable overhead
expenses other than in connection with the purchase of any new Settlements, and
which shall be revised monthly to the extent necessary based on monthly review
and revision of such Periodic Payments and such overhead expenses. Pursuant to
such Amortization Schedule, portions of the aggregate unpaid principal amount of
the Advances shall be due and payable from time to time and the aggregate unpaid
principal amount of the Advances shall be reduced to zero no later than the date
set forth in such Amortization Schedule.
(c) The Borrower shall cause all Collections in respect of Purchased
Settlements to be deposited directly into the Collection Account. The Borrower
agrees that all Collections in respect of Purchased Settlements shall be
received by the Borrower in trust for the benefit of the Agent, the Servicing
Agent and Lenders and shall be remitted by the Borrower (on the Business Day
received, if practicable, otherwise on the immediately succeeding Business Day)
to the Collection Account. Any proceeds or other Collateral received by the
Agent shall be remitted to the Servicing Agent on the next immediate Business
Day after the Agent's receipt thereof.
(i) On each Business Day the Servicing Agent shall apply all
Collections (other than Collections in respect of Purchased Settlements
purchased with the proceeds of to Discretionary Non-Ratable Advances) on
deposit in the Collection Account in respect of Purchased Settlements to
the Obligations in the following order of priority (such allocations to be
made by the Servicing Agent based on information and directions provided to
it by the Servicer and the Borrower, provided that if the Agent gives any
conflicting directions with respect to any such allocation (prior to the
Servicing Agent's making of the same), the Servicing Agent shall act in
accordance with the Agent's directions; it being understood and agreed that
the Servicing Agent shall be entitled to rely, and shall have no liability
for relying, on any such directions in accordance with this parenthetical):
(A) first, to the payment of any accrued and unpaid Servicing
Fees which are due and payable at such time, if any,
(B) second, to the payment of interest (calculated in accordance
with Section 2.12), if any, which is due and payable with respect to
the Servicing Agent Advances, allocated among such Advances pro rata
based on the unpaid principal amount thereof;
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(C) third, to the extent that the aggregate outstanding principal
amount of all Advances (other than Discretionary Non-Ratable Advances)
shall exceed the Borrowing Base, to the prepayment and reduction of
the outstanding principal amount of any Servicing Agent Advances,
allocated among such Advances pro rata based on the unpaid amounts of
such Advances;
(D) fourth, to the payment of interest (calculated in accordance
with Section 2.12), if any, which is due and payable with respect to
the Settlements Advances (other than Discretionary Non-Ratable
Advances) and Settlement Differential Advances, allocated among such
Advances pro rata based on the unpaid principal amounts thereof;
(E) fifth, to the repayment of the aggregate unpaid principal
amount of the Settlement Advances (other than Discretionary
Non-Ratable Advances) and Settlement Differential Advances which are
then due and payable in accordance with the Amortization Schedule,
allocated among such Advances pro rata based on the unpaid amounts of
such Advances;
(F) sixth, to the extent that the aggregate outstanding principal
amount of all Advances (other than Discretionary Non-Ratable Advances)
exceeds the Borrowing Base, to the prepayment of the aggregate unpaid
principal amount of the Settlement Advances (other than Discretionary
Non-Ratable Advances) and Settlement Differential Advances that are
Floating-Rate Advances, allocated among such Advances pro rata based
on the unpaid amounts of such Advances;
(G) seventh, to the extent that the aggregate outstanding
principal amount of all Advances (other than Discretionary Non-Ratable
Advances) exceeds the Borrowing Base, to the extent the aggregate
amount of all outstanding Advances exceeds the Borrowing Base, to the
repayment of the aggregate unpaid principal amount of the Settlement
Advances (other than Discretionary Non-Ratable Advances) and
Settlement Differential Advances that are Fixed-Rate Advances in the
amount of such excess, allocated among such Advances pro rata based on
the unpaid principal amounts thereof;
(H) eighth, to any Breakage Cost which is then due and owing
(including any amounts which would become due and payable after giving
effect to any prepayment of principal in accordance with clause
seventh above and clause tenth below);
(I) ninth, to the payment of all other fees, expenses and
indemnities due and payable hereunder, including, without limitation,
the Unused Commitment Fee and the Servicing Agent Fee.
(J) tenth, to the ratable payment of all other Obligations due
and payable hereunder; and
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(K) eleventh, to the Borrower's Account for the use of the
Borrower, upon the approval of the Agent, as provided herein and in
the Agreement of Limited Partnership.
(ii) On each Business Day the Servicing Agent shall apply all
Collections in respect of Purchased Settlements purchased with the proceeds
of Discretionary Non-Ratable Advances on deposit in the Collection Account
to the Obligations in the following order of priority (such allocations to
be made by the Servicing Agent based on information and directions provided
to it by the Servicer and the Borrower, provided that if the Agent gives
any conflicting directions with respect to any such allocation (prior to
the Servicing Agent's making of the same), the Servicing Agent shall act in
accordance with the Agent's directions; it being understood and agreed that
the Servicing Agent shall be entitled to rely, and shall have no liability
for relying, on any such directions in accordance with this parenthetical):
(A) first, to the payment of any accrued and unpaid Servicing
Fees which are due and payable at such time, if any,
(B) second, to the payment of interest (calculated in accordance
with Section 2.12), if any, which is due and payable with respect to
the Discretionary Non-Ratable Advances, allocated among such
Discretionary Non-Ratable Advances pro rata based on the unpaid
principal amounts thereof;
(C) third, to the repayment of the aggregate unpaid principal
amount of the Discretionary Non-Ratable Advances that are then due and
payable in accordance with the Amortization Schedule, allocated among
such Advances pro rata based on the unpaid amounts of such
Discretionary Non-Ratable Advances;
(D) fourth, to the extent that the aggregate outstanding
principal amount of all Discretionary Non-Ratable Advances exceeds the
Discretionary Non-Ratable Advance Borrowing Base, to the prepayment of
the aggregate unpaid principal amount of the Discretionary Non-Ratable
Advances that are Floating-Rate Advances, allocated among such
Advances pro rata based on the unpaid amounts of such Advances;
(E) fifth, to the extent that the aggregate outstanding principal
amount of all Discretionary Non-Ratable Advances exceeds the
Discretionary Non-Ratable Advance Borrowing Base, to the prepayment of
the aggregate unpaid principal amount of the Discretionary Non-Ratable
Advances that are Fixed-Rate Advances, allocated among such Advances
pro rata based on the unpaid amounts of such Advances;
(F) sixth, to any Breakage Cost which is then due and owing
(including any amounts which would become due and payable after giving
effect to any prepayment of principal in accordance with clause fifth
above and clause eighth below);
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(G) seventh, to the payment of all other fees, expenses and
indemnities due and payable hereunder, including, without limitation,
the Unused Commitment Fee and the Servicing Agent Fee.
(H) eighth, to the ratable payment of all other Obligations due
and payable hereunder; and
(I) ninth, to the Borrower's Account for the use of the Borrower,
upon the approval of the Agent, as provided herein and in the
Agreement of Limited Partnership.
At the direction of the Agent, the Servicing Agent may, and is hereby authorized
to, make or cause to be made an advance on behalf of the Borrower for payment of
all fees, principal, interest, or other Obligations owing by the Borrower under
this Agreement or any of the other Advance Documents if and to the extent that
the Borrower fails to promptly pay any such amounts as and when due. At the
option of the Lenders and to the extent permitted by applicable law, advances so
made may be deemed Advances hereunder.
(d) On each Monthly Payment Date, if the excess of the Net Pool Weighted
Average Yield on those Purchased Settlements that are Eligible Settlements that
are allocated to the Unmatched Group on such date over the Weighted Average
Forward Rate of all outstanding Advances which are not Matched Funded is less
than five percent (5.00%), then the Borrower shall prepay the aggregate unpaid
principal balance of any such Advances with the proceeds of one or more Match
Funded Fixed-Rate Advances to be requested by the Borrower from the Servicing
Agent on such date to effect an excess of such Net Pool Weighted Average Yield
(all of which shall then be Match Funded) over the weighted average of the
Interest Rates applicable to all such Advances equal to a percentage greater
than two percent (2%) which is acceptable to the Agent; provided, however, such
Matched Funded Fixed-Rate Advances shall be requested by the Borrower in
accordance with the provisions of this Agreement and the terms of each such
Advance shall be at the sole discretion of the Agent.
SECTION 2.10 Optional Prepayments. (a) Subject to the limitations set forth
in this Section 2.10(a), the Borrower may at any time upon written notice to the
Agent, the Servicing Agent and each of the Lenders prepay all or any portion of
the balance of the principal amount of any Floating-Rate Advance or Fixed-Rate
Advance, which notice shall be given at least (2) Business Days prior to the
proposed date of such prepayment, in the case of the prepayment of any
Floating-Rate Advance, and at least five (5) Business Days prior to the proposed
date of such prepayment of any Fixed-Rate Advance; provided, however, that in
the event that any Advances (other than Discretionary Non-Ratable Advances) are
outstanding, the Borrower may make prepayments in respect of Discretionary
Non-Ratable Advances only out of Collections received into the Collection
Account in respect of Purchased Settlements purchased with the proceeds of
Discretionary Non-Ratable Advances or the proceeds of any life insurance policy
relating to any Non-Guaranteed Settlement. Each such prepayment shall (i) be
accompanied by (x) the payment of all accrued but unpaid interest on the amounts
to be so prepaid and (y) in the case of the
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prepayment of any Fixed-Rate Advance, any Breakage Costs required to be paid in
connection therewith as set forth in Section 2.10(b), and (ii) in the case of
any prepayment of less than the aggregate balance of all Advances then
outstanding, be in a minimum amount of $500,000. Floating-Rate Advances may be
prepaid without premium or penalty.
(b) If any portion of any Fixed-Rate Advance is repaid prior to the last
date of the Fixed-Rate Interest Period applicable thereto for any reason
whatsoever (including, without limitation, the acceleration of the Obligations
in accordance with Section 6.2(a) or the required prepayment thereof pursuant to
Section 2.11(b)), or the Borrower shall fail, for any reason, to borrow any
proposed Fixed-Rate Advance on the date specified in the applicable Notice of
Borrowing (including without limitation, as a result of the Borrower's failure
to satisfy any conditions precedent to such borrowing), the Borrower shall
reimburse each Lender on demand for any Breakage Costs incurred.
(c) If the Borrower desires to terminate any Fixed-Rate Advance prior to
the agreed-upon termination date, the Borrower may request that each Lender
provide an indicative quotation of the amount that such Lender would charge or
pay the Borrower to agree to terminate such Fixed-Rate Advance. If the Borrower
elects to terminate such Fixed-Rate Advance, the Borrower shall pay a Lender the
applicable amount determined in a commercially reasonable manner by such Lender
in such Lender's sole discretion, notwithstanding that any such amount may be
different than the amount quoted by such Lender in accordance with the first
sentence of this Section 2.10(c).
SECTION 2.11 Mandatory Prepayments. (a) Notwithstanding anything contained
herein to the contrary, all Obligations shall become immediately due and payable
upon the occurrence of the Facility Termination Date for any reason whatsoever.
(b) On each date on which the aggregate outstanding principal amount of all
Advances exceeds the aggregate of the Lenders' Commitments, and/or the aggregate
outstanding principal amount of all Advances (other than Discretionary
Non-Ratable Advances) exceeds the lesser of (i) the aggregate of the Lenders'
Commitments minus the aggregate outstanding principal amount of all
Discretionary Non-Ratable Advances, or (ii) the Borrowing Base on such date, the
Borrower shall pay to the Servicing Agent for the account of each Lender the
amount of any such excess (to be applied as set forth in the following
sentence), together with accrued but unpaid interest on the amount required to
be so prepaid to the date of such prepayment and, in the case of the prepayment
of any Fixed-Rate Advance, the Breakage Costs required to be paid pursuant to
Section 2.10(b). Any such mandatory prepayment shall be applied (i) first, to
the prepayment of all Floating-Rate Advances, if any, and (ii) second, to any
Fixed-Rate Advances then outstanding. The Borrower's obligation to prepay such
excess shall be a demand Obligation which bears interest at the Default Rate
from the date such excess occurs until repayment in full of said excess.
SECTION 2.12 Interest. (a) The Borrower shall pay to the Servicing Agent
for the account of each Lender interest on the unpaid principal amount of each
Advance made by the Servicing Agent from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:
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(i) During such periods as such Advance is a Floating-Rate Advance,
the Borrower shall pay interest on such Advance at a rate per annum equal
to the Adjusted Base Rate in effect from time to time; provided that any
amount of principal which is not paid when due (whether at stated maturity,
by acceleration or otherwise) shall bear interest, from the date on which
such amount is due until such amount is paid in full, at the Default Rate
in effect from time to time.
(ii) During such periods as such Advance is a Fixed-Rate Advance, the
Borrower shall pay interest on such Advance at a rate per annum at all
times during the Fixed-Rate Interest Period for such Advance equal to the
Fixed Rate in effect for such period; provided that any amount of principal
which is not paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest, from the date on which such amount is due
until such amount is paid in full, at the Default Rate in effect from time
to time.
(b) Except as otherwise provided herein, accrued but unpaid interest on
each Floating-Rate Advance, to the extent applicable, shall be payable on each
Monthly Payment Date. Accrued interest on each Fixed-Rate Advance shall be due
and payable on the last day of the Fixed-Rate Interest Period for such Advance;
provided, however, that with respect to any Fixed-Rate Advance which has a
Fixed-Rate Interest Period which is more than three (3) months long, the accrued
interest on the related Advance shall also be due and payable on the last day of
each three-month period during which such Fixed-Rate Advance is outstanding.
Notwithstanding the foregoing, interest payable at the Default Rate shall be
payable from time to time on demand of the Agent.
(c) In no event shall any interest rate exceed the maximum rate permissible
for business borrowers such as the Borrower under applicable Law (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the
Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate. In the event that, upon payment in full of the Obligations under
this Agreement, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would have been
paid or accrued if the interest rates set forth in this Agreement had at all
times been in effect, then the Borrower shall, to the extent permitted by
applicable law, pay the Servicing Agent, for the benefit of the affected
Lenders, an amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have been charged if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest which would have accrued
had the interest rates set forth in this Agreement, at all times, been in effect
and (b) the amount of interest actually paid or accrued under this Agreement. In
the event that a court determines that any Lender has received interest and
other charges hereunder in excess of the Maximum Rate, such excess shall be
deemed received on account of, and shall automatically be applied to reduce,
the Obligations other than interest, in the inverse order of maturity, and if
there are no Obligations outstanding, such Lender shall refund such excess to
the Borrower.
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SECTION 2.13 (a) Funding Indemnification. If any payment of a Fixed-Rate
Advance occurs on a date which is not the last day of the applicable Fixed-Rate
Interest Period, whether because of acceleration, prepayment, or otherwise, or a
Fixed-Rate Advance is not made on the date specified by the Borrower for any
reason other than default by the Lenders, the Borrower indemnifies each Lender
for any loss or cost incurred by it resulting therefrom, including, without
limitation, any Breakage Cost or any other loss or cost in liquidating or
employing deposits acquired to fund or maintain the Fixed-Rate Advance. The
Borrower shall not be responsible for any Breakage Costs or any other loss,
cost, or expenses arising as the time of, and arising solely as a result of, any
assignment made pursuant to Section 7.7 and the reallocation of any portion of
the Fixed-Rate Advances of the Lender making such assignment unless, in each
case, such assignment is requested by the Borrower.
(b) Increased Capital. If, due to either (i) the introduction of, or any
change in the interpretation of any law or regulation, or (ii) the compliance by
any Lender with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), which affects
or would affect the amount of capital required or expected to be maintained by
such Lender or any corporation controlling such Lender and the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender, the Borrower shall immediately pay to such Lender, from time to time as
specified by such Lender, additional amounts sufficient to compensate such
Lender or such corporation, in light of such circumstances, to the extent that
such Lender reasonably determines such increase in capital to be allocable to
the existence of such Lender's commitment to lend hereunder. A certificate as to
such amounts submitted to the Borrower by such Lender shall, in the absence of
manifest error, be conclusive and binding for all purposes.
SECTION 2.14 Payments and Computations. (a) The Borrower shall make each
payment and prepayment hereunder and under the Revolving Loan Notes and the
Servicing Agent Note with respect of principal, interest, expenses, indemnities,
fees or other Obligations (except Unused Commitment Fees and other fees due the
Agent) due from the Borrower not later than 1:00 P.M. (New York City time) on
the day when due in U.S. Dollars to the Servicing Agent at its address referred
to in Section 7.2 or to the Servicing Agent's Account in same-day funds. The
Borrower hereby authorizes the Servicing Agent, if and to the extent payment is
not made when due hereunder or under the Revolving Loan Notes, to charge from
time to time against the Servicing Agent Account any amount so due, or upon
notice to the Borrower, to make Advances in the amount of and in payment of such
amounts. The Borrower agrees that, to the extent there are insufficient funds in
the Servicing Agent Account or such other accounts to make any payment when due,
the Borrower shall immediately pay to the Servicing Agent all amounts due that
remain unpaid. Payments on Obligations may also be made by (i) application of
funds in the Collection Account as provided in Section 2.9(c) or (ii) by the
making of additional Advances as provided in Section 2.6(e). All computations of
interest (other than interest on a Floating-Rate Advance) and Unused Commitment
Fees shall be made by the Agent on the basis of a year of 360 days in each case
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest or commitment fees are
payable. Interest on a Floating-Rate
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Advance shall be computed by the Agent on the basis of a year of 365 or 366
days, as applicable, and the actual number of days elapsed. Each determination
by the Agent of an interest rate hereunder shall be conclusive and binding for
all purposes, absent error; provided, however, that in any event each such
determination shall be conclusive and binding unless the Agent shall have
received written notice from the Borrower of such error within a commercially
reasonable period.
(b) All payments to be made in respect of Unused Commitment Fees or other
fees due to the Agent from the Borrower hereunder shall be made to the Agent's
Account prior to 11:00 A.M. (New York City time) on the date when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower, and without setoff, counterclaim or other
deduction of any nature, and an action therefor shall immediately accrue. The
Borrower hereby authorizes and directs each of the Agent and the Servicing Agent
to charge either or both of the Agent's Account and the Servicing Agent Account,
respectively, for all such fees due from the Borrower hereunder when due and the
Servicing Agent agrees to charge such account for such amounts at the direction
of the Agent and to remit such amounts to the Agent. The Borrower agrees that,
to the extent there are insufficient funds in the Agent's Account, the Servicing
Agent Account or such other accounts to make any payment when due, the Borrower
shall immediately pay to the Agent all amounts due that remain unpaid. The Agent
shall allocate and distribute Unused Commitment Fees to each Lender (as a
Lender, and to the extent applicable, as Servicing Agent) in accordance with
such Lender's daily average unused Commitment.
(c) (i) If the Agent shall not have exercised the Daily Settlement Option,
on each Weekly Settlement Date, the Servicing Agent shall distribute to the
Agent and the Lenders in immediately available funds all payments and
prepayments received during the previous week by the Servicing Agent in respect
of principal, interest and other amounts received and available for distribution
as of the opening of business on such date, net of any principal amount that the
Agent or such Lender would be required to remit to the Servicing Agent under
Sections 2.6(c)(ii) or 2.6(c)(iii), as applicable, of this Agreement. The
Servicing Agent's, the Agent's and each Lender's statement of account, ledger or
other relevant record shall be conclusive, in the absence of error, provided,
however, that in any event each such statement, ledger or other relevant record
shall be conclusive and binding unless the Agent shall have received written
notice from the Borrower of such error within a commercially reasonable period
and unless notice is received shall be deemed an "account stated." The Borrower
shall have no liability to the Servicing Agent, the Agent or any Lender for any
loss or expense incurred as a result of the failure by the Servicing Agent to
comply with the provisions of this Section 2.14(c)(i).
(ii) If the Agent has exercised its Daily Settlement Option, on each
Business Day thereafter, the Servicing Agent shall distribute to the Agent and
the Lenders in immediately available funds all payments and prepayments received
by the Servicing Agent in respect of principal, interest and other amounts
received and available for distribution as of the opening of business on such
date, net of any principal amount that the Agent or such Lender would be
required to remit to the Servicing Agent under Sections 2.6(c)(ii) or
2.6(c)(iii), as applicable, of this Agreement. The Servicing Agent's, the
Agent's and each Lender's statement of account, ledger or other relevant record
shall be conclusive, in the absence of error, provided, however, that in any
event each such statement, ledger or other relevant record shall be conclusive
and binding unless
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the Agent shall have received written notice from the Borrower of such error
within a commercially reasonable period and unless such notice is received
timely shall be deemed an "account stated." The Borrower shall have no liability
to the Servicing Agent, the Agent or any Lender for any loss or expense incurred
as a result of the failure by the Servicing Agent to comply with the provisions
of this Section 2.14(c)(ii).
(d) The Borrower hereby transfers and conveys to the Agent, for its and the
Lenders' benefit, exclusive ownership and control of each of the Lock-Boxes and
the Lock-Box Accounts. If, notwithstanding the requirements of Section 5.2(m),
the Borrower receives any Collections of any Purchased Settlements or any other
proceeds of Collateral which are required to be paid to the Servicing Agent or
the Agent, each for the benefit of the Lenders, it shall receive such payments
as the Agent's trustee, and shall promptly (and, in any event, within one (1)
Business Day after its receipt thereof) deliver such payments to a Lock-Box
Account, or to the Servicing Agent, in each case, in their original form duly
endorsed in blank. All Collections received in the Lock-Boxes or the Lock-Box
Accounts and all amounts on deposit in the Agent's Account shall be the sole
property of the Agent, for the benefit of itself and the Lenders, and subject to
the Agent's sole control. All amounts on deposit in the Servicing Agent Account
shall be the sole property of the Servicing Agent, for the benefit of itself,
the Agent, and the Lenders, and subject to the Servicing Agent's sole control.
At the Agent's request, the Borrower shall execute and deliver to the Agent such
documents as the Agent shall require to grant the Agent access to, and exclusive
dominion and control over, any lock-boxes and/or bank accounts (including,
without limitation, the Lock-Boxes and Lock-Box Accounts) to which Collections
are remitted.
SECTION 2.15 Payment on Non-Business Days. Whenever any payment hereunder
or under the Revolving Loan Notes shall be stated to be due on a day other than
a Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest or commitment fees, as the case may be.
SECTION 2.16 Pro Rata Treatment of Lenders. Subject to the weekly
settlement procedures contained in Section 2.1(d)(ii) and Section 2.14(c)(i) to
this Agreement prior to the exercise by the Agent of the Daily Settlement
Option, each Borrowing, and each selection of, Conversion to or Continuation of
any Interest Rate and each payment or prepayment by the Borrower with respect to
principal and other amounts (except interest) due from the Borrower hereunder to
the Lenders (other than any such amounts of the type described in Section 2.6,
Section 2.13, Section 8.8 or Section 9.8) shall be made and distributed in
proportion to the Ratable Shares of each Lender.
ARTICLE 3. CONDITIONS OF LENDING
SECTION 3.1 Condition Precedent to Initial Advance. The obligation of the
Lenders and the Servicing Agent to make the initial Advance is subject to the
condition precedent that the Agent shall have received, with sufficient copies
for the Servicing Agent and each of the
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Lenders, on or before the day of such Advance the following, each dated such
day, in form and substance (and in such quantities as shall be) satisfactory to
the Agent:
(a) Each of this Agreement, the Security Agreement, the Assignment
Agreement and the Servicing Agreement, fully executed, with all Exhibits and
Schedules thereto completed in form and substance satisfactory to the Agent.
(b) The Revolving Loan Notes.
(c) Certificate of the Secretary of the General Partner, certifying (i)
resolutions adopted by the Board of Directors authorizing, among other things,
the execution and delivery by the General Partner of the this Agreement, the
Revolving Loan Notes, the Security Agreement, the Servicing Agreement, the
Assignment Agreement and any other documents and instruments required to be
executed by the Partnership or the General Partner pursuant to the terms of the
Advance Documents, (ii) names and signatures of officers of the General Partner
authorized to execute the documents and instruments referred to in clause (i)
above, (iii) the accuracy and currency of the By-Laws of the General Partner,
and (iv) the accuracy and currency of the Agreement of Limited Partnership.
(d) Certificate of Incorporation of the General Partner certified by the
Secretary of State of Delaware.
(e) Good Standing or Subsistence Certificate for the General Partner from
the Secretaries of State of Delaware and Pennsylvania.
(f) Certificate of Limited Partnership of the Borrower certified by the
Secretary of State of Delaware.
(g) Good Standing or Subsistence Certificate for the Borrower from the
Secretaries of State of Delaware and Pennsylvania.
(h) Officer's Certificate executed on behalf of the General Partner by the
chairman, the president or the chief financial officer of the General Partner
that (i) the representations and warranties of the Borrower contained in this
Agreement or otherwise made in writing in connection therewith are true and
correct on or as of the Closing Date and (ii) no event shall have occurred and
be continuing on the Closing Date which would constitute a Default or an Event
of Default under this Agreement.
(i) Favorable opinions of Wolf, Block, Schorr and Solis-Cohen, counsel for
the Borrower, in form and substance satisfactory to the Agent.
(j) Executed financing statements, amendments and assignments required to
be filed by the Borrower pursuant to the Security Agreement.
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(k) Certified copies of UCC and tax lien and judgment search reports with
respect to the Borrower and the General Partner from such jurisdictions as are
deemed necessary or desirable by the Agent, in each case, dated a date
reasonably prior to the Closing Date.
(l) Executed releases with respect to any Liens (other than Permitted
Liens) filed against the Borrower or any of its properties.
(m) Borrowing Base Certificate dated as of the Closing Date.
(n) Certification evidencing coverage under the fidelity insurance policy
referred to in Section 5.1(p);
(o) All of the items listed on the List of Closing Documents which are not
included in items (a) through (n) above, in form and substance satisfactory to
the Agent.
SECTION 3.2 Conditions Precedent to All Advances. The obligation of
Servicing Agent to make each Advance (including the initial Advance) and each of
the Lenders to make Advances shall be subject to the further conditions
precedent that on the date of such Advance and after giving effect thereto (a)
the following statements shall be true (and each of the giving of the applicable
notice requesting such Advance and the acceptance by the Borrower of the
proceeds of such Advance shall constitute a representation and warranty by the
Borrower that on the date of such Advance such statements are true):
(i) The Agent shall have received (a) a fully completed Notice of
Borrowing and Borrowing Base Certificate, and (b) in the case of any
proposed Settlement Advance (other than a Discretionary Non-Ratable
Advance) or Settlement Differential Advance, a Borrowing Base Certificate
reflecting a Borrowing Base that equals or exceeds the sum of the
outstanding Settlement Advances (other than Discretionary Non-Ratable
Advances) and Settlement Differential Advances after giving effect to such
proposed Advances;
(ii) The representations and warranties contained in Section 4.1 and
in Section 4.2, as applicable, of this Agreement are correct on and as of
the date of such Advance, before and after giving effect to such Advance
and to the application of the proceeds of such Advance, as though made on
and as of such date;
(iii) No event has occurred and is continuing, or would result from
such Advance or from the application of the proceeds of such Advance, which
constitutes an Event of Default or would constitute an Event of Default or
Potential Default unless waived; and
(iv) Since the Closing Date, no event or events shall have occurred
and be continuing which would have, or would reasonably be expected to
result in, a Material Adverse Change;
(b) the Servicing Agent shall have:
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(i) Received confirmation from the Servicer that all documents
required to be contained in the Settlement Package with respect to
each Settlement to be acquired with the proceeds of such Advance have
been received and appear to be in satisfactory form and in compliance
with the requirements of this Agreement;
(ii) Received such other approvals, opinions or documents as the
Agent or the Servicing Agent may reasonably request, including, but
not limited to, an opinion from counsel acceptable to the Agent that
each Settlement against which such Advance is to be made is an
Eligible Settlement in accordance with this Agreement (such opinion
may rely, with respect to factual matters, on written representations
made by the Seller, the Broker, if any, and the Borrower)( it being
understood that each of the Agent and the Servicing Agent hereby agree
to give prompt notice of such reasonable request to the other);
(iii) Completed a reasonable investigation, to the extent the
Agent has determined such investigation to be necessary, with respect
to each Settlement against which such Advance is to be made;
(iv) Received, in the event the Settlement against which such
Advance is to be made is being purchased in a state where no
Settlement has previously been purchased by the Borrower, satisfactory
advice from counsel to the Agent that the purchase of such Settlement
does not violate or contravene the Law of such state (such opinion may
rely on one or more opinions provided by local counsel, who shall be
acceptable to the Agent, counsel to the Agent, and the Borrower, and
whose legal fees shall be solely the expense of the Borrower); and
(v) Certification evidencing coverage under the fidelity
insurance policy referred to in Section 5.1(p).
(c) The acceptance by the Borrower of each Advance shall be deemed to
constitute, as of the date of such Advance, (i) a representation and warranty by
the Borrower that the conditions in this Section 3.2 have been satisfied and
(ii) a confirmation and reaffirmation by the Borrower of the granting and
continuance of the Agent's Liens on the Collateral on behalf of the Lenders
pursuant to the Security Agreement.
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ARTICLE 4. REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a limited partnership duly formed and validly existing
under the laws of the State of Delaware, is qualified to do business and is in
good standing in all other states in which such qualification and good standing
are necessary in order for the Borrower to conduct its business and own its
property as conducted and owned in such states, except in such states where
failure to qualify to do business would not have a materially adverse effect on
the business operations or financial condition of the Borrower, has all
requisite power and authority to conduct its business, to own its property and
to execute, deliver and perform all of its obligations under this Agreement and
the other Advance Documents, has the requisite corporate power and authority and
the legal right to own, pledge, mortgage or otherwise encumber the Collateral,
and to conduct its business as now and proposed to be conducted, and has all
licenses, permits, consents or approvals from or by, and has made all filings
with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent they are material to such ownership, operation and
conduct.
(b) The General Partner is a corporation duly organized and existing in
good standing under the laws of the State of Delaware, is qualified to do
business and is in good standing in all other states in which such qualification
and good standing are necessary in order for the General Partner to conduct its
business and own property as conducted and owned in such states, except in such
states where failure to qualify to do business would not have a materially
adverse effect on the business operations or financial condition of the
Borrower, and has all requisite power and authority to conduct its business, to
own its property and to execute and deliver this Agreement and the other Advance
Documents as general partner and agent of the Borrower, and to execute, deliver
and perform all of its obligations under the other Advance Documents to which it
is a party.
(c) The execution, delivery and performance by the Borrower and the General
Partner of this Agreement, the Revolving Loan Notes, the Security Agreement, the
Assignment Agreement, the Servicing Agreement, and each Lock-Box Agreement are
within the Borrower's powers, have been duly authorized by all necessary action,
and do not contravene (i) the Borrower's partnership agreement or (ii) any law
or contractual restriction binding on, or affecting, the Borrower.
(d) No authorization or approval or other action by, and no notice to or
registration of or filing with, any Governmental Authority or regulatory body or
holder of any Indebtedness is required for the due execution, delivery and
performance by the Borrower, or to insure the legality, validity, binding effect
or enforceability of, this Agreement, the Revolving Loan Notes, the Security
Agreement and the Servicing Agreement.
(e) This Agreement, the Security Agreement, the Assignment Agreement and
the Servicing Agreement are, and the Revolving Loan Notes when delivered
hereunder will be, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms.
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(f) There are no judgments or other judicial or administrative orders
outstanding against the Borrower nor is there any pending or, to the best
knowledge of the Borrower, threatened action or proceeding affecting the
Borrower before any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or operations of the
Borrower or which purports to affect the legality, validity or enforceability of
this Agreement, the Revolving Loan Notes, the Security Agreement, the Assignment
Agreement, the Servicing Agreement or any Lock-Box Agreement.
(g) The Borrower is not in violation of any law, rule, regulation, order,
writ, judgment, decree, determination or award applicable to it or any
indenture, lease, loan or other agreement to which it is a party or by which it
or its assets may be bound or affected, the violation of which may reasonably be
expected to have a material adverse effect upon the ability of the Borrower to
perform any of its obligations under this Agreement or a material adverse effect
upon the ability of the Borrower to perform any of their respective obligations
the other documents related thereto to which it is party.
(h) No proceeds of any Advance will be used to acquire any equity security
of a class which is registered pursuant to Section 12 of the Securities Exchange
Act of 1934.
(i) The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
G issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Advance will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
(j) The principal place of business and chief executive office of the
Borrower and the office where the Borrower keeps all of its records are located
at the address of the Borrower referred to in Section 7.2 (or at such other
locations as to which the notice and other requirements specified in Section
5.1(d) shall have been satisfied).
(k) The names and addresses of all the lock-box banks, together with the
account number of the Collection Account, of the Borrower at such lock-box
banks, are specified in Schedule I hereto (which shall be deemed to include any
other lock-box banks or Collection Account as to which the notice and other
requirements specified in the Servicing Agreement have been satisfied).
(l) Except as set forth on Schedule VI, neither the Borrower nor any of its
ERISA Affiliates has maintained or participated in any Plan during the past six
(6) years. With respect to any such Plan, (i) such Plan complied and complies in
all material respects with all applicable requirements of law and regulations,
(ii) no Reportable Event has occurred with respect to any such Plan, (iii) no
such Plan has been terminated, and (iv) no funding deficiency has occurred in
respect of any such Plan, except, in each case, where the occurrence of any of
the foregoing could not be reasonably expected to result in liability to the
Borrower in excess of $50,000.
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(m) The balance sheets and statements of income and cash flows of the
Borrower as of December 31, 1996 (i) have been prepared in accordance with GAAP,
and (ii) are true and complete and present fairly the respective financial
condition and results of operations of the Borrower, and said balance sheets
accurately reflect the all of the respective liabilities, including contingent
liabilities of the Borrower.
(n) The Borrower has filed all federal, state and local tax returns which
it is required by Law to file and has paid all taxes, assessments and other
governmental charges due in respect of its respective returns, except to the
extent that any such taxes, assessments or other governmental charges are being
contested in good faith and as to which the Borrower has set aside on its books
adequate reserves and in respect of which no Liens have attached to or been
filed against the Collateral. There are no agreements or waivers extending the
statutory period of limitations applicable to any federal income tax return of
the Borrower for any period.
(o) Except as described in Schedule II hereto, the Borrower is not a party
to any material lease, contract, agreement, understanding or commitment of any
kind (including without limitation all agreements which, if breached, could
directly or indirectly have a Material Adverse Effect), and to the best of the
Borrower's knowledge, (a) all parties (including the Borrower) to all such
material leases, contracts, agreements, understandings and commitments, have
complied with the provisions thereof, (b) no such party (including the Borrower)
is in default under any provision thereof, and (c) no event has occurred which,
but for the giving of notice or the passage of time, or both, would constitute a
default thereunder.
(p) Neither this Agreement nor any other Advance Document to which the
Borrower is a party, or any certificate or statement furnished to the Agent, the
Servicing Agent or any Lender in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading. There
is no fact known to the Borrower which has or may have a Material Adverse Effect
which has not been set forth in this Agreement or in the other Advance
Documents, certificates and statements furnished to the Agent, the Servicing
Agent or any Lender in connection with the transactions contemplated hereby.
(q) There has occurred no event which constitutes a Potential Default or an
Event of Default.
(r) The Borrower is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended, and the making of the Advances and the use of the proceeds
thereof by the Borrower will not violate any provision of said Act, or any rule,
regulation or order issued by the Securities and Exchange Commission thereunder.
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(s) The Borrower has good, indefeasible, and merchantable title to and
ownership of the Collateral, free and clear of all liens, claims, security
interests, and encumbrances except those held by the Agent, and other Permitted
Liens.
SECTION 4.2 Additional Representations and Warranties of the Borrower with
Respect to Settlements. With respect to each Settlement against which an Advance
shall be made, the Borrower represents and warrants, as of the time of its
purchase of such Settlement, as follows:
(a) The Settlement is an Eligible Settlement;
(b) To the best knowledge of the Borrower, the Settlement is the legal,
valid and binding obligation of each Obligor related thereto, enforceable
against each such Obligor 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 Seller's right to receive payments under such
Settlement does not contravene or conflict with any applicable laws, rules or
regulations or any contractual or other restriction, limitation or encumbrance;
(d) To the best knowledge of the Borrower, the Settlement has not, nor has
any document in the related Settlement Package, been satisfied, subordinated or
rescinded;
(e) The Settlement is unrelated to an Obligor (if such Settlement is not
funded by a Qualified Annuity), Designated Annuity Funding Company (if such
Settlement is funded by a Qualified Annuity), or Seller either of which is (i)
the subject of a bankruptcy, insolvency or receivership proceeding or unable to
make payments on its obligations when due, unless, with respect to a Seller, the
bankruptcy court having jurisdiction over such Seller has approved the sale of
the Settlement to the Borrower, (ii) not located in the United States, or (iii)
an Insurer or other entity which the Agent or the Servicing Agent has previously
notified the Borrower is unacceptable to the Agent or the Servicing Agent, as
applicable, in its commercially reasonable judgment;
(f) The Settlement 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 Borrower
to the Agent;
(g) The Seller has represented and warranted to the Borrower in writing
that:
(i) the Settlement is not the primary source of income of the Seller,
and the Seller does not have any disability or other incapacity that would
prevent the Seller from being gainfully employed;
(ii) the proceeds of the sale of the Settlement to the Borrower will
be used for the valid personal, business or commercial purposes of the
Seller;
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(iii) the Seller has been advised of, and understands, the advantages
and disadvantages of a sale of the Settlement pursuant to the related
Purchase Agreement through consultation with such legal, tax and accounting
advisors as the Seller deems necessary, and the Seller has been represented
by counsel in the negotiation and execution of the related Purchase
Agreement;
(iv) the Seller is competent to enter into the related Purchase
Agreement, has executed such agreement voluntarily, and has legitimate
reasons for selling the Settlement thereby; and
(v) the sale of the Settlement under the Purchase Agreement is being
made by the Seller in good faith and without actual intent to hinder, delay
or defraud the Seller's present or future creditors;
(h) Counsel for the Seller has issued a letter to the effect that Counsel
has explained to the Seller the terms of the transaction contemplated in the
Purchase Agreement, and is satisfied that the Seller understands the nature and
terms of such transaction;
(i) To the best knowledge of the Borrower, the insurance policy, annuity
contract or other instrument, if any, obligating an Obligor or Designated
Annuity Funding Company to make one or more payments with respect to the
Settlement:
(A) has been duly authorized and, together with the Settlement,
constitutes the legal, valid and binding obligation of such Obligor or
Designated Annuity Funding Company, as applicable, in accordance with its
terms; and
(B) together with the Settlement, does not contravene in any respect
any requirement of law applicable thereto;
(j) The Seller's Questionnaire related to the Settlement has been reviewed
and approved by the Borrower;
(k) The Settlement has a Purchase Yield no less than the ING CoF plus seven
and one-half percent (7.50%);
(l) The Borrower has taken and completed all actions reasonably required
under the UCC to protect and perfect its interest in the Settlement;
(m) Any one or more payments by the Borrower to the Seller or the Seller's
designated payee(s) of all or a part of the Purchase Price agreed upon by the
Seller and Borrower in the Purchase Agreement have been, or will be, duly
authorized by an Authorized Officer of the Borrower; and
(n) All of the applicable Eligible Settlement Purchase Procedures have been
completed;
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(o) the Borrower has (i) obtained and maintains a life insurance policy on
the life of the Seller related to such Settlement Agreement in an amount
sufficient to fund the aggregate amount of all non-guaranteed Periodic Payments,
if any, due or to become due in respect of such Settlement Agreement and (ii)
caused the collateral assignment of the beneficial interest in respect of such
life insurance policy in favor of the Agent, for the benefit of itself, the
Servicing Agent and the Lenders; and
(p) in the event that any Obligor of, or the Designated Annuity Funding
Company in respect of, such Settlement may, at its option, upon the death of the
Seller related to such Settlement, prepay any Periodic Payments to become due
thereunder, the discount rate applicable to such prepayment shall not exceed the
Purchase Yield in respect of such Settlement.
ARTICLE 5. COVENANTS OF THE BORROWER
SECTION 5.1 Affirmative Covenants. So long as any Obligations shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower will,
unless the Required Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property except
to the extent contested in good faith.
(b) Reporting Requirements. Furnish to the Agent (with sufficient copies
for each Lender):
(i) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, a copy of the audited
financial statements for such year for the Borrower, containing financial
statements for such year certified in a manner acceptable to the Agent by
Coopers & Lybrand or other independent public accountants acceptable to the
Agent;
(ii) as soon as available and in any event within twenty (20) Business
Days after the end of each month, financial statements of the Borrower,
including, but not limited to, a balance sheet and income statement, as of
the end of such month, certified by the chief financial officer of the
Borrower;
(iii) as soon as possible and in any event within five (5) days after
the occurrence of each Potential Default or Event of Default, a statement
of the chief financial officer of the Borrower setting forth the nature and
period of existence of such Potential Default or Event of Default and the
action which the Borrower has taken and proposes to take with respect
thereto;
(iv) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to any of its Partners, and copies of all
reports and registration statements which the Borrower files with the
Securities and Exchange Commission or any national securities exchange;
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(v) promptly after the filing or receiving thereof, copies of all
reports and notices which the Borrower files under ERISA, with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which the Borrower receives from such entity;
(vi) promptly after the Borrower knows that any Reportable Event has
occurred with respect to any Plan, the occurrence of which could reasonably
be expected to have a material adverse effect on the financial condition of
the Borrower and its Subsidiaries taken as a whole, and, in any event,
within thirty (30) days after the Borrower knows that any Reportable Event
has occurred with respect to any Plan, a statement, signed by an Authorized
Officer of the Borrower, describing said Reportable Event and the action
which the Borrower proposes to take with respect thereto; and
(vii) such other information respecting the condition or operations,
financial or otherwise, of the Borrower as the Agent or any Lender may from
time to time reasonably request.
(c) Settlement Reporting. Furnish to the Agent:
(i) as soon as available and in any event within seven (7) Business
Days after the end of each month, a report (the "Monthly Report") in the
form of Exhibit M attached hereto or such other form satisfactory to the
Agent in its commercially reasonable discretion related to all Purchased
Settlements as of the last Business Day of the immediately preceding month
setting forth (i) each Delinquent Settlement (with an explanation for such
status) as of the end of such month, (ii) each Settlement which has been
returned to the Servicer pursuant to Section 3.3 of the Servicing Agreement
as of the end of such month, (iii) the Weighted Average Maturity for each
Claim Group, (iv) the present value of the Purchased Settlements, (v) the
Delinquency Ratio, (vi) the excess of the Net Pool Weighted Average Yield
over the Weighted Average Forward Rate of all outstanding Settlement
Advances and Settlement Differential Advances which are not Match Funded,
as of the next succeeding Monthly Payment Date, and (vii) the aggregate
value of all of the Purchased Settlements, together, in each case, with the
calculations thereof in a form satisfactory to the Agent in its
commercially reasonable discretion;
(ii) on the Commitment Termination Date, a report identifying each
Purchased Settlement on the day immediately preceding the Commitment
Termination Date;
(iii) upon the Agent's request, on any day, a report identifying each
Purchased Settlement on such day; and
(iv) with each Notice of Borrowing, and no less than weekly, on the
first Wednesday following the end of each calendar week (to the extent not
delivered earlier in any such week in accordance with this clause), a fully
completed Borrowing Base Certificate;
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(d) UCC Matters; Protection and Perfection of Security Interests. Keep its
principal place of business and chief executive office, and the office where it
keeps its records, at the address of the Borrower referred to in Section 4.1(j),
or, upon thirty (30) days' prior written notice to the Agent, the Servicing
Agent and the Lenders, at such other locations within the United States where
all actions necessary reasonably requested by the Agent to protect and perfect
the interest of the Agent in the Collateral have been taken and completed. The
Borrower will not make any change to its name or use any tradenames, fictitious
names, assumed names or "doing business as" names, unless prior to the effective
date of any such name change or use, the Borrower delivers to the Agent such
executed financing statements as the Agent may request to reflect such name
change or use, together with such other documents and instruments as the Agent
may request in connection therewith. The Borrower agrees that from time to time,
at its expense, it will promptly execute and deliver all further instruments and
documents, and take all further action necessary and/or reasonably required by
the Agent to perfect, protect or more fully evidence the interest in the
Purchased Settlements acquired by the Borrower under the applicable Purchase
Agreements, or to enable the Agent to exercise or enforce any of its rights
hereunder. Without limiting the generality of the foregoing, upon the request of
the Agent, the Borrower will execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate or as the Agent may
require. The Borrower hereby authorizes the Agent to file one or more financing
or continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Collateral and the Collections now existing or
hereafter arising without the signature of the Borrower where permitted by law.
A carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement.
(e) Access to Certain Documentation and Information Regarding the
Settlements.
(i) Provide the Agent, the Lenders and/or any of their respective duly
authorized representatives, attorneys or accountants access to any and all
documentation that the Borrower may possess regarding the Settlements, such
access being afforded without charge, but only upon reasonable request and
during normal business hours, so as not to interfere unreasonably with the
Borrower's normal operations, at the office of the Borrower.
(ii) Maintain with respect to Purchased Settlements, accounts and
records as to each Purchased Settlement that are accurate and sufficiently
detailed so as to permit (x) the reader thereof to know as of the most
recently ended calendar month the status of each Purchased Settlement
including payments made and payments owing (and whether or not such
payments are past due), and (y) reconciliation of payments on each
Purchased Settlement and the amounts from time to time deposited in the
Collection Account in respect thereof.
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(f) Accounting System. Maintain a financial accounting system determined by
Coopers & Lybrand or such other independent certified public accountants
acceptable to the Agent on an ongoing basis to be adequate (to the extent that
the procedures contained in such system are complied with) to generate timely,
accurate and complete financial records of the Borrower.
(g) Existence and Rights; Compliance with Laws. Preserve and keep in full
force and effect its limited partnership existence, rights, permits, patents,
franchises, licenses, trademarks and trade names and obtain and preserve its
qualification to do business as a foreign entity in each jurisdiction in which
such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and comply in all material respects with any
and all Laws which may at any time be applicable to it.
(h) Books and Records. Maintain proper and complete financial and
accounting books and records.
(i) Taxes. Pay when due all taxes, assessments, charges and levies imposed
upon it or any of its respective properties or which it is required to withhold
and pay over, and provide evidence of such payment to the Agent if requested,
except where such taxes, assessments or charges shall be contested in good faith
by appropriate proceedings and where adequate reserves therefor have been set
aside on its books, provided that Borrower shall pay or cause to be paid all
such taxes, assessments, charges, and levies in excess, individually or in the
aggregate, in excess of $50,000 or if any Lien is or is reasonably likely to be
filed with respect thereto against the assets of the Borrower. Within ten (10)
days of the Agent's request therefor, Borrower will furnish the Agent with
copies of federal income tax returns filed by the Borrower.
(j) Maintenance of Properties. Maintain all of its tangible property
(except for obsolete property not yet disposed of) in good repair, working order
and condition and, from time to time, make all appropriate and proper repairs,
renewals, replacements, additions and improvements thereto.
(k) Performance and Compliance with Material Agreements. Perform and comply
with each of the provisions of all material agreements of the kind described in
Section 4.1(g) to which it is a party.
(l) Litigation. Give prompt notice to the Agent, the Servicing Agent and
each Lender, of all litigation or proceedings affecting it which, (a) if
adversely determined, could have a Material Adverse Effect, or (b) in any event,
in which damages exceeding $200,000 (if such damages would be covered by
insurance) or $100,000 (if such damages would not be covered by insurance) are
claimed (whether or not the claim is considered to be covered by insurance) in
respect of any litigation or proceeding, or any series of related litigation or
proceedings, or, in the aggregate in respect of all litigation and proceedings
occurring during any twelve (12) month period.
(m) Notice of Defaults. Within one Business Day after becoming aware
thereof, notify the Agent, the Servicing Agent and each Lender promptly of the
occurrence of any Event of Default or Potential Default hereunder, which notice
shall describe such event and the actions which the Borrower intends to take
with respect thereto.
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(n) Change of Business Location; Change of Lock-Boxes, Collection Accounts,
or Lock-Box Banks. (i) Notify the Agent at least thirty (30) days in advance of
(x) any change in the location of the principal place of business of the
Borrower, (y) the establishment of any new, or the discontinuance of any
existing, place of business, or (z) any change to its name or of the use of any
tradenames, fictitious names, assumed names or "doing business as" names, and,
in each case, execute, deliver, and file (and, if necessary, pay related filing
fees and taxes) all such documents as may be necessary or advisable in the
opinion of the Agent and the Agent's legal counsel to continue to perfect and
protect the Liens of the Agent in the Collateral (including, without limitation,
UCC financing statements). Notwithstanding anything contained herein to the
contrary, the Borrower may not move its principal place of business to a
location outside of the United States.
(ii) Notify the Agent at least thirty (30) days in advance of
terminating any Lock-Box, Collection Account or Lock-Box Bank, and provide
for such termination and handling procedures for Collections previously
directed to be sent thereto as shall be acceptable to the Agent in its
commercially reasonable judgment. Notify the Agent at least ten (10) days
in advance of adding any new lock-box, bank account or bank as a new
Lock-Box, Collection Account or Lock-Box Bank and, prior to directing any
Obligors or Designated Annuity Funding Company to remit Collections
thereto, deliver a fully executed Lock-Box Agreement with respect to any
such new Lock-Box, Collection Account or Lock-Box Bank, as applicable, to
the Agent.
(iii) Agree that, from time to time, at its expense, it will promptly
execute and deliver all further instruments and documents, and take all
further action that the Agent may reasonably request in order to perfect,
protect or more fully evidence the Agent's interest in the Purchased
Settlements, or to enable the Agent to exercise or enforce any of its
rights hereunder. Without limiting the generality of the foregoing, the
Borrower will, upon the request of the Agent, execute and file such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate or as the Agent may reasonably request. The Borrower hereby
authorizes the Agent to file one or more financing or continuation
statements, and amendments thereto and assignments thereof, relative to all
or any of the Purchased Settlements and the other collateral now existing
or hereafter arising without the signature of the Borrower where permitted
by law.
(o) Payment of Obligations. Pay all Permitted Indebtedness when due in
accordance with the terms thereof; provided, however, that unless an Event of
Default or Potential Default is then continuing or would result therefrom, the
Borrower shall be permitted to prepay any such obligations owing to any Person
other than an Affiliate.
(p) Fidelity Insurance. Maintain, at its own expense, a fidelity insurance
policy, with broad coverage with responsible companies on all officers,
employees or other persons acting on behalf of the Borrower in any capacity with
regard to the Purchased Settlements to handle
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documents and papers related thereto. Any such fidelity insurance shall protect
and insure the Borrower against losses, including forgery, theft, embezzlement,
and fraud, and shall be maintained in an amount of at least $5,000,000, and in a
form acceptable to the Agent in its commercially reasonable judgement. No
provision of this Section 5.1(p) requiring such fidelity insurance shall
diminish or relieve the Borrower from its duties and obligations as set forth in
this Agreement. The Borrower shall be deemed to have complied with this
provision if one of its respective Affiliates has such fidelity policy coverage
and, by the terms of such fidelity policy, the coverage afforded thereunder
extends to the Borrower. Upon the request of the Agent at any time subsequent to
the Closing Date, the Borrower shall cause to be delivered to the Agent a
certification evidencing coverage under such fidelity policy. Any such insurance
policy shall not be cancelled or modified in a materially adverse manner without
ten (10) days' prior written notice to the Agent, the Servicing Agent and each
Lender.
(q) Opinion Updates. The Borrower shall provide the Agent with updated
opinions on each five-year anniversary of the Closing Date, with respect to the
opinion described in Section 3.1(i).
SECTION 5.2 Negative Covenants. So long as any Obligations shall remain
unpaid or any of the Lenders shall have any Commitment hereunder, the Borrower
will not, without the written consent of the Required Lenders:
(a) Business Activities. Conduct any business other than
(1) the acquisition from time to time of any or all right, title and
interest in and to any right to receive one or more pre-scheduled deferred
payments including (i) any right to the underlying payments of Eligible
Settlements including payments arising out of claims on insurance policies
related thereto, (ii) any rights to payments of awards from lotteries operated
or sanctioned by federal, state or local governmental authorities and (iii) any
other asset consisting of the right held by any Person to receive one or more of
such pre-scheduled deferred payments whether arising under contract, a claim at
law, judicial award, gift, bequest or otherwise (collectively, the "Payment
Contracts");
(2) the execution and delivery by the Borrower from time to time of
agreements, each between the Borrower, as transferee, and one or more other
parties, including Affiliates, as transferors (collectively, the "Payment
Contracts Seller"), to effect the transfer from the Payment Contracts Seller to
the Borrower of various Payment Contracts and any related insurance policies and
any proceeds or further associated rights (the "Related Security") agreed upon
by the Borrower and the Payment Contracts Seller, in each case pursuant to the
terms of one or more agreements providing therefor;
(3) the execution and delivery by the Borrower from time to time of
agreements, each between the Borrower, as transferor, and one or more other
parties, including Affiliates, as transferees (collectively, the "Payment
Contracts Buyer"), to effect the transfer from the Borrower to the Payment
Contracts Buyer of various Payment Contracts and any Related Security agreed
upon by the Borrower and the Payment Contracts Buyer, in each case pursuant to
the terms of one or more agreements providing therefor;
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(4) the conveyance by the Borrower from time to time of Payment Contracts
and/or any Related Security into one or more trusts or other issuing vehicles
(each, an "Issuing Vehicle") that will issue interests in or debt secured by
Payment Contracts and any Related Security (such interests and/or debt,
collectively, the "Issuing Vehicle Securities"), in each case pursuant to the
terms of one or more agreements providing therefor;
(5) the establishment by the Borrower from time to time of Issuing Vehicles
for the issuance and sale of Issuing Vehicle Securities, in each case pursuant
to the terms of the agreement providing therefor;
(6) the execution and delivery by the Borrower from time to time of
underwriting agreements and purchase agreements related to the sale of Issuing
Vehicle Securities by the Borrower;
(7) the performance by the Borrower of all of its obligations under the
aforementioned agreements;
(8) the preparation, execution and delivery of any and all other documents
and agreements as may be required in connection with the performance of the
activities of the Borrower approved above; and
(9) to engage in any lawful act or activity and to exercise any powers
permitted under the Delaware ULPA that are related or incidental to the
foregoing and necessary, convenient or advisable to accomplish the foregoing.
(b) Sales, Liens, Etc. Except as permitted under the Security Agreement or
pursuant to an Approved Asset Securitization, (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of, or create or suffer to exist any Lien
upon or with respect to, any Settlement or the related Settlement Amount or
Collections, or upon or with respect to the Collection Account or any other
account to which any Collections are sent, or assign any right to receive income
in respect thereof or (ii) create or suffer to exist any Lien upon or with
respect to any of its properties, whether now owned or hereafter acquired, or
assign any right to receive income, to secure or provide for the payment of any
Indebtedness of any Person.
(c) Indebtedness. Create or suffer to exist any Indebtedness, except for
Permitted Indebtedness.
(d) Loans and Advances. Make any loans or advances to any Person.
(e) Dividends, Etc. Declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any interest in the Borrower, or purchase, redeem or otherwise
acquire for value any interest in the Borrower or any rights or options to
acquire any such interest; provided, however that so long as the Borrower is not
an organization taxable as a corporation, for each fiscal year of the Borrower,
the Borrower may make distributions to its Partners in an aggregate amount equal
to the federal, state, and local income tax liability of such Partners with
respect to income of the Borrower attributable to such Partners.
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(f) Mergers, Etc. Merge or consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire all or substantially all of the assets of,
any Person.
(g) Dissolution and Merger. Wind-up, liquidate or dissolve its affairs,
convey, sell, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its properties or assets
(whether now owned or hereafter acquired).
(h) Investments. Except pursuant to any Approved Asset Securitization, make
any investment of capital in any Person either by purchase of stock or
securities, contributions to capital, property transfer or otherwise or acquire
or agree to acquire by any manner any business or Person.
(i) Extraordinary Transactions. Except pursuant to any Approved Asset
Securitization, enter into or agree to enter into any transaction that is not in
the ordinary course of business.
(j) Change of Business or Capital Structure. (i) Change the nature of its
business or enter into a new business or (ii) change the legal form of its
business or (iii) make any change in the capital structure thereof which could
reasonably be expected to be detrimental to the interests of the Agent, the
Servicing Agent and/or any of the Lenders.
(k) Change in Agreement of Limited Partnership. Amend or modify or the
Agreement of Limited Partnership which could reasonably be expected to be
detrimental to the interests of the Agent, the Servicing Agent and/or any of the
Lenders.
(l) Bankruptcy Proceedings. (1) Commence any case, proceeding or other
action under any existing or future bankruptcy, insolvency or similar law
seeking to have an order for relief entered with respect to itself, or seeking
reorganization, arrangement, adjustment, wind-up, liquidation, dissolution,
composition or other relief with respect to itself or its debts, (2) seek
appointment of a receiver, trustee, custodian or other similar official for
itself or any part of its assets, (3) make a general assignment for the benefit
of creditors, (4) take any action in furtherance of, or consenting to or
acquiescing in, any of the foregoing, (5) initiate or support the filing of a
motion in any bankruptcy or other insolvency proceedings involving any of its
Affiliates to substantively consolidate itself with any such Person.
(m) Deposits in Lock-Box or the Collection Accounts. (i) Deposit at any
time any proceeds of any Collateral in any of the Borrower's bank accounts other
than the Collection Account, (ii) direct any Obligor or Designated Annuity
Funding Company to make any payments of any Settlements to any other destination
other than a Lock-Box or the Collection Account or (iii) permit the assets of
any Person (other than the Borrower) to be deposited into any of the Lock-Boxes
or the Collection Accounts.
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(n) Limitation of Overhead Expenses. Incur in any month Overhead Expenses
in excess of 125% of the Approved Working Capital Budget for such month.
ARTICLE 6. EVENTS OF DEFAULT
SECTION 6.1 Events of Default. Each of the following events shall
constitute an "Event of Default" hereunder:
(a) (i) The Borrower shall fail to make any required payment of principal
or interest when due hereunder and such failure shall continue unremedied for
three (3) Business Days thereafter or (ii) the Borrower shall fail to make any
required payment on any other Obligation when due hereunder and such failure
shall continue unremedied for twenty (20) days after notice to the Borrower from
the Agent, the Servicing Agent or any Lender.
(b) The Borrower or the General Partner shall be the subject of an
Insolvency Event and, in the case of any involuntary Insolvency Event instituted
against the Borrower or the General Partner either such Insolvency Event remains
undismissed for thirty (30) days or any of the remedies sought in any such
proceeding are granted;
(c) Any representation or warranty made or deemed to be made by the
Borrower (or any of its officers or managers) under or in connection with this
Agreement or a Monthly Report or other information or report delivered pursuant
hereto shall prove to have been false or incorrect in any material respect when
made; or
(d) The Borrower shall fail to perform or observe any other material term,
covenant or agreement, except as described in Sections 6.1(a) or 6.1(c),
contained in this Agreement, the Security Agreement, the Servicing Agreement or
any other agreement or document executed in connection herewith or therewith on
its part to be performed or observed and any such failure shall remain
unremedied for twenty (20) days after written notice thereof shall have been
given by the Agent to the Borrower; or
(e) The Borrower shall fail to perform any reporting requirements contained
in this Agreement, and in the case of audited financial statements, monthly
financial reports, and all other reports, agreements or documents, such failure
to perform shall remain unremedied for twenty (20), ten (10), and five (5)
Business Days, respectively; or
(f) The Delinquency Ratio with respect to Settlements for any three
consecutive Collection Periods shall equal or exceed ten percent (10.00%); or
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(g) There shall have been any Material Adverse Change in the financial
condition or operations of the Borrower or the General Partner or there shall
have occurred any event which has a Material Adverse Effect on the
collectibility of all or a portion of the Purchased Settlements or the
enforceability of the Purchased Settlements, Purchase Agreements, or the Notices
of Direction of Payments, or there shall have occurred any other event which has
a Material Adverse Effect on the ability of the Borrower to perform hereunder;
or
(h) The Borrower shall become, or become controlled by, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended;
or
(i) The Borrower or the General Partner shall fail to pay any principal of
or interest on any Indebtedness (excluding the Indebtedness evidenced by the
Revolving Loan Notes), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in such agreement or instrument, if the effect of such default is to accelerate,
or permit the acceleration of, the maturity of such Indebtedness; or any such
Indebtedness shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled required prepayment) prior to the stated
maturity thereof; or
(j) the aggregate of the Values of all Eligible Settlements owing by (i) to
the extent such Eligible Settlements are not funded by Qualified Annuities, any
Obligor thereof or (ii) to the extent such Eligible Settlements are funded by
Qualified Annuities, any applicable Designated Annuity Funding Company, which,
in either case, is the subject of an Insolvency Event, shall be equal to or
greater than ten percent (10.00%) of the aggregate of the Values of all of the
Eligible Settlements; or
(k) Any of the following events shall occur:
(i) any two of James Delaney, Gary Veloric or Michael Goodman shall for any
reason terminate their active participation in the conduct of the Borrower's
business or are removed as directors of the General Partner; or
(ii) the General Partner shall cease to be directly or indirectly
controlled by Messrs. Delaney, Veloric and/or Goodman.
(l) Any Class A Partner (as defined in the Agreement of Limited
Partnership) fails to make the additional capital contributions to the Borrower
required by Section 3.3(a) of the Agreement of Limited Partnership; or
(m) The Agent shall cease to have a first priority perfected security
interest in all of the Collateral;
(n) A Servicer Default shall occur and shall either (i) remain unremedied
or (ii) the defaulting Servicer shall not have been replaced, in either case,
within sixty (60) days after notice thereof is given by the Agent or any Lender
to the Servicer and the Borrower;
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(o) (i) the aggregate outstanding principal amount of Advances (other than
Discretionary Non-Ratable Advances) shall exceed the Borrowing Base for one (1)
Business Day or (ii) the aggregate outstanding principal amount of all
Discretionary Non-Ratable Advances shall exceed the Discretionary Non-Ratable
Advances Borrowing Base for (1) Business Day;
(p) The aggregate of (i) the Unfunded Liabilities of all Single Employer
Plans; (ii) in the event that any member of the Controlled Group shall withdraw
from any Multiemployer Plan, or any Multiemployer Plan shall be in
"Reorganization" or shall be "Insolvent", as defined in ERISA, in each case, if
the Reorganization or Insolvent status continues unremedied for thirty (30)
days, in any such case, the aggregate amount of any liability of the Borrower
and its Subsidiaries resulting from such withdrawal, Reorganization or Insolvent
status; and (iii) in the event that (A) any Person shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Internal Revenue Code of 1986, as amended from time to time) involving any
Plan, (B) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, for which an excise tax is due or would be due in
the absence of a waiver, shall exist with respect to any Plan, (C) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Required Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, and, in the case of a Reportable Event, the continuance of
such Reportable Event unremedied for ten (10) days after notice of such
Reportable Event pursuant to Section 4043(a), (d) or (e) of ERISA is given and,
in the case of the commencement of proceedings, the continuance of such
proceedings for ten (10) days after commencement thereof, (D) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, or (E) any
other event or condition shall occur or exist with respect to any Plan; and in
each case in clauses (A) through (E) of this Section 6.1(p), such event or
condition, together with all other such events or conditions, if any, could
reasonably be expected to subject the Borrower or any of the Subsidiaries to any
tax, penalty or other liabilities, such aggregate amount of tax, penalty, or
other liabilities; shall in the aggregate, exceed $50,000;
(q) A breach of Section 8.8(c) of the Agreement of Limited Partnership
shall occur; or
(r) the Net Pool Weighted Average Yield on those Purchased Settlements that
are Eligible Settlements that are allocated to a Matched Group shall be less
than a per annum rate equal to (i) the weighted average of the Fixed Rates on
all Match Funded Advances plus (ii) two percent (2%).
SECTION 6.2 Remedies.
(a) Termination. Immediately upon the occurrence of an Event of Default as
described in Section 6.1(b), the Commitment Termination Date and the Facility
Termination Date shall be deemed to have occurred automatically and all of the
Advances then outstanding, all interest thereon and all other amounts payable by
the Borrower hereunder shall automatically
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become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrower,
anything herein to the contrary notwithstanding. Upon the occurrence of any
other Event of Default or at any time thereafter during the continuation of such
Event of Default, the Agent may (and, at the direction of the required
constituency of Lenders which would be required to waive any such Event of
Default, shall), if the Commitment Termination Date hereunder has not
theretofore occurred, declare the Commitment Termination Date to have occurred
and declare the Commitments of all of the Lenders and their respective
obligations to make Advances, and the Servicing Agent's obligations to make
Advances, to be terminated, whereupon the same shall forthwith terminate and all
of the Advances then outstanding, all interest thereon and all other amounts
payable by the Borrower hereunder shall immediately thereupon become and be due
and payable, without presentment, demand, protest or any notice of any kind, all
of which are hereby expressly waived by the Borrower, anything herein to the
contrary notwithstanding.
(b) Additional Remedies. Upon the occurrence and during the continuation of
an Event of Default, the Agent shall have, in addition to all other rights and
remedies under this Agreement and the other Advance Documents, all other rights
and remedies provided under the UCC of each applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
ARTICLE 7. MISCELLANEOUS
SECTION 7.1 Amendments, Etc. Subject to the provisions of this Article 7,
the Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Advance Documents or
changing in any manner the rights of the Lenders or the Borrower hereunder or
waiving any Default hereunder (in each case, except as provided below);
provided, however, that no such supplemental agreement shall, without the
consent of each Lender affected thereby:
(i) Postpone or extend the Commitment Termination Date, the Facility
Termination Date, the Scheduled Commitment Termination Date or any other
date fixed for any payment of principal of, or interest on, the Advances or
any fees or other amounts payable to such Lender;
(ii) Reduce the principal amount of any outstanding Advances, or
reduce the rate or extend the time of payment of interest or fees thereon;
(iii) Reduce the percentage specified in the definition of Required
Lenders or any other percentage of Lenders specified to be the applicable
percentage in this Agreement to act on specified matters;
(iv) Change the amount of the Commitment of any Lender hereunder;
(v) Permit the Borrower to assign its rights under this Agreement;
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(vi) Amend Section 2.9 or this Section 7.1;
(vii) Release any guarantor of the Obligations or all or substantially
all of the Collateral;
and, provided, further, that no such supplemental agreement shall, without the
consent of the Supermajority Lenders:
(i) Amend the definition of "Borrowing Base", "Designated Annuity
Funding Company Concentration Amount", "Designated Annuity Funding Company
Concentration Limit", "Eligible Settlement", "Post-Asset Securitization
Annuity Provider Concentration Amount", "Post-Asset Securitization Annuity
Provider Concentration Limit", "Settlement Concentration Amount",
"Settlement Concentration Limit", and "Value"; or
(ii) Waive compliance with or any default arising under or otherwise
amend any of Sections 5.1(d), 5.1(e)(i), 5.2(e), 5.2(j), 5.2(k), 5.2(l),
5.2(m)(ii), 6.1(a), 6.1(b), 6.1(d) (to the extent related to the
noncompliance with any other section referred to in this clause (ii)),
6.1(f), 6.1(g) (to the extent the Supermajority Lenders have agreed that a
Material Adverse Change has occurred pursuant to Section 6.1(g)), 6.1(h),
6.1(j) 6.1(k), 6.1(m), 6.1(o), 6.1(q) or 6.1(r).
No amendment of any provision of this Agreement or the Servicer Agreement
relating to the Agent shall be effective without the written consent of the
Agent. No amendment of any provision of this Agreement or the Servicer Agreement
relating to the Servicing Agent shall be effective without the written consent
of the Agent and the Servicing Agent.
SECTION 7.2 Notices, Etc. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex or cable
communication) and mailed, telegraphed, telexed, cabled or delivered, if to the
Borrower, at its address at The Graham Building, 15th and Ranstead Streets,
Philadelphia, Pennsylvania 19102, Attention: Gary Veloric; if to the Agent, at
its address at 135 East 57th Street, 9th Floor, New York, New York 10022,
Attention: Structured Finance - Robert L. Novick, Facsimile No.: (212) 593-3362;
and if to the Servicing Agent, at its address at PNC Bank Center, 1600 Market
Street, 31st Floor, Philadelphia, Pennsylvania 19103, Attention: Thomas A.
Gutman, Facsimile No.: (215) 585-8351 or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
party. All such notices and communications shall be effective, upon receipt, or
in the case of (i) notice by mail, upon return of the completed delivery receipt
when sent via United States certified mail, or (ii) notice by overnight courier,
one Business Day after being deposited with a national overnight courier
service, except that notices and communications to the Agent or the Servicing
Agent, as applicable, pursuant to Article 2 shall not be effective until
received by the Agent or the Servicing Agent, as applicable,.
SECTION 7.3 No Waiver; Remedies. No failure on the part of the Agent, the
Servicing Agent or any Lender to exercise, and no delay in exercising, any right
hereunder or under the Revolving Loan Notes shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
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SECTION 7.4 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with those applied
in the preparation of the financial statements referred to in Section 5.1(b).
SECTION 7.5 Costs, Expenses and Taxes; Indemnification. The Borrower agrees
to pay all costs and expenses in connection with the preparation, execution,
delivery, filing, recording, administration, modification and amendment of this
Agreement, the Revolving Loan Notes and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent and the Servicing Agent with respect thereto
and with respect to advising the Agent as to its rights and responsibilities
under this Agreement pursuant to the terms of the Fee Letter. The Borrower
further agrees to pay on demand all costs and expenses, if any (including
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Revolving Loan Notes and the other documents to be delivered
hereunder, including, without limitation, reasonable counsel fees and expenses
in connection with the enforcement of rights under this Section 7.5. In
addition, the Borrower shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the Revolving Loan Notes and the other documents to be delivered
hereunder, and agrees to save the Agent, the Servicing Agent and each Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes.
The Borrower further agrees to (i) reimburse the Agent, the Servicing Agent
and each Lender for any reasonable costs and expenses (including, without
limitation, attorneys' and paralegals' fees and expenses) incurred by the Agent
in defending any suit brought against it by the Borrower or any other Person in
connection with the transactions contemplated by this Agreement, and (ii)
indemnify and hold the Agent, the Servicing Agent and each Lender, and their
respective officers, directors, employees, attorneys and agents (collectively,
the "Indemnitees") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever incurred by such
Indemnitees, whether direct, indirect or consequential, as a result of or
arising from or relating to any proceeding by any Person, whether threatened or
initiated, asserting any claim for legal or equitable remedy against any Person
under any statute or regulation, including, without limitation, any federal or
state usury laws or under any common law or equitable cause or otherwise arising
from or in connection with the negotiation, preparation, execution, delivery,
enforcement, performance and administration of this Agreement or any other
document executed in connection herewith, provided that the Borrower shall have
no obligation hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of such Indemnitee seeking such
indemnification. Each Indemnitee will promptly notify the Borrower of the
commencement of any legal proceeding which may give rise to any indemnified
liability under the foregoing indemnity and shall permit the Borrower to
participate in the defense of any Indemnitee in any such proceeding and shall
consult with the Borrower prior to agreeing to any settlement related thereto
(provided that the Indemnitees retain the sole right to agree to any such
settlement). The foregoing indemnity shall survive the payment of the
Obligations and the termination of this Agreement. All of the foregoing fees,
costs and expenses shall be part of the Obligations, payable upon demand, and
secured by the Collateral.
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SECTION 7.6 Right of Set-off; Ratable Payments; Relations Among Lenders.
(a) Upon the occurrence and during the continuance of any Event of Default, each
of the Agent, the Servicing Agent and the Lenders are hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by the
Agent, the Servicing Agent or such Lender to or for the credit or the account of
the Borrower against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement and the Revolving Loan Notes, whether or
not the Agent, the Servicing Agent or such Lenders shall have made any demand
under this Agreement or the Revolving Loan Notes and although such obligations
may be unmatured. The Agent, the Servicing Agent and each Lender agrees promptly
to notify the Borrower after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Agent, the Servicing Agent and the Lenders under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Agent, the Servicing Agent and
the Lenders may have.
(b) If any Lender, other than the Servicing Agent in its capacity as the
Servicing Agent at any time prior to the election of the Daily Settlement
Option, whether by setoff or otherwise, has payment made to it upon its Advances
in a greater proportion than that received by any other Lender (other than with
respect to Discretionary Non-Ratable Advances), such Lender agrees, promptly
upon demand, to purchase a portion of the Advances held by the other Lenders so
that after such purchase each Lender will hold its ratable proportion of
Advances. If any Lender, whether in connection with setoff or amounts which
might be subject to setoff or otherwise, receives collateral or other protection
for its Obligation or such amounts which may be subject to setoff, such Lender
agrees, promptly upon demand, to take such action necessary such that all
Lenders share in the benefits of such collateral ratably in proportion to the
obligations owing to them. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
(c) (i) Except with respect to the exercise of set-off rights of any Lender
in accordance with Section 7.6(a), the proceeds of which are applied in
accordance with this Agreement, and except as set forth in the following
sentence, each Lender agrees that it will not take any action, nor institute any
actions or proceedings, against the Borrower or any other obligor hereunder or
with respect to any Collateral or Advance Document, without the prior written
consent of the Required Lenders or, as may be provided in this Agreement or the
other Advance Documents, at the direction of the Agent.
(ii) The Lenders are not partners or co-venturers, and no Lender shall
be liable for the acts or omissions of, or (except as otherwise set forth
herein in case of the Agent and the Servicing Agent) authorized to act for,
any other Lender.
SECTION 7.7 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Agent, the Servicing Agent and each
Lender, and their
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respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Agent, the Servicing Agent and the Required Lenders. Each
Lender may assign to one or more banks or other entities all or any part or
portion of, or may grant participations to one or more banks or other entities
in all or any part or portion of its rights and obligations hereunder
(including, without limitation, its Commitment, its Revolving Loan Notes or its
Advances); provided, however, that each such assignment (i) shall be in form and
substance acceptable to the Agent and (ii) shall be to a bank or other financial
institution which is acceptable to the Agent in its sole discretion; provided,
further, however, that no such assignment shall be permitted without the
Borrower's prior written consent (which consent shall not be unreasonably
withheld) unless a Default or Potential Default shall have occurred and be
continuing at the time thereof. The Agent shall provide information regarding
such assignments to the Servicing Agent as is necessary to allow the Servicing
Agent to properly fulfill its obligations hereunder, and the Servicing Agent
shall be entitled to rely on such information provided by the Agent without any
independent investigation or analysis. Upon, and to the extent of, any
assignment (unless otherwise stated therein) made by any Lender hereunder, the
assignee or purchaser of such assignment shall be a Lender hereunder for all
purposes of this Agreement. Without limiting the foregoing, each assignee and
each purchaser of an assignment or participation shall, to the fullest extent
permitted by law, have the same rights and benefits hereunder with respect to
the rights and benefits so assigned or participated as it would have if it were
a Lender hereunder.
SECTION 7.8 Effect on Limited Partners. This Agreement and the Revolving
Loan Notes do not represent a debt, liability, or obligation of any limited
partner of the Borrower or any shareholder of the General Partner, and none of
such shareholders of the General Partner or any other Persons shall have any
liability for the Borrower's debts, liabilities or other Obligations under this
Agreement, the Revolving Loan Notes and the Servicing Agent Notes.
SECTION 7.9 GOVERNING LAW. THIS AGREEMENT AND THE REVOLVING LOAN NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
SECTION 7.10 Section Headings. All section headings are inserted for
convenience of reference only and shall not affect any construction or
interpretation of this Agreement.
SECTION 7.11 Tax Characterization. The parties hereto intend for the
transactions effected hereunder to constitute a financing transaction for
federal taxation purposes.
SECTION 7.12 Execution. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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ARTICLE 8. THE AGENT
SECTION 8.1 Appointment; Nature of Relationship. ING Capital is appointed
by the Servicing Agent and the Lenders as the Agent hereunder and under each
other Advance Document, and each of the Servicing Agent and the Lenders
irrevocably authorizes the Agent to act as the contractual representative of the
Servicing Agent and such Lender with the rights and duties expressly set forth
herein and in the other Advance Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this Article
8. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall not have any fiduciary
responsibilities to the Servicing Agent or any Lender by reason of this
Agreement and that the Agent is merely acting as the representative of the
Servicing Agent and the Lenders with only those duties as are expressly set
forth in this Agreement and the other Advance Documents. In its capacity as the
Servicing Agent's and the Lenders' contractual representative, the Agent (i)
does not assume any fiduciary duties to any of the Servicing Agent or the
Lenders, (ii) is a "representative" of the Servicing Agent and the Lenders
within the meaning of Section 9-105 of the Uniform Commercial Code as in effect
in the State of New York and (iii) is acting as an independent contractor, the
rights and duties of which are limited to those expressly set forth in this
Agreement and the other Advance Documents. Each of the Servicing Agent and the
Lenders agrees to assert no claim against the Agent on any agency theory or any
other theory of liability for breach of fiduciary duty, all of which claims the
Servicing Agent and each Lender waives.
SECTION 8.2 Powers. The Agent shall have and may exercise such powers under
the Advance Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties or fiduciary duties to the Servicing
Agent or the Lenders, or any obligation to the Servicing Agent or the Lenders to
take any action hereunder or under any of the other Advance Documents except any
action specifically provided by the Advance Documents required to be taken by
the Agent.
SECTION 8.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Servicing
Agent, the Lenders or any Lender for any action taken or omitted to be taken by
it or them hereunder or under any other Advance Document or in connection
herewith or therewith except to the extent such action or inaction is found in a
final non-appealable judgment by a court of competent jurisdiction to have
arisen solely from (i) the gross negligence or willful misconduct of such Person
or (ii) breach of contract by such Person with respect to the Advance Documents.
SECTION 8.4 No Responsibility for Advances, Creditworthiness, Collateral,
Recitals, Etc. Neither the Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into,
or verify (i) any statement, warranty or representation made in connection with
any Advance Document or any borrowing hereunder; (ii) the performance or
observance of any of the covenants or agreements of any obligor under any
Advance Document; (iii) the satisfaction of any condition specified in Article
3, except receipt of items required to be delivered solely to the Agent; (iv)
the existence or possible existence of any Default or (v) the validity,
effectiveness or genuineness of any Advance Document or any other instrument or
writing
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furnished in connection therewith. The Agent shall not be responsible to the
Servicing Agent or any Lender for any recitals, statements, representations or
warranties herein or in any of the other Advance Documents, for the perfection
or priority of any of the Liens on any of the Collateral, or for the execution,
effectiveness, genuineness, validity, legality, enforceability, collectibility,
or sufficiency of this Agreement or any of the other Advance Documents or the
transactions contemplated thereby, or for the financial condition of any
guarantor of any or all of the Obligations, the Borrower or any of their
respective Subsidiaries.
SECTION 8.5 Action on Instructions of Lenders. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Advance Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders, the Servicing Agent and
on all holders of Revolving Loan Notes. The Agent shall be fully justified in
failing or refusing to take any action hereunder and under any other Advance
Document unless it shall first be indemnified to its satisfaction by the Lenders
pro rata against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.
SECTION 8.6 Employment of Agents and Counsel. The Agent may execute any of
its duties as the Agent hereunder and under any other Advance Document by or
through employees, agents, and attorney-in-fact and shall not be answerable to
the Servicing Agent or the Lenders, except as to money or securities received by
it or its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Agent shall be
entitled to advice of counsel concerning the contractual arrangement between the
Agent, the Servicing Agent and the Lenders and all matters pertaining to the
Agent's duties hereunder and under any other Advance Document.
SECTION 8.7 Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Revolving Loan Note, notice, consent, certificate, affidavit,
letter, telegram, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons, and, in
respect to legal matters, upon the opinion of counsel selected by the Agent,
which counsel may be employees of the Agent.
SECTION 8.8 The Agent's Reimbursement and Indemnification. The Lenders
agree to reimburse and indemnify the Agent ratably in proportion to their
respective Ratable Shares of any Advances (i) for any amounts not reimbursed by
the Borrower for which the Agent is entitled to reimbursement by the Borrower
under the Advance Documents, (ii) for any other expenses incurred by the Agent
on behalf of the Lenders, in connection with the preparation, execution,
delivery, administration and enforcement of the Advance Documents and (iii) for
any liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever which
may be imposed on, incurred by or asserted against the Agent in any way relating
to or arising out of the Advance Documents or any other document delivered in
connection therewith or the transactions contemplated thereby, or the
enforcement of any of the terms thereof or of any such other documents, provided
that no Lender shall be liable for any of the foregoing to the extent any of the
foregoing is found in a final non-appealable judgment by a court of competent
jurisdiction to have arisen solely from the gross negligence or willful
misconduct of the Agent.
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SECTION 8.9 Rights as a Lender. With respect to its Commitment, Advances
made by it and the Revolving Loan Note issued to it, the Agent shall have the
same rights and powers hereunder and under any other Advance Document as any
Lender and may exercise the same as through it were not the Agent, and the term
"Lender" or "Lenders", as applicable, shall, unless the context otherwise
indicates, include the Agent in its individual capacity. The Agent may accept
deposits from, lend money to, and generally engage in any kind of trust, debt,
equity or other transaction, in addition to those contemplated by this Agreement
or any other Advance Document, with the Borrower or any of its Subsidiaries in
which such Person is not prohibited hereby from engaging with any other Person.
SECTION 8.10 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Servicing Agent or any
other Lender and based on the financial statements prepared by the Borrower and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Advance
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Servicing Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Advance Documents.
SECTION 8.11 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Servicing Agent, the Lenders and the Borrower, and
the Agent may be removed at any time with or without cause by written notice
received by the Agent from the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint, on behalf of the
Borrower, the Servicing Agent and the Lenders, a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving notice of resignation, then the retiring Agent may appoint, on
behalf of the Borrower, the Servicing Agent and the Lenders, a successor Agent.
Notwithstanding anything herein to the contrary, so long as no Default has
occurred and is continuing, each such successor Agent shall be subject to
approval by the Borrower, which approval shall not be unreasonably withheld.
Such successor Agent shall be a commercial bank having capital and retained
earnings of at least $50,000,000. Upon the acceptance of any appointment as the
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder and under the other Advance Documents. After
any retiring Agent's resignation hereunder as Agent, the provisions of this
Article 8 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent hereunder
and under the other Advance Documents.
SECTION 8.12 Collateral Documents. The Servicing Agent and each Lender
authorizes the Agent to enter into each of the Collateral Documents to which it
is a party and to take all action
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contemplated by such documents. The Servicing Agent and each Lender agrees that
neither the Servicing Agent nor any Lender shall have the right individually to
seek to realize upon the security granted by any Advance Document, it being
understood and agreed that such rights and remedies may be exercised solely by
the Agent for the benefit of the Servicing Agent and the Lenders upon the terms
of the Advance Documents.
ARTICLE 9. THE SERVICING AGENT
SECTION 9.1 Appointment; Nature of Relationship. PNC Bank, National
Association is appointed by the Agent and the Lenders as the Servicing Agent
hereunder and under each other Advance Document, and each of the Agent and the
Lenders irrevocably authorizes the Servicing Agent to act as the contractual
representative of the Agent and such Lender with the rights and duties expressly
set forth herein and in the other Advance Documents. The Servicing Agent agrees
to act as such contractual representative upon the express conditions contained
in this Article 9. Notwithstanding the use of the defined term "Agent," it is
expressly understood and agreed that the Servicing Agent shall not have any
fiduciary responsibilities to the Agent or any Lender by reason of this
Agreement and that the Servicing Agent is merely acting as the representative of
the Agent and the Lenders with only those duties as are expressly set forth in
this Agreement and the other Advance Documents. In its capacity as the Agent's
and the Lenders' contractual representative, the Servicing Agent (i) does not
assume any fiduciary duties to any of the Agent or the Lenders and (ii) is
acting as an independent contractor, the rights and duties of which are limited
to those expressly set forth in this Agreement and the other Advance Documents.
Each of the Agent and the Lenders agrees to assert no claim against the
Servicing Agent on any agency theory or any other theory of liability for breach
of fiduciary duty, all of which claims the Agent and each Lender waives.
SECTION 9.2 Powers. The Servicing Agent shall have and may exercise such
powers under the Advance Documents as are specifically delegated to the
Servicing Agent by the terms of each thereof, together with such powers as are
reasonably incidental thereto. The Servicing Agent shall have no implied duties
or fiduciary duties to the Agent or the Lenders, or any obligation to the Agent
or the Lenders to take any action hereunder or under any of the other Advance
Documents except any action specifically provided by the Advance Documents
required to be taken by the Servicing Agent.
SECTION 9.3 General Immunity. Neither the Servicing Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower, the
Agent, the Lenders or any Lender for any action taken or omitted to be taken by
it or them hereunder or under any other Advance Document or in connection
herewith or therewith except to the extent such action or inaction is found in a
final non-appealable judgment by a court of competent jurisdiction to have
arisen solely from (i) the gross negligence or willful misconduct of such Person
or (ii) breach of contract by such Person with respect to the Advance Documents.
SECTION 9.4 No Responsibility for Advances, Creditworthiness, Collateral,
Recitals, Etc. Neither the Servicing Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into, or verify (i) any statement, warranty or
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representation made in connection with any Advance Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any obligor under any Advance Document; (iii) the satisfaction of
any condition specified in Article 3, except receipt of items required to be
delivered solely to the Servicing Agent; (iv) the existence or possible
existence of any Default or (v) the validity, effectiveness or genuineness of
any Advance Document or any other instrument or writing furnished in connection
therewith. The Servicing Agent shall not be responsible to the Agent or any
Lender for any recitals, statements, representations or warranties herein or in
any of the other Advance Documents, for the perfection or priority of any of the
Liens on any of the Collateral, or for the execution, effectiveness,
genuineness, validity, legality, enforceability, collectibility, or sufficiency
of this Agreement or any of the other Advance Documents or the transactions
contemplated thereby, or for the financial condition of any guarantor of any or
all of the Obligations, the Borrower or any of their respective Subsidiaries.
SECTION 9.5 Action on Instructions of Lenders. The Servicing Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
and under any other Advance Document in accordance with written instructions
signed by the Required Lenders, and such instructions and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders, the
Agent and on all holders of Revolving Loan Notes. The Servicing Agent shall be
fully justified in failing or refusing to take any action hereunder and under
any other Advance Document unless it shall first be indemnified to its
satisfaction by the Lenders pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action.
SECTION 9.6 Employment of Agents and Counsel. The Servicing Agent may
execute any of its duties as the Servicing Agent hereunder and under any other
Advance Document by or through employees, agents, and attorney-in-fact and shall
not be answerable to the Servicing Agent or the Lenders, except as to money or
securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. The Servicing Agent shall be entitled to advice of counsel
concerning the contractual arrangement between the Servicing Agent, the Agent
and the Lenders and all matters pertaining to the Servicing Agent's duties
hereunder and under any other Advance Document.
SECTION 9.7 Reliance on Documents; Counsel. The Servicing Agent shall be
entitled to rely upon any Revolving Loan Note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and, in respect to legal matters, upon the opinion of counsel selected
by the Servicing Agent, which counsel may be employees of the Servicing Agent.
SECTION 9.8 The Servicing Agent's Reimbursement and Indemnification. The
Lenders agree to reimburse and indemnify the Servicing Agent ratably in
proportion to their respective Ratable Shares of any Advances (i) for any
amounts not reimbursed by the Borrower for which the Servicing Agent is entitled
to reimbursement by the Borrower under the Advance Documents, (ii) for any other
expenses incurred by the Servicing Agent on behalf of the Lenders, in connection
with the interpretation, performance and administration of the Advance Documents
and (iii) for any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted
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against the Servicing Agent in any way relating to or arising out of the Advance
Documents or any other document delivered in connection therewith or the
transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have arisen
solely from the gross negligence or willful misconduct of the Servicing Agent.
SECTION 9.9 Rights as a Lender. With respect to its Commitment, Advances
and Servicing Agent Advances made by it and the Revolving Loan Note and
Servicing Agent Note issued to it, the Servicing Agent shall have the same
rights and powers hereunder and under any other Advance Document as any Lender
and may exercise the same as through it were not the Servicing Agent, and the
term "Lender" or "Lenders", as applicable, shall, unless the context otherwise
indicates, include the Servicing Agent in its individual capacity. The Servicing
Agent may accept deposits from, lend money to, and generally engage in any kind
of trust, debt, equity or other transaction, in addition to those contemplated
by this Agreement or any other Advance Document, with the Borrower or any of its
Subsidiaries in which such Person is not prohibited hereby from engaging with
any other Person.
SECTION 9.10 Successor Servicing Agent. The Servicing Agent may resign at
any time by giving written notice thereof to the Agent, the Lenders and the
Borrower, and the Servicing Agent may be removed at any time with or without
cause by written notice received by the Servicing Agent from the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint, on behalf of the Borrower, the Agent and the Lenders, a
successor Servicing Agent. If no successor Servicing Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Servicing Agent's giving notice of
resignation, then the retiring Servicing Agent may appoint, on behalf of the
Borrower, the Agent and the Lenders, a successor Servicing Agent.
Notwithstanding anything herein to the contrary, so long as no Default has
occurred and is continuing, each such successor Servicing Agent shall be subject
to approval by the Borrower, which approval shall not be unreasonably withheld.
Such successor Servicing Agent shall be a commercial bank having capital and
retained earnings of at least $50,000,000. Upon the acceptance of any
appointment as the Servicing Agent hereunder by a successor Servicing Agent,
such successor Servicing Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Servicing Agent,
and the retiring Servicing Agent shall be discharged from its duties and
obligations hereunder and under the other Advance Documents. After any retiring
Servicing Agent's resignation hereunder as Servicing Agent, the provisions of
this Article 9 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Servicing
Agent hereunder and under the other Advance Documents.
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IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Revolving Credit Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
J.G. WENTWORTH S.S.C. LIMITED
PARTNERSHIP, a Delaware limited partnership
By: J.G. WENTWORTH STRUCTURED
SETTLEMENT FUNDING CORPORATION, as
general partner
By:
---------------------------------------
Name:
Title:
ING (U.S.) CAPITAL CORPORATION, as Agent
and as a Lender
By:
---------------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION,
as Servicing Agent and as a Lender
By:
---------------------------------------
Name:
Title:
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ASSUMPTION AGREEMENT AND AMENDMENT NO. 2 TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS ASSUMPTION AGREEMENT AND AMENDMENT NO. 2 ("Assumption Agreement and
Amendment") is made as of September 30, 1997, by J.G. Wentworth S.S.C. Limited
Partnership, a Delaware limited partnership (the "Company"), J.G. Wentworth
Receivables II, LLC, a Delaware limited liability company ("JGW II LLC"), ING
(U.S.) Capital Corporation ("ING Capital") and PNC Bank, National Association
("PNC Bank").
Reference is hereby made to (i) that certain Amended and Restated Revolving
Credit Agreement dated as of February 11, 1997 (as amended to the date hereof,
the "Credit Agreement") among the Company, the financial institutions from time
to time parties thereto (the "Lenders"), ING Capital, in its capacity as a
Lender and as contractual representative (the "Agent") on behalf of itself and
the other Lenders, and PNC Bank, in its capacity as a Lender and as servicing
agent (the "Servicing Agent"), (ii) that certain Amended and Restated Security
Agreement dated as of February 11, 1997 (the "Security Agreement") executed by
the Company in favor of the Agent, (iii) each of the Amended and Restated
Revolving Loan Notes, dated as of February 11, 1997, of the Company to the order
of ING Capital and PNC Bank, in the original principal amount of $75,000,000 and
$30,000,000, respectively (the "Revolving Loan Notes"), (iv) that certain
Revolving Loan Note, dated as of February 11, 1997, of the Company to the order
of the Servicing Agent (the "Servicing Agent Note", and, together with the
Revolving Loan Notes, the "Notes"), (v) that certain Agreement for Settlements
Servicing dated as of August 24, 1995 (as amended, the "Servicing Agreement")
among the Company, ING Capital and Electronic Data Systems Corporation, and (vi)
all other "Advance Documents" (as defined in the Credit Agreement; the Credit
Agreement, the Security Agreement, the Notes, the Servicing Agreement and the
Advance Documents hereinafter referred to collectively as the "Wentworth S.S.C.
Documents"). Capitalized terms not otherwise defined herein shall have the
meanings assigned thereto in the Credit Agreement as amended hereby.
WHEREAS, the Company is the owner of 100% of the issued and outstanding
member interests of JGW II LLC;
WHEREAS, the Company and JGW II LLC are entering into that certain Purchase
and Contribution Agreement pursuant to which the Company will, concurrently with
the effectiveness of this Assignment and Assumption Agreement and from time to
time hereafter, sell, transfer and otherwise assign to JGW II LLC all of its
right, title and interest in and to the Settlements, whether now owned or
hereafter existing, and certain other property related thereto; and
WHEREAS, in connection with the foregoing, the Company wishes to assign to
JGW II LLC all of its rights under the Wentworth S.S.C. Documents, and JGW II
LLC desires to assume the obligations and liabilities of the Company under the
Wentworth S.S.C. Documents; and
WHEREAS, JGW II LLC has requested the Lenders, the Agent and the Servicing
Agent to amend the Credit Agreement, and the Lenders, the Agent and the
Servicing Agent are
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willing to amend the Credit Agreement on the terms and conditions set forth
herein, it being expressly understood that, except as expressly provided herein,
this Assumption Agreement and Amendment shall in no event constitute a waiver by
the Lenders, the Servicing Agent or the Agent of any breach of the Credit
Agreement or any of the Lenders', the Servicing Agent's or the Agent's rights or
remedies with respect thereto;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the parties hereto, the
Company and JGW II LLC hereby agree as follows:
1. Assignment and Assumption. Effective as of September 30, 1997 and
subject to the satisfaction of the conditions precedent set forth in Section 3
below:
1.1. Assignment of Rights. The Company hereby assigns, without recourse,
all of its rights under the Credit Agreement to JGW II LLC, including, without
limitation, the right to obtain Advances, all on the terms and subject to the
conditions set forth in the Credit Agreement. From and after the date hereof,
the Company acknowledges and agrees that it shall cease to have any rights under
the Credit Agreement, including, without limitation, any right to obtain
Advances thereunder.
1.2 Assumption of Obligations JGW II LLC hereby assumes, as its direct and
primary obligation, the payment and performance of all of the liabilities and
obligations of the Company under the Wentworth S.S.C. Documents, including,
without limitation, the obligation to pay interest and fees with respect to all
such liabilities and obligations, and indemnification obligations related
thereto (collectively the "Assumed Obligations") and hereby agrees to make all
payments required under the Wentworth S.S.C. Documents in effect and to
discharge the Assumed Obligations as they become due or are declared due. JGW II
LLC acknowledges that the Company has assigned to JGW II LLC all of the rights
of the Company under the Credit Agreement, including, without limitation, the
right to obtain Advances, all on the terms and subject to the conditions set
forth in the Credit Agreement. From and after the date hereof, JGW II LLC agrees
to perform and discharge all of the Assumed Obligations, including, without
limitation, performance and observance of all of the covenants and conditions of
the Wentworth S.S.C. Documents to be performed or observed by the Company
thereunder or in connection therewith, and to be bound in all respects by the
terms of the Wentworth S.S.C. Documents as they relate to the Company as if JGW
II LLC were an original signatory thereto. From and after the Effective Date (as
defined below) hereof (i) all references in any of the Wentworth S.S.C.
Documents to the Company as the "Borrower" as defined in the Credit Agreement
(or any equivalent term in any other Wentworth S.S.C. Document) shall be deemed
to be a reference to JGW II LLC as the Borrower, (ii) all references to the
"Security Agreement" in the Wentworth S.S.C. Documents shall mean and be a
reference to the "Security Agreement" executed by JGW II LLC in connection with
this amendment (as such agreement may be amended, restated and/or otherwise
modified from time to time) and (iii) the Company shall cease to be a party to
the Credit Agreement and the Notes and shall have no continuing obligations
thereunder or under any of the other Wentworth S.S.C. Documents except as
otherwise expressly provided herein.
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1.3 Consent. Each of the Agent, Servicing Agent and Lenders hereby consent
to the assignment of rights from the Company to JGW II LLC and the assumption by
JGW II LLC of the obligations and liabilities of the Company and agree that from
and after the effectiveness of this Assumption Agreement and Amendment, (i) JGW
II LLC shall have all of the rights, benefits and obligations of the Company
under the Credit Agreement and the other Wentworth S.S.C. Documents and (ii) the
Company shall be relieved of any further obligations under the Credit Agreement,
the Notes, the Security Agreement, and the other Wentworth S.S.C. Documents,
subject to the terms and conditions set forth herein and therein, provided,
however, that (x) the Company shall (except as otherwise provided herein) remain
obligated under the Servicing Agreement with respect to all of the Settlements
and Related Security in existence as of or prior to the effective date of this
Assumption Agreement and Amendment; (y) nothing in this Agreement shall be
deemed to constitute a release by the Agent, the Servicing Agent or any Lender
of any Lien on any Settlements, Related Security or other Collateral in
existence as of the date hereof and transferred (or purported to be transferred)
to JGW II LLC under the Seller Purchase Agreement (it being understood that all
Collateral sold to JGW II LLC under such agreement is being sold subject to the
Lien of the Agent except as provided in the Intercreditor Agreement) and (z) the
Company shall remain liable for damages caused by any breach of any
representation, warranty or covenant made by it contained in any of the
Wentworth S.S.C. Documents insofar as such representation, warranty or covenant
relates to matters in existence as of or prior to, or actions taken by it prior
to, the effective date of this Assumption Agreement and Amendment. Except as
otherwise provided in clause (y) of the immediately preceding sentence with
respect to that portion of the Collateral transferred or purported to be
transferred to JGW II LLC, the Agent, the Servicing Agent and the Lenders hereby
agree that as of the Effective Date, any Liens heretofore created under the
Security Agreement or any other Wentworth S.S.C. Documents on any other
Collateral which remains property of the Company shall be released and of no
further force and effect.
1.4. JGW II LLC Representations and Warranties. To induce the Lenders, the
Servicing Agent and Agent to consent to JGW II LLC's assumption of the Assumed
Obligations and to hereafter make and extend Advances and other financial
accommodations to or for the account of JGW II LLC under the Credit Agreement,
JGW II LLC hereby represents and warrants to the Lenders, the Servicing Agent
and the Agent that, as of the date hereof:
(a) JGW II LLC (i) is a limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization; (ii) is duly qualified to do business and is in good
standing under the laws of each jurisdiction in which failure to be so
qualified and in good standing will have or is reasonably likely to have a
Material Adverse Effect, and (iii) has all requisite power and authority to
own, operate and encumber its Property and to conduct its business as
presently conducted and as proposed to be conducted in connection with and
following the consummation of the transactions contemplated by this
Assumption Agreement and Amendment.
(b) JGW II LLC has the requisite power and authority to execute,
deliver and perform its obligations under this Assumption Agreement and
Amendment, and thereby to perform its obligations under the Wentworth
S.S.C. Documents, and all other agreements, instruments and documents
executed and delivered or to be executed and delivered by it pursuant
hereto or in connection herewith.
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<PAGE>
(c) JGW II LLC has taken all necessary company action to authorize the
execution and delivery of, and the performance of its obligations under,
this Assumption Agreement and Amendment and all other agreements,
instruments and documents executed and delivered by JGW II LLC pursuant
hereto or in connection herewith.
(d) This Assumption Agreement and Amendment and all other agreements,
instruments or documents executed and delivered by JGW II LLC pursuant
hereto or in connection herewith have been duly executed and delivered and,
together with all S.S.C. Wentworth Documents assumed hereby, constitute the
legal, valid and binding obligations of JGW II LLC enforceable against JGW
II LLC in accordance with their terms, 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 principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(e) The execution, delivery and performance by JGW II LLC of this
Assumption Agreement and Amendment and all other agreements, instruments or
documents executed and delivered by JGW II LLC pursuant hereto or in
connection herewith and the performance by JGW II LLC of the S.S.C.
Wentworth Documents do not and will not (i) cause a violation by JGW II LLC
of any requirement of law or contractual obligation binding upon JGW II
LLC, the consequences of which violation, singly or in the aggregate, would
be likely to have an adverse effect on the ability of JGW II LLC to perform
its obligations under this Assumption Agreement and Amendment, the
Wentworth S.S.C. Documents or any other agreements, instruments or
documents executed and delivered by JGW II LLC pursuant to or in connection
therewith or would be likely to have a Material Adverse Effect, or would be
likely to subject the Agent, the Servicing Agent or any Lender to any
liability (whether criminal or civil), (ii) constitute a tortious
interference with any such contractual obligation or conflict with, result
in a breach of or constitute (with or without notice or lapse of time or
both) a default under any such requirement of law or contractual
obligation, the consequences of which tortious interference, default or
violation, singly or in the aggregate, would be likely to have a Material
Adverse Effect or would be likely to subject the Agent, the Servicing Agent
or any Lender to any liability (whether criminal or civil), or require the
termination of any such contractual obligation, (iii) result in or require
the creation or imposition of any Lien whatsoever upon any of the
properties or assets of JGW II LLC (other than the Lien granted pursuant to
the Security Agreement in favor of the Agent, for the ratable benefit of
itself, the Servicing Agent and the Lenders), and the Lien granted in the
Intercreditor Agreement or (iv) require any approval of any Person holding
directly or indirectly an ownership interest in JGW II LLC or consent of
any Person under any contractual obligation of JGW II LLC, except such as
have been duly obtained or will be duly obtained in accordance with
applicable law.
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<PAGE>
(f) The execution, delivery, and performance by JGW II LLC of this
Assumption Agreement and Amendment and any other documents, instruments or
agreements executed and delivered by JGW II LLC pursuant hereto or in
connection herewith do not require any registration with, consent or
approval of, or notice to, or other action by any governmental authority,
except filings, consents or notices which have been made, obtained or given
(unless the failure to obtain any such filing, consent or notice will not
have a Material Adverse Effect).
(g) The correct limited liability company name, the principal place of
business and the chief executive office of JGW II LLC and the places where
JGW II LLC's books and records are kept are as follows:
J.G. Wentworth Receivables II LLC
300 Delaware Avenue
Wilmington, DE 19801
2. Amendments to the Credit Agreement. Effective as of September 30, 1997,
and immediately subsequent to the effectiveness of Section 2 hereof, and subject
to the conditions precedent set forth in Section 3 below, the Credit Agreement
is hereby amended as follows:
2.1. Section 1.1 of the Credit Agreement is hereby amended as follows:
(i) to delete the period (".") at the conclusion of the definition of
"Approved Asset Securitization Transaction", to substitute therefor a
semi-colon (";") and to insert immediately thereafter the following:
"provided, however, that, from and after the date on which the Company has
fulfilled its obligations under Section G(l) of that certain letter
agreement dated May 23, 1997 among J.G. Wentworth & Co., Inc., the Company
and ING Baring (U.S.) Securities, Inc.), the term "Approved Asset
Securitization Transaction" shall also include any Asset Securitization
Transaction the consummation of which (after giving effect to the
application of proceeds thereof) would not cause an Event of Default or
Potential Default."
(ii) to insert immediately after the word "owing" in the definition of
"Asset Securitization Transaction" the phrase "(or to be owing as a result
of such financing arrangement)."
(iii) to insert immediately after the phrase "which neither the
Borrower" now appearing in clause (xiii) of the definition of "Eligible
Settlement", the following: ", the Company";
(iv) to delete the phrase "the Borrower" now occurring in the
definition of "General Partner" and to substitute the following therefor:
"the Company";
(v) to insert immediately after the phrase "the Borrower" now
appearing in clause (b) of the definition of "Material Adverse Change", the
following: "and/or the Company";
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(vi) to delete clause (b) now appearing in the definition of
"Permitted Indebtedness" and to substitute therefor the following clauses
(b) and (c): "(b) Other Indebtedness incurred in the ordinary course of the
Borrower's business but not to exceed $1,000,000 at any time outstanding
and otherwise permitted to be incurred pursuant to Section 5.2; and (c)
Indebtedness incurred in connection with any Approved Asset Securitization
Transaction."
(vii) to delete the definition of "Permitted Liens" in its entirety
and to substitute the following therefor: "Permitted Liens" shall mean (i)
Liens for taxes, assessments, or similar charges, incurred in the ordinary
course of business and which are not yet due and payable, (ii) Liens in
favor of the Agent and/or (iii) Liens in favor of the Issuer in connection
with the sale or transfer of Settlements and Related Property to evidence
the sale of Settlements to the Issuer in connection with an Approved Asset
Securitization Transaction."
(viii) to delete the phrase "Borrower" each time it now appears in the
definition of "Purchase Agreement" and to substitute therefor the phrase
"Company";
(ix) to delete the phrase "Borrower" now appearing in the definition
of "Purchase Price" and "Purchase Yield" and to substitute therefor the
phrase "Company";
(x) to insert immediately after the phrase "for the Borrower" now
appearing in the definition of "Servicer", the following: "and/or any
Affiliate of the Borrower";
(xi) to delete the definition of "Settlement Package" in its entirety
and to substitute the following therefor: "Settlement Package" shall mean,
as it relates to any Purchased Settlement, fully executed copies of all
documentation related to the purchase of any and all Settlements by the
Company, and shall include, without limitation, (i) the original Purchase
Agreement related to a Settlement and all documents required to be
delivered to the Company pursuant thereto, (ii) the original Settlement,
(iii) the original Notice of Direction of Payment, (iv) any notifications
or acknowledgments received by the Company and/or the Borrower related to a
Purchased Settlement, including acknowledgments of releases and payment
obligations, and (v) a Seller Daily Report (as defined in the Seller
Purchase Agreement)";
(xii) to add the following definitions alphabetically therein:
"Affiliated Entity" shall mean any of J.G. Wentworth & Company,
Inc., a Pennsylvania corporation, any of its direct or indirect
Subsidiaries and/or Affiliates of any of the foregoing.
"Company" shall mean J.G. Wentworth S.S.C. Limited Partnership, a
Delaware limited partnership.
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"Delaware Act" shall mean the Delaware Limited Liability Company
Act (6 Del. C. (section) 18-101, et seq.), as the same may be amended
or supplemented from time to time, and any successor statute.
"Intercreditor Agreement" shall mean that Amended and Restated
Collateral Trust and Intercreditor Agreement dated as of September 30,
1997 by and among ING Capital, (as Lender and as Agent), PNC (as
Servicing Agent, as a Lender, as Collateral Trustee and in certain
other capacities), the Company, the Borrower, the Issuer, J.G.
Wentworth Receivables I LLC, and the other institutions from time to
time parties thereto, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Issuer" shall mean J.G. Wentworth Receivables III LLC, a
Delaware limited liability company.
"Issuer Purchase Agreement" shall mean that certain Purchase and
Contribution Agreement, dated as of September 30, 1997, between the
Borrower as seller and the Issuer as purchaser, as the same may be
amended, restated, supplemented or otherwise modified from time to
time
"Seller Purchase Agreement" shall mean that certain Purchase and
Contribution Agreement, dated as of September 30, 1997, between the
Company as seller and the Borrower as purchaser, as the same may be
amended, restated, supplemented or otherwise modified from time to
time.
2.2 Section 2.2(b) of the Credit Agreement is hereby amended to delete the
last sentence thereof in its entirety and to substitute therefor the following:
"The proceeds of Settlement Differential Advances may only be used by the
Borrower to pay (i) Obligations of the Borrower, (ii) Servicing Fees and (iii)
due and payable Overhead Expenses or distributions and/or reimbursements to the
Company to enable the Company to pay due and payable Overhead Expenses and
certain other expenses in an aggregate amount not to exceed during any month
(when aggregated with all other such amounts previously paid by the Borrower
during such month) 125% of the Approved Working Capital Budget for such month."
2.3. Section 2.5 of the Credit Agreement is hereby amended (i) to insert
immediately after each occurrence of the phrase "the Borrower" now appearing
therein, the following: "and/or the Company"; (ii) to delete the phrase
"Borrower's pro rata share" and to substitute therefor the phrase "Borrower's
and/or the Company's pro rata share"; and (iii) to delete the phrase "the
Borrower's general partner" now appearing in the fifth sentence thereof and to
substitute therefor the following: "the General Partner".
2.4. Section 2.9 of the Credit Agreement is hereby amended to delete the
phrase "the Agreement of Limited Partnership" now appearing in each of clause
(c)(i)(K) and clause (c)(ii)(I) thereof, and to substitute the following
therefor: "the constituent documents of the Borrower".
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2.5 Section 2.14(d) of the Credit Agreement is hereby amended to reflect
that, as of June 13, 1997, the Agent re-assigned to the Company all right, title
and interest of the Company in and to the Lock-Boxes and the Lock-Box Accounts
for purposes of the Company consummating the assignments contemplated by the
Intercreditor Agreement, the terms and provisions of which Intercreditor
Agreement, as in effect from and after June 13, 1997, have superseded the
provisions of such Section 2.14(d) and any other provisions of the Credit
Agreement, the Lock-Box Agreement and the Security Agreement relating to such
Lock-Boxes and/or Lock-Box Accounts.
2.6. Section 3.2 of the Credit Agreement is hereby amended (i) to insert
immediately after the occurrence of the phrase "the Borrower" now appearing in
clause (b)(ii) thereof, the following: "and/or the Company"; (ii) to insert
immediately after the first occurrence of the phrase "the Borrower" now
appearing in clause (b)(iv) thereof, the following: "and/or the Company"; and
(iii) to insert immediately after the second occurrence of the phrase "the
Borrower" now appearing in clause (b)(iv) thereof, the following: "and the
Company".
2.7. Section 4.1(a) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"(a) The Borrower is a limited liability company duly formed and
validly existing under the laws of the State of Delaware, is qualified to
do business and is in good standing in all other states in which such
qualification and good standing are necessary in order for the Borrower to
conduct its business and own its property as conducted and owned in such
states, except in such states where failure to qualify to do business would
not have a materially adverse effect on the business operations or
financial condition of the Borrower, has all requisite power and authority
to conduct its business, to own its property and to execute, deliver and
perform all of its obligations under this Agreement and the other Advance
Documents, has the requisite power and authority and the legal right to
own, pledge, mortgage or otherwise encumber the Collateral, and to conduct
its business as now and proposed to be conducted, and has all licenses,
permits, consents or approvals from or by, and has made all filings with,
and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent they are material to such ownership, operation
and conduct."
2.8. Section 4.1 of the Credit Agreement is hereby further amended to
insert the following at the end thereof:
"(t) Tradenames. The Borrower has no tradenames, fictitious names,
assumed names or "doing business as" names and since its incorporation, the
Borrower (i) has not been the subject of any merger or other corporate
reorganization that resulted in a change of name, identity or corporate
structure or (ii) had any other name.
(u) Subsidiaries; Business Activities. The Borrower has no
Subsidiaries other than the Issuer and does not otherwise own or hold,
directly or indirectly, any capital stock or equity security of, or any
equity interest in, any other Person and has conducted no other business
except for the execution and delivery of the Seller Purchase Agreement,
this Agreement, the Issuer Purchase Agreement, the acquisition and sales of
Settlements and related property therein contemplated, and such other
activities as are incidental to the foregoing.
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(v) Valid Transfer. The Seller Purchase Agreement creates a valid
sale, transfer and/or assignment to the Borrower of all right, title and
interest of the Company in and to all Settlements and related property
conveyed to the Borrower thereunder.
(w) Company Receivables. The Borrower has given reasonably equivalent
value to the Company (which may include additional equity interests in the
Borrower) in consideration for the transfer to the Borrower by the Company
of the Settlements pursuant to the Seller Purchase Agreement, and no such
transfer has been made for or on account of an antecedent debt owed by the
Company to the Borrower."
2.9. Section 4.1(b) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"(b) The Company is a limited partnership and the General Partner is a
corporation and each of the Company and the General Partner is duly formed
and validly existing under the laws of the State of Delaware, is qualified
to do business and is in good standing in all other states in which such
qualification and good standing are necessary in order for the Company
and/or the General Partner to conduct its business and own its property as
conducted and owned in such states, except in such states where failure to
qualify to do business would not have a materially adverse effect on the
business operations or financial condition of the Borrower, the Company
and/or the General Partner, and each of the Company and the General Partner
has all requisite power and authority to conduct its business, to own its
property and to execute, deliver and perform all of its obligations under
the Seller Purchase Agreement and to execute and deliver this Agreement and
the other Advance Documents on behalf of the Borrower."
2.10 Section 4.1(c) of the Credit Agreement is hereby amended (i) to delete
the phrase "and the General Partner" now appearing in the first line thereof and
(ii) to delete the phrase "the Borrower's partnership agreement" now appearing
in clause (i) thereof and to substitute the following therefor: "the Borrower's
limited liability company agreement".
2.11. Section 4.1(m) of the Credit Agreement is hereby amended to delete
the text thereof in its entirety.
2.12. Section 4.1(o) of the Credit Agreement is hereby amended to delete
the phrase "Except as described in Schedule II hereto," and to substitute the
following therefor: "Except for the Seller Purchase Agreement, the Issuer
Purchase Agreement, or any similar agreement entered into in connection with an
Approved Asset Securitization Transaction,"
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2.13. Section 4.2(g)(ii) of the Credit Agreement is hereby amended to
delete the phrase "the Borrower" now appearing therein and to substitute the
following therefor: "the Company".
2.14. Section 4.2(m) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"(m) Any one or more payments by the Company to the Seller or the
Seller's designated payee(s) of all or a part of the Purchase Price agreed
upon by the Seller and Company in the Purchase Agreement have been, or will
be, duly authorized by an Authorized Officer of the Company;"
2.15. Section 5.1(g) of the Credit Agreement is hereby amended to delete
the phrase "its limited partnership existence" now appearing therein and to
substitute therefor the following: "its limited liability company existence".
2.16. Section 5.1(p) of the Credit Agreement is hereby amended to delete
from the first sentence thereof the phrase "at its own expense" and to
substitute therefor "at its or the Company's own expense".
2.17. Section 5.1 of the Credit Agreement is hereby amended to insert the
following at the end thereof:
"(r) Maintenance of Separate Member. The Borrower will (i) maintain at
least two independent members, each of whom is not otherwise (and has not
at any time during the last five years otherwise been) an officer,
director, employee, shareholder, partner, holder of any limited liability
company interest, creditor, trustee, liquidator, member, manager,
conservator or receiver of or for the Company or any other Affiliated
Entity (unless so acting in a similar independent role), or any relative of
any of the foregoing, and is otherwise acceptable to the Agent and (ii)
ensure that such independent members receive reasonable and customary fees
and/or other compensation in an amount not exceeding $7,500 per calendar
year per member.
(s) Seller Purchase Agreement. The Borrower will at its expense timely
perform and comply in all material respects with all provisions, covenants
and other promises required to be observed by it under the Seller Purchase
Agreement, maintain the Seller Purchase Agreement in full force and effect,
enforce the Seller Purchase Agreement in accordance with its respective
terms, and, at the request of the Agent, make to the Company such
reasonable demands and requests for information and reports or for action
as the Agent may request to the extent that the Borrower is entitled to do
the same thereunder.
(t) Acquisition of Settlements from the Company. With respect to each
Settlement acquired by the Borrower from the Company, the Borrower shall
(i) acquire such Settlement pursuant to and in accordance with the terms of
the Seller Purchase Agreement, (ii) take all action necessary to perfect,
protect and more fully evidence the Borrower's
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ownership of such Settlement, including, without limitation, (A) filing and
maintaining effective financing statements (Form UCC-1) against the Company
in all necessary or appropriate filing offices, and filing continuation
statements, amendments or assignments with respect thereto in such filing
offices and (B) executing or causing to be executed such other instruments
or notices (other than to the Seller, the Qualified Assignee or the
Designated Annuity Funding Company related to such Settlement) as may be
necessary or appropriate and (iii) take all additional action that the
Agent or the Required Lenders may reasonably request to perfect, protect
and more fully evidence the respective interests of the parties to this
Agreement.
(u) Confidentiality of Settlement Agreements. The Borrower, and its
officers, directors and employees shall keep, and shall cause to be kept,
strictly confidential all terms of all Settlement Agreements, including,
without limitation, the name of the Settlement Counterparties related
thereto and the nature of the injury to the Seller, and shall not copy or
disclose such terms in any manner whatsoever, in whole or in part, except
(i) to the Servicer in accordance with the Servicing Agreement, (ii) as
required pursuant to the terms of any Approved Asset Securitization
Transaction, and (iii) as required by law; provided that the Borrower may
in any event disclose in its sole discretion the terms of any Settlement
Agreement so long as (i) all references therein to the Settlement
Counterparties related thereto and the nature of the Seller's injury shall
be stricken from such disclosure, and (ii) such recipient shall agree to
the terms of confidentiality contained in this Section 5.1(u).
(v) Maintenance of Separate Existence. The Borrower shall take all
reasonable steps to continue its identity as a separate legal entity and to
make it apparent to third Persons that it is an entity with assets and
liabilities distinct from those of J.G. Wentworth & Company, Inc., the
Company, the other Affiliated Entities or any other Person, and that it is
not a division of any of the Affiliated Entities or any other Person. In
that regard, and without limiting the foregoing in any manner, the Borrower
shall:
(1) maintain its limited liability company existence and make
independent decisions with respect to its daily operations and
business affairs and, other than pursuant to the terms of the limited
liability company agreement of the Borrower, not be controlled in
making such decisions by any other Affiliated Entity or any other
Person;
(2) maintain at least two members neither of which otherwise is
(or at any time during the last five years has been) a direct,
indirect or beneficial officer, general partner, member, director,
employee, affiliate, associate, customer or supplier of any of the
Affiliated Entities (unless acting as such in an independent
capacity), nor a direct, indirect or beneficial owner of the
outstanding equity interest (including, limited partnership interests
or limited liability company interest) of any of the Affiliated
Entities (any such Person also being a "Affiliated Entity"), nor a
relative of any of the foregoing, nor a trustee in bankruptcy for any
of the foregoing;
11
<PAGE>
(3) maintain separate and clearly delineated office space owned
by it or evidenced by a written lease or sublease (even if located in
an office owned or leased by, or shared with, another Affiliated
Entity);
(4) maintain its assets in a manner which facilitates their
identification and segregation from those of any of the other
Affiliated Entities;
(5) maintain a separate telephone number which will be answered
only in its own name and separate stationery and other business forms;
(6) conduct all intercompany transactions with the other
Affiliated Entities on terms which the Borrower reasonably believes to
be on an arm's-length basis;
(7) not guarantee any obligation of any of the other Affiliated
Entities, nor have any of its obligations guaranteed by any other
Affiliated Entity or hold itself out as responsible for the debts of
any other Affiliated Entity or for the decisions or actions with
respect to the business and affairs of any other Affiliated Entity,
nor seek or obtain credit or incur any obligation to any third-party
based upon the creditworthiness or assets of any other Affiliated
Entity or any other Person;
(8) except as expressly otherwise permitted hereunder or under
any of the other Advance Documents, not permit the commingling or
pooling of its funds or other assets with the assets of any other
Affiliated Entity;
(9) maintain separate deposit and other bank accounts to which no
other Affiliated Entity (other than as a master servicer in connection
with an Approved Asset Securitization Transaction) has any access;
(10) maintain financial records which are separate from those of
the other Affiliated Entities;
(11) compensate (either directly or through reimbursement of its
allocable share of any shared expenses) all employees, consultants and
agents, and Affiliated Entities, to the extent applicable, for
services provided to the Borrower by such employees, consultants and
agents or Affiliated Entities, in each case, from the Borrower's own
funds;
(12) have agreed with each of the other relevant Affiliated
Entities to allocate among themselves shared overhead and corporate
operating services and expenses which are not reflected in
documentation in connection with an Approved Asset Securitization
Transaction (including without limitation the services of shared
employees, consultants and agents and reasonable legal and auditing
expenses) on the basis of actual use or the value of services
rendered, and otherwise on a basis reasonably related to actual use or
the value of services rendered;
12
<PAGE>
(13) pay for its own account for accounting and payroll services,
rent, lease and other expenses (or its allocable share of any such
amounts provided by one or more other Affiliated Entity) and not have
such operating expenses (or the Borrower's allocable share thereof)
paid by any of the Affiliated Entities, provided, that J.G. Wentworth
& Company, Inc. and/or the Company shall be permitted to pay the
initial organizational expenses of the Borrower;
(14) maintain adequate capitalization in light of its business
and purpose;
(15) conduct all of its business (whether in writing or orally)
solely in its own name through its duly authorized officers, employees
and agents;
(16) not make or declare any dividends or other distributions of
cash or property to the holders of its equity securities or make
redemptions or repurchases of its equity securities, in either case,
on a periodic basis any more frequently than monthly or otherwise, in
certain other irregular cases, in accordance with appropriate
corporate formalities and consistent with sound business judgment; and
all such distributions, redemptions or repurchases shall only be
permitted hereunder to the extent that it is not violative of any
applicable law and that no Event of Default or Potential Default then
exists or would result therefrom;
(17) maintain at least one employee (which employee may be shared
with an Affiliate pursuant to a written agreement allocating the
compensation and other remuneration and benefits for such employee as
among such parties) in charge of day-to-day operations of the
Borrower;
(18) otherwise practice and adhere to corporate formalities such
as complying with its constitutive documents and member and manager
resolutions, the holding of regularly scheduled meetings of members
and managers, and maintaining complete and correct books and records
and minutes of meetings and other proceedings of its members and
managers; and
(19) not fail to maintain all policies and procedures or take or
continue to take all actions necessary or appropriate to ensure that
all factual assumptions set forth in those certain opinions of counsel
of the Borrower delivered in connection with any Approved Asset
Securitization Transaction concluding that sales of Settlements by the
Company to the Borrower made pursuant to the Seller Purchase Agreement
would constitute true sales and that the Borrower would not be
substantively consolidated with the Company or J.G. Wentworth &
Company, Inc. following the occurrence of an Insolvency Event with
respect to either such Person
13
<PAGE>
2.18 Section 5.2(a) of the Credit Agreement is hereby amended (i) to delete
from clause (9) thereof the phrase "Delaware ULPA" and to substitute therefor
the phrase "Delaware Act"; (ii) to delete the period (".") at the conclusion of
such clause (9) and to substitute therefor a semi-colon followed by the word and
("; and") and to insert immediately thereafter the following:
"(10) to engage in such activities as a member or managing member of
any Issuing Vehicle as are necessary or appropriate in connection with the
activities of such Issuing Vehicle pursuant to the terms of any Approved
Asset Securitization Transaction or otherwise.
Notwithstanding the foregoing, the Borrower shall not, without the
prior written consent of the Required Lenders, (i) purchase or otherwise
acquire any Payment Contracts from any Payment Contracts Seller except for
acquisitions from the Company pursuant to the Seller Purchase Agreement,
(ii) convey or otherwise dispose of any Payment Contracts or Related
Security to any Payments Contracts Buyer other than to the Issuer under the
Issuer Purchase Agreement or directly to any Issuing Vehicle in connection
with an Approved Asset Securitization Transaction, and (iii) shall not
establish any Issuing Vehicles or Subsidiaries except for the Issuer and
such Issuing Vehicles to which the Issuer may assign or otherwise convey
its rights under, or a security interest in, the Payment Contracts and
Related Security so acquired from the Borrower."
2.19 Section 5.2(d) of the Credit Agreement is hereby amended to insert at
the conclusion thereof of the following: "except for loans or advances made to
the Issuer expressly contemplated under the terms of the Issuer Purchase
Agreement."
2.20 Section 5.2(e) of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"Dividends, Etc. Declare or make any dividend payment or other distribution
of assets, properties, cash, rights, obligations or securities on account of any
interest in the Borrower, or purchase, redeem or otherwise acquire for value any
interest in the Borrower or any rights or options to acquire any such interest;
provided, however that (i) so long as the Borrower is not an organization
taxable as a corporation, for each fiscal year of the Borrower, the Borrower may
make distributions to the Company in an aggregate amount equal to the federal,
state, and local income tax liability of the Company's Partners with respect to
income of the Borrower or of the Company attributable to such Partners; (ii) the
Borrower may make distributions to the Company to enable the Company to pay
Overhead Expenses and certain other expenses to the extent permitted by Section
5.2(n); and (iii) so long as no Event of Default or Potential Default has
occurred and is continuing, the Borrower may make other distributions to the
Company so long as, immediately after giving effect thereto, the Borrower's
Tangible Net Worth would not be reduced below $4,000,000."
2.21 Section 5.2(f) of the Credit Agreement is hereby amended to delete the
period at the end thereof and to substitute the following therefor: ", except
for sales of Settlements and Related Security and similar property pursuant to
the Issuer Purchase Agreement, the Seller Purchase Agreement, or any similar
agreement entered into in connection with any Approved Asset Securitization
Transaction."
14
<PAGE>
2.22 Section 5.2(k) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"(k) Change in Organizational Documents. Amend, modify or otherwise
change any of the terms or provisions in its organizational documents as in
effect on the date hereof in any manner which could reasonably be expected
to be detrimental to the interests of the Agent, the Servicing Agent and/or
any of the Lenders."
2.23 Section 5.2(n) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"(n) Limitation of Overhead Expenses. Incur in any month Overhead
Expenses, or reimburse the Company in such month (whether directly or
indirectly) for Overhead Expenses, to the extent such Overhead Expenses
exceed 125% of the Approved Working Capital Budget for such month."
2.24 Section 5.2 of the Credit Agreement is hereby further amended to
insert the following at the end thereof:
"(o) Transactions with Affiliates. The Borrower will not enter into,
or be a party to, any transaction with any of its Affiliates, except (i)
the transactions contemplated by the Seller Purchase Agreement and the
Issuer Purchase Agreement or any or any similar agreement entered into in
connection with any Approved Asset Securitization Transaction and (ii) any
other transactions (including, without limitation, the lease of office
space or computer equipment or software by the Borrower from an Affiliate
and the sharing of employees and employee resources and benefits) (A) in
the ordinary course of business or as otherwise permitted hereunder, (B)
pursuant to the reasonable requirements and purposes of the Borrower's
business, (C) upon fair and reasonable terms (and, to the extent material,
pursuant to written agreements) that are consistent with market terms for
any such transaction, and (D) not inconsistent with the factual assumptions
set forth in the opinion letters referred to in clause (19) of Section
5.1(v)."
2.25 Section 6.1(b) of the Credit Agreement is hereby amended to insert
immediately after each occurrence of the phrase "the Borrower" now appearing
therein, the following: ", the Company".
2.26 Section 6.1(g) of the Credit Agreement is hereby amended to delete
therefrom the phrase "or the General Partner."
2.27 Section 6.1(i) of the Credit Agreement is hereby amended to delete
therefrom the phrase "or the General Partner."
15
<PAGE>
2.28 Section 6.1(k) of the Credit Agreement is hereby amended to insert the
following at the conclusion thereof: "Notwithstanding the foregoing, it shall
not constitute an Event of Default under this Section 6.1(k) if the events
described in clauses (i) or (ii) above have occurred in connection with or
otherwise following an initial public offering of the stock of either J.G.
Wentworth & Co., Inc. or an Affiliate thereof created to facilitate such public
offering).
2.29 Section 6.1(l) of the Credit Agreement is hereby amended to delete the
phrase "the Borrower" now appearing therein and to substitute therefor the
following: "the Company".
2.30 Section 6.1(p) of the Credit Agreement is hereby amended to delete the
phrase "the Borrower" each time it now appears therein and to substitute
therefor the following: "the Company:".
2.31 Section 6.1 of the Credit Agreement is hereby amended to delete the
period (".") at the conclusion of clause (r) thereof, to substitute therefor a
semi-colon (";") and to insert immediately thereafter the following:
"(s) Any representation or warranty made or deemed to be made by the
Company (or any of its officers or managers) under or in connection with
the Seller Purchase Agreement or other information or report delivered
pursuant hereto shall prove to have been false or incorrect in any material
respect when made;
(t) The Company shall fail to perform or observe any other material
term, covenant or agreement contained in the Seller Purchase Agreement or
any other agreement or document executed in connection therewith on its
part to be performed or observed and any such failure shall remain
unremedied for twenty (20) days after written notice thereof shall have
been given by the Agent to the Borrower and the Company;
(u) The Company shall permit any amendment or modification to the
Agreement of Limited Partnership which could reasonably be expected to be
detrimental to the interests of the Agent, the Servicing Agent and/or any
of the Lenders; or
(v) The Borrower shall cease to be an Affiliate of the Company, or the
Company shall cease to own at least 95% of the limited liability company
interest in the Borrower."
2.32 Section 7.8 of the Credit Agreement is hereby deleted in its entirety
and the following is substituted therefor:
SECTION 7.8 Effect on Owners of Interests in the Borrower, Limited
Partners of the Company and Shareholders of the General Partner. This
Agreement and the Revolving Loan Notes do not represent a debt, liability,
or obligation of any owner of a limited liability company interest in the
Borrower, any limited partner of the Company or any shareholder of the
General Partner, and none of such owners, partners, shareholders of the
General Partner or any other Persons shall have any liability for the
Borrower's debts, liabilities or other Obligations under this Agreement,
the Revolving Loan Notes and the Servicing Agent Notes.
16
<PAGE>
2.33 Article 7 of the Credit Agreement is hereby amended to add the
following at the end thereof:
SECTION 7.13. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, each of the Agent, the Servicing Agent and
the Lenders hereby agrees that it shall not, prior to the date which is one
year and one day after the termination of this Agreement with respect to
the Borrower, acquiesce, petition or otherwise invoke or cause the
Borrower, the Company or the General Partner to invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Borrower or the Company under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Borrower
or the Company or any substantial part of its property or ordering the
winding-up or liquidation of the affairs of the Borrower or the Company.
SECTION 7.14. Limitations on Liability. None of the members, managers,
partners, officers, employees, agents, shareholders, directors or holders
of limited liability company interests of or in (x) the Borrower or (y) the
general or limited partners of the Company, past, present or future, shall
be under any liability to the Agent, the Servicing Agent or the Lenders,
respectively, any of their successors or assigns, or any other Person for
any action taken or for refraining from the taking of any action in such
capacities or otherwise pursuant to this Agreement or for any obligation or
covenant under this Agreement, it being understood that this Agreement and
the obligations created hereunder shall be, to the fullest extent permitted
under applicable law, with respect to the Borrower, solely the limited
liability company obligation of the Borrower. The Borrower and any member,
manager, partner, officer, employee, agent, shareholder, director, or
holder of a limited liability company interest of or in the Borrower may
rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person (other than the Borrower or any
Affiliate thereof) respecting any matters arising hereunder.
SECTION 7.15. Intercreditor Agreement. Each of the parties hereto
agrees that, as amongst themselves, to the extent the terms and provisions
of this Assumption Agreement and Amendment or any of the Wentworth S.S.C.
Documents are inconsistent with the terms and provisions of the
Intercreditor Agreement, the terms and provisions of the Intercreditor
Agreement shall control.
3. Conditions of Effectiveness of this Assumption Agreement and Amendment.
This Assumption Agreement and Amendment shall become effective and be deemed
effective as of the date hereof (the "Effective Date"), if, and only if the
Agent shall have received each of the following:
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<PAGE>
(a) Duly executed originals of this Assumption Agreement and Amendment
from each of the Company, JGW II LLC, the Servicing Agent and the Lenders.
(b) Duly executed originals of the Seller Purchase Agreement from each
of the Company and JGW II LLC.
(c) Certificate of the Secretary of the General Partner on behalf of
the Company as the Managing Member of JGW II LLC, certifying (i)
resolutions adopted by the Board of Directors authorizing, among other
things, the execution and delivery by the Company and JGW II LLC of this
Assumption Agreement and Amendment and the Seller Purchase Agreement and
any other documents and instruments required to be executed by either of
them pursuant to the terms hereof or thereof, (ii) names and signatures of
officers of the General Partner authorized to execute the documents and
instruments referred to in clause (i) above, (iii) the accuracy and
currency of the By-Laws of the General Partner, (iv) the accuracy and
currency of the Agreement of Limited Partnership of the Company, and (v)
the accuracy and currency of JGW II LLC's Limited Liability Company
agreement.
(d) Certificate of Formation of JGW II LLC, Certificate of Limited
Partnership of the Company and Certificate of Incorporation of the General
Partner, each certified by the Secretary of State of Delaware.
(e) Good Standing or Subsistence Certificate for each of JGW II LLC,
the Company and the General Partner from the Secretaries of State of
Delaware and Pennsylvania.
(f) Officer's Certificate executed on behalf of the General Partner on
behalf of the Company as managing member of JGW II LLC by the chairman, the
president or the chief financial officer of the General Partner that (i)
the representations and warranties of JGW II LLC contained in this
Agreement or the Credit Agreement or otherwise made or deemed to be made as
of the Effective Date and (ii) no event shall have occurred and be
continuing on the Effective Date which would constitute a Default or an
Event of Default under this Agreement.
(g) Favorable opinions of Wolf, Block, Schorr and Solis-Cohen, counsel
for the Company and JGW II LLC, in form and substance satisfactory to the
Agent.
(h) Executed financing statements required to be filed by the Company
in favor of JGW II LLC pursuant to the Seller Purchase Agreement and to be
filed by JGW II LLC pursuant to the Security Agreement, in each case with
the Secretary of the Commonwealth of Pennsylvania, the Prothonotaries of
Philadelphia, Montgomery and Delaware Counties, Pennsylvania and the
Secretaries of State of New Jersey and Delaware.
(i) Certified copies of UCC and tax lien and judgment search reports
with respect to JGW II LLC, the Company and the General Partner from such
jurisdictions as are deemed necessary or desirable by the Agent, in each
case, dated a date reasonably prior to the Effective Date.
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<PAGE>
(j) Evidence satisfactory to it that the Company has contributed to
the capital of JGW II LLC the Company's member interest in JGW Receivables
I LLC.
(k) Such other documents, instruments and agreements as the Agent may
reasonably request.
4. Representations and Warranties of JGW II LLC.
4.1. Upon the effectiveness of this Assumption Agreement and Amendment, JGW
II LLC hereby reaffirms in all material respects all covenants, representations
and warranties heretofore made by the Company in the Credit Agreement to the
extent the same are not amended hereby and except to the extent the same
expressly relates solely to an earlier date and agrees that all such cove nants,
representations and warranties shall be deemed to have been re-made as of the
effective date of this Assumption Agreement and Amendment and that, as of the
Effective Date and after giving effect hereto, no Event of Default or Potential
Default has occurred and is continuing.
4.2. JGW II LLC hereby represents and warrants that this Assumption
Agreement and Amendment and the Credit Agreement, as previously executed and as
amended hereby, constitute legal, valid and binding obligations of JGW II LLC
and are enforceable against JGW II LLC in accordance with their terms, 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 principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
5. Reference to and Effect on the Agreement.
5.1. Upon the effectiveness of this Assumption Agreement and Amendment
pursuant to Section 3 hereof, on and after the date hereof, each reference in
the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or
words of like import shall mean and be a reference to the Credit Agreement as
amended hereby.
5.2. Except as specifically set forth above, the Credit Agreement, and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
5.3. The execution, delivery and effectiveness of this Assumption Agreement
and Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any Lender, the Agent or the Servicing
Agent nor constitute a waiver of any provision of the Credit Agreement, or any
other documents, instruments and agreements executed and/or delivered in
connection therewith.
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<PAGE>
5.4 Without limiting the immediately preceding Section, the parties hereto
acknowledge and agree that, by their execution hereof, neither the Agent nor any
Lender is waiving any rights such party may have in the future to seek to
exclude any Settlements from the Borrowing Base or otherwise enforce any rights
in respect of any Settlements due to any failure of the Borrower to satisfy
certain of the representations, warranties and covenants contained in the Credit
Agreement and the other Wentworth S.S.C. Documents with respect to any
Settlements.
6. Section Headings. The Section headings contained in this Assumption
Agreement and Amendment are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Assumption Agreement and
Amendment.
7. Counterparts. This Assumption Agreement and Amendment may be executed by
one or more of the parties to this Assumption Agreement and Amendment on any
number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
8. Entire Agreement. This Assumption Agreement and Amendment, taken
together with the Credit Agreement and all of the other Advance Documents,
embodies the entire agreement and understanding of the parties hereto and
supersedes all prior agreements and understandings, written and oral, relating
to the subject matter hereof.
9. Governing Law. This Assumption Agreement and Amendment shall be governed
by and construed in accordance with the internal laws (as distinguished from the
choice of law provisions) of the State of New York.
10. Fees and Expenses. JGW II LLC hereby confirms its agreement to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution and delivery of this Assumption Agreement and Amendment and any of the
other instruments, documents and agreements to be executed and/or delivered in
connection herewith, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel to the Agent, the Servicing Agent and the
Lenders with respect thereto.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assumption
Agreement and Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
J.G. WENTWORTH S.S.C. LIMITED PARTNERSHIP
By: J.G. Wentworth Structured Settlement Funding
Corporation, its sole general partner
By:
--------------------------------------------
Name:
Title:
J.G. WENTWORTH RECEIVABLES II LLC
By: J.G. Wentworth S.S.C. Limited Partnership,
its member
By: J.G. Wentworth Structured Settlement Funding
Corporation, its sole general partner
By:
--------------------------------------------
Name:
Title:
ING (U.S.) CAPITAL CORPORATION, as
Agent and as a Lender
By:
--------------------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION, as
Servicing Agent and as a Lender
By:
--------------------------------------------
Name:
Title:
21
<PAGE>
AMENDMENT NO. 1
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NO. 1 ("Amendment No. 1") is entered into as of May 26, 1997
by and among J.G. WENTWORTH S.S.C. LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Borrower"), ING (U.S.) CAPITAL CORPORATION ("ING Capital"),
and PNC BANK, NATIONAL ASSOCIATION ("PNC Bank", and, together with ING Capital,
the "Lenders"), ING Capital, in its capacity as the contractual representative
for itself and the Lenders (the "Agent") and PNC Bank, as servicing agent (the
"Servicing Agent"). Capitalized terms used in this Amendment which are not
otherwise defined herein, shall have the meanings given such terms in the Credit
Agreement (as defined below).
WITNESSETH:
WHEREAS, the Borrower, the Lenders, the Agent and the Servicing Agent are
parties to that certain Amended and Restated Revolving Credit Agreement, dated
as of February 11, 1997 (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement");
WHEREAS, the Borrower has requested that the Lenders, the Servicing Agent
and the Agent temporarily increase the aggregate amount of the Commitments to
$115,000,000 and amend the Credit Agreement in certain respects; and
WHEREAS, the Lenders, the Agent and the Servicing Agent are willing to
amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Lenders, the Servicing Agent and the Agent hereby agree as follows.
1. Amendments to the Credit Agreement. Effective as of May 26, 1997 and
subject to the satisfaction of the conditions precedent set forth in Section 2
below, the Credit Agreement is hereby amended as follows:
1.1. Section 1.1 of the Credit Agreement is hereby amended to add the
following definition alphabetically thereto:
<PAGE>
"Reduction Date" shall mean the earlier of (x) August 22, 1997 and (y) the
sale of the Series 1997-1 Structured Settlement Pass-Through Trust
Certificates issued pursuant to that certain Pooling and Servicing
Agreement (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Pooling and Servicing Agreement") to be
entered into by and among J.G. Wentworth Receivables I LLC, as seller (the
"Company"), J.G. Wentworth & Company, Inc., as the initial master servicer
(the "Master Servicer"), and PNC Bank, National Association, as trustee
(the "Trustee"), and that certain Series 1997-1 Supplement (as the same may
be amended, restated, supplemented or otherwise modified from time to time,
the "Supplement") to be entered into by and among the Company, the Master
Servicer and the Trustee.
1.2. Exhibit K of the Credit Agreement is hereby amended and restated in
its entirety to read as set forth in Attachment A hereto.
2. Conditions of Effectiveness of this Amendment. This Amendment shall
become effective and be deemed effective as of the date hereof (the "Effective
Date"), if, and only if the Agent shall have received each of the following (in
each case, in form and substance, and in such quantities, satisfactory to it):
(a) duly executed originals of this Amendment from the Borrower, the
Lenders, the Agent and the Servicing Agent;
(b) duly executed original Amended and Restated Revolving Loan Note
payable to the order of ING Capital, as a Lender;
(c) a Certificate of the Secretary of the General Partner certifying
the resolutions adopted by the Board of Directors of the General Partner
approving and authorizing the execution and delivery of the Amendment; and
(d) such other documents, instruments and agreements as the Agent may
reasonably request.
Notwithstanding anything herein to the contrary, in the event the conditions to
effectiveness set forth in this Section 2 are not either satisfied or waived in
writing by all of the Lenders on or prior to May 31, 1997 then this Amendment
shall be of no force and effect.
3. Representations and Warranties of the Borrower.
3.1 Upon the effectiveness of this Amendment, the Borrower hereby reaffirms
in all material respects all covenants, representations and warranties made in
the Credit Agreement to the extent the same are not amended hereby and except to
the extent the same expressly relates solely to an earlier date and agrees that
all such covenants, representations and warranties shall be deemed to have been
re-made as of the effective date of this Amendment and that, as of the effective
date of this Amendment and after giving effect hereto, no Event of Default or
Potential Default has occurred and is continuing.
-2-
<PAGE>
3.2 The Borrower hereby represents and warrants that this Amendment and the
Credit Agreement, as previously executed and as amended hereby, constitute
legal, valid and binding obligations of the Borrower and are enforceable against
the Borrower in accordance with their terms.
4. Reference to the Effect on the Agreement.
4.1 Upon the effectiveness of this Amendment pursuant to Section 2 hereof,
on and after the date hereof, each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import shall mean
and be a reference to the Credit Agreement as amended hereby.
4.2 Except as specifically set forth above, the Credit Agreement, and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
4.3 The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of any Lender, the Agent or the Servicing Agent nor constitute a waiver
of any provision of the Credit Agreement, or any other documents, instruments
and agreements executed and/or delivered in connection therewith.
5. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
6. Counterparts. This Amendment may be executed by one or more of the
parties to this Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
7. Entire Agreement. This Amendment, taken together with the Credit
Agreement and all of the other Advance Documents, embodies the entire agreement
and understanding of the parties hereto and supersedes all prior agreements and
understandings, written and oral, relating to the subject matter hereof.
8. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws (as distinguished from the choice of law
provisions) of the State of New York.
9. Fees and Expenses. The Borrower hereby confirms its agreement to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution and delivery of this Amendment and any of the other instruments,
documents and agreements to be executed and/or delivered in connection herewith,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel to the Agent, the Servicing Agent and the Lenders with respect thereto.
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 1 has been duly executed as of the
day and year first above written.
J.G. WENTWORTH S.S.C. LIMITED PARTNERSHIP,
a Delaware limited partnership
By: J.G. Wentworth Structured Settlement
Funding Corporation, as general partner
By:
---------------------------------------
Name:
Title:
ING CAPITAL CORPORATION,
as Agent and as a Lender
By:
---------------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION, as
Servicing Agent and as a Lender
By:
---------------------------------------
Name:
Title:
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ATTACHMENT A TO AMENDMENT NO. 1
TO THE AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
[See Attached]
<PAGE>
EXHIBIT K
Commitments
Lender Amount of Commitment
- ------ --------------------
ING (U.S.) CAPITAL CORPORATION $85,000,000; provided, that at all times
--------
on and after the Reduction Date, the
Commitment of ING (U.S.) Capital
Corporation shall be $75,000,000
PNC BANK, NATIONAL ASSOCIATION $30,000,000
TOTAL $115,000,000, and from and after
the Reduction Date, $105,000,000
<PAGE>
ATTACHMENT B TO AMENDMENT NO. 1
TO THE AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
[See Attached]
<PAGE>
AMENDED AND RESTATED
REVOLVING LOAN NOTE
$85,000,000 May 26, 1997
New York, New York
FOR VALUE RECEIVED, J.G. WENTWORTH S.S.C. LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Borrower"), hereby promises to pay to the order of ING
(U.S.) CAPITAL CORPORATION (the "Lender"), at its office located at 135 East
57th Street, New York, New York 10022, or to such other location as the Lender
shall specify to the Borrower from time to time, in immediately available funds
in lawful money of the United States the principal amount of EIGHTY-FIVE MILLION
DOLLARS ($85,000,000) or, if less, the aggregate unpaid principal amount of all
Advances made by the Lender to the Borrower pursuant to Section 2.6 of the
Amended and Restated Revolving Credit Agreement, dated as of February 11, 1997,
by and among the Borrower, the financial institutions from time to time parties
thereto as lenders (including, without limitation, the Lender), ING (U.S.)
Capital Corporation, as agent (the "Agent"), and PNC Bank, National Association,
as servicing agent (as the same has been or may hereafter be amended, restated,
supplemented or otherwise modified from time to time, the "Amended and Restated
Revolving Credit Agreement"), on the Facility Termination Date. Capitalized
terms used and not otherwise defined herein shall have the meanings assigned to
them in the Amended and Restated Revolving Credit Agreement.
The Borrower also agrees to pay interest in like money at such office on
the unpaid principal of each such Advance from time to time from the date of
each such Advance until payment in full thereof at the rate or rates and on the
dates set forth in the Amended and Restated Revolving Credit Agreement. The
Borrower further agrees to pay all fees, expenses, indemnities, and monetary
Obligations set forth in the Amended and Restated Revolving Credit Agreement,
including, without limitation, the Unused Commitment Fee, in accordance with the
terms of such Agreement.
This Amended and Restated Revolving Loan Note is one of the Revolving Loan
Notes referred to in, and is entitled to the benefits of, the Amended and
Restated Revolving Credit Agreement, which, among other things, contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of the principal hereof prior
to the maturity hereof upon the terms and conditions specified therein and is
secured by the Purchased Settlements covered thereby.
This Amended and Restated Revolving Loan Note and the Amended and Restated
Revolving Credit Agreement do not represent a debt, liability, or obligation of
any limited partner of the Borrower or any shareholder of the Borrower's general
partner and none of such
<PAGE>
shareholders of the General Partner or any other Persons shall have any
liability for the Borrower's debts, liabilities or other Obligations under this
Amended and Restated Revolving Credit Note, the Servicing Agent Note or the
Amended and Restated Revolving Credit Agreement.
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings ascribed to them in the Amended and Restated Revolving Credit
Agreement.
THIS AMENDED AND RESTATED REVOLVING LOAN NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS DISTINGUISHED FROM THE
CONFLICT OF LAW PROVISIONS) OF THE STATE OF NEW YORK.
This Amended and Restated Revolving Note (i) re-evidences, in part, the
Borrower's indebtedness to the Lender under that certain Amended and Restated
Revolving Loan Note dated as of February 11, 1997 made by the Borrower in favor
of the Lender in the original principal amount of $75,000,000 (the "Original
Note"), (ii) is given in substitution for, and not as payment of, the Original
Note, and (iii) is in no way intended to constitute a novation of the Borrower's
indebtedness which was evidenced by the Original Note.
This Amended and Restated Revolving Note shall be binding upon the Borrower
and shall inure to the benefit of the holder hereof and its successors and
assigns. The obligations and liabilities of the Borrower hereunder may not be
assigned to any person or entity without the prior written consent of the holder
hereof. Any such assignment in violation of this paragraph shall be void and of
no force or effect.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.
2
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Revolving Loan Note has been
duly executed and delivered on behalf of the Borrower by its duly authorized
officer on the date and year first written above.
J.G. WENTWORTH S.S.C. LIMITED
PARTNERSHIP
By: J.G. WENTWORTH STRUCTURED
SETTLEMENT FUNDING CORPORATION,
as General Partner
By:
---------------------------------
Name:
Title:
3
<PAGE>
CREDIT AGREEMENT
BY AND AMONG
J.G. WENTWORTH MFC ASSOCIATES, L.P.,
J.G. WENTWORTH FUNDING CORP.,
THE FINANCIAL INSTITUTIONS FROM
TIME TO TIME PARTIES HERETO
AND
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL MARKETS, INC.,
as Agent
Dated as of May 26, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. CERTAIN DEFINITIONS
1.1 Certain Definitions........................................... 1
1.2 Construction.................................................. 23
1.3 Accounting Principles......................................... 24
ARTICLE 2. THE LOANS
2.1 Loans......................................................... 24
2.2 Voluntary Conversion and Continuation of Loans................ 26
2.3 Notes......................................................... 28
2.4 Unused Commitment Fee......................................... 28
2.5 Reductions of the Maximum Facility Amount;
Termination of the Commitments................................ 28
ARTICLE 3. INTEREST RATES; PAYMENTS
3.1 Interest Rate Option; Computation of Interest;
Maximum Interest Rate......................................... 28
3.2 Interest After Default........................................ 30
3.3 Euro-Rate Unascertainable..................................... 30
3.4 Selection of Interest Rate Options............................ 31
3.5 Payments...................................................... 32
3.6 Pro Rata Treatment of Banks................................... 34
3.7 Interest Payment Dates........................................ 34
ARTICLE 4. INCREASED COSTS; TAXES; BREAKAGE
4.1 Interest Protection........................................... 35
4.2 Increased Capital............................................. 35
4.3 Taxes......................................................... 35
4.4 Breakage...................................................... 37
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Borrower................ 38
5.2 Representations and Warranties of the General
Partner....................................................... 43
5.3 Survival of Representations and Warranties.................... 44
ARTICLE 6. CONDITIONS PRECEDENT
6.1 Conditions Precedent to Effectiveness of this
Agreement..................................................... 44
6.2 Conditions Precedent to Each Loan and Each
Continuation or Continuation of any Loan...................... 47
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ARTICLE 7. AFFIRMATIVE COVENANTS
7.1 Affirmative Covenants of the Borrower......................... 48
7.2 Affirmative Covenants of the General Partner.................. 56
ARTICLE 8. NEGATIVE COVENANTS
8.1 Negative Covenants of the Borrower............................ 56
8.2 Negative Covenants of the General Partner..................... 58
ARTICLE 9. DEFAULTS AND REMEDIES
9.1 Events of Default............................................. 60
9.2 Remedies...................................................... 62
9.3 Notice of Sale................................................ 63
ARTICLE 10. THE AGENT
10.1 Appointment................................................. 63
10.2 UCC Filings................................................. 64
10.3 Delegation of Duties........................................ 64
10.4 Nature of Duties, Independent Credit
Investigation. ............................................ 64
10.5 Actions in Discretion of Agent; Instructions
from the Banks.............................................. 65
10.6 Reimbursement and Indemnification of Agent by
the Borrower................................................ 65
10.7 Exculpatory Provisions...................................... 66
10.8 Reimbursement and Indemnification of Agent by
Banks. .................................................... 67
10.9 Reliance by Agent. ........................................ 68
10.10 Notice of Default. ........................................ 68
10.11 Notices. .................................................. 68
10.12 The Agent in its Individual Capacity. ...................... 68
10.13 Holders of Notes. ......................................... 68
10.14 Sharing of Payments......................................... 69
10.15 Successor Agent. .......................................... 69
10.16 Calculations. ............................................. 70
10.17 Beneficiaries. ............................................ 70
10.18 The Agent May Perform....................................... 70
ARTICLE 11. MISCELLANEOUS
11.1 Modifications, Amendments or Waivers......................... 70
11.2 No Implied Waivers; Cumulative Remedies; Writing
Required. .................................................. 71
11.3 Reimbursement and Indemnification of Banks by
the Borrower................................................. 71
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11.4 Payments Due on Non-Business Days............................ 72
11.5 Funding by Branch, Subsidiary or Affiliate................... 73
11.6 Notices...................................................... 73
11.7 Severability. .............................................. 73
11.8 GOVERNING LAW. ............................................. 74
11.9 Prior Understanding. ....................................... 74
11.10 Duration; Survival. ........................................ 74
11.11 Successors and Assigns; Assignments.......................... 74
11.12 Confidentiality. ........................................... 77
11.13 Counterparts. .............................................. 78
11.14 CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO
VENUE; AGENT FOR SERVICE OF PROCESS.......................... 78
11.15 WAIVER OF JURY TRIAL......................................... 78
11.16 Assignment and Security Interest. ........................... 78
11.17 Lending to Competitors....................................... 79
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EXHIBITS
EXHIBIT A -- Form of Notes
EXHIBIT B-1 -- Form of Loan Request
EXHIBIT B-2 -- Form of Conversion/Continuation Request
EXHIBIT C -- Form of Assignment and Assumption
Agreement
EXHIBIT D -- Form of Guaranty Agreement
EXHIBIT E-1 -- Form of Assignment of Interest (JUA)
EXHIBIT E-2 -- Form of Assignment of Interest (MTF)
EXHIBIT E-3 -- Form of Assignment of Interest (The City
of Philadelphia and SEPTA)
EXHIBIT F-1 -- Form of Notice of Assignment (JUA)
EXHIBIT F-2 -- Form of Notice of Assignment (MTF)
EXHIBIT F-3 -- Form of Notice of Assignment (The City
of Philadelphia and SEPTA)
EXHIBIT G -- Form of Notification of Deferral
EXHIBIT H -- Form of Security Agreement
EXHIBIT I -- Form of Opinion of Counsel for the
Borrower and the General Partner
EXHIBIT J -- Form of Borrowing Base Certificate
EXHIBIT K -- Form of Lock-Box Agreement
EXHIBIT L -- Form of Monthly Report
SCHEDULES
SCHEDULE 1.1(a) -- Commitments of the Banks
SCHEDULE 1.1(b) -- Guarantors
SCHEDULE 1.1(c) -- Permitted Existing Indebtedness
SCHEDULE 5.1(j) -- Intellectual Property
SCHEDULE 5.1(k) -- Material Agreements and Contracts
SCHEDULE 5.1(q) -- ERISA Matters
SCHEDULE 5.1(w) -- Bank Accounts; Lock-Boxes; Lock-Box
Accounts; Lock-Box Banks
SCHEDULE 5.1(x) -- Locations of Offices; Chief
Executive Office
SCHEDULE 5.1(y) -- Insurance Policies
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<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of May 26, 1995 by and among J.G.
WENTWORTH MFC ASSOCIATES, L.P., a Pennsylvania limited partnership (the
"Borrower"), J.G. WENTWORTH FUNDING CORP., a Pennsylvania corporation (the
"General Partner"), the financial institutions from time to time parties hereto
(together with each such institution's respective successors and assigns being
referred to herein collectively as the "Banks" and each individually as "Bank")
and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL MARKETS, INC. ("ING"), as agent
(in such capacity as agent, the "Agent").
RECITALS
WHEREAS, the Borrower has requested, and the Banks have agreed to make,
certain loans, advances and other financial accommodations to the Borrower on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. CERTAIN DEFINITIONS
1.1 Certain Definitions. In addition to words and terms defined
elsewhere in this Agreement, the following words and terms shall have the
following meanings, respectively, unless the context clearly requires otherwise:
"Affiliate" as to any Person shall mean any other Person (i) which
directly or indirectly controls, is controlled by, or is under common control
with, such Person, (ii) which beneficially owns or holds 10% or more of any
class of the voting stock (or, in the case of a Person that is not a
corporation, 10% or more of the equity interest) of such Person, or (iii) 10% or
more of the voting stock (or, in the case of a Person that is not a corporation,
10% or more of the equity interest) of which is beneficially owned or held,
directly or indirectly, by such Person. Control, as used herein, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, partnership interests, membership, voting
rights, governing boards, committees, divisions or other bodies, including the
power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
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"Agent" shall mean ING and its successors in such capacity hereunder.
"Agent's Account" shall mean the Agent's bank account at Morgan
Guaranty Trust, New York, ABA No. 021 00 0238, Account No. 60007116, for the
account of ING (U.S.) Capital Markets, or such other account as may be
designated by the Agent from time to time by notice to the Borrower.
"Agreement" shall mean this Credit Agreement, as the same may be
amended, restated, supplemented or otherwise modified from time to time
hereafter, including all schedules and exhibits hereto.
"Applicable Discount Rate" shall mean, with respect to any Purchased
Claim, the Discount Rate then applicable to the Claim Group to which such Claim
is allocated at such time.
"Assignment and Assumption Agreement" shall mean an Assignment, Notice
and Assumption Agreement substantially in the form of Exhibit C hereto, by and
among a Bank making an assignment and a Bank accepting such assignment pursuant
to Section 11.11.
"Assignment of Interest" shall mean an assignment substantially in the
form of Exhibit E-1, E-2 or E-3 attached hereto among the Borrower, the
Plaintiff and the Plaintiff's Attorney pursuant to which the Plaintiff and the
Plaintiff's Attorney sells, assigns and conveys all of their respective rights,
title and interests in a Claim and all amounts due with respect thereto.
"Authorized Officer" shall mean those Persons designated by written
notice to the Agent from the Borrower as being authorized to execute notices,
reports and other documents required hereunder. The Borrower may amend such list
of Persons from time to time by giving written notice of such amendment to the
Agent.
"Bankruptcy Code" shall mean Title 11 of the United States Code 11
U.S.C. (section)101 et seq.), as amended from time to time, and any successor
statute.
"Banks" shall have the meaning assigned to such term in the Preamble to
this Agreement.
"Base Rate" shall mean, on any date, a fluctuating per annum rate of
interest equal to the higher of (i) the Chemical Bank Prime Rate and (ii) the
Citibank Prime Rate.
"Base Rate Option" shall mean, on any date of determination, the higher
of (i) the Base Rate as in effect on such date minus 0.50% and (ii) the sum of
(a) the Euro-Rate that
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would have been applicable on such date for a one month Interest Period
commencing on the first day of the month in which such date of determination
occurs, plus (b) 2.50%.
"Base Rate Portion" shall mean the portion of the Loans bearing
interest under the Base Rate Option at such time.
"Borrower's Account" shall have the meaning assigned to such term in
Section 2.1(d).
"Borrowing" shall mean a borrowing consisting of one or more Borrowing
Tranches from the Banks.
"Borrowing Base" shall mean on any date of determination, the sum of:
(a) with respect to all Seasoned Purchased Claims included on the then
current Borrowing Base Certificate on such date, the product of (1) the sum
of the present values of the outstanding Maturity Values of each such
Purchased Claim which is an Eligible Claim on such date of determination,
discounted at the Applicable Discount Rate with respect thereto as in
effect on such date and (2) 98%; and
(b) with respect to all other Purchased Claims included on then current
Borrowing Base Certificate on such date, the sum of the Purchase Prices of
each such Purchased Claim which is an Eligible Claim as of such date, less
any Collections received with respect to any such Claims included in this
clause (b).
"Borrowing Base Certificate" shall mean the certificate in the form of
Exhibit J hereto delivered with each Loan Request and at the times specified in
Sections 6.1(i) and 7.1(a)(x).
"Borrowing/Conversion Date" shall mean, with respect to any Loan, the
date for the making thereof or the Continuation or Conversion to the same or a
different Interest Rate Option, which date shall in any case be a Business Day.
"Borrowing Tranche" shall mean (i) with respect to the Fixed Rate
Portion of the Loans, Loans to which a Fixed Rate Option applies by reason of
the selection of, Conversion to or Continuation of such Interest Rate Option on
the same day and having the same Interest Period, and (ii) with respect to the
Base Rate Portion of the Loans, all outstanding Loans to which the Base Rate
Option applies by reason of the selection of or Conversion to such Interest Rate
Option.
"Business Day" shall mean any day other than a Saturday or Sunday or
other day upon which banks are authorized or required to close in New York City;
provided, however, that when
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used with respect to the Euro-Rate, the term "Business Day" shall be deemed to
mean a day of the year on which dealings are carried on in the London interbank
market and banks are open in London and not authorized or required to be closed
in New York City.
"Chemical Bank Base Rate" shall mean the rate designated by Chemical
Bank from time to time as its prime rate in the United States, such rate to
change as when such designated rate changes. The Chemical Bank Base Rate is not
necessarily the lowest rate of interest charged by Chemical Bank in connection
with extensions of credit to its customers.
"Citibank Base Rate" shall mean the rate designated by Citibank, N.A.
from time to time as its prime rate in the United States, such rate to change as
when such designated rate changes. The Citibank Base Rate is not necessarily the
lowest rate of interest charged by Citibank, N.A. in connection with extensions
of credit to its customers.
"City of Philadelphia" shall mean the City of Philadelphia,
Pennsylvania, a municipal corporation formed under Title 53 of Pa.C.S.A.
"Claim" shall mean (i) a fully settled Residual Bodily Injury claim
against the JUA resulting from a motor vehicle accident for which payment has
been deferred for twelve months pursuant to N.J.S.A. 17:33B-3 of the FAIRA and
the Department of Insurance Order No. A91-343 or for eighteen months pursuant to
N.J.S.A. 17:33-B3 of the FAIRA and N.J.A.C. 11:3-2A.3; (ii) a fully settled
Residual Bodily Injury Claim against the MTF resulting from a motor vehicle
accident for which payment has been deferred for eighteen months pursuant to the
GDP Act and the Plan of Operation; (iii) a fully settled claim against the City
of Philadelphia resulting from an accident for which payment has been deferred
by the City of Philadelphia for up to twelve months; and (iv) a fully settled
claim against SEPTA resulting from an accident for which payment has been
deferred by SEPTA for up to eight months.
"Claim Group" shall mean either the Base Rate Claim Group, the Matched
Claim Group or the Unmatched Claim Group.
"Claims Package" shall mean fully executed copies of all documentation
relating to the purchase of any and all Claims by the Borrower, and shall
include, without limitation, (i) the Assignment of Interest and all documents
required to be delivered to the Borrower pursuant thereto, (ii) the Judgment (to
the extent such Claim is a judgment Claim), (iii) the Settlement Agreement (to
the extent such Claim is a settlement Claim), (vi) the Release, (vii) the
Notice of Assignment, (viii) the Notification of Deferral (to the extent such
Claim is a Partial Claim) and (ix) any notifications or acknowledgments received
by the Borrower from Servicing Carriers relating to Purchased
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Claims, including acknowledgment of releases and payment obligations.
"Claims Servicer" shall mean Electronic Data Systems Corporation, a
Texas corporation, in its capacity as the provider of services under the
Servicing Agreement and/or any other Person or entity performing similar
services for the Borrower which has been approved by the Agent in accordance
with the terms of this Agreement.
"Closing Date" shall mean May 26, 1995.
"Collateral" shall mean the property of the Borrower in which security
interests are granted to the Agent for the benefit of itself and the Banks
hereunder or under the Security Agreement.
"Collections" shall mean, with respect to any Purchased Claim, all cash
collections and other cash proceeds of such Purchased Claim.
"Commitment" shall mean as to any Bank at any time, the amount set
forth opposite its name on Schedule 1.1(a) attached hereto or on Schedule I to
the most recent Assignment and Assumption Agreement to which such Bank is a
party, in each case, as such amount may be reduced pursuant to Section 2.5(a),
and "Commitments" shall mean the aggregate Commitments of all of the Banks at
such time.
"Commitment Percentage" shall mean, with respect to any Bank, the
percentage set forth next to such Bank's name on Schedule 1.1(a) or on Schedule
I to the most recent Assignment and Assumption Agreement to which such Bank is a
party.
"Commitment Termination Date" shall mean the earliest to occur of (i)
the date of the reduction of the Commitments to zero or the termination of the
Commitments, in either case, pursuant to Section 2.5, (ii) the declaration or
automatic occurrence of the Commitment Termination Date or the Facility
Termination Date pursuant to Section 9.2, or (iii) May 24, 1996.
"Competitor" shall have the meaning assigned to such term in Section
11.17.
"Continue" and "Continuation" each refers to the continuation of a Loan
accruing interest at a Fixed Rate Option for an additional Interest Period at
such Fixed Rate Option.
"Convert," "Conversion," and "Converted" each refers to either (i) a
conversion of Loans accruing interest at the Base Rate Option to Loans accruing
interest at a Fixed Rate Option or (ii) a conversion of Loans accruing interest
at a Fixed Rate
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Option to Loans accruing interest at a different Fixed Rate Option or the Base
Rate Option.
"Conversion/Continuation Request" shall mean a request for the
Conversion or Continuation of any outstanding Loans made in accordance with
Section 2.2, which request shall be substantially in the form of Exhibit B-2
hereto appropriately completed.
"CoreStates shall mean CoreStates Bank, N.A.
"CoreStates Documents shall have the meaning assigned to such term in
Section 6.1(c).
"Default Rate" shall mean a floating per annum rate equal to the Base
Rate then in effect plus 2.00% per annum.
"Defaulted Claim" shall mean a Claim: (i) as to which any portion of
the Maturity Value thereof remains unpaid for more than seventy-five (75) days
after the Scheduled Maturity Date of such Claim , (ii) as to which the Obligor
thereof has taken any action, or suffered any event to occur, of the types
described in clause (vii) of the definition of "Eligible Claim," (iii) any
Insolvency Event has occurred with respect to the Ultimate Obligor with respect
to such Claim, or (iv) which has been or should have been written off the
Borrower's books as being uncollectible.
"Delinquency Ratio" shall mean the ratio (expressed as a percentage)
computed as of the last day of each calendar month by dividing (i) the aggregate
Maturity Value of all Purchased Claims that were Delinquent Receivables on such
date, by (ii) the aggregate Maturity Value of all Purchased Claims on such Date.
"Delinquent Claim" shall mean a Claim that is not a Defaulted Claim and
as to which any portion of the Maturity Value thereof remains unpaid forty-five
(45) days after the last day of the calendar month in which the Scheduled
Maturity Date of such Claim occurs.
"Discount Rate" shall mean for any day, as reported in the most recent
Monthly Report (or, until the first such report shall have been delivered, on
the Closing Date) and confirmed by the Agent:
(a) with respect to the Base Rate Claim Group, a rate per annum equal
to:
(M x .25%) + ER(WAM(FL));
(b) with respect to the Matched Claim Group, a rate per annum equal to:
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(M x .25%) + ER(WAM(MP));
(c) with respect to the Unmatched Claim Group, a rate per annum equal
to:
(M x .25%) + [ER(WTM(UP)) + ER(WAM(UP) - WTM(UP))];
in each case, as such amounts (other than the interest rates) are calculated as
of the last day of the immediately preceding month and as such interest rates
are in effect on the date of such Monthly Report (or, until the date the first
such Monthly Report shall be delivered, as such amounts are calculated on the
Closing Date) (the "Set Date") and where:
ER(WAM(FL)) = The Euro-Rate which would be applicable on
such Set Date to (and interpolated on a
straight-line basis for the applicable number
of days of) an Interest Period commencing on
such Set Date and having a duration equal to
the Weighted Average Maturity of the Purchased
Claims allocated to the Base Rate Claim Group;
ER(WAM(MP)) = The Euro-Rate which would be applicable on
such Set Date to (and interpolated on a
straight-line basis for the applicable number
of days of) an Interest Period commencing on
such Set Date and having a duration equal to
the Weighted Average Maturity of the Purchased
Claims allocated to the Matched Claim Group;
ER(WTM(UP)) = The Euro-Rate which would be applicable on
such Set Date to (and interpolated on a
straight line basis for the applicable number
of days of) an Interest Period commencing on
such Set Date and having a duration equal to
the Weighted Average Tranche Maturity of the
Purchased Claims allocated to the Unmatched
Claim Group;
ER(WAM(UP)-WTM(UP)) = The forward Euro-Rate which (based on the
interest rate information available on such
Set Date, interpolated on a straight line
basis for the applicable number of days
thereof) would be applicable to an Interest
Period having a duration equal to the
difference between (x) the Weighted Average
Maturity of the Purchased Claims allocated to
the Unmatched Claim Group and (y) the Weighted
Average Tranche
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Maturity of such Purchased Claims and which
Interest Period would be deemed to commence
such number of days as equals such Weighted
Average Tranche Maturity after the Set Date;
and
M = The Multiplier on such date;
provided, however, that if any of the Interest Periods used to calculate the
interest rates set forth above would (regardless of the actual duration thereof)
be outstanding one year after the Set Date, such interest rate shall,
notwithstanding the references therein to the Euro-Rate, be calculated by
reference to the Swap Rate.
"Dollar", "Dollars", "U.S. Dollars" and the symbol "$" shall mean
lawful money of the United States of America.
"Eligible Claim" shall mean a Claim:
(i) which is not a Defaulted Claim or a Delinquent Claim;
(ii) (A) the performance of which has been completed by the Plaintiff
and/or the Plaintiff's Attorney, as applicable, and by all other parties other
than the Obligor; (B) that requires the Maturity Value thereof to be paid in
full within the following number of months after the effective date of the
Release relating thereto: (x) eighteen months, in the case of a Claim against
the JUA or the MTF, (y) twelve months, in the case of a Claim against The City
of Philadelphia and (z) eight months, in the case of a Claim against SEPTA; and
(C) that has been duly authorized and is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor, enforceable
against such Obligor in accordance with its terms and is not subject to any
dispute, offset, counterclaim or defense whatsoever;
(iii) with respect to which, the Scheduled Maturity Date thereof is no
later than 30 days prior to the Scheduled Facility Termination Date;
(iv) which (a) was acquired by the Borrower from a Plaintiff (or the
estate thereof), Plaintiff's Attorney or any other seller that, immediately
prior to its sale thereof to the Borrower, owned such Claim free and clear of
any Lien and (b) continues to be free and clear of any Lien other than a
Permitted Lien;
(v) which (A) is either a "general intangible" within the meaning of
Section 9-106 of the UCC of all applicable juris dictions or such other type of
property in which the Agent's and the Banks' security interest therein shall be
perfected by the
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execution by all parties thereto of a Notice of Assignment with respect thereto
as contemplated herein; (B) has been delivered to the Claims Servicer, together
with all other instruments, documents and agreements included in the Claims
Package with respect thereto, in each case, in accordance with the terms of the
Servicing Agreement; (C) is denominated and payable only in Dollars in the
United States; and (D) no portion of which is payable on account of taxes;
(vi) the assignment of which does not contravene or conflict with any
applicable Law or any contractual or other restriction, limitation or
encumbrance;
(vii) which has not been compromised, adjusted or modified (including,
without limitation, by extension of time of payment or the granting of any
discounts, allowances or credits);
(viii) which does not contravene in any material respect any Law
applicable thereto and which no party thereto is in violation of any such Law in
any material respect;
(ix) with respect to which all of the conditions precedent set forth in
the Assignment of Claim have been fully satisfied;
(x) the rating of the Ultimate Obligor in respect thereof (other than
the MTF or the JUA) is at least "BBB-" or the equivalent by Standard & Poor's
Ratings Group or any other nationally recognized statistical ratings agency that
rates such Person, and no other such rating agency that rates (either actually
or on a "shadow" basis) such Person has rated it less than "BBB-" or the
equivalent thereof;
(xi) in respect of which the respective Notice of Assignment executed
by all parties and acknowledged by the Obligor thereof has been delivered to the
Claims Servicer; provided, that a Claim shall not be deemed ineligible pursuant
to this clause (xi) for the failure to have delivered evidence of the
acknowledgement of such Obligor with respect to such Notice of Assignment to the
Claims Servicer until ninety days after the date of the purchase of such Claim
by the Borrower;
(xii) which is not a judgment Claim, unless the Borrower shall have
provided evidence satisfactory to the Agent of the perfection, in favor of the
Agent, of a first priority, perfected security interest or Lien therein; and
(xiii) which complies with such other criteria and requirements as the
Agent may from time to time in its commercially reasonable credit judgment
specify to the Borrower following thirty days' prior written notice, which other
criteria and requirements shall be based on the existence or occurrence of any
factors to be specified by the Agent, in such notice, which,
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in the commercially reasonable credit judgment of the Agent materially impair
the composition, quality, the Collateral with respect thereto or the prospects
of collection thereof.
"Environmental Laws" shall mean all federal, state, local and foreign
Laws, including, without limitation, permits, orders, judgments, consent decrees
issued, or entered into, pursuant thereto, relating to pollution or protection
of human health or the environment or employee safety in the work place.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended or supplemented from time to time, and any successor
statute, and the rules and regulations thereunder, as from time to time in
effect.
"ERISA Group" shall mean any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Borrower, (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Borrower, and (iii)
member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as the Borrower, any corporation described
in clause (i) above or any partnership, trade or business, described in clause
(ii) above.
"Euro-Rate" shall mean, with respect to any Borrowing Tranche to which
the Euro-Rate applies for any Interest Period, the per annum rate of interest
determined by the Agent to be equal to the sum of (a) 2.50% and (b) the rate for
deposits in Dollars in a principal amount of not less than $500,000 for a period
approximating such Interest Period which appears on the Reuters Screen LIBO Page
as of 11:00 A.M. (London time) on the second Business Day before (and for value
on) the first day of such Interest Period (and, in the case of any such Interest
Period in excess of three months, adjusted by the Agent to account for quarterly
payment of interest thereon by the Borrower as required by Section 3.7), divided
by the remainder of one minus the Euro-Rate Reserve Percentage (expressed as a
decimal) applicable, if any, during such Interest Period. The Agent shall give
the Borrower and each Bank notice of the Euro-Rate determined by the Agent to be
applicable to any such Borrowing Tranche for any Interest Period promptly (and,
in any event, within 10 days) after the commencement thereof, and such
determination by the Agent shall be conclusive absent manifest error.
"Euro-Rate Portion" shall mean the portion of the Loans bearing
interest at the Euro-Rate.
"Euro-Rate Reserve Percentage" shall mean the maximum percentage
(expressed as a decimal rounded upward to the nearest
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1/100 of 1%) as determined by the Agent (which determination shall be conclusive
absent manifest error) which is in effect during any relevant period, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirements (including, without
limitation, supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities") of a member bank in such System.
"Event of Default" shall mean any of the Events of Default described in
Section 9.1.
"Facility Termination Date" shall mean the earlier to occur of (i) the
declaration or automatic occurrence of the Facility Termination Date pursuant to
Section 9.2 and (ii) the date occurring two years after the occurrence of the
Commitment Termination Date for any reason whatsoever.
"FAIRA" means the Fair Automobile Insurance Reform Act of 1990,
N.J.S.A. 17:33B-1 et seq., or any successor statute.
"Federal Funds Effective Rate" shall mean for any day during, the rate
per annum (rounded upward to the nearest 1/100 of 1%) announced by the Federal
Reserve Bank of New York (or any successor) on such day as being the weighted
average of the rates on overnight Federal funds transactions arranged by Federal
funds brokers on the previous trading day, as computed and announced by such
Federal Reserve Bank (or any successor) in substantially the same manner as such
Federal Reserve Bank computes and announces the weighted average it refers to as
the "Federal Funds Effective Rate" as of the date of this Agreement; provided,
however, that if such Federal Reserve Bank (or its successor) does not announce
such rate on any day, the "Federal Funds Effective Rate" for such day shall be
the average of the quotations of such rate for such day on such transactions
obtained by the Agent from three Federal Funds brokers of recognized standing
selected by it.
"Fee Letter" shall have the meaning assigned to such term in Section
2.4.
"Fixed Rate Option" shall mean either the Euro-Rate or the Swap Rate.
"Fixed Rate Portion" shall mean the portion of the Loans bearing
interest at the Fixed Rate.
"GAAP" shall mean generally accepted accounting principles as are in
effect from time to time, subject to the provisions of Section 1.3, and applied
on a consistent basis (except for changes in application in which the Borrower's
independent certified public accountants and the Agent concur) both as to
classification of items and amounts.
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"GDP Act" shall mean the New Jersey Good Driver Protection Act of 1994,
P.L. 1994, C.57.
"General Partner" shall have the meaning assigned to such term in the
Preamble of this Agreement.
"Governmental Authority" shall mean any national, federal, state, local
or other government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
"Guarantor" shall mean any of the Persons set forth on Schedule 1.1(b)
hereto.
"Guaranty" shall mean with respect to any Person any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any liability or obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limiting the generality of the foregoing, any agreement to indemnify or
hold harmless any other Person, any performance bond or other suretyship
arrangement, any agreement to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor and any other
form of assurance against loss, except indorsement of negotiable or other
instruments for deposit or collection in the ordinary course of business.
"Guaranty Agreement" shall mean any Guaranty and Surety Agreement in
substantially the form of Exhibit D hereto executed and delivered by a Guarantor
in favor of the Agent for the benefit of the Banks.
"Guaranty Fund" shall mean the New Jersey Automobile Insurance Guaranty
Fund created pursuant to N.J.S.A. 17:33B-5 of the FAIRA.
"Indebtedness" shall mean as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money; (ii)
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments; (iii) amounts raised under or liabilities in respect of any
note purchase or acceptance credit facility; (iv) reimbursement obligations
under any letter of credit, currency swap agreement, interest rate swap, cap,
collar or floor agreement or other interest rate management device; (v)
obligations of such Person to pay the deferred purchase price of property or
services; (vi) obligations of such Person as lessee under leases which have been
or should be, in accordance with
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GAAP recorded as capital leases; (vii) any other transaction (including without
limitation forward sale or purchase agreements, capitalized leases and
conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements, and whether as structured as a borrowing, sale and leaseback, or
sale of assets for accounting purposes; (viii) any Guaranty of any Indebtedness
of the types described in this definition; (ix) liabilities secured by any Lien
on property owned or acquired, whether or not such a liability shall have been
assumed; or (x) unvested pension obligations; provided, however, that
"Indebtedness" shall not include trade payables and accrued expenses incurred in
the ordinary course of business which are not represented by a promissory note
or other evidence of indebtedness and which are not more than thirty days past
due).
"Insolvency Event" shall mean, with respect to any Person, an event of
the type described in Section 9.1(f) shall have occurred with respect to such
Person.
"Interest Period" shall mean, with respect to each Fixed Rate Portion
constituting part of the same Borrowing Tranche, the period commencing on the
date such Loan is made, Converted or Continued at or to the applicable Fixed
Rate Option for such Borrowing Tranche, and ending on the last day of the period
selected by the Borrower by delivery of a Loan Request or a
Conversion/Continuation Request in accordance with the terms of this Agreement.
The determination of Interest Periods shall be subject to the following
provisions:
(i) Subject to the limitations set forth herein, the duration of
each Interest Period for a Borrowing Tranche which is requested to
accrue interest at the Euro-Rate shall be any number of months up to
(and including) twelve, and the duration of each Interest Period for a
Borrowing Tranche which is requested to accrue interest at the Swap
Rate shall be any period between twelve and eighteen months;
(ii) In the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the next
preceding Interest Period expires;
(iii) If an Interest Period would otherwise expire on a day other
than a Business Day, the last day of such Interest Period shall be
extended to occur on the immediately succeeding Business Day; provided,
however, that, in the case of an Interest Period to which the Euro-Rate
is applicable, if the next succeeding Business Day occurs in the
following calendar month, then the last day of such Interest Period
shall be deemed to occur on the immediately preceding Business Day;
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(iv) In the case of an Interest Period to which the Euro-Rate is
applicable, if such Interest Period commences on the last Business Day
in a calendar month or on a day for which there is no numerically
corresponding day in the calendar month in which such Interest Period
is to expire, the last day of such Interest Period shall be deemed to
occur on the last Business Day of the calendar month in which such
Interest Period is to expire;
(v) No Borrowing Tranche of less than $500,000 or an integral
multiple of $100,000 in excess of such amount may be allocated,
Converted or Continued to an Interest Period, and if the aggregate
principal amount of any Borrowing Tranche allocated to an Interest
Period shall at any time during such Interest Period fall below
$500,000, such Interest Period shall be terminated and the Loans
allocated thereto shall be Converted to the Base Rate Option on such
date; and
(vi) The Borrower may not select any Interest Period which is
scheduled to expire after the Scheduled Facility Termination Date.
"Interest Rate Option" shall mean the Euro-Rate, the Swap Rate or the
Base Rate Option.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as the same may be amended or supplemented from time to time, or any successor
statute, and the rules and regulations thereunder, as the same are from time to
time in effect.
"Involuntary Proceeding" shall have the meaning assigned to such term
in Section 9.1(f).
"JUA" shall mean the New Jersey Automobile Full Insurance Underwriting
Association, created pursuant to N.J.S.A. 17:30E-4 of the NJAFIAA.
"Judgment" shall have the meaning assigned to such term in the
Assignment of Interest.
"Law" shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Governmental Authority, including,
without limitation, any Environmental Laws.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including but not
limited to any conditional
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sale or title retention arrangement, and any assignment, deposit arrangement or
lease intended as, or having the effect of, security and any filed financing
statement or other notice of any of the foregoing (whether or not a lien or
other encumbrance is created or exists at the time of the filing).
"Loan Documents" shall mean this Agreement, the Notes, the Guaranty
Agreements, the Security Agreement, the Lock-Box Agreements, the Fee Letter and
any other instruments, certificates or documents delivered or contemplated to be
delivered hereunder or thereunder or in connection herewith or therewith, as the
same may be supplemented or amended from time to time hereafter in accordance
herewith or therewith, and "Loan Document" shall mean any of the Loan Documents.
"Lock-Box" shall mean a Lock-Box described on Schedule 5.1(w) hereto
and/or any other lock-box from time to time hereafter designated by the Borrower
as a Lock-Box in accordance with the terms hereof and of the Security Agreement
and in respect of which a Lock-Box Agreement executed by all of the parties
thereto shall have been delivered to the Agent in accordance with the terms
hereof and thereof.
"Lock-Box Account" shall mean the bank accounts described on Schedule
5.1(w) hereto and/or any other bank account from time to time hereafter
designated by the Borrower as a Lock-Box Account in accordance with the terms
hereof and of the Security Agreement and in respect of which a Lock-Box
Agreement executed by all of the parties thereto shall have been delivered to
the Agent in accordance with the terms hereof and thereof.
"Lock-Box Agreement" shall mean an agreement substantially in the form
of that attached hereto as Exhibit K.
"Lock-Box Bank" shall mean the bank(s) described on Schedule 5.1(w) at
which any Lock-Box or Lock-Box Account is maintained or any other bank from time
to time hereafter designated by the Borrower as a Lock-Box Bank in accordance
with the terms hereof and of the Security Agreement and who has executed and
delivered a Lock-Box Agreement to the Agent with respect to all such Lock-Boxes
and/or Lock-Box Accounts maintained with it as required pursuant hereto and/or
to the Security Agreement.
"Loan Request" shall mean a request for Loans made in accordance with
Section 2.1(b), which request shall be substantially in the form of Exhibit B-1
hereto appropriately completed.
"Loans" shall mean collectively, and "Loan" shall mean separately, all
Loans or any Loan made by the Banks or one of the Banks to the Borrower pursuant
to Section 2.1.
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"Management Agreement" shall mean that certain letter agreement dated
as of the Closing Date between the Borrower and J.G. Wentworth and Company, Inc.
concerning the provision of certain services by J.G. Wentworth and Company, Inc.
for the Borrower, as the same may be amended, restated, supplemented or
otherwise modified from time to time hereafter in accordance with the terms of
this Agreement.
"Matched Claim Group" shall mean, at any time, those Purchased Claims
then allocated to Interest Periods ending within five days of the respective
Scheduled Maturity Dates thereof.
"Material Adverse Change" shall mean any set of circumstances or events
which (a) has or could reasonably be expected to have any, material adverse
effect whatsoever upon the validity or enforceability of, or the Borrower's or
any Guarantor's ability to perform its respective obligations under, this
Agreement or any other Loan Document, (b) is or could reasonably be expected to
be material and adverse to the businesses, properties, assets, financial
condition, results of operations or prospects of the Borrower or any Guarantor,
(c) impairs materially or could reasonably be expected to impair materially the
ability of the Borrower to duly and punctually pay or perform its Obligations
hereunder and under the other Loan Documents, or (d) impairs materially or could
reasonably be expected to impair materially the ability of the Agent or any of
the Banks, to the extent permitted, to enforce their legal remedies pursuant to
this Agreement or any other Loan Document.
"Material Adverse Effect" shall mean an effect that could result in a
Material Adverse Change.
"Maturity Value" shall mean with respect to any Claim, the Settlement
Amount thereof plus all interest payable with respect thereto.
"Maximum Available Facility Amount" shall mean at any time, the lesser
of (A) Maximum Facility Amount at such time and (B) the Borrowing Base at such
time.
"Maximum Facility Amount" shall mean $90,000,000, as the same may be
reduced from time to time pursuant to Section 2.5(a); provided, however, that at
any time from and after the Commitment Termination Date, the "Maximum Facility
Amount" shall equal the aggregate principal balance of the Loans outstanding at
such time.
"Maximum Rate" shall have the meaning assigned to such term in Section
3.1(d).
"Meridian" shall mean Meridian Bank, its successors and assigns.
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"Monthly Report" shall mean a report substantially in the form of that
attached as Exhibit L and covering the matters described in Section 7.1(vii).
"MTF" shall mean the Market Transition Facility of New Jersey created
pursuant to N.J.S.A. 17:33B-1 of the FAIRA, as amended by the GDP Act.
"Multiplier" shall mean, (i) at any time prior to the purchase by the
Borrower of the portfolio of Claims from Settler's Funding, L.L.C., 1, and (ii)
at any time after such purchase, an amount, as reported on the most recent
Monthly Report, equal to the ratio of (a) the difference of the aggregate
Maturity Value of the Purchased Claims as of the last day of the month covered
by such report, minus $6,533,000, to (b) the aggregate Maturity Value of the
Purchased Claims as of the last day of the month covered by such report.
"Net Worth" shall mean as of any date of determination the difference
of (i) the aggregate present value of all Purchased Claims (other than Defaulted
Claims) owned by the Borrower at such time, discounted at the Applicable
Discount Rates as in effect as of such date with respect thereto, minus (ii) the
total liabilities of the Borrower at such time as determined in accordance with
GAAP.
"Notice of Assignment" shall mean the notification to the Servicing
Carrier, in the case of Claims against the JUA or the MTF, or to the payor of
the Purchased Claims, in the case of any other Claim, of the Assignment of
Interest executed by the Plaintiff, the Plaintiff's Attorney and the Borrower
and acknowledged by the Servicing Carrier or the other payor, as applicable,
which Notice of Assignment shall be substantially in the form of Exhibit F-1,
F-2 or F-3 attached hereto, and pursuant to which such Servicing Carrier or
other payer, as applicable, (a) acknowledges receipt of notification of such
Assignment of Interest in favor of the Borrower, (b) acknowledges receipt of
notification of the Agent's security interest in such Claim and (c) agrees to
pay the Maturity Value of such Claim to the Claims Servicer or to such other
Person as the Agent may direct.
"Notification of Deferral" shall mean the notification to the Borrower
from the Plaintiff's Attorney requesting deferral of monies owed to the
Plaintiff's Attorney, which Notification of Deferral shall be substantially in
the form of Exhibit G attached hereto.
"NJAFIAA" shall mean the New Jersey Automobile Full Insurance
Availability Act, N.J.S.A. 17:30E-1 et seq.
"Notes" shall mean collectively, and "Note" shall mean separately, all
the Notes of the Borrower, in each case, in the form of Exhibit A hereto and
evidencing the Loans together with
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all amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
"Obligations" shall mean and include all loans, advances, debts,
liabilities, obligations, covenants and duties owing to the Agent and the Banks
by the Borrower of any kind or nature, present or future, arising under this
Agreement, the Notes, the Security Agreement, the Fee Letter or any of the other
Loan Documents or other instruments, documents or agreements executed and/or
delivered in connection with any of the foregoing and to which the Borrower is a
party, whether or not for the payment of money, whether arising by reason of an
extension of credit, opening of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising. The term includes, without limitation, the
principal amount of all Loans, together with interest, charges, expenses, fees,
attorneys' and paralegals' fees and expenses, and any other sums chargeable to
the Borrower under this Agreement or the other Loan Document pursuant to which
it arose.
"Obligor" shall mean, with respect to any Claim, the JUA, the MTF, the
City of Philadelphia, SEPTA, or the applicable Servicing Carrier obligated to
make payments with respect to such Claim.
"Other Taxes" shall have the meaning assigned to such term in Section
4.3(b).
"Partial Claim" shall mean any Claim of a Plaintiff (or its estate) or
a Plaintiff's Attorney, but not both, which has been purchased by the Borrower.
"Partnership Agreement" shall mean the Limited Partnership Agreement of
J. G. Wentworth MFC Associates, L.P. dated as of June 9, 1993 among the General
Partner, Gary Veloric and James DeLaney, as the same may be amended, restated,
supplemented or otherwise modified from time to time hereafter in accordance
with the terms of this Agreement.
"Permitted Assignee" shall mean (i) any of the Banks or their
Affiliates, PNC Bank, Meridian, UJB or any company managed or administered by
ING or (ii) any other financial institutions approved by the Borrower upon the
request of any Bank, which approval shall not unreasonably be withheld;
provided, however, that after the occurrence and during the continuance of an
Event of Default under Section 9.1(a) or Section 9.1(b)(i), a "Permitted
Assignee" shall mean any financial institution selected by a Bank .
"Permitted Indebtedness" shall mean:
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(a) Indebtedness under the Loan Documents;
(b) Existing Indebtedness as set forth on Schedule 1.1(c); and
(c) Other Indebtedness incurred in the ordinary course of the
Borrower's business but not to exceed $100,000 at any time outstanding.
"Permitted Liens" shall mean:
(a) Liens for taxes, assessments or similar charges, incurred in the
ordinary course of business and which are not yet due and payable;
(b) pledges or deposits made in the ordinary course of business and to
the extent required by Law to secure payment of worker's compensation, or to
participate in any fund in connection with worker's compensation, unemployment
insurance, old-age pensions or other social security programs;
(c) Liens in favor of the Agent for the benefit of itself and the
Banks; and
(d) purchase money security interests on the equipment or goods of the
Borrower securing no more than 100% of the purchase price of the equipment or
goods purchased with the proceeds of any purchase money Indebtedness, to the
extent such Indebtedness is Permitted Indebtedness hereunder.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, government or political subdivision or agency thereof, or any other
entity.
"Plaintiff" shall mean a person with a Claim.
"Plaintiff's Attorney" shall mean the attorney who represented a
Plaintiff in connection with the settling of a Claim.
"Plan of Operation" shall mean the Plan of Operation adopted by the New
Jersey Insurance Commissioner pursuant to the GDP Act, as amended from time to
time.
"PNC Bank" shall mean PNC Bank, National Association, its successors
and assigns.
"PNC Documents" shall have the meaning assigned to such term in Section
6.1(c).
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"Potential Default" shall mean any event or condition which with
notice, passage of time or both would constitute an Event of Default.
"Prohibited Transaction" shall mean any prohibited transaction as
defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by the United
States Department of Labor.
"Property" shall mean all real property, both owned and leased, of the
Borrower.
"Purchased Claims" shall mean all Claims against the JUA, the MTF, the
City of Philadelphia or SEPTA previously or hereafter purchased by the Borrower
from Plaintiffs (or their respective estates), Plaintiff's Attorneys or, subject
to the terms hereof, any other sellers of such Claims; provided, however, that
with respect to any Partial Claim, "Purchased Claim" shall exclude any amounts
(including any assignment obligations) with respect to the Claim of the
Plaintiff or the Plaintiff's Attorney, as applicable, which has not agreed to
sell such Claim.
"Purchase Price" shall mean, with respect to any Claim, the aggregate
amount paid by the Borrower for the Claim from the Person from whom such Claim
was purchased.
"Ratable Share" shall mean the proportion that a Bank's Commitment
bears to the Commitments of all of the Banks.
"Register" shall have the meaning assigned to such term in Section
11.11(e).
"Release" shall have the meaning assigned to such term in the
Assignment of Interest.
"Required Banks" shall mean (i) if there are no Loans outstanding,
those Banks whose Commitments aggregate at least 50% of the Commitments of all
of the Banks, or (ii) if there are Loans outstanding, those Banks whose Loans
outstanding aggregate at least 50% of the total outstanding principal amount of
the Loans.
"Residual Bodily Injury Claim" shall mean a liability claim for loss of
any kind, other than present economic loss, resulting from liability imposed by
law for, or as a result of bodily injury or death.
"Scheduled Facility Termination Date" shall mean the date occurring two
years after the date set forth in clause (iii) of the definition of "Commitment
Termination Date."
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"Scheduled Maturity Date" shall mean with respect to any Claim, the
original date scheduled for the payment by the Obligor thereof of the Settlement
Amount with respect thereto.
"Seasoned Purchased Claim" shall mean on any date of determination, any
Claim which became a Purchased Claim in any calendar month ending prior to such
date of determination.
"Security Agreement" shall mean the Security Agreement in substantially
the form of Exhibit H hereto executed and delivered by the Borrower in favor of
the Agent for the benefit of the Banks.
"SEPTA" shall mean the Southeastern Pennsylvania Transportation
Authority created pursuant to the Metropolitan Transportation Authorities Act of
1963 and currently operating under 74 Pa. C.S.A. (section)(section)1501-1543.
"Servicing Agreement" shall mean (i) initially, the Servicing Agreement
between the Borrower and the Claims Servicer dated as of June 11, 1993, as
amended, and that certain letter agreement dated as of December 30, 1993 among
PNC Bank, CoreStates and the Claims Servicer, as amended, in each case, as the
same are made subject to those certain letter agreements dated as the Closing
Date among the Agent, the Claims Servicer and the Borrower, in the one case, and
the Agent and Claims Servicer, in the other case, in each case, setting forth
the agreement and procedures for the provision of custodial and administrative
services by the Claim Servicer for the Borrower and the Agent with respect to
the Purchased Claims and (ii) upon the execution thereof, the agreement(s)
contemplated by Section 7.1(s)(iv) to be executed by the Borrower, the Agent and
the Claims Servicer with respect to the provision of such services by the Claims
Servicer for and on behalf of the Borrower and the Agent, in each case, as such
agreements may be amended, supplemented or otherwise modified from time to time
in accordance with the terms of this Agreement.
"Servicing Carrier" shall mean (i) with respect to Claims against the
JUA, an insurance company that had or presently has a contract with the JUA to
underwrite, process and adjust automobile insurance policies for the JUA
pursuant to the NJAFIAA, (ii) with respect to Claims against the MTF, an
insurance company that has or presently has a contract with the MTF to
underwrite, process and adjust automobile policies for the MTF pursuant to the
FAIRA, as amended by the GDP Act, and (iii) with respect to Claims against the
City of Philadelphia or SEPTA, The City of Philadelphia or SEPTA, respectively.
"Settlement Agreement" shall mean the agreement between the Plaintiff,
the Plaintiff's Attorney and the Servicing Carrier settling litigation between
the Plaintiff and the JUA, the MTF, the City of Philadelphia or SEPTA, as
applicable.
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"Settlement Amount" shall mean with respect to any Claim, the total
consideration agreed to be paid by the Obligor thereon to the Plaintiff and/or
the Plaintiff's Attorney (exclusive of interest which is to accrue thereon) for
the settlement of the Claim.
"Subsidiary" of any Person at any time shall mean (a) any corporation
or trust of which 50% or more (by number of shares or number of votes) of the
outstanding capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more directors or trustees (regardless of any
contingency which does or may suspend or dilute the voting rights) is at such
time owned directly or indirectly by such Person or one or more of such Person's
subsidiaries, or any partnership of which such Person is a general partner or of
which 50% or more of the partnership interests is at the time directly or
indirectly owned by such Person or one or more of such Personals subsidiaries,
and (b) any corporation, trust, partnership or other entity which is controlled
or capable of being controlled by such Person or one or more of such Person's
subsidiaries.
"Swap Rate" shall mean, with respect to any Borrowing Tranche to which
the Swap Rate applies for any Interest Period, a per annum rate of interest
equal to the sum of (a) 2.50% and (b) a rate per annum to be determined by the
Agent to be applicable to such Interest Period by interpolating (on a
straight-line basis) between the average one-year and the eighteen-month zero
coupon bond swap rates offered to major financial institutions (as quoted by the
Agent's Derivatives and Treasury Department) for notional amounts in a principal
amount of not less than $500,000 for a period approximating such Interest Period
(adjusted by the Agent to account for quarterly payment of interest thereon by
the Borrower as required by Section 3.7), as such rate shall be determined by
the Agent as of 11:00 A.M. (New York City time) on the second Business Day
before (and for value on) the first day of such Interest Period. The Agent shall
give the Borrower and each Bank notice of the Swap Rate determined by the Agent
to be applicable to any such Borrowing Tranche for any Interest Period promptly
(and, in any event, within 10 days) after the commencement thereof, and such
determination by the Agent shall be conclusive absent manifest error.
"Swap Rate Portion" shall mean the portion of the Loans bearing
interest at the Swap Rate.
"Taxes" shall have the meaning assigned to such term in Section 4.3.
"UJB" shall mean United Jersey Bank, its successors and assigns.
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"Ultimate Obligor" shall mean (a) with respect to any Claim against The
City of Philadelphia, The City of Philadelphia, (b) with respect to any Claim
against SEPTA, SEPTA, (c) with respect to any Claim against the JUA, the JUA and
the State of New Jersey, and (d) with respect to a Claim against the MTF, the
MTF and the State of New Jersey.
"Uniform Commercial Code" shall mean the Uniform Commercial Code (or
any successor statute) as in effect from time to time in the State of New York
or of any other jurisdiction the laws of which are required by Section 9-103
thereof to be applied in connection with the issue of the perfection of security
interests.
"Unmatched Claim Group" shall mean, at any time, the Purchased Claims
which are not included in the Base Rate Claim Group or the Matched Claim Group.
"Unused Commitment Fee" shall have the meaning assigned to that term in
Section 2.4.
"Weighted Average Maturity" shall mean on any date as reported in the
most recent Monthly Report with respect to any specified group of Purchased
Claims, the weighted average of the maturities (determined by reference to the
Scheduled Maturity Dates) of all such outstanding Purchased Claims in such group
as of the last day of month covered by such report.
"Weighted Average Tranche Maturity" shall mean on any date as set forth
on the then most recent Monthly Report with respect to any group of Purchased
Claims accruing interest at a Fixed Rate Option, the weighted average of the
remaining durations of all Interest Periods for all of the Purchased Claims in
such group as of the last day of the month covered by such report.
"Weighted Average Tranche Rate" shall mean on any date as set forth on
the then most recent Borrowing Base Certificate, the per annum rate equal to the
weighted average of all applicable per annum interest rates applicable to all
outstanding Borrowing Tranches accruing interest at a Fixed Rate Option as of
the last day of the week covered by such Weekly Report.
"Welfare Plan" shall have the meaning assigned to such term is Section
5.1(q)(ii).
1.2 Construction. Unless the context of this Agreement otherwise
clearly requires, references to the plural shall include the singular,
references to the singular shall include the plural, references to the part
shall include the whole and references to any masculine, feminine or neuter
pronoun shall include all other genders. References in this Agreement to
"determination" of or by the Agent or the Banks shall be deemed
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to include good faith estimates by the Agent or the Banks, respectively (in the
case of quantitative determinations) and good faith beliefs by the Agent or the
Banks, respectively (in the case of qualitative determinations). The words
"hereof," "herein," "hereunder" and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement.
Any references herein to Articles, Sections, Exhibits or Schedules are
references to Articles, Sections, Exhibits and Schedules of or to this Agreement
unless expressly otherwise specified. All other undefined terms used herein
shall, unless the context otherwise requires, have the meanings provided for by
the UCC to the extent the same are used or defined therein. The Section and
other headings contained in this Agreement and the Table of Contents preceding
this Agreement are for reference purposes only and shall not control or affect
the construction of this Agreement or the interpretation thereof in any respect.
1.3 Accounting Principles. Except as otherwise provided in this
Agreement, all computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to this Agreement
shall be made and prepared in accordance with GAAP (including principles of
consolidation where appropriate), and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP.
ARTICLE 2. THE LOANS
2.1 Loans.
(a) Upon the terms and subject to the conditions hereinafter set forth,
each Bank, severally and not jointly with any other Bank, agrees to make to the
Borrower, from time to time during the period from the date hereof to, but not
including, the Commitment Termination Date, Loans in an aggregate principal
amount up to such Bank's Commitment; provided, however, that the aggregate
outstanding principal balance of all such Loans shall at no time exceed the
Maximum Available Facility Amount at such time. Within such limits of time and
amount and subject to the other provisions of this Agreement, the Borrower may
borrow, repay without premium or penalty, except as provided in Section 4.4, and
reborrow pursuant to this Section 2.1.
(b) Except as otherwise provided herein, the Borrower may from time to
time prior to the Commitment Termination Date request the Banks to make Loans to
the Borrower by the delivery to the Agent, not later than 10:00 A.M. New York
City time (i) three (3) Business Days prior to the proposed Borrowing/
Conversion Date with respect to the making of Loans to which a Fixed Rate Option
is requested to apply and (ii) on the proposed Borrowing/Conversion Date with
respect to the making of a Loan to which the Base Rate Option applies, in either
case, of a duly
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completed Loan Request therefor, or a request by telephone immediately confirmed
in writing (including by any tele-transmission) signed by an Authorized Officer
in such form. The Agent shall have no duty to verify the authenticity of the
signature appearing on any Loan Request and, with respect to any telephonic
request for a Loan, the Agent shall have no duty to verify the identity of any
individual representing himself as an Authorized Officer. Any Loan Request
received by the Agent after the time specified in the immediately preceding
sentence shall be deemed to have been received by the Agent on the next Business
Day, and the date specified in any such Loan Request as the proposed
Borrowing/Conversion Date shall be deemed to be the Business Day immediately
succeeding the proposed Borrowing/Conversion Date specified in such Loan
Request.
(c) Each Loan Request shall be (x) irrevocable, (y) shall specify (i)
the proposed Borrowing Date; (ii) the aggregate amount of such Borrowing, which,
in the case of a Borrowing to which the Base Rate Option shall be applicable,
shall be in a minimum amount of $2000, and, in the case of a Borrowing to which
the Fixed Rate Option shall be applicable, shall be in a minimum amount of
$500,000 and in integral multiples of $100,000 in excess of such amount; (iii)
which Interest Rate Options shall be applicable and the allocation of the
Borrowing Tranches with respect thereto, and (iv) with respect to any such Loans
to which a Fixed Rate Option is to be applicable, an appropriate Interest Period
for each Borrowing Tranche of such Borrowing, and (z) shall be accompanied by a
fully completed Borrowing Base Certificate.
(d) The Agent shall, promptly (but in any event by 12:00 P.M. on the
date of its deemed receipt of a Loan Request for a Loan) notify the Banks of its
receipt of such Loan Request specifying: (A) the proposed Borrowing/Conversion
Date and the time and method of disbursement of such Loan; (B) the amount of
such Loan and the allocation of the Borrowing Tranches thereof among the
applicable Interest Periods and/or the Base Rate Option as requested by the
Borrower; and (C) each Bank's Ratable Share of such Loan. Each Bank shall remit
its Ratable Share of the principal amount of each Loan to the Agent's Account by
no later than 11:00 A.M. (New York City time) on the Borrowing Date specified or
deemed specified in such Loan Request, and the Agent shall, to the extent the
Banks have made funds available to it for such purpose, fund such Loan to the
Borrower in U.S. Dollars and immediately available funds to the Borrower's
Account No. 085-435-214-90 maintained with PNC Bank, National Association, Land
Title Building, Broad and Chestnut Street, Philadelphia, Pennsylvania 19101, ABA
No. 031 0000 53 (the "Borrower's Account") prior to 2:00 P.M. New York City time
on the Borrowing/Conversion Date specified or deemed specified in such Loan
Request; provided, that if any Bank fails to remit such funds to the Agent in a
timely manner, the Agent may, but shall not be required to, advance on behalf of
any such Bank, such
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Bank's Ratable Share of the Loans on the applicable Borrowing/Conversion Date
unless such Bank shall have notified the Agent prior to such
Borrowing/Conversion Date that it does not intend to make available its Ratable
Share of such Loans on such date. If the Agent makes such advance, each of the
Borrower and such defaulting Bank severally, but not jointly, shall be liable to
repay the Agent the amount thereof immediately upon the Agent's demand therefor,
together with interest thereon from the date such amount is advanced until
repaid in full at a rate equal to, in the case of such Bank, the Federal Funds
Effective Rate and, in the case of the Borrower, the interest rate applicable to
the Interest Rate Option applicable to the Borrowing Tranche to which such Loan
was allocated. Until such amount is repaid to the Agent by such Bank or the
Borrower, such advance shall be deemed for all purposes to be a Loan made by the
Agent to the Borrower, and the Agent shall for all purposes hereunder be deemed
a "Bank" and shall be entitled to all rights, remedies and benefits as such
hereunder and under the other Loan Documents. Upon the repayment of the
principal and interest of any such Loan by such Bank to the Agent, such
repayment shall be treated (to the extent of the principal amount thereof) as
the funding of such Bank's Ratable Share of the Loans to which such amounts
relate. No such repayment or payment by the Borrower shall prejudice its rights
in respect of any default by such Bank hereunder. The failure of any Bank to
fulfill its Commitment to fund any Loan on any Borrowing/Conversion Date shall
not relieve any other Bank of its Commitment to fund any such Loan on such date,
but no Bank shall be responsible for the failure of any other Bank to fulfill
such Commitment of any other Bank.
(e) The Borrower shall only use the proceeds of the Loans (i) to
refinance the Indebtedness evidenced by the PNC Documents and the CoreStates
Documents on the Closing Date, (ii) to purchase additional Eligible Claims,
(iii) to pay the Obligations, (iv) to pay the fees and expenses of the Claim
Servicer under and in accordance with the terms of the Servicing Agreement, and
(v) for any other legal purpose to the extent permitted hereunder and under the
other Loan Documents.
2.2 Voluntary Conversion and Continuation of Loans.
(a) Prior to the Facility Termination Date, the Borrower shall have the
option with respect to each Borrowing Tranche, (i) to Convert all or any portion
of the Borrowing Tranche accruing interest at the Base Rate Option to Borrowing
Tranches accruing interest at a Fixed Rate Option; (ii) to Convert all or any
portion of any outstanding Borrowing Tranches accruing interest at a Fixed Rate
Option to a Borrowing Tranche accruing interest at a different Fixed Rate Option
or at the Base Rate Option, in either case, upon the expiration date of the
Interest Period applicable to such Fixed Rate Portions being Converted; or (iii)
upon the expiration of the applicable Interest Periods applicable to any
outstanding Borrowing Tranches
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accruing interest at a Fixed Rate, to Continue all or any portion of such
Borrowing Tranches at such Fixed Rate for an additional Interest Period to be
selected by the Borrower in accordance with the terms and conditions hereof. The
Borrower's right to Convert or Continue Loans pursuant to this Section 2.2 shall
be understood to include the right (i) to divide any Borrowing Tranche into two
or more Borrowing Tranches having aggregate principal equal to the aggregate
principal of such initial Borrowing Tranche or (ii) to combine any two or more
Borrowing Tranches into a single Borrowing Tranche having aggregate principal
equal to the aggregate principal of such initial Borrowing Tranches; provided,
that with respect to any Borrowing Tranche accruing interest at the Euro-Rate,
such divisions or combinations may only be made upon the expiration of the
Interest Periods to which such Borrowing Tranche is allocated.
(b) To Convert or Continue any Borrowing Tranche under Section 2.2(a),
the Borrower shall deliver a written Conversion/ Continuation Request signed by
an Authorized Officer or telephonic notice (confirmed immediately thereafter in
writing (including by any tele-transmission) signed by an Authorized Officer in
such form) to the Agent not later than 10:00 A.M. (New York City time) (i) on
the third Business Day prior to the proposed Borrowing/Conversion Date with
respect to the proposed Conversion or Continuation if the Borrowing Tranche is
to be Converted into or Continued at a Fixed Rate Option and (ii) on the
proposed Borrowing/Conversion Date with respect to the a proposed Conversion
from a Fixed Rate Option to the Base Rate Option. The Agent shall then give each
Bank prompt (and in any event not later than 12:00 P.M. on such day) notice
thereof by telephone, facsimile or telex. Each such notice by the Borrower shall
specify (i) the proposed Borrowing/Conversion Date of such proposed
Conversion/Continuation (which shall be a Business Day), (ii) the Borrowing
Tranches to be Converted and/or Continued, (iii) the principal amount of the
Loans to be Converted and/or Continued, (iv) whether such Borrowing Tranche is
to be Converted or Continued and (v) in the case of any Conversion to or
Continuation of any Loans at a Fixed Rate, the requested Interest Period for
such Converted and/or Continued Borrowing Tranche. Any Conversion/Continuation
Request (or telephonic notice thereof) shall be irrevocable, and the Borrower
shall be bound to Convert or to Continue the Loans in accordance therewith. The
Agent shall have no duty to verify the authenticity of the signature appearing
on any Conversion/Continuation Request and, with respect to any telephonic
request for a Conversion/Continuation, the Agent shall have no duty to verify
the identity of any individual representing himself as an Authorized Officer.
Any Conversion/Continuation Request received by the Agent after the time
specified in the immediately preceding sentence shall be deemed to have been
received by the Agent on the next Business Day.
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2.3 Notes. The Loans payable to each Bank shall be evidenced by a Note
of the Borrower dated the Closing Date payable to the order of such Bank in a
maximum principal face amount equal to the Commitment of such Bank.
2.4 Unused Commitment Fee. The Borrower shall pay to the Agent, for the
account of the Banks in such proportions as the Agent and each such Bank shall
agree, a fee (the "Unused Commitment Fee") on the average daily excess of the
Maximum Facility Amount over the aggregate outstanding principal balance of the
Loans at the per annum rate set forth in that certain letter agreement of even
date herewith (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Fee Letter") among the Agent, ING and the
Borrower. The Unused Commitment Fee shall be calculated on the basis of a
360-day year and the actual number of days elapsed and shall be payable, in
arrears, on the first Business Day of each calendar month commencing after the
date hereof and on the Commitment Termination Date.
2.5 Reductions of the Maximum Facility Amount; Termination of the
Commitments. (a) The Borrower shall have the option, upon not less than 5 days'
prior written notice to the Agent, to reduce, in whole or in part, any unused
portion of the Maximum Facility Amount; provided, that any such reduction shall
be in a minimum amount of $1,000,000 and in integral multiples of $100,000 in
excess of such amount. Any such reduction in the Commitments pursuant to the
immediately preceding sentence shall reduce the Commitment of each Bank ratably
in accordance with their respective Commitment Percentages. Any such notice of
reduction given by the Borrower to the Agent shall be irrevocable when given.
(b) In addition, the Borrower shall have the option to terminate the
Commitments in their entirety, upon not less than 5 days' prior written notice
thereof to the Agent (who shall promptly thereafter notify each of the Banks
thereof) and the payment in full, in cash, of all then outstanding interest and
principal on the Loans, any breakage fees then owing or resulting from such
prepayment pursuant to Section 4.4, and all other Obligations then outstanding
(and whether or not then otherwise due and payable). Any such notice of
termination given by the Borrower to the Agent shall be irrevocable when given.
ARTICLE 3. INTEREST RATES; PAYMENTS
3.1 Interest Rate Option; Computation of Interest; Maximum Interest
Rate.
(a) The Borrower shall pay to the Agent for the account of each Bank
interest on the unpaid principal amount of each Loan made by the Bank from the
date of such Loan until such
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principal amount shall be paid in full, at the following rates per annum:
(i) with respect to each Borrowing Tranche of the Euro-Rate Portion, a
rate per annum at all times during the Interest Period to which such
Borrowing Tranche is allocated equal to the Euro-Rate for such Interest
Period;
(ii) with respect to each Borrowing Tranche of the Swap Rate Portion, a
rate per annum at all times during the Interest Period to which such
Borrowing Tranche is allocated equal to the Swap Rate for such Interest
Period; and
(iii) with respect to the Base Rate Portion, a rate per annum equal at
all times to the Base Rate in effect from time to time;
it being understood that, subject to the provisions of this Agreement, the
Borrower may select different Interest Rate Options and different Interest
Periods to apply simultaneously to the Loans comprising different Borrowing
Tranches and may Convert to or Continue one or more Interest Rate Options with
respect to all or any portion of the Loans, comprising any Borrowing Tranche.
(b) All interest accruing hereunder (other than interest at the Base
Rate Option) shall be computed on the basis of a year of 360 days and the actual
number of days elapsed. Interest accruing at the Base Rate Option shall be
computed on the basis of a year of 365 or 366 days, as applicable, and the
actual number of days elapsed.
(c) The Agent's determination of a rate of interest and any change
therein shall, in the absence of manifest error, be conclusive and binding upon
all parties hereto.
(d) In no event shall any interest rate exceed the maximum rate
permissible for business borrowers such as the Borrower under applicable Law
(the "Maximum Rate"). If, in any month, any interest rate, absent such
limitation, would have exceeded the Maximum Rate, then the interest rate for
that month shall be the Maximum Rate, and, if in future months, that interest
rate would otherwise be less than the Maximum Rate, then that interest rate
shall remain at the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have been paid if the same
had not been limited by the Maximum Rate. In the event that, upon payment in
full of the Obligations under this Agreement, the total amount of interest paid
or accrued under the terms of this Agreement is less than the total amount of
interest which would have been paid or accrued if the interest rates set forth
in this Agreement had at all times been in effect, then the Borrower shall, to
the extent permitted by applicable law, pay the Agent, for the
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benefit of the affected Banks, an amount equal to the difference between (a) the
lesser of (i) the amount of interest which would have been charged if the
Maximum Rate had, at all times, been in effect or (ii) the amount of interest
which would have accrued had the interest rates set forth in this Agreement, at
all times, been in effect and (b) the amount of interest actually paid or
accrued under this Agreement. In the event that a court determines that any Bank
has received interest and other charges hereunder in excess of the Maximum Rate,
such excess shall be deemed received on account of, and shall automatically be
applied to reduce, the Obligations other than interest, in the inverse order of
maturity, and if there are no Obligations outstanding, such Bank shall refund
such excess to the Borrower.
(e) The Borrower may call the Agent on or before the date on which a
Loan Request or Conversion/Continuation Request is to be delivered to receive an
indication of the rates then in effect, but it is acknowledged and agreed that
such projection shall not be binding on the Agent or the Banks nor affect the
rate of interest which thereafter is actually in effect when the election is
made.
3.2 Interest After Default. To the extent permitted by Law, upon the
occurrence and during the continuation of an Event of Default, any principal,
interest, fee or other amount payable hereunder shall bear interest for each day
thereafter until paid in full (before and after judgment) at the Default Rate as
in effect from time to time. The Borrower acknowledges that such increased
interest rate reflects, among other things, the fact that such Loans or other
Obligations have become a substantially greater risk given their default status
and that the Banks are entitled to additional compensation for such risk.
3.3 Euro-Rate Unascertainable.
(a) If (x) on any date on which a Euro-Rate would otherwise be
determined, the Agent shall have determined (which determination shall be
conclusive absent manifest error) that:
(i) adequate and reasonable means do not exist for ascertaining
such Euro-Rate; or
(ii) a contingency has occurred which materially and adversely
affects the London interbank market relating to the Euro-Rate; or
(y) at any time any Bank shall have determined (which determination shall be
conclusive absent manifest error) that:
(i) the making, maintenance or funding of any Loan to which a
Euro-Rate applies has been made impracticable or unlawful by compliance by such
Bank in good faith with any Law or any interpretation or application thereof by
any Governmental
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Authority or with any request or directive of any such Governmental Authority
(whether or not having the force of Law); or
(ii) such Euro-Rate will not adequately and fairly reflect the
cost to such Bank of the establishment or maintenance of any such Loan; or
(iii) after making all reasonable efforts, that deposits of the
relevant amount in Dollars for the relevant Interest Period for a Loan to which
a Euro-Rate applies are not available to such Bank at the effective cost of
funding such Loan in the London interbank market;
then, in the case of any event specified in subclause (x)(i) or (x)(ii) above,
the Agent shall promptly so notify the Banks and the Borrower thereof and in the
case of an event specified in subclause (y)(i), (ii) or (iii) above, such Bank
shall promptly so notify the Agent and endorse a certificate to such notice as
to the specific circumstances of such notice and the Agent shall promptly send
copies of such notice and certificate to the other Banks and the Borrower. Upon
such date as shall be specified in such notice (which shall not be earlier than
the date such notice is given) the obligation of (A) the Banks in the case of
such notice given by the Agent or (B) such Bank in the case of such notice given
by such Bank to allow the Borrower to select, Convert to or Continue a Loan
accruing interest at the Euro-Rate Option shall be suspended until the Agent
shall have later notified the Borrower or such Bank shall have later notified
the Agent, of the Agent's or such Bank's, as the case may be, determination
(which determination shall be conclusive absent manifest error) that the
circumstances giving rise to such previous determination no longer exist.
(b) If at any time the Agent makes a determination under Section
3.3(a) and the Borrower has previously notified the Agent of its selection of,
any Conversion to or Continuation of a Loan to accrue interest at the Euro-Rate
and such Interest Rate Option has not yet gone into effect, such notification
shall be deemed to provide for selection of, Conversion to or Continuation of
such Loan to the Base Rate Option. If any Bank notifies the Agent of a
determination under subclause (y)(i), (ii) or (iii) of Section 3.3(a), the
Borrower shall, subject to the Borrower's indemnification obligations under
Section 4.4, as to any Loan of the Bank to which a Euro-Rate applies, on the
date specified in such notice either Convert such Loan to the Base Rate Option
or pay such Loan in full.
3.4 Selection of Interest Rate Options. If the Borrower fails to select
an Interest Period in accordance with the provisions of Section 2.2 in the case
of a Continuation of a Borrowing Tranche accruing interest at a Fixed Rate
Option, the Borrower shall be deemed to have Converted such Loan or portion
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thereof to the Base Rate Option, commencing upon the last day of the current
Interest Period. If an Event of Default shall occur and be continuing, the Agent
may in its discretion limit the Borrower to the Base Rate Option hereunder.
3.5 Payments.
(a) All of the Obligations shall be full recourse obligations of the
Borrower and shall be due and payable at the times set forth herein and in the
Notes. Notwithstanding anything contained in this Agreement, the Notes or the
other Loan Documents to the contrary, all outstanding principal, interest and
other Obligations of the Borrower owing hereunder and under the other Loan
Documents shall be due and payable on the Facility Termination Date. The
Obligations may be prepaid at the option of the Borrower, in whole or in part,
at any time without notice; provided that any such prepayment of less than all
of the outstanding Obligations at such time shall be applied as set forth in
Section 3.5(b). In addition, the Obligations shall be mandatorily prepaid in
accordance with Section 3.5(b). The principal amount of any Loan which is
prepaid may, subject to the limitations set forth Section 2.1(a), be reborrowed.
(b) (i) The Borrower shall instruct all Obligors to make all payments
in respect of the Purchased Claims to be sent to a Lock-Box under the exclusive
ownership and control of the Agent pursuant to the Lock Box Agreement relating
to such Lock-Box. All such payments received in a Lock-Box shall be deposited
on a daily basis to a Lock-Box Account, whereupon, upon such funds becoming
available (in accordance with the applicable Lock-Box Bank's schedule of
availability), they shall be transferred (by electronic transfer of immediately
available funds) to the Agent's Account. All such amounts received by the Agent
in the Agent's Account as aforesaid (as well as any other amounts deposited
therein in accordance herewith, other than to the extent specifically designated
by the Borrower for the payment of a specific Obligation (other than interest or
principal) due hereunder) shall be credited, first, to the payment of interest,
if any, which is then due and payable with respect to the Loans in accordance
with Section 3.7, second, to any breakage costs which is then due and owing
(including any such amounts which would become due and payable after giving
effect to any prepayment of principal in accordance with the immediately
succeeding clause third) in accordance with Section 4.4, third, to the
prepayment and reduction of the outstanding principal amount of the Loans,
fourth, to the payment of all other fees, expenses and indemnities due and
payable hereunder, including without limitation, the Unused Commitment Fee, and
fifth, with respect to any excess, remit such amounts to the Borrower's Account
for the account of the Borrower.
(ii) If, on any day, the aggregate outstanding principal balance
of the Loans shall exceed the Maximum Available
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Facility Amount (after giving effect to the application of any Collections
available for application in accordance with subclause (b)(i) immediately
above), the Borrower shall be required on such day to make a prepayment of the
Loans and the other Obligations by payment thereof by wire transfer to the
Agent's Account of immediately available funds in such an amount that, when
applied in accordance with subclause (b)(i) immediately above, will be
sufficient to eliminate such excess. In addition, all such proceeds of the
Purchased Claims, other Collateral and other payments received from or on behalf
of the Borrower (including any such payments required to be turned over to the
Agent in respect of damaged, destroyed or condemned Collateral pursuant to the
terms of the Security Agreement) in respect of the Obligations shall be applied
in the manner set forth in Section 3.5(b)(i).
(iii) Unless otherwise specified by the Borrower, all prepayments
of principal made in accordance with this Section 3.5(b) shall be applied first
to the Base Rate Portion of the outstanding Loans and then to the Fixed Rate
Portion of such Loans. Without limiting the foregoing in any way, all
prepayments applied to the principal of any Fixed Rate Portion shall be subject
to Section 4.4 hereof to the extent applicable.
(c) All payments and prepayments to be made in respect of principal,
interest, Unused Commitment Fees, or other fees, expenses, indemnities or other
Obligations due from the Borrower hereunder shall be made to the Agent's Account
prior to 11:00 A.M. (New York City time) on the date when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower, and without setoff, counterclaim or other
deduction of any nature, and an action therefor shall immediately accrue. The
Borrower hereby authorizes and directs the Agent to charge the Agent's Account
for each payment of principal and interest when due on the Loans and for all
fees, expenses, indemnities and other Obligations due from the Borrower
hereunder when due. The Borrower agrees that, to the extent there are
insufficient funds in the Agent's Account or such other accounts to make any
payment when due, the Borrower shall immediately pay to the Agent all amounts
due that remain unpaid.
(d) On each day upon its receipt thereof, the Agent shall distribute to
the Banks in immediately available funds all payments and prepayments applied by
the Agent in respect of principal, interest and other amounts received and
available for distribution as of the opening of business on such date, net of
any principal amount that such Bank would be required to remit to the Agent
under Section 2.1(d) of this Agreement. The Agent's and each Bank's statement of
account, ledger or other relevant record shall, in the absence of manifest
error, be conclusive as the statement of the amount of principal of and interest
on the Loans and other amounts owing under this Agreement and shall be
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deemed an "account stated." The Borrower shall have no liability to the Agent or
any Bank for any loss or expense incurred as a result of the failure by the
Agent to comply with the provisions of this Section 3.5(d).
(e) The Borrower hereby transfers and conveys to the Agent, for its and
the Banks' benefit, exclusive ownership and control of each of the Lock-Boxes
and the Lock-Box Accounts. If, notwithstanding the requirements of Section
3.5(b)(i), the Borrower receives any Collections of any Purchased Claims or any
other proceeds of Collateral which are required to be paid to the Agent, for the
benefit of the Banks, it shall receive such payments as the Agent's trustee, and
shall promptly (and, in any event, within one (1) Business Day after its receipt
thereof) deliver such payments to a Lock-Box Account or to the Agent, in each
case, in their original form duly endorsed in blank. All Collections received in
the Lock-Boxes or the Lock-Box Accounts and all amounts on deposit in the
Agent's Account shall be the sole property of the Agent, for the benefit of
itself and the Banks, and subject to the Agent's sole control. At the Agent's
request, the Borrower shall execute and deliver to the Agent such documents as
the Agent shall require to grant the Agent access to, and exclusive dominion and
control over, any lock-boxes and/or bank accounts (including, without
limitation, the Lock-Boxes and Lock-Box Accounts) to which Collections are
remitted.
3.6 Pro Rata Treatment of Banks. Each Borrowing, and each selection of,
Conversion to or Continuation of any Interest Rate Option and each payment or
prepayment by the Borrower with respect to principal, interest and other amounts
due from the Borrower hereunder to the Banks (other than any such amounts of the
type described in Section 2.3, Article 4, Section 10.6 or Section 11.3) shall be
made in proportion to the Ratable Shares of each Bank.
3.7 Interest Payment Dates. Interest on Loans to which the Base Rate
Option applies shall be due and payable in arrears on the first Business Day of
each month after the date hereof and on the date (following the Commitment
Termination Date) on which all such Loans shall be paid in full. Interest on
Loans to which a Fixed Rate Option applies shall be due and payable on the last
day of each Interest Period for those Loans; provided, that with respect to any
Interest Period which is more than three (3) months long, the accrued interest
thereon shall also be due and payable thereon on the last day of each three
month period during which such Loans are outstanding; and provided, further,
that from and after the occurrence of the Commitment Termination Date for any
reason whatsoever, the Agent may, in its sole discretion, apply Collections to
the payment of accrued but unpaid interest on the Loans (including Loans
allocated to any Fixed Rate Options) at such other times as it, in its sole
discretion, may designate, which may be daily.
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ARTICLE 4. INCREASED COSTS; TAXES; BREAKAGE
4.1 Interest Protection. If due to either: (a) the introduction of or
any change (other than any change by way of imposition or increase of the
reserve requirements included in the Euro-Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (b) the compliance by any Bank with
any guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be an increase in the cost
to such Bank of making, funding or maintaining any Loans hereunder accruing
interest at the Euro-Rate, then the Borrower shall, from time to time, within
five (5) Business Days after demand and delivery of a certificate (as described
below) to the Borrower by such Bank (with a copy to the Agent), pay to such
Bank, that portion of such increased costs incurred which such Bank determines
is attributable to making, funding or maintaining such Loans hereunder. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods. Such Bank shall submit to the Borrower and the Agent a
certificate as to such increased costs incurred, amounts not received or
receivable or required payment made or to be made, which certificate, setting
forth the calculation thereof, shall be conclusive and binding for all purposes
absent manifest error.
4.2 Increased Capital. If either (i) the introduction of or any change
in or in the interpretation of any Law or (ii) compliance by any Bank with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of Law) affects or would affect the amount of
capital required or expected to be maintained by such Bank, and such Bank
determines that the amount of such capital is increased by or based upon the
existence of the such Bank's Commitment to make or the Bank's maintaining Loans
hereunder, then, within five (5) Business Days after demand and delivery of a
certificate (as described below) to the Borrower by such Bank (with a copy to
the Agent), the Borrower shall pay to such Bank Person from time to time, as
specified by such Affected Person, additional amounts sufficient to compensate
such Bank in light of such circumstances, to the extent that such Bank
reasonably determines such increase in capital to be allocable to the existence
of its agreement to make or maintain Loans hereunder. In determining such
amount, such Bank may use any reasonable averaging and attribution methods. A
certificate as to such amounts submitted to the Borrower and the Agent by such
Bank, setting forth the calculation thereof, shall be conclusive and binding for
all purposes absent manifest error.
4.3 Taxes.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 3.5(a), free and clear of and without deduction for any
and all present or future taxes,
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levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank and the Agent, net income
taxes that are imposed by the United States and franchise taxes and net income
taxes that are imposed on such Bank or the Agent by the state or foreign
jurisdiction under the laws of which such Bank or the Agent (as the case may be)
is organized or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Bank or
the Agent, (i) the sum payable shall be increased as may be necessary so that,
after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.3), such Bank or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable Law.
(b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Bank and the Agent for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
4.3) paid by such Bank or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto; provided that a Bank or the Agent, as appropriate, making a demand for
indemnity payment shall provide the Borrower, at its address referred to in
Section 11.6, with a certificate from the relevant taxing authority or from a
responsible officer of such Bank or the Agent stating or otherwise evidencing
that a Bank or the Agent has made payment of such Taxes or Other Taxes and will
provide a copy of or extract from documentation, if available, furnished by such
taxing authority evidencing assertion or payment of such Taxes or Other Taxes.
This indemnification shall be made within 30 days from the date such Bank or the
Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Agent, at its address referred to in Section 11.6,
appropriate evidence of payment thereof.
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(e) The Agent and each Bank that is not created or organized under the
laws of the United States or a political subdivision thereof shall, to the
extent that it may then do so under applicable laws and regulations, deliver to
the Borrower (with, in the case of each Bank, a copy to the Agent) (i) within 15
days after the date hereof, or, if later, the date on which such Bank becomes a
Bank pursuant to Section 11.11 hereof, two (or such other number as may from
time to time be prescribed by applicable Laws) duly completed copies of IRS Form
4224 or Form 1001 (or any successor forms or other certificates or statements
which may be required from time to time by the relevant United States taxing
authorities or applicable Laws), as appropriate, to permit the Borrower to make
payments hereunder for the account of such Bank or the Agent, as the case may
be, without deduction or withholding of United States federal income or similar
taxes and (ii) upon the obsolescence of or after the occurrence of any event
requiring a change in, any form or certificate previously delivered pursuant to
this Section 4.3(e), copies (in such numbers as may be from time to time be
prescribed by applicable laws or regulations) of such additional, amended or
successor forms, certificates or statements as may be required under applicable
laws or regulations to permit the Borrower and the Agent to make payments
hereunder for the account of such Bank or the Agent, as the case may be, without
deduction or withholding of United States federal income or similar taxes.
(f) For any period with respect to which a Bank or the Agent has failed
to provide the Borrower with the appropriate form, certificate or statement
described in Section 4.3(e) (other than if such failure is due to a change in
law occurring after the date of this Agreement), such Bank or the Agent, as the
case may be, shall not be entitled to indemnification under Section 4.3(a) or
4.3(c) with respect to Taxes imposed by the United States.
(g) Within 30 days of the written request of the Borrower therefor, the
Agent and each Bank, as appropriate, shall execute and deliver to the Borrower
such certificates, forms or other documents which can be furnished consistent
with the facts and which are reasonably necessary to assist the Borrower in
applying for refunds of taxes remitted hereunder.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 4.3 shall survive the termination of this Agreement.
4.4 Breakage. In addition to the compensation required by Sections 4.1,
4.2 and 11.3, the Borrower shall indemnify each Bank against all liabilities,
losses or expenses (including loss of margin, any loss or expense incurred in
liquidating or employing deposits from third parties and any loss or expense
incurred in connection with funds acquired by a Bank
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to fund or maintain Loans subject to a Fixed Rate Option) which such Bank
sustains or incurs as a consequence of any:
(a) payment, prepayment, Conversion or Continuation of any Loan to
which a Fixed Rate Option was applicable on a day other than the last day of the
corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or prepayment
is then due);
(b) failure of the Borrower to borrow, Convert or Continue, in whole or
in part, any Loan requested by the Borrower to be made pursuant to any Loan
Request or Conversion/Continuation Request; or
(c) default by the Borrower in the performance or observance of any
covenant or condition contained in this Agreement or any other Loan Document,
including without limitation any failure of the Borrower to pay when due (by
acceleration or otherwise) any principal, interest, fees or any other amount due
hereunder.
If any Bank sustains or incurs any such loss or expense it shall from time to
time notify the Borrower of the amount determined in good faith by such Bank
(which determination shall be conclusive absent manifest error and may include
such assumptions, allocations of costs and expenses and averaging or attribution
methods as such Bank shall deem reasonable) to be necessary to indemnify such
Bank for such loss or expense. Such notice shall set forth in reasonable detail
the basis for such determination. Such amount shall be due and payable by the
Borrower to such Bank within five (5) Business Days after such notice is given.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Borrower. In order to induce
the Banks to enter into this Agreement and to make the Loans, the Borrower
represents and warrants to the Agent and the Banks that:
(a) The Borrower is a limited partnership duly formed, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania, and is
duly qualified or licensed to do business in New Jersey and in all other
jurisdictions where the failure to qualify would have a Material Adverse Effect.
(b) The General Partner is the Borrower's sole general partner. The
General Partner owns one percent (1%) of the partnership interests in the
Borrower. The General Partner is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania, and is
duly qualified or licensed as a foreign corporation in good standing
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in New Jersey and in all other jurisdictions where the failure to qualify would
have a Material Adverse Effect.
(c) The Borrower's sole limited partners are Gary Veloric and James
DeLaney, each of whom owns 49.5% of the partnership interests in the Borrower.
(d) The Borrower has all requisite power and authority, partnership or
otherwise, to own, lease, encumber and operate its properties and assets and to
carry on its business as now being conducted and to enter into and to perform
its obligations under this Agreement and the other Loan Documents to which it is
a party and to fulfill its obligations set forth herein and therein and the
Borrower has the legal power and authority to issue the Notes. The execution,
delivery and performance of this Agreement by the Borrower, the Borrowings
thereunder and the execution and delivery of the Notes and all other Loan
Documents have, in each case, been duly authorized by all requisite partnership
action on behalf of the Borrower and, to the best knowledge of the Borrower,
will not violate or constitute a default under any provision of Law applicable
to the Borrower or of the certificate of limited partnership of the Borrower or
the Partnership Agreement, or of any indenture, note, loan or credit agreement,
license or any other agreement, lease or instrument to which the Borrower is a
party or by which the Borrower or any of Borrower's properties are bound. This
Agreement, the Notes and the other Loan Documents to which the Borrower is a
party constitute the valid and legally binding obligations of Borrower
enforceable against the Borrower in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or equitable principles from time to time in effect
relating to or affecting the rights of creditors generally. This Agreement, the
Notes and the other Loan Documents to which the Borrower is a party have been
executed and delivered by a duly authorized officer of the General Partner.
(e) No consent or approval of any trustee or holder of any
Indebtedness, nor any authorization, consent, approval, license, exemption of or
registration, declaration or filing with any Governmental Authority is or will
be necessary for the valid execution and delivery of this Agreement, the Notes
and the other Loan Documents to which the Borrower is a party or the
consummation by the Borrower of the transactions contemplated hereby or thereby,
other than any such consents and approvals as shall have been obtained.
(f) No recording, filing, registration, notice or other similar action
is required in order to insure the legality, validity, binding effect or
enforceability of this Agreement, the
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Notes or the other Loan Documents as against all Persons, other than such
filings as may be required under the UCC.
(g) There are no judgments or other judicial or administrative orders
outstanding against the Borrower, nor is there any action, suit or proceeding at
law or in equity or by or before any Governmental Authority now pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
any of the Borrower's property or rights which, if adversely determined, could
have a Material Adverse Effect. To the best of the Borrower's knowledge,
Borrower is not in default under any applicable Law of any Governmental
Authority having jurisdiction over it.
(h) The Borrower's audited annual balance sheet as at December 31, 1994
and the audited statements of income and cash flows for the year then ended (i)
have been prepared in accordance with GAAP consistently applied, and (ii) are
true and complete and present fairly the financial condition and results of
operations of Borrower as of December 31, 1994 and for the period covered
thereby, and said balance sheets accurately reflect all liabilities, including
contingent liabilities of Borrower as of the date thereof. Since December 31,
1994, the Borrower has conducted its business in the ordinary course, and there
has been no Material Adverse Change.
(i) The Borrower has filed all federal, state and local tax returns
which it is required by Law to file and has paid all taxes, assessments and
other governmental charges due in respect of such returns, except to the extent
that any such taxes, assessments or other governmental charges are being
contested in good faith and as to which Borrower has set aside on its books
adequate reserves and in respect of which no Liens have attached to or been
filed against the Collateral. There are no agreements or waivers extending the
statutory period of limitations applicable to any federal income tax return of
Borrower for any period.
(j) All patents, trademarks, service marks, tradenames, copyrights,
licenses, registrations, franchises and permits of the Borrower are listed and
described on Schedule 5.1(j) hereto, which patents, trademarks, service marks,
tradenames, copyrights, licenses, registrations, franchises, permits and rights
are the only such patents, trademarks, service marks, tradenames, copyrights,
licenses, registrations, franchises, permits and rights necessary for the
Borrower to own and operate its properties and to carry on its business as
presently conducted and planned to be conducted.
(k) Except as described in Schedule 5.1(k) hereto, the Borrower is not
a party to any material lease, contract, agreement, understanding or commitment
of any kind (including without limitation all agreements which, if breached,
could
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directly or indirectly have a Material Adverse Effect), and to the best of
Borrower's knowledge, (a) all parties (including the Borrower) to all such
material leases, contracts, agreements, understandings and commitments, have
complied with the provisions thereof, (b) no such party (including the Borrower)
is in default under any thereof, and (c) no event has occurred which, but for
the giving of notice or the passage of time, or both, would constitute a default
thereunder.
(l) The Borrower does not own or lease any Property.
(m) All of the Borrower's properties and assets are free and clear of
any Liens, other than Permitted Liens.
(n) Neither this Agreement nor any other Loan Document to which the
Borrower is a party, or any certificate or statement furnished to the Agent or
the Banks in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact known to Borrower
which has or may have a Material Adverse Effect which has not been set forth in
this Agreement or in the other Loan Documents, certificates and statements
furnished to the Banks in connection with the transactions contemplated hereby.
(o) Borrower has no outstanding Indebtedness to any Person other than
to Bank, except for Permitted Indebtedness.
(p) Borrower owns no, and shall not use any of the proceeds of the
Loans to purchase or carry, any margin stock (within the meaning of Regulation
G, T, U or X and the regulations thereunder promulgated by the Board of
Governors of the Federal Reserve System, as the same are in effect from time to
time) or to extend credit to others for the purpose of purchasing or carrying
any margin stock. The Borrower is not, and is not controlled by, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(q) (i) Neither the Borrower nor any member of the ERISA Group has ever
maintained or been required to pay any amount with respect to any "employee
pension benefit plan" (as defined in Section 3(2) of ERISA), including any
plan which is subject to Title IV of ERISA. Schedule 5.1(q) hereto sets
forth a true and complete list of each "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) covering any employee or former employee
of the Borrower or any member of the ERISA Group (the "Welfare Plans").
(ii) The Borrower and each member of the ERISA Group are in compliance
in all material respects with any applicable provisions of ERISA with
respect to all Welfare Plans. There has been no Prohibited Transaction with
respect to any Welfare Plan which could result in any
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material liability of the Borrower or any other member of the ERISA Group.
Borrower and all members of the ERISA Group have made when due any and all
payments required to be made under any agreement relating to all of its
Welfare Plans or any Laws pertaining thereto.
(iii) Neither the Borrower nor any other member of the ERISA Group
maintains or contributes to any Welfare Plan which provides benefits to any
persons following their termination of employment other than as required by
Section 601 of ERISA; and
(iv) To the extent that any Welfare Plan is insured, Borrower and all
other members of the ERISA Group have paid when due all premiums required
to be paid thereunder. To the extent that any Welfare Plan is funded other
than with insurance, Borrower and all other members of the ERISA Group have
made when due all contributions required to be made thereunder and under
applicable Law.
(r) The Borrower has no employees and is not party to any employment
agreements, collective bargaining agreements or any other labor contracts, other
than the Management Agreement.
(s) Borrower does not operate or do business under any assumed, trade
or fictitious names.
(t) To the actual knowledge of the Borrower, no partner of the Borrower
is a director, executive officer or principal shareholder of a Bank and no
director of a Bank is in control of Borrower. For purposes of this Section, the
terms "director," "executive officer," "principal shareholder" and "control of"
have the respective meanings assigned thereto in Regulation O issued by the
Board of Governors of the Federal Reserve System.
(u) There has occurred no event which constitutes a Potential Default
or an Event of Default.
(v) The Borrower has no Subsidiaries.
(w) Schedule 5.1(w) hereto is a complete list of all of the Borrower's
bank accounts, lock-box accounts and lock-boxes and the names and addresses of
the banks at which they are maintained, in each case, as of the Closing Date.
(x) Schedule 5.1(x) hereto is a complete list of the addresses of the
Borrower's chief executive office and principle place of business and all other
locations (owned or leased) at which any assets, books or records of the
Borrower are kept, in each case, as of the Closing Date.
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(y) Schedule 5.1(y) herein is a complete list of all of the Borrower's
insurance policies, in each case, as of the Closing Date.
5.2 Representations and Warranties of the General Partner. In order to
induce the Banks to enter into this Agreement and to make the Loans, the General
Partner represents and warrants to the Banks that:
(a) The General Partner is a corporation duly formed, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania, and is
duly qualified or licensed to do business in New Jersey and in all other
jurisdictions where the failure to qualify would have a Material Adverse Effect.
(b) The General Partner is the Borrower's sole general partner. The
General Partner owns one percent (1%) of the partnership interests in the
Borrower. The General Partner is a holding company, does not conduct any other
business other than as general partner of the Borrower, does not have any
employees, and does not own or lease any assets or properties, other than the
general partnership interest in the Borrower. The General Partner has no
Indebtedness and is solvent.
(c) One hundred percent of the issued and outstanding capital stock of
the General Partner is owned by Gary Veloric and James DeLaney.
(d) The General Partner has all requisite corporate power and authority
to execute, deliver and perform its obligations hereunder and other the other
Loan Documents to which it is a party, and to execute and deliver, for and on
behalf of the Borrower, this Agreement and the other Loan Documents to which the
Borrower is a party; all of which, in each case, has been duly authorized by all
requisite corporate action on behalf of the General Partner and, to the best
knowledge of the General Partner, will not violate or constitute a default under
any provision of Law applicable to the General Partner or of the Article of
Incorporation or By-Laws of the General Partner. This Agreement, the Notes and
the other Loan Documents to which the Borrower is a party constitute the valid
and legally binding obligations of Borrower enforceable against the Borrower in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally or equitable principles
from time to time in effect relating to or affecting the rights of creditors
generally. This Agreement and the other Loan Documents to which the General
Partner is a party have been executed and delivered by a duly authorized officer
of the General Partner.
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5.3 Survival of Representations and Warranties. All of the foregoing
representations and warranties of the Borrower and the General Partner set forth
in Section 5.1 and 5.2, respectively, shall survive the execution and delivery
of the this Agreement and the making by the Banks of the Loans hereunder and
shall continue in full force and effect so long as any of the Obligations of the
Borrower are outstanding or unperformed or this Agreement remains in effect.
ARTICLE 6. CONDITIONS PRECEDENT
6.1 Conditions Precedent to Effectiveness of this Agreement. The
effectiveness of this Agreement and the Commitments of the Banks hereunder are
subject to the condition precedent that the Agent shall have received original
copies, in form and substance satisfactory to it and (other than with respect to
the Notes) in sufficient copies for each it and each of the Banks, of the
following:
(a) Fully-executed copies of this Agreement, the Notes, the Security
Agreement, the Servicing Agreement, the Lock-Box Agreement, the Fee Letter and
the Guaranty Agreements, together with all schedules and exhibits thereto;
(b) Acknowledgment copies of all properly filed financing statements
required to be filed by the Borrower pursuant to the Security Agreement;
(c) Pay-out letters executed by (i) PNC Bank, individually and as
agent, Meridian and UJB, acknowledging (x) the repayment and satisfaction in
full of all of the Indebtedness and other obligations owing by the Borrower to
such Person under and in connection with that certain Credit Agreement dated as
of December 30, 1993 (as amended) among such Persons and the Borrower, all other
instruments, documents and agreements executed in connection therewith
(collectively, the "PNC Documents") and the transactions contemplated thereby
and (y) the termination of all such PNC Documents and all arrangements
thereunder, and (ii) CoreStates acknowledging (x) the repayment and satisfaction
in full of all of the Indebtedness and other obligations owing by the Borrower
to CoreStates under and in connection with that certain Loan and Security
Agreement by and among Borrower, the General Partner and CoreStates dated as of
June 11, 1993 (as amended) among, CoreStates, the General Partner and the
Borrower, all other instruments, documents and agreements executed in connection
therewith (collectively, the "CoreStates Documents") and the transactions
contemplated thereby, and (y) the termination of all such CoreStates Documents
and all arrangements thereunder, in each case, together with executed releases
relating to any UCC financing statements or any other filing made by or on
behalf of any such Persons against the Borrower or any of the Collateral;
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(d) Certified copies of UCC and tax lien and judgment search reports
with respect to the Borrower and the General Partner from such jurisdictions as
are deemed necessary or desirable by the Agent, in each case, dated a date
reasonably prior to the Closing Date;
(e) Executed releases with respect to any Liens (other than Permitted
Liens) filed against the Borrower or the General Partner or any of their
respective properties;
(f) Written acknowledgment by the Claims Servicer of the Agent's
security interest in the Purchased Claims and the Claims Packages and agreement
by the Claims Servicer that upon notice of an Event of Default it will perform
all services under the Servicing Agreement for the benefit of the Banks and
relinquish all Claims Packages to the Agent, at the option of the Agent;
(g) A Certificate of the Claims Servicer, certifying (i) a list
attached thereto of all Purchased Claims as of the Closing Date, with each
Purchased Claim identified by number, indicating for each Purchased Claim (A)
the Purchase Price and Maturity Value, (B) whether the claim is a settled Claim
or judgment Claim; and (C) the status of documentation of the Claims Package,
certified by the Claims Servicer to be true and correct in all material
respects; and (ii) that the Claims Servicer is in compliance with all provisions
of the Servicing Agreement and the processing manual then in use by the Claims
Servicer;
(h) A Borrowing Base Certificate dated as of the Closing Date and
certified by an Authorized Officer:
(i) A Certificate of the Assistant Secretary of the General Partner
dated as of the Closing Date, certifying:
(i) that the copies of the Partnership Agreement, the Articles of
Incorporation of the General Partner and the By-Laws of the General
Partner attached thereto are true, correct and complete copies of the
foregoing as the same are in force as of the Closing Date;
(ii) copies of the Resolutions of the Board of Directors of the General
Partner attached thereto authorizing the execution and delivery of this
Agreement and the other Loan Documents by the General Partner on its
own behalf and for and on behalf of the Borrower, and the performance
of the transactions contemplated therein by the Borrower and the
General Partner; and
(iii) the names and signatures of the officers of the General Partner
authorized to execute this Agreement
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and the other Loan Documents on its and the Borrower's behalf;
(j) A copy of the Articles of Incorporation of the General Partner
certified by the Secretary of the Commonwealth of Pennsylvania as of date
reasonably prior to the Closing Date;
(k) Good Standing Certificates for the General Partner from the
Secretary of the Commonwealth of Pennsylvania and the Secretary of State of New
Jersey, in each case, dated as of a date reasonably prior to the Closing Date;
(l) A copy of the Certificate of Limited Partnership of the Borrower
certified by the Secretary of the Commonwealth of Pennsylvania as of date
reasonably prior to the Closing Date;
(m) Good Standing Certificates for the General Partner from the
Secretary of the Commonwealth of Pennsylvania and the Secretary or State of New
Jersey, in each case, dated as of a date reasonably prior to the Closing Date;
(n) written opinion of counsel to the Borrower and the General Partner
addressed to the Agent and the Banks in substantially the form of Exhibits I
attached hereto;
(o) A certificate signed by the General Partner to the effect that (i)
the representations and warranties of the Borrower and the General Partner set
forth in Sections 5.1 and 5.2 are true as of the Closing Date, (ii) no Potential
Default or Event of Default hereunder has occurred and is continuing as of such
date, (iii) no Material Adverse Change has occurred in Borrower's financial
condition since December 31, 1994, and (iv) all conditions precedent required to
be satisfied by the Borrower or the General Partner for the making of the
initial Loans hereunder shall have been satisfied on or prior to the Closing
Date;
(p) Evidence that adequate insurance in compliance with Section 7.1(i)
hereof and the Security Agreement is in full force and effect and that all
premiums then due thereon have been paid, together with certified copies of the
casualty insurance policy or policies evidencing coverage satisfactory to the
Banks, with additional insured and lender loss payable endorsements naming the
Agent, as agent for the Banks, as additional insured and lender loss payee;
(q) Evidence of insurance covering the Claims Servicer comparable to
that required by Section 7.1(i) of this Agreement;
(r) Audited annual financial statements of the Claims Servicer for the
year ended December 31, 1994; and
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(s) Such additional documents, certificates, information, approvals and
opinions as the Agent or any Bank may reasonably require or request.
The acceptance by the Borrower of any Loans on the Closing Date shall be deemed
to be a representation and warranty made by Borrower and the General Partner to
the effect that all of the conditions to the making of such Loans set forth in
this Section 6.1 have been satisfied, with the same effect as delivery to the
Agent of a certificate signed by an officer of General Partner, for itself and
on behalf of the Borrower, dated the Closing Date, to such effect.
6.2 Conditions Precedent to Each Loan and Each Continuation or
Continuation of any Loan. The obligation of the Banks to make each Loan,
including the initial Loans to be made on the Closing Date, and to Continue or
Convert any Borrowing Tranche of such Loan from time to time thereafter, shall,
in each case, be subject to the further conditions precedent that on the date of
any such Loan:
(a) Both before and after giving effect to the funding, Conversion or
Continuation of any such Loan and the use of the proceeds thereof, all of
the representations and warranties of Borrower and the General Partner
contained herein and in each of the other Loan Documents shall be true and
correct in all material respects as though made on and as of such date,
except to the extent that any such representation or warranty expressly
speaks to an earlier date.
(b) No event shall have occurred and be continuing, or would result
from the funding, Continuation or Conversion of such Loan or the use of the
proceeds thereof, which constitutes or would constitute an Event of Default
or Potential Default.
(c) The aggregate unpaid principal amount of the Loans, after giving
effect to such Loan shall not exceed the Maximum Available Facility Amount.
(d) The Agent shall have received a Loan Request or
Conversion/Continuation Request with respect to any such proposed Loan
(other than that to be made on the Closing Date), Conversion or
Continuation, respectively.
(e) Since the Closing Date, no event or events shall have occurred and
be continuing which would have, or would reasonably be expected to result
in, a Material Adverse Change.
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(f) No order, judgment or decree of any Governmental Authority and no
Law applicable to the Agent or any Bank shall purport by its terms to
enjoin, restrain or otherwise prohibit the making, Conversion or
Continuation of such Loan.
The delivery by the Borrower of each Loan Request, Conversion/
Continuation Request, and/or the acceptance by the Borrower of each Loan or the
benefits of such Conversion or Continuation shall, in any case, be deemed to
constitute, as of the date of such delivery or Loan, as applicable, (A) a
representation and warranty by the Borrower and the General Partner that the
conditions in this Section 6.2 have been satisfied and (B) a confirmation and
reaffirmation by the Borrower of the granting and continuance of the Agent's
Liens on the Collateral pursuant to the Security Agreement.
ARTICLE 7. AFFIRMATIVE COVENANTS
7.1 Affirmative Covenants of the Borrower. So long as this Agreement
remains in effect or any of the Obligations of the Borrower remains outstanding,
the Borrower shall:
(a) Furnishing Financial Statements and Other Reports. Furnish or
caused to be furnished to the Agent:
(i) within 90 days after the close of each fiscal year of the Borrower,
a balance sheet and statements of income, owners' equity and cash flows of the
Borrower audited by Coopers & Lybrand or any other independent public accounting
firm selected by the Borrower and acceptable to the Agent showing the financial
condition of the Borrower as of the close of such fiscal year and the results of
the Borrower's operations during such fiscal year and certified without
qualification (except any qualifications that the Required Banks may in their
discretion approve in writing) by such firm to have been prepared in accordance
with GAAP;
(ii) within 60 days after the end of each of Borrower's first three
fiscal quarters, internal, unaudited financial statements showing the same
financial information as described in Section 7.1(a), as of the end of each such
period and for the then lapsed portion of such year, certified by the General
Partner of the Borrower to be true and correct and to have been prepared in
accordance with GAAP (subject to normal year-end adjustments);
(iii) (x) within 30 days after the end of each month, an internal,
unaudited statement of income prepared by the Borrower, (y) within 20 days after
the end of each month, the calculation of the Delinquency Ratio and Net Income
for the immediately preceding month then ended, and (z) within 20 days after the
end of each month, an aging report with respect to the
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Purchased Claims, certified as being accurate in all material respects by the
Claims Servicer;
(iv) accompanying the financial statements provided pursuant to
Sections 7.1(a) and (b), a certificate of the General Partner of Borrower,
stating (i) that a review of the activities of Borrower during such period has
been made under its immediate supervision with a view to determining whether all
of the obligations and covenants hereunder or in connection herewith have been
performed and fulfilled, (ii) that such review showed that there existed during
such period no Potential Default or Event of Default or if any such Potential
Default or Event of Default existed, specifying the nature thereof, the period
of existence thereof and what action Borrower proposes to take, or has taken,
with respect thereto, and (iii) that the Borrower is in compliance with all
terms, conditions and provisions of this Agreement and all other Loan Documents;
(v) copies of all management letters prepared by the Borrower's
accountants, promptly after receipt thereof;
(vi) promptly after the sending or making available or filing of the
same, copies of all reports, proxy statements and financial statements delivered
or sent by the Borrower to its limited partners or prospective investors;
(vii) within 5 Business Days after the end of each month, a report (the
"Monthly Report") setting forth the Applicable Discount Rate for each Claim
Group for the upcoming month, the Weighted Average Maturity for each Claim
Group, the Weighted Average Tranche Rate for each Claim Group, the present value
of the Purchased Claims, the Present Value of the Purchased Claims, the
Delinquency Ratio and the aggregate Maturity Value of all of the Purchased
Claims, together, in each case, with the calculations thereof.
(vii) within 20 days after the end of each month, a report prepared by
the Claims Servicer listing each Purchased Claim identified by number and
indicating for each Purchased Claim (i) the Purchase Price thereof, the Maturity
Value thereof, and the outstanding Maturity Value thereof; and (ii) whether the
Claim is a settled Claim or judgment Claim, accompanied by certification by the
Claims Servicer that all calculations with respect to the Purchased Claims are
correct and that the Claims Servicer is in compliance with all provisions of the
Servicing Agreement and the processing manual then in use by the Claims
Servicer;
(viii) to the extent requested by the Agent, copies of all notices sent
by the Claims Servicer to the Borrower with respect to the Purchased Claims;
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(ix) within 120 days after the close of the fiscal year of the Claims
Servicer, a copy of the Claims Servicer's annual report as sent to its
shareholders;
(x) no less than weekly, on the first Wednesday following the end of
each calendar week (to the extent not delivered earlier in any such week in
accordance with this clause), and with each Loan Request, a fully completed
Borrowing Base Certificate;
(xi) promptly upon request, such other information regarding the
operations, business affairs and financial condition of the Borrower as the
Agent or the Banks may, from time to time, reasonably request upon reasonably
adequate notice, including without limitation budgets and forecasts;
(xii) (x) within 30 days after any extension, renewal or replacement
thereof, a copy of an insurance certificate evidencing the effectiveness of a
fidelity bond (or other similar insurance) covering the Claims Servicer and (y)
as soon as practicable thereafter, descriptions of any material changes to any
of the insurance policies maintained by the Borrower or the Claims Servicer of
the type described in Section 7.1(i).
All balance sheets, statements and other information furnished pursuant hereto
shall be prepared in accordance with GAAP and fairly set forth the financial
condition of the Borrower and the results of Borrower's operations. The Banks
shall have the right, from time to time, to discuss the Borrower's affairs
directly with the Borrower's independent certified public accountants after
reasonable notice to the Borrower; provided, that the Borrower shall have the
right to be present at any such discussions.
(b) Net Worth. Have at all times a Net Worth at least equal to the
greater of (x) $1,000,000 and (y) the product of (1) 2% and (2) the difference
of (A) the aggregate present value at such time of all of the Purchased Claims,
minus (B) the present value of all Defaulted Claims, in each case, discounted at
the Applicable Discount Rate as in effect at such time with respect thereto.
(c) Existence and Rights; Compliance with Laws. Preserve and keep in
full force and effect its limited partnership existence, rights, permits,
patents, franchises, licenses, trademarks and trade names and obtain and
preserve its qualification to do business as a foreign entity in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement and comply in all material
respects with any and all Laws which may at any time be applicable to it.
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(d) Books and Records. Maintain proper and complete financial and
accounting books and records in which shall be set forth accurately and in
accordance with GAAP, all of its dealings and transactions.
(e) Taxes. Pay when due all taxes, assessments, charges and levies
imposed upon it or any of its respective properties or which it is required to
withhold and pay over, and provide evidence of such payment to the Agent if
requested, except where such taxes, assessments or charges shall be contested in
good faith by appropriate proceedings and where adequate reserves therefor have
been set aside on its books, provided that Borrower shall pay or cause to be
paid all such taxes, assessments, charges, and levies in excess, individually or
in the aggregate, in excess of $50,000 or if any Lien is or is reasonably likely
to be filed with respect thereto against the assets of the Borrower. Within ten
days of a Bank's request therefor, Borrower will furnish the Banks with copies
of federal income tax returns filed by the Borrower.
(f) Maintenance of Properties. Maintain all of its tangible property
(except for obsolete property not yet disposed of) in good repair, working order
and condition and, from time to time, make all appropriate and proper repairs,
renewals, replacements, additions and improvements thereto.
(g) Performance and Compliance with Material Agreements. Perform and
comply with each of the provisions of all material agreements of the kind
described in Section 5.1(j) to which it is a party.
(h) [Intentionally Omitted].
(i) Insurance. Carry at all times, in coverage, form and amount
satisfactory to the Agent insurance as is customarily maintained by companies in
the same or similar businesses as the Borrower, as well as coverage against
employee dishonesty, and pay all premiums on the policies for such insurance
when and as they become due and do all other things necessary to maintain such
policies in full force and effect. Notwithstanding the foregoing, the amount of
property insurance for Borrower's property and equipment shall in no event be
required to exceed the aggregate of the amount of the Commitments. The Borrower
shall from time to time if requested by the Agent, promptly furnish or cause to
be furnished to the Agent evidence in form and substance satisfactory to the
Agent, of the maintenance of all insurance required to be maintained by this
Section 7.1(i) including, but not limited to, such originals or copies as the
Agent may request of policies, certificates of insurance, riders and
endorsements relating to the casualty, property and fidelity policies of the
Borrower and proof of premium payments. The Borrower shall cause all casualty,
property and fidelity policies of the Borrower to provide, and the insurers
issuing such
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policies to certify to the Agent and the Banks, that (a) such policies contain
endorsements that name the Agent and the Banks as additional insured and the
Agent as lender loss payee as their interests may appear, with the understanding
that any obligation imposed upon the insured (including, without limitation, the
liability to pay premiums) shall be the sole obligation of the Borrower and not
that of the insured, (b) the interest of the Agent shall be insured regardless
of any breach or violation by the Borrower or the holder or owner of the
policies of any warranties, declarations and conditions contained in such
policies, (c) if such insurance be proposed to be canceled or materially changed
for any reason whatsoever, such insurer will promptly notify the Agent thereof
and such cancellation or change shall not be effective as to the Agent for sixty
days after receipt by the Agent of such notice, unless the effect of such change
is to extend or increase coverage under the policy; (d) the Agent will have the
right at its election to remedy any Default in the payment of premiums within
thirty days of notice from the insurer of such default; (e) loss payments in
each instance will be payable to the Agent as secured party, or otherwise as its
interest may appear; (f) such policies are primary without right of contribution
of any other insurance carried by or on behalf of any additional insured with
respect to their respective interests in the Collateral; and (g) inasmuch as the
policy covers more than one insured, all terms, conditions, insuring agreements
and endorsements (except limits of liability) shall operate as if there were a
separate policy covering each insured.
(j) Inspection. Allow any representative of the Agent or a Bank to
review at any time all Claims Packages in the possession of the Borrower or the
Claims Servicer, to visit and inspect any of the properties of the Borrower, to
examine the books of account and other records and files of the Borrower, to
make copies thereof and to discuss the affairs in business, finances and
accounts of the Borrower with its officers and executive employees, all at such
reasonable times, upon reasonable notice and as often as the Agent or any Bank
may request; provided, that such inspections shall not interfere with the
reasonable conduct of the Borrower's business; and provided, further, that Banks
individually may not perform field audits of the Borrower unless a Potential
Default has occurred and is continuing, but a representative of any Bank may
accompany the Agent on any field audit. The Agent's inspections are solely for
the protection of the Banks and no action or inaction of the Agent or the Banks
shall constitute any representation by the Agent or the Banks that the Borrower
is in compliance with the terms of this Agreement or that the Agent or the Banks
approve of the Borrowers affairs, business, finances or accounts.
(k) Litigation. Give prompt notice to the Agent of all litigation or
proceedings affecting it which, if adversely determined, could have a Material
Adverse Effect or in which
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damages exceeding $100,000 (if such damages would be covered by insurance) or
$50,000 (if such damages would not be covered by insurance) are claimed (whether
or not the claim is considered to be covered by insurance).
(l) Notice of Defaults. Within one Business Day after becoming aware
thereof, notify the Agent promptly of the occurrence of any Event of Default or
Potential Default hereunder, which notice shall describe such event and the
actions which the Borrower intends to take with respect thereto.
(m) Change of Business Location; Change of Lock-Boxes, Lock-Box
Accounts or Lock-Box Banks. (i) Notify the Agent at least thirty (30) days in
advance of (x) any change in the location of its principal place of business,
(y) the establishment of any new, or the discontinuance of any existing, place
of business, or (z) any change to its name or of the use any tradenames,
fictitious names, assumed names or "doing business as" names, and, in each case,
execute, deliver, file (and pay filing fees and taxes) all such documents as may
be necessary or advisable in the opinion of the Agent and the Agents legal
counsel to continue to perfect and protect the Liens of the Agent in the
Collateral (including, without limitation, UCC financing statements).
Notwithstanding anything contained herein to contrary, the Borrower may not move
its principal place of business to a location outside of the United States of
America.
(ii) Notify the Agent at least thirty (30) days in advance of
terminating any Lock-Box, Lock-Box Account or Lock-Box Bank, and provide for
such termination and handling procedures for Collections previously directed to
be sent thereto as shall be acceptable to the Agent in its commercially
reasonable judgment. Notify the Agent at least ten (10) days in advance of
adding any new lock-box, bank account or bank as a new Lock-Box, Lock-Box
Account or Lock-Box Bank and, prior to directing any Obligors to remit
Collections thereto, deliver a fully-executed Lock-Box Agreement with respect to
any such new Lock-Box, Lock-Box Account or Lock-Box Bank, as applicable, to the
Agent.
(iii) Agrees that from time to time, at its expense, it will promptly
execute and deliver all further instruments and documents, and take all further
action that the Agent or any Bank may reasonably request in order to perfect,
protect or more fully evidence the Agent's interest in the Purchased Claims, or
to enable the Agent or any of the Banks to exercise or enforce any of its rights
hereunder. Without limiting the generality of the foregoing, the Borrower will
upon the request of the Lender, execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate or as the Agent may
reasonably request. The Borrower hereby authorizes the Lender to file one or
more financing or continuation statements, and amendments thereto and
assignments
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thereof, relative to all or any of the Purchased Claims and the other Collateral
now existing or hereafter arising without the signature of the Borrower where
permitted by law.
(n) ERISA. Comply and cause each member of the ERISA Group to comply
with ERISA, the Internal Revenue Code and other applicable Laws applicable to
all Welfare Plans, except where such failure, alone or in conjunction with any
other failure, would not have a Material Adverse Effect and would not result in
any Lien on any of the Collateral. Without limiting the generality of the
foregoing, the Borrower shall make, and/or shall cause the other members of the
ERISA Group to make, all required contributions to each of the Welfare Plans.
(o) Notices Regarding Plans and Benefit Arrangements. The Borrower will
furnish or cause to be furnished to the Agent and each of the Banks:
(1) Promptly upon becoming aware of the occurrence thereof, notice
(including the nature of the event and, when known, any action taken or
threatened by any Governmental Authority with respect thereto) of:
(i) any Prohibited Transaction which could subject the Borrower or any
member of the ERISA Group to a civil penalty assessed pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue
Code in connection with any Welfare Plan; and
(ii) increases in the benefits of any Existing Welfare Plan.
(2) At least 30 days prior to the commencement of contributions to any
employee benefit plan to which the Borrower or any other member of the ERISA
Group was not previously contributing; provided, however, that the Borrower
shall not, and shall not permit any other member of the ERISA Group to, agree to
become obligated to make contributions to any such new employee benefit plan
without the prior written consent of the Agent; it being agreed that such
consent may be withheld unless and until this Agreement is amended to include
such provisions with respect to such new plan as the Agent reasonably deems
necessary or desirable.
(3) If requested by the Agent, promptly after receipt thereof, copies
of each annual report (IRS Form 5500 Series) and all accompanying schedules, the
most recent financial information concerning the financial status of each
Welfare Plan administered or maintained by the Borrower or any member of the
ERISA Group, and schedules showing the amounts contributed to each such Welfare
Plan by or on behalf of the Borrower or any member of the ERISA Group in which
any of their personnel participate or from which such personnel may derive a
benefit.
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(p) Maintain Separateness From Affiliates. The Borrower shall engage in
only (1) the acquisition, ownership, selling and pledging of Purchased Assets
and (2) the exercise of any powers permitted to corporations under the corporate
law of the Commonwealth of Pennsylvania which are incidental to the foregoing or
necessary, suitable or convenient to accomplish the foregoing, and the Borrower
shall incur no Indebtedness other than trade payables in connection with its
operations in the normal course of business as set forth above; the Borrower
will (A) maintain its books and records separate from the books and records of
any other entity, (B) maintain separate bank accounts from, and no funds of the
Borrower shall be commingled with funds of, any other entity, (C) conduct all of
its business solely in its own name, and (D) only enter into transactions with
Affiliates that are in writing and are on terms substantially no less favorable
than it could obtain in a similar arm's-length transaction with an unaffiliated
third party.
(q) Accounting Systems. Maintain a financial accounting system reviewed
by Coopers & Lybrand or such other independent certified public accountants
acceptable to the Agent and the Required Banks and determined (to the extent
that the procedures contained in such system are complied with) to be adequate
to generate timely, accurate and complete financial records of the Borrower.
(r) Payment of Obligations; Payments Under Management Agreement. Shall
pay all Permitted Indebtedness when due in accordance with the terms thereof;
provided, however, that unless an Event of Default or Potential Default is then
continuing or would result therefrom, the Borrower shall be permitted to prepay
any such obligations owing to any Person other than an Affiliate. Except to the
extent any Event of Default or Potential Default under Section 9.1(a) shall have
then occurred and be continuing or the covenant set forth in Section 7.1(b)
would no longer be true, the Borrower shall be permitted to make payments under,
and in accordance with the terms of, the Management Agreement.
(s) Post-Closing Deliveries. Deliver to the Agent, in form and
substance satisfactory to it and in sufficient number of copies for the Agent
and each of the Banks:
(i) within 45 days after the Closing Date, lenders' loss payable
endorsement executed by the applicable insurance carrier with respect to
each of the insurance policies described in Schedule 5.1(y) covering the
items described in subclauses (a)-(g) of Section 7.1(i), within 45 days
after the Closing Date;
(ii) within 30 days after the Closing Date, a copy of the Good Standing
Certificate for the General Partner from the Secretary of State of New
Jersey evidencing that the
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General Partner has filed its annual report with the Secretary of State of
New Jersey;
(iii) within 30 days after the Closing Date, evidence of the
appointment by each of the Guarantors, the Borrower and the General Partner
of The Prentice Hall Corporation System, Inc., as each such Person's agent
for the service of process within the State of New York; and
(iv) within 30 days after the provision of a draft thereof by the
Agent, a substitute agreement to serve as the Servicing Agreement as among
the Borrower, the Claims Servicer and the Agent, for the benefit of the
Banks.
7.2 Affirmative Covenants of the General Partner. So long as this
Agreement remains in effect or any of the Obligations of the Borrower remains
outstanding, the General Partner hereby covenants to engage in only (1) the
ownership of the general partnership interests of the Borrower and (2) in its
capacity as the sole general partner of the Borrower, the management of the
Borrower; the General Partner will (A) maintain its books and records separate
from the books and records of any other entity, (B) maintain separate bank
accounts from, and no funds of the General Partner shall be commingled with
funds of, any other entity, and (C) conduct all of its affairs solely in its own
name. The General Partner shall maintain its corporate existence in the
Commonwealth of Pennsylvania and preserve its qualification to do business as a
foreign entity in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement and
comply in all material respects with any and all Laws which may at any time be
applicable to it.
ARTICLE 8. NEGATIVE COVENANTS
8.1 Negative Covenants of the Borrower. So long as this Agreement
remains in effect or any of the Obligations of the Borrower remains outstanding,
the Borrower shall not:
(a) Dissolution and Merger. Wind-up, liquidate or dissolve its affairs,
convey, sell, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its properties or assets
(whether now owned or hereafter acquired), or enter into any transaction of
merger or consolidation.
(b) Other Borrowing and Liens. Incur, create, assume or permit to exist
any Indebtedness (either conventionally or by sale/leaseback), or any Lien on
any of its properties or assets, whether now owned or hereafter acquired, other
than Permitted Indebtedness and Permitted Liens.
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(c) Guarantees. Become liable, directly or indirectly, in respect of
any Guaranty, or assume, guarantee, endorse or otherwise in any way become
liable on the obligation of any other person, directly or indirectly, other than
to or for the benefit of the Agent, for the ratable benefit of the Banks, except
endorsements of negotiable instruments for deposit or collection in the usual
course of business.
(d) Loans and Investments. Make any loans or extension of credit or
purchase or otherwise acquire the capital stock, equity interest, assets or
obligations of, or any other interest in, any Person or entity.
(e) Distributions. Return any capital to the General Partner or any
limited partner or authorize or make any distribution, payment or delivery of
property or cash to the General Partner or any limited partner or redeem,
retire, purchase or otherwise acquire, directly or indirectly, for a
consideration, any of its general or limited partnership interests now or
hereafter outstanding or set aside any funds for any of the foregoing purposes;
provided, however, that so long as no Event of Default or Potential Default then
exists or would result therefrom and to the extent authorized by all appropriate
partnership action and not violative of the Partnership Agreement or any
applicable law, the Borrower, no more frequently than once a calendar month, may
make distributions of income to the General Partner and limited partners in
accordance with the Partnership Agreement.
(f) Disposal of Assets; Modification of Purchased Claims. Sell, lease,
transfer or otherwise dispose of any part or any amount of its assets, real or
personal, including any accounts, contracts or contract rights, other than any
obsolete or unusable property for the fair market value thereof. Extend the
Scheduled Maturity Date of, agree to adjust, compromise, modify, or otherwise
reduce the Maturity Value or Settlement Amount of, or agree to or grant any
waiver or amendment with respect to, any Purchased Claim.
(g) Change of Business or Capital Structure. Change the nature of its
business or enter into a new business or change the legal form of its business
or make any change in the capital structure thereof.
(h) Leases and Leaseback. Enter into any new agreement to rent or lease
any real or personal property, except for any operating leases entered into in
the ordinary course of the Borrower's business and not having aggregate lease
payments, when combined with all other such lease payments required to be made
by the Borrower, of not more than $100,000 in any calendar year.
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(i) [Intentionally Omitted].
(j) Amendment of Partnership Agreement, the Servicing Agreement or the
Management Agreement. Amend, restate, supplement, terminate or otherwise modify
the Partnership Agreement, the Servicing Agreement, or the Management Agreement,
in any respect or permit any of the foregoing to occur, in each case, without
the prior written consent of the Agent.
(k) Purchase of Other Types of Claims. Purchase any claims against the
JUA other than Residual Bodily Injury Claims.
(l) Bankruptcy Proceedings. (1) Commence any case, proceeding or other
action under any existing or future bankruptcy, insolvency or similar law
seeking to have an order for relief entered with respect to itself, or seeking
reorganization, arrangement, adjustment, wind-up, liquidation, dissolution,
composition or other relief with respect to itself or its debts, (2) seek
appointment of a receiver, trustee, custodian or other similar official for
itself or any part of its assets, (3) make a general assignment for the benefit
of creditors, (4) take any action in furtherance of, or consenting to or
acquiescing in, any of the foregoing, (5) initiate or support the filing of a
motion in any bankruptcy or other insolvency proceedings involving the General
Partner or any of its Affiliates to substantively consolidate itself with any
such Person.
(m) Portfolio Purchases. The Borrower shall not purchase any Claims
from any seller (other than the applicable Plaintiff (or the estate thereof) or
the applicable Plaintiff's Attorney with respect thereto) unless and until the
Borrower has reviewed and approved the assignment and documentation procedures
in respect of such seller's purchase of such Claims as being sufficient to vest
good and marketable title of such Claims in such seller upon it purchase
thereof.
(n) Deposits in Lock-Box or Lock-Box Accounts. No proceeds of any
Collateral shall at any time be deposited in any of the Borrower's bank accounts
other than the Lock-Box Account. The Borrower shall not direct any Obligor to
make any payments of any Claims to any other destination other than a Lock-Box
or a Lock-Box Account. The Borrower shall not permit the assets of any Person
(other than the Borrower) to be deposited into any of the Lock-Boxes or the
Lock-Box Accounts.
(o) Minimum Purchase Price. The Borrower shall not purchase any Claim
for a Purchase Price discount of less than (i) one minus (ii)(a) the Base Rate
at such time plus 2.50% per annum.
8.2 Negative Covenants of the General Partner. So long as this
Agreement remains in effect or any of the
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Obligations of the Borrower remains outstanding, the General Partner shall not:
(a) Permit Non-Compliance by the Borrower. Take, or permit the Borrower
to take, any action which would cause the representations, warranties or
covenants hereunder to be breached in any material respect or which is otherwise
inconsistent with the terms of this Agreement.
(b) Dissolution and Merger. Wind-up, liquidate or dissolve its affairs,
convey, sell, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its properties or assets
(whether now owned or hereafter acquired), or enter into any transaction of
merger or consolidation.
(c) Other Borrowing and Liens. Incur, create, assume or permit to exist
any Indebtedness (either conventionally or by sale/leaseback), or any Lien on
any of its properties or assets, whether now owned or hereafter acquired.
(d) Guarantees. Become liable, directly or indirectly, in respect of
any Guaranty, or assume, guarantee, endorse or otherwise in any way become
liable on the obligation of any other Person (other than the Borrower), directly
or indirectly.
(e) Loans and Investments. Make any loans or extension of credit or
purchase or otherwise acquire the capital stock, equity interest, assets or
obligations of, or any other interest in, any Person or entity, other than the
Borrower.
(f) Change of Business or Capital Structure. Engage in any business
other than the ownership of the general partnership of the Borrower and the
duties in connection therewith or change the legal form of its business or make
any change in the capital structure thereof.
(g) Bankruptcy Proceedings. (1) Commence any case, proceeding or other
action under any existing or future bankruptcy, insolvency or similar law
seeking to have an order for relief entered with respect to the General Partner
or the Borrower, or seeking reorganization, arrangement, adjustment, wind-up,
liquidation, dissolution, composition or other relief with respect to the
General Partner, the Borrower or the respective debts of either of the
foregoing, (2) seek appointment of a receiver, trustee, custodian or other
similar official for the General Partner or the Borrower or any part of the
respective assets of either of the foregoing, (3) make, on behalf of the General
Partner or the Borrower, a general assignment for the benefit of creditors, (4)
take any action in furtherance of, or consenting to or acquiescing in, any of
the foregoing, (5) initiate or support the filing of a motion in any bankruptcy
or
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other insolvency proceedings involving the General Partner, the Borrower or any
of its Affiliates to substantively consolidate the General Partner or the
Borrower, as applicable, with any such Person.
ARTICLE 9. DEFAULTS AND REMEDIES
9.1 Events of Default. Each of the following is an event of default
("Event of Default") hereunder and under the Notes:
(a) The Borrower fails to pay when due, whether on demand, after
acceleration or otherwise, (i) any principal of the Loans, or (ii) any other
Obligation owed to the Banks or the Agent hereunder (other than as described in
the immediately preceding subclause (a)(i)), and, in the case of any such
failure to make any payment of the type described in this subclause (a)(ii),
such failure shall continue unremedied for five (5) days after the date upon
which such payment became due and payable.
(b) (i) the Borrower shall fail to comply with the covenant set forth
in Section 7.1(b), and such failure shall continue unremedied for 10 days after
the Borrower became aware, or should have become aware, thereof, or (ii) the
Borrower or the General Partner fails to comply with or perform as and when
required or to observe any of the terms, conditions or covenants of this
Agreement, the Notes or any other Loan Document (other than as described in the
immediately preceding clauses (a) or (b)(i)) to which such Person is party and
which is to be complied with, performed or observed by such Person, and such
failure shall continue unremedied for a period of 25 days after the giving of
notice of any such failure by the Agent or any Bank to an officer or agent of
the Borrower or the General Partner, as the case may be (such grace period to be
applicable only in the event such default can be remedied by corrective action
by Borrower or the General Partner, as the case may be, as determined by the
Agent in its sole discretion).
(c) Any financial statement or any representation or warranty of
Borrower, the General Partner, or a Guarantor made herein or in any report,
certificate or other document furnished in connection with this Agreement or any
of the other Loan Documents proves to be false or misleading in any material
adverse respect when made.
(d) Any Indebtedness of the Borrower or the General Partner is declared
to be due and payable prior to its stated maturity or is not paid or discharged
when due or within any permitted grace period after such due date; or there
shall occur any event which constitutes, or which with the giving of notice or
the passage of time, or both, would constitute an event of default under any
instrument, agreement or evidence of Indebtedness of the Borrower or the General
Partner, the
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occurrence of which would permit the holder of such Indebtedness to accelerate
the maturity thereof.
(e) The occurrence of a Material Adverse Change.
(f) (i) The Borrower, the General Partner, or any of the Ultimate
Obligors shall generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted against such Person (an "Involuntary Proceeding") or by such Person,
in either case, seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property, and in the case of
an Involuntary Proceeding, such proceeding shall remain unstayed or unvacated
for 30 days or any relief sought thereunder shall be granted; or (ii) the
Borrower, the General Partner, or any of the Ultimate Obligors shall take any
action authorizing any of the actions set forth in clause (i) above in this
Section 9.1(f); or
(g) Any final judgment, decree or order for payment of money in excess
of $100,000 (whether or not covered by insurance) is entered against Borrower or
the General Partner and the same remains unsatisfied for more than 30 days,
unless the same has been appealed and a stay of the enforcement thereof has been
obtained.
(h) Any attachment or execution process is issued against all or any
substantial part of the assets of the Borrower or the General Partner.
(i) The suspension by Borrower of all or any substantial part of its
business operations.
(j) Any Governmental Authority seizes, appropriates, condemns or
occupies all or a substantial part of the properties of Borrower or the General
Partner.
(k) The Agent shall cease to have a valid and perfected first priority
security interest in any Purchased Claims and the Collections with respect
thereto.
(l) The FAIRA or the GDP Act shall be repealed, or there shall occur
any amendment, modification, interpretation of or regulation issued with respect
to, or modification in or termination of the appropriations level of the FAIRA
or the New Jersey Automobile Guaranty Fund established thereunder, which in
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the sole judgment of the Agent or the Required Banks, has or is likely to have a
Material Adverse Effect.
(m) Any Law is adopted, changed or interpreted and the effect of such
adoption, change or interpretation is to repeal, eliminate or materially
adversely affect the value or collectibility of the Purchased Claims, including,
without limitation, any such Law permitting the deferral of the payment of any
pre-existing Purchased Claims from the original Scheduled Maturity Date therefor
to a later date.
(n) Any Law, policy or practice (whether or not having the force of
Law) is adopted permitting the Obligor of any Purchased Claim to adjust, reduce,
compromise, settle or otherwise modify (including by extension of time of
payment or the granting of any discounts, allowances or credits) the Settlement
Amounts of any Purchased Claim or the related interest rate payable with respect
thereto.
(o) The Guarantors shall cease to own collectively 99% of the limited
partnership interests in Borrower and 100% of the capital stock of the General
Partner.
(p) The General Partner shall cease to be the sole general partner of
Borrower.
(q) The Claim Servicer shall fail to comply with or perform as and when
required or to observe any of the terms, conditions or covenants of the
Servicing Agreement and such failure shall continue unremedied for a period of 3
Business Days after the giving of notice of any such failure by the Agent or any
Bank to an officer or agent of the Claims Servicer (such grace period to be
applicable only in the event such default can be remedied by corrective action
by the Claim Servicer, as the case may be, as determined by the Agent in its
sole discretion).
(r) Any Guarantor (or any receiver, debtor-in-possession, or trustee
of or for such Guarantor) shall make any assertion or commence any action
challenging the enforceability of the Guaranty to which it is a party or
contesting liability thereunder.
(s) Either the Borrower or the General Partner shall become, or become
controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(t) The Delinquency Ratio for any month shall equal or exceed eight
percent (8%).
9.2 Remedies.
(a) Upon the occurrence of any Event of Default other than as described
in Section 9.1(f) or 9.1(s), or at any time
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thereafter during the continuation of that Event of Default, the Agent (on its
own or at the direction of the Required Banks) may, if the Commitment
Termination Date hereunder has not theretofore occurred, declare the Commitment
Termination Date to have occurred and declare the Commitments of the Banks to be
terminated, whereupon the same shall forthwith terminate.
(b) Automatic Termination. Immediately upon the occurrence of an Event
of Default described in Section 9.1(f) or 9.1(s), (i) the Commitment Termination
Date and the Facility Termination Date shall be deemed to have occurred
automatically and (ii) all of the Loans then outstanding, all interest thereon
and all other outstanding Obligations owed by the Borrower to the Agent and the
Banks hereunder shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower notwithstanding anything contained herein to
the contrary.
(c) Additional Remedies. Upon the occurrence and during the
continuation of an Event of Default, the Agent and the Banks shall have, in
addition to all other rights and remedies under this Agreement and the other
Facility Documents, all other rights and remedies provided under the UCC of each
applicable jurisdiction and other applicable laws, which rights shall be
cumulative and non-exclusive, to the extent permitted by Law. The Agent may, and
upon the request of the Required Banks shall, exercise all post-default rights
granted to the Agent and the Banks under the Loan Documents or applicable Law.
9.3 Notice of Sale. Any notice required to be given by the Agent of a
sale, lease or other disposition of the Collateral or any other intended action
by the Agent, if given ten (10) days prior to such proposed action, shall
constitute commercially reasonable and fair notice thereof to the Borrower.
ARTICLE 10. THE AGENT
10.1 Appointment. Each of the Banks hereby irrevocably designates,
appoints and authorizes ING to act as Agent for such Bank under this Agreement
to execute and deliver or accept on behalf of each such Bank the other Loan
Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note
by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent
to take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and any other instruments, documents and/or agreements
referred to herein, and to exercise such powers and to perform such duties
hereunder as are specifically delegated to or required of the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. ING
agrees to act as the Agent on behalf of the Banks to the extent provided in this
Agreement. The appointment and authority of the Agent hereunder shall
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termination on the date upon which the Obligations shall have been fully and
indefeasibly paid in cash.
10.2 UCC Filings. The Banks, the Borrower and the General Partner each
hereby expressly recognizes and agrees that the Agent may be listed as the
assignee or secured party of record on the various UCC filings required to be
made hereunder and under the other Loan Documents in order to perfect the
interests of the Agent and the Banks in the Collateral, that such listing shall
be for administrative convenience only in creating a record or nominee secured
party to take certain actions hereunder and under the other Loan Documents on
behalf of the Banks and that such listing will not affect in any way the status
of the Banks as the secured parties with respect to the Collateral. In addition,
such listings shall impose no duties on the Agent other than those expressly and
specifically undertaken by it in accordance with this Article 10. In furtherance
of the foregoing, each Bank shall be entitled to enforce its rights created
under this Agreement and the other Loan Documents without the need to conduct
such enforcement through the Agent, except as specifically required hereunder or
under any of the other Loan Documents.
10.3 Delegation of Duties. The Agent may perform any of its duties
hereunder or under any of the other Loan Documents by or through agents or
employees (provided such delegation does not constitute a relinquishment of its
duties as Agent) and, subject to Sections 10.6 and 10.7 hereof, shall be
entitled to engage and pay for the advice or services of any attorneys,
accountants or other experts concerning all matters pertaining to its duties
hereunder and to rely upon any advice so obtained. The Agent shall not be liable
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
10.4 Nature of Duties, Independent Credit Investigation. The Agent
shall have no duties or responsibilities hereunder or under the other Loan
Documents, except those expressly set forth herein and therein and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any such other Loan Document or be deemed to
otherwise exist. The duties of the Agent shall be mechanical and administrative
in nature; the Agent shall not have by reason of this Agreement a fiduciary or
trust relationship in respect of any Bank, the Borrower, the General Partner or
any Guarantor; and nothing in this Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon the Agent any obligations in
respect of this Agreement except as expressly set forth herein. Each of the
Banks expressly acknowledges (a) that the Agent has not made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of the Borrower, the General Partner or the Guarantors,
shall be deemed to constitute any representation or warranty by the Agent
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to any Bank; (b) that it has made and will continue to make, without reliance
upon the Agent, its own independent investigation of the financial condition and
affairs and its own appraisal of the creditworthiness of Borrower, the General
Partner and the Guarantors in connection with this Agreement and the making and
continuance of the Loans hereunder; and (c) except as expressly provided herein,
that the Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other information with
respect thereto, whether coming into its possession before the making of any
Loan or at any time or times thereafter.
10.5 Actions in Discretion of Agent; Instructions from the Banks. The
Agent shall, upon the written request of the Required Banks, take or refrain
from taking any action of the type specified as being subject to direction by
the Required Banks and otherwise the Agent, in its sole discretion, shall take
or refrain from taking any action of the type specified as being within the
Agent's rights, powers or discretion herein; provided that the Agent shall not
be required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement, any other Loan Document or applicable Law.
In the absence of a request by the Required Banks, the Agent shall have the
authority, in its sole discretion, to take or not to take any such action,
unless this Agreement specifically requires the consent of the Required Banks or
all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section
10.7.
10.6 Reimbursement and Indemnification of Agent by the Borrower. The
Borrower shall unconditionally pay or reimburse the Agent (and its agents and/or
nominees) and save the Agent (and such agents and/or nominees) harmless against:
(a) liability for the payment of all reasonable out-of-pocket costs,
expenses and disbursements, including, but not limited to, fees and expenses of
counsel, appraisers and environmental consultants, incurred by the Agent (or
such agents and/or nominees):
(i) in connection with the development, negotiation, preparation,
printing, execution, syndication, interpretation, performance and administration
of this Agreement and the other Loan Documents, including, without limitation,
all reasonable fees and expenses relating to the periodic auditing of the books
and records of the Borrower by the Agent (or its agents and/or nominees);
provided, however, that in no event shall the Borrower have any liability to pay
any such costs, fees or expenses relating to such periodic auditing of the
Borrower's books and records in excess of $7500 in any calendar year.
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(ii) relating to any requested amendments, waivers or consents
pursuant to the provisions hereof;
(iii) in connection with the enforcement of this Agreement or any
other Loan Document or collection of amounts due hereunder or thereunder or the
proof and allowability of any claim arising under this Agreement or any other
Loan Document, whether in bankruptcy or receivership proceedings or otherwise;
and
(iv) in any workout, restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof or
of any rights hereunder or under any other Loan Document or in connection with
any foreclosure, collection or bankruptcy proceedings; and
(b) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
its capacity as such, or any of its directors, employees, officers or agents,
acting on its behalf in such capacity, in any way relating to or arising out of
this Agreement or any other Loan Documents or any action taken or omitted by the
Agent or such other foregoing Persons hereunder or thereunder; provided that
Borrower shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements if the same results solely from the Agent's (or such director's,
employee's, officer's or agent's, as applicable) gross negligence or willful
misconduct as determined by a court of competent jurisdiction by final and
non-appealable judgment (or settlement tantamount to a final judgment).
10.7 Exculpatory Provisions.
(a) Neither the Agent nor any of its directors,
officers, employees, agents, attorneys or Affiliates shall:
(i) be liable to any Bank for any action taken or omitted to be
taken by it or them hereunder, or in connection herewith, including, without
limitation, pursuant to any Loan Document, unless caused by its or their own
gross negligence or willful misconduct, subject to the obligations of the Agent
under Section 10.1 of this Agreement;
(ii) be responsible in any manner to any of the Banks for the
effectiveness, enforceability, genuineness, validity or the due execution of
this Agreement or any other Loan Documents or for any recital, representation,
warranty, document, certificate, report or statement of the Borrower, the
General Partner, the Banks, any Guarantor or any Affiliate of any of the
foregoing, made herein or furnished under or in connection with
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this Agreement or any other Loan Documents or for any failure of the Borrower,
the General Partner, any Bank, any Guarantor or any Affiliate of any of the
foregoing to perform its respective obligations hereunder or under any of the
other Loan Documents;
(iii) be under any obligation to any of the Banks to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions hereof or thereof on the part of Borrower or the General Partner, or
the financial condition of Borrower, the General Partner or the Guarantors, or
the existence or possible existence of any Event of Default or Potential
Default, subject to the obligations of the Agent under Section 10.1 of this
Agreement; or
(iv) be under any duty or have any responsibility to the Banks to
inspect the properties, books or records of the Borrower, the General Partner,
any Guarantor or any Affiliate of any of the foregoing.
(b) Neither the Agent nor any Bank nor any of their respective
directors, officers, employees, agents, attorneys or Affiliates shall be liable
to the Borrower, the General Partner, any Guarantor or any Affiliate of any of
the foregoing and, in the case of the Agent, any Bank for consequential damages
resulting from any breach of contract, tort or other wrong in connection with
the negotiation, documentation, administration or collection of the Loans or any
of the Loan Documents, whether or not it knew or was made aware of the
possibility of the occurrence thereof.
10.8 Reimbursement and Indemnification of Agent by Banks. Each Bank
shall reimburse and indemnify the Agent and its directors, officers, employees
and agents (to the extent not reimbursed by the Borrower and without limiting
the obligation of the Borrower to do so) in proportion to its Ratable Share from
and against all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent,
in its capacity as such, or any such director, officer, employee or agent acting
on its behalf in such capacity, in any way relating to or arising out of this
Agreement or any other Loan Documents or any action taken or omitted by the
Agent (or any such director, officer, employee or agent, as applicable)
hereunder or thereunder; provided, that the Agent shall refund to the Banks any
amounts paid by the Banks pursuant to this Section 10.8 for which the Agent is
subsequently reimbursed by the Borrower; and provided, further, that no Bank
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
if the same results from the Agent's (or such director's, officer's, employee's
or agent's, as applicable) gross negligence or willful misconduct.
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10.9 Reliance by Agent. The Agent shall be entitled to rely upon any
writing, telegram, telex or teletype message, resolution, notice, consent,
certificate, letter, cablegram, statement, order or other document or
conversation by telephone or otherwise believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons, and upon
the advice and opinions of counsel and other professional advisers selected by
the Agent. The Agent shall be fully justified in failing or refusing to take any
action hereunder unless it shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.
10.10 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Potential Default or Event of
Default unless the Agent has received written notice from a Bank or the Borrower
referring to this Agreement, describing such Potential Default or Event of
Default and stating that such notice is a "notice of default." In the event that
the Agent receives such a notice, the Agent shall take such action with respect
to such Event of Default or Potential Default as shall be directed by the
Required Banks; provided, that unless and until the Agent shall have received
such directions, the Agent may (but shall have no obligation to) take such
action, or refrain from taking such action, with respect to such Event of
Default or Potential Default as the Agent shall deem advisable and in the best
interest of the Banks.
10.11 Notices. The Agent shall send to each Bank a copy of all notices
received from Borrower pursuant to the provisions of this Agreement or the other
Loan Documents promptly upon receipt thereof.
10.12 The Agent in its Individual Capacity. With respect to its
Commitment and the Loans made by ING, ING shall have the same rights and, powers
hereunder as any other Bank and may exercise the same as though it were not the
Agent, and the term "Banks" shall, unless the context otherwise indicates,
include ING in its individual capacity. ING and its Affiliates and each of the
Banks and their respective Affiliates may, except as prohibited herein, make
Loans to, accept deposits from, discount drafts for, act as trustee under
indentures of, and generally engage in any kind of banking or trust business
with, the Borrower and its Affiliates as though, in the case of the Agent, it
were not acting as Agent hereunder, and in the case of each Bank, as though such
Bank were not a Bank hereunder.
10.13 Holders of Notes. The Agent may deem and treat any payee of any
Note as the owner thereof for all purposes hereof unless and until written
notice of the assignment or transfer thereof shall have been filed with the
Agent. Any request, authority or consent of any Person who at the time of
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making such request or giving such authority or consent is the holder of any
Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
10.14 Sharing of Payments. If any Bank shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Loans made by it (other than pursuant to
Sections 2.3, Article 4, or Section 11.3) in excess of its Ratable Share of
payments on account of the Loans obtained by all the Banks, such Bank shall
forthwith (i) notify each of the other Banks of such receipt and (ii) purchase
from each of the other Banks participations in the Loans made by them as shall
be necessary to cause such purchasing Bank to share the excess payment ratably
with each such other Bank; provided, however, that, if all or any portion of
such excess payment is thereafter recovered from such purchasing Bank, such
purchase from each of the other Banks shall be rescinded and such Banks shall
repay to the purchasing Bank the purchase price of such purchased participations
to the extent of such recovery together with an amount equal to such other
Bank's ratable share (according to the proportion of (i) the amount of such
Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower agrees
that any Bank so purchasing a participation from another Bank pursuant to this
Section 10.14 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation.
10.15 Successor Agent. The Agent may resign as Agent upon not less than
ninety days' prior written notice to the Borrower and the Banks. If the Agent
shall resign under this Agreement, then either (a) the Required Banks shall
appoint from among the Banks a successor agent for the Banks, or (b) if a
successor agent shall not be so appointed and approved within the sixty day
period following the Agent's notice to the Banks of its resignation, then the
Agent shall appoint, with the consent of the Borrower, which consent shall not
be unreasonably withheld, a successor agent which shall serve as Agent until
such time as the Required Banks appoint a successor agent. Upon its appointment
pursuant to either clause (a) or (b) above, such successor agent shall succeed
to the rights, powers and duties of the Agent and the term "Agent" shall mean
such successor agent, effective upon its appointment, and the former Agent's
rights, powers and duties as Agent shall be terminated without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement. Notwithstanding such resignation, the provisions of this Article
10 shall continue to inure to the benefit of such former Agent.
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10.16 Calculations. In the absence of gross negligence or
willful misconduct, the Agent shall not be liable for any error in computing the
amount payable to any Bank whether in respect of the Loans, fees or any other
amounts due to the Banks under this Agreement. In the event an error in
computing any amount payable to any Bank is made, the sole recourse of any such
Bank shall be to collect the misallocated portion of any such payment from the
other Banks or the Borrower that received such misallocated payment, with, in
the case of any such amounts to be collected from the Borrower, interest thereon
to be calculated at the Base Rate Option.
10.17 Beneficiaries. Except with respect to Sections 10.6, 10.7 and
10.16, the provisions of this Article 10 are solely for the benefit of the Agent
and the Banks, and the Borrower shall have no rights to rely on or enforce any
of the provisions hereof. In performing its functions and duties under this
Agreement the Agent shall act solely as agent of the Banks and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for the Borrower, the General Partner, any Guarantor or
any Affiliate of any of the foregoing.
10.18 The Agent May Perform. If the Borrower or the General Partner
fails to perform any agreement contained herein or in any of the other Loan
Documents, the Agent may itself perform, or cause the performance of, such
agreement, and the expenses of the Agent incurred in connection therewith shall
be deemed payable by the Borrower in accordance with Section 10.6. The Agent
shall use its best efforts to give the Borrower or the General Partner, as
applicable, notice of any such actions taken or caused to be taken by the Agent
within a reasonable time after its initiation thereof; provided, that neither
the Agent nor any of the Banks shall have any liability for the failure by the
Agent to provide such notice.
ARTICLE 11. MISCELLANEOUS
11.1 Modifications, Amendments or Waivers. No amendment or waiver of
any provision of this Agreement, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Banks, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all of the Banks, do any of the following: (a) waive any
of the conditions specified in Section 6.2, (b) increase the Commitments of the
Banks or the calculation of the Ratable Share of the Banks or subject the Banks
to any additional obligations, (c) reduce the principal of, or interest on, the
Loans or other amounts payable to the Banks hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Loans or any fee
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or other amounts payable hereunder or postpone or extend the Commitment
Termination Date or the Facility Termination Date, (e) change the aggregate
unpaid principal amount of the Loans, which shall be required for the Banks or
any of them to take any action hereunder, or (f) amend this Section 11.1; and
provided further that no amendment, waiver or consent shall, unless in writing
and signed by the Agent in addition to the Banks required above to take such
action, affect the rights or duties of the Agent under this Agreement.
11.2 No Implied Waivers; Cumulative Remedies; Writing Required. No
course of dealing and no delay or failure of the Agent or any Bank in exercising
any right, power, remedy or privilege under this Agreement or any other Loan
Document shall affect any other or future exercise thereof or operate as a
waiver thereof; nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Agent and the Banks under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which they would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of any Bank of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
11.3 Reimbursement and Indemnification of Banks by the Borrower.
(a) Except as expressly otherwise provided herein, the Borrower shall,
unconditionally upon demand, pay or reimburse to each Bank (other than the
Agent, as to which Borrower's obligations are set forth in Section 10.6) and
save such Bank harmless against liability for the payment of all reasonable
out-of-pocket costs, expenses and disbursements (including fees and expenses of
counsel for each Bank), incurred by such Bank:
(i) in connection with the administration and interpretation of this
Agreement, and other instruments and documents to be delivered hereunder;
(ii) relating to any amendments, waivers or consents pursuant to the
provisions hereof;
(iii) in connection with the enforcement of this Agreement or any other
Loan Document, or the collection of amounts due hereunder or thereunder or the
proof and allowability of any claim arising under this Agreement or any other
Loan Document, whether in bankruptcy or receivership proceedings or otherwise;
and
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(iv) in any workout, restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof or
of any rights hereunder or under any other Loan Document or in connection with
any foreclosure, collection or bankruptcy proceedings;
provided, however, that except as the Borrower may otherwise agree, the Borrower
shall not be liable for any fees, costs or expenses incurred by any Bank or any
Permitted Assignee or proposed Permitted Assignee thereof (including, without
limitation, the fees and/or expenses of counsel) in connection with the
negotiation of any assignment or proposed assignment hereunder pursuant to
Section 11.11 or the preparation, negotiation, execution or delivery of an
Assignment and Assumption Agreement and/or any other instruments, documents
and/or agreements in connection therewith.
(b) The Borrower shall, unconditionally upon demand, pay or reimburse
to each Bank (other than the Agent, as to which Borrower's obligations are set
forth in Section 10.6), or any of its directors, officers, employees and agent
and save such Bank, directors, officers, employees and agents harmless against
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against such Bank, director, officer,
employee or agent in any way relating to or arising out of this Agreement or any
other Loan Documents or any action taken or omitted by such Bank, director,
officer, employee or agent hereunder or thereunder, provided that Borrower shall
not be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements if the
same results solely from such Bank's, director's, officer's, employee's or
agent's gross negligence or willful misconduct as determined by a court of
competent jurisdiction by final and non-appealable judgment (or settlement
tantamount to a final judgment).
(c) The Banks will attempt to minimize the fees and expenses of legal
counsel and other professionals for the Banks which are subject to reimbursement
by the Borrower hereunder by considering the usage of one firm to represent the
Banks and the Agent if appropriate under the circumstances.
11.4 Payments Due on Non-Business Days. Whenever any payment or action
to be made or taken hereunder shall be stated to be due on a day which is not a
Business Day, such payment or action shall be made or taken on the next
following Business Day (except as otherwise expressly provided in Section
3.2(a)), and such extension of time shall be included in computing interest or
fees, if any, in connection with such payment or action.
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11.5 Funding by Branch, Subsidiary or Affiliate. Each Bank shall have
the right from time to time to make or maintain any Loan by arranging for a
branch, subsidiary or Affiliate of such Bank to make or maintain such Loan
subject to the last sentence of this Section 11.5. If any Bank causes a branch,
subsidiary or Affiliate to make or maintain any part of the Loans hereunder, all
terms and conditions of this Agreement shall, except where the context clearly
requires otherwise, be applicable to such part of the Loans to the same extent
as if such Loans were made or maintained by such Bank but in no event shall any
Bank's use of such a branch, subsidiary or Affiliate to make or maintain any
part of the Loans hereunder cause such Bank or such branch, subsidiary or
Affiliate to incur any cost or expenses payable by the Borrower hereunder or
require the Borrower to pay any other compensation to any Bank (including,
without limitation, any expenses incurred or payable pursuant to Article 4)
which would otherwise not be incurred had such Loans not been made or maintained
through such branch, subsidiary or affiliate.
11.6 Notices. Except as otherwise expressly permitted hereunder, all
notices, requests, demands, directions and other communications (collectively
"notices") given to or made upon any party hereto under the provisions of this
Agreement shall be in writing (including telex or facsimile communication) and
shall be delivered or sent to the respective parties at the addresses and
numbers set forth under their respective names on the signature pages hereof (or
in the Assignment and Assumption Agreement pursuant to which such Person became
a party hereto) or to such other address or number as such party may from time
to time designate by written notice delivered to all of the other parties as set
forth in this Section. All notices shall, except as otherwise expressly herein
provided, be deemed delivered and effective (a) in the case of notice given by
telex or facsimile, when received, (b) in the case of hand-delivered notice,
when hand delivered, and (c) if given by national overnight courier service, the
next Business Day after such notice is deposited with such courier service;
provided, that notices to the Agent shall not be deemed effective until actually
received by the Agent. Any Bank giving any notice to the Borrower shall
simultaneously send a copy thereof to the Agent. Copies of all notices to
Borrower shall be sent to Andrew S. Hillman, Esquire, Silverman Coopersmith
Hillman & Frimmer, Two Penn Center Plaza, Suite 910, Philadelphia, PA 19102,
Telecopier No.: 215/636-3999, Telephone No.: 215/636-4474; provided, that the
failure to send a copy of any notice to said counsel shall in no way affect,
limit or invalidate any notice sent to the Borrower or the exercise of any of
the Banks' or the Agent's rights or remedies pursuant to a notice to the
Borrower.
11.7 Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any
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jurisdiction such provision shall, as to such jurisdiction, be ineffective to
the extent of such invalidity or unenforceability without in any manner
affecting the validity or enforceability thereof in any other jurisdiction or
the remaining provisions hereof in any jurisdiction.
11.8 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS DISTINGUISHED FROM THE CHOICE OF LAW PROVISIONS) OF
THE STATE OF NEW YORK.
11.9 Prior Understanding. This Agreement supersedes all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
11.10 Duration; Survival. All representations and warranties of the
Borrower and the General Partner contained herein or made in connection herewith
shall survive the making of the Loans and shall not be waived by the execution
and delivery of this Agreement, any investigation by the Agent or the Banks, the
making of Loans, or payment in full of the Loans. All covenants and agreements
of Borrower and the General Partner contained in Articles 7 and 8 shall continue
in full force and effect from and after the date hereof so long as Borrower may
borrow hereunder and until termination of the Commitments and payment in full of
the Obligations in cash. Notwithstanding anything contained herein to the
contrary, all covenants and agreements of the Borrower contained herein relating
to the payment of principal, interest, premiums, additional compensation or
expenses and indemnification, including those set forth in the Notes, Section
2.3, Article 4, and Sections 10.6, 10.8, and 11.3 hereof, shall survive the
payment in full of the Obligations and the termination of this Agreement.
11.11 Successors and Assigns; Assignments.
(a) This Agreement shall be binding upon and shall inure to the benefit
of the Banks, the Agent, the Borrower, the General Partner and their respective
successors and permitted assigns; provided, however, that neither the Borrower
nor the General Partner may assign or transfer any of its rights and obligations
hereunder or any interest herein. Subject to the exceptions thereon set forth in
the immediately succeeding clause (b), (i) the Banks shall only be permitted to
only assign their respective rights and benefits hereunder to a Permitted
Assignee and (ii) ING shall not be permitted to make any such assignment
hereunder if, after giving effect thereto, the ratio of (x) its used and unused
Commitments at such time to (y) the Maximum Facility Amount at such time would
be less than 51%.
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(b) Notwithstanding anything contained in the immediately preceding
clause (a) or any other provision hereof or of any other Loan Document, upon the
occurrence and during the continuance of any Event of Default under Section
9.1(a) or Section 9.1(b)(i), each of the Banks shall be permitted to assign any
or all of its rights and remedies hereunder (including its Loans and
Commitments) to any other financial institution without the consent or approval
of the Borrower and, in the case of ING, without regard as to whether such
assignment would result in a violation of the restriction regarding its
maintenance of a 51% interest in the aggregate used and unused Commitments
hereunder as set forth in the immediately preceding clause (a), which
restriction shall be deemed to be inapplicable at any such time and at all times
thereafter to the extent such an assignment is made which so reduces the amount
of ING's used and unused Commitments to a level below such percentage.
(c) Each Bank may upon at least 10 days notice to the Agent, assign to
one or more Permitted Assignees all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment and the Loans owing to it); provided, however, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all of the
assigning Bank's rights and obligations under this Agreement, (ii) the amount of
the Commitment of the assigning Bank being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Assumption Agreement
with respect to such assignment) shall in no event be less than the lesser of
(A) $5,000,000 and (B) the full amount of the assigning Bank's Commitment, (iii)
each such assignment shall be to a bank or other financial institution which is
not currently engaged in any lending or financing arrangement with a Competitor
and is otherwise acceptable to the Agent in its sole discretion, and (iv) the
parties to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register, a fully-executed Assignment and
Assumption Agreement, together with a processing and recordation fee of $2500.
Upon such execution, delivery, acceptance and recording by the Agent, from and
after the effective date specified in each Assignment and Assumption Agreement,
which effective date shall be at least five Business Days after the execution
thereof, (x) the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Assumption Agreement, have the rights and obligations of a Bank
hereunder and (y) the Bank assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such Assignment
and Assumption Agreement, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all or the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall cease to be a party
hereto). Concurrently with its acceptance of any such Assignment and
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Assumption Agreement, the Agent shall substitute a revised Schedule 1.1(a) to
this Agreement showing the current Commitments of each of the Banks after giving
effect to such assignment contemplated thereby.
(d) By executing and delivering an Assignment and Assumption Agreement,
the assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Assumption Agreement, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower, the General Partner or any Guarantor or the performance or
observance by the Borrower, the General Partner or any Guarantor of any of its
respective obligations under this Agreement or any of the other Loan Documents;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of such financial statements and other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption Agreement; (iv) such
assignee will, independently and without reliance upon the Agent, such assigning
Bank or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Bank.
(e) The Agent shall maintain at its address referred to in Section 11.6
a copy of each Assignment and Assumption Agreement delivered to and accepted by
it and a register for the recordation of the names and addresses of the Banks
and the Commitment of, and principal amount of the Loans owing to, each Bank
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
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(f) Subject to the provisions of Section 11.11(b), upon its receipt of
an Assignment and Assumption Agreement executed by an assigning Bank and an
assignee, the Agent shall, if such Assignment and Assumption Agreement has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower.
(g) Notwithstanding anything contained herein to the contrary, except
as contemplated pursuant to Section 10.14, no Bank may sell participations in or
to any of its rights and obligations under this Agreement (including, without
limitation, any portion of its Commitment or the Loans owing to it) to any
Person.
(h) Each Bank may, in connection with any assignment or potential
assignment pursuant to this Section 11.11, disclose to the assignee or potential
assignee any information relating to the Borrower, the General Partner, the
Guarantors or any Affiliates of any of the foregoing which has been furnished to
such Bank by or on behalf of the Borrower, the General Partner, the Guarantors
or any such Affiliate; provided, such assignee or potential assignee agrees to
be bound by the provisions of Section 11.12 below.
(i) Nothing herein shall prohibit any Bank from pledging or assigning
as collateral any of its rights under this Agreement to any Federal Reserve Bank
in accordance with applicable law and any such pledge or collateral assignment
may be made without compliance with Section 11.11.
11.12 Confidentiality. The Agent and the Banks each shall keep
confidential all information obtained from the Borrower, the General Partner and
the Guarantors which is identified by such Person in writing as being nonpublic
and confidential or proprietary in nature, except as provided below, and shall
use such information only in connection with their respective capacities under
this Agreement and for the purposes contemplated hereby. The Agent and the Banks
shall be permitted to disclose such information (a) to outside legal counsel,
accountants and other professional advisors who need to know such information,
provided that such Persons agree to maintain the confidentiality thereof, (b)
Permitted Assignees or potential Permitted Assignees as contemplated by Section
11.11, (c) to the extent requested by any bank regulatory authority or as
otherwise required by applicable Law or by any subpoena or similar legal
process, or in connection with any investigation or proceeding, provided that
the Agent or such Bank providing such information shall notify the Borrower as
soon as practicable after providing such information, (d) to any other Person if
such information becomes publicly available other than as a result of a breach
of this Agreement or becomes available from a source not subject to
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confidentiality restrictions, or (e) for any other purpose to the extent that
the Borrower, the General Partner or the Guarantors, as applicable, shall have
consented to such disclosure.
11.13 Counterparts. This Agreement may be executed by different parties
hereto on any number of separate counterparts, each of which, when so executed
and delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
11.14 CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE; AGENT FOR
SERVICE OF PROCESS. (A) THE BORROWER, THE GENERAL PARTNER, THE AGENT AND THE
BANKS EACH HEREBY AGREES TO THE JURISDICTION OF ANY STATE COURT LOCATED IN NEW
YORK CITY OR ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK.
(B) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
(C) EACH OF THE BORROWER AND THE GENERAL PARTNER HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH PROCESS MAY BE
MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO IT AT ITS ADDRESS
REFERRED TO IN SECTION 11.6 OR, AT THE AGENT'S AND/OR THE BANKS' OPTION, BY
SERVICE UPON THE PRENTICE HALL CORPORATION SYSTEM, INC. AT 375 HUDSON STREET,
NEW YORK, NEW YORK 10014, WHICH EACH OF THE BORROWER AND GENERAL PARTNER HEREBY
APPOINT AS ITS REGISTERED AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS
ISSUED BY ANY COURT IN THE STATE OF NEW YORK.
11.15 WAIVER OF JURY TRIAL. THE BORROWER, THE GENERAL PARTNER, THE
AGENT AND THE BANKS EACH WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
11.16 Assignment and Security Interest. The Borrower hereby assigns,
and grants to each Bank a continuing lien upon and security interest in, any and
all of its moneys, securities and other property, and the proceeds thereof, now
or hereafter held or received by or in transit to such Bank, from or for it,
whether for safekeeping, custody, pledge, transmission, collection or otherwise,
and also upon any and all of its deposits (general or special) and credits with,
and any and all of its claims against such Bank at any time existing including,
without limitation, any balance or share of any demand, time,
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savings, passbook, trust, agency, escrow or like account, as collateral security
for all present and future Obligations of the Borrower to the Banks, whether now
existing or hereafter arising.
11.17 Lending to Competitors. Each Bank, upon becoming a party
hereto, hereby agrees not to enter into any lending or financing arrangement
with any Person (a "Competitor") engaged in the purchase of Claims in direct
competition with the Borrower.
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
J. G. WENTWORTH MFC
ASSOCIATES, L.P.
By: J. G. WENTWORTH FUNDING CORP.,
Its sole General Partner
Attest:_________________ By:________________________________
Andrew S. Hillman Gary Veloric
Assistant Secretary Chairman and Secretary
Address for Notices:
Centre Square West
1500 Market Street, Suite 3125
Philadelphia, PA 19102
Attention: James DeLaney
Telecopier No. (215) 567-7525
Telephone No. (215) 567-7660
J. G. WENTWORTH FUNDING CORP.
Attest:_________________ By:________________________________
Andrew S. Hillman Gary Veloric
Assistant Secretary Chairman and Secretary
Address for Notices:
Centre Square West
1500 Market Street, Suite 3125
Philadelphia, PA 19102
Attention: James DeLaney
Telecopier No. (215) 567-7525
Telephone No. (215) 567-7660
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INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC., as Agent
By:________________________________
Elliot Ganz
Assistant General Counsel
Address for Notices:
135 East 57th Street
New York, New York 10022-2101
Attention: Asset-Backed Finance
Robert L. Novick
Telecopier No. (212) 593-3362
Telephone No. (212) 446-1793
BANKS:
INTERNATIONALE NEDERLANDEN (US)
CAPITAL MARKETS, INC.
By:________________________________
Elliot Ganz
Assistant General Counsel
Address for Notices:
135 East 57th Street
New York, New York 10022-2101
Attention: Asset-Backed Finance
Robert L. Novick
Telecopier No. (212) 593-3362
Telephone No. (212) 446-1793
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FIRST AMENDMENT
THIS FIRST AMENDMENT (the "Amendment") dated as of September 25, 1995
is entered into by and among J.G. WENTWORTH MFC ASSOCIATES, L.P., a Pennsylvania
limited partnership (the "Borrower"), J.G. WENTWORTH FUNDING CORP., a
Pennsylvania corporation (the "Parent"), THE FINANCIAL INSTITUTIONS PARTIES
HERETO (collectively, the "Banks") and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
MARKETS, INC. ("ING"), individually and as agent for the Banks (in such capacity
as agent, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Parent, the Banks and the Agent have entered
into that certain Credit Agreement dated as of May 26, 1995 (the "Agreement";
the terms defined therein being used herein as therein defined unless otherwise
defined herein), pursuant to which the Banks and the Agent have made and may
from time to time hereafter make certain loans, advances and other financial
accommodations to the Borrower;
WHEREAS, the parties hereto have agreed to modify certain terms and
provisions of the Agreement as set forth herein; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Amendment of the Agreement. Effective as of the date hereof,
the Agreement is hereby amended as follows:
1.01. Section 1.1 of the Agreement is hereby amended as follows:
(a) The following definition of "Base Rate Claim Group" shall be added
thereto immediately after the definition of "Base Rate" appearing therein:
"'Base Rate Claim Group' shall mean, at any time, those Purchased
Claims then allocated to Interest Periods bearing interest at the Base
Rate Option."
(b) The definition of "Base Rate Option" appearing therein is hereby
amended and restated in its entirety to read as follow:
"'Base Rate Option' shall mean, for any date during any calendar month
or any such shorter period ending on the Commitment Termination Date, a
per annum rate determined as of the last day of such calendar month or
on the Commitment Termination Date, as applicable, to the daily average
of the higher of (i) the Base Rate as in effect on such date minus
0.50% and (ii) the sum of (a) the daily average during such period (as
determined on the last day of such period) of the Euro-Rates which
would have been in effect on each Business Day during such period for
one-month Interest Periods commencing on each such day, and (b) 2.50%."
(c) The definition of "Required Banks" appearing therein is hereby
amended and restated in its entirety to read as follow:
"'Required Banks' shall mean (i) if there are no Loans outstanding,
those Banks whose Commitments aggregate at
<PAGE>
least 51% of the Commitments of all of the Banks, or (ii) if there are
Loans outstanding, those Banks whose Loans outstanding aggregate at
least 51% of the total outstanding principal amount of the Loans."
1.02. Section 2.1(d) of the Agreement is hereby amended to delete the
reference therein to "11:00 A.M. (New York City time)" and to substitute
therefor a reference to "1:00 P.M. (New York City time)."
1.03. Section 8.1(o) of the Agreement is hereby amended and restated in its
entirety to read as follows:
"(o) Minimum Purchase Price. The Borrower shall not purchase any Claim
for a Purchase Price which exceeds the present value of the Maturity
Value of such Claim as calculated on the date of purchase thereof using
a per annum discount rate equal to sum of the Base Rate Option at such
time plus 0.25%."
1.04. Section 11.1 of the Agreement is hereby amended and restated in its
entirety to read as follows:
"11.1 Modifications, Amendments or Waivers. No amendment or waiver of
any provision of this Agreement, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Required Banks, and then such
waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no
amendment, waiver or consent shall, unless in writing and signed by all
of the Banks, do any of the following:
(a) amend, supplement, or otherwise modify the definitions of, or the
manner of calculating, any of the following (or any component
definition thereof which would have the effect of so modifying or
effecting the calculation of any of the following): "Borrowing Base,"
"Claim," "Discount Rate," "Eligible Claim," "Maturity Value," or
"Seasoned Purchased Claim,";
(b) waive any of the conditions specified in Section 6.2;
(c) increase the Commitments of the Banks or the calculation of the
Ratable Share of the Banks or subject the Banks to any additional
obligations;
(d) reduce the principal of, or interest on, the Loans or other amounts
payable to the Banks hereunder;
(e) postpone any date fixed for any payment of principal of, or
interest on, the Loans or any fee or other amounts payable hereunder or
postpone or extend the Commitment Termination Date or the Facility
Termination Date;
(f) change the aggregate unpaid principal amount of the Loans, which
shall be required for the Banks or any of them to take any action
hereunder;
(g) amend, modify or supplement Section 9.1(f) or grant any waiver with
respect to the occurrence of any Event of Default thereunder; or
-2-
<PAGE>
(h) amend this Section 11.1; and
provided further that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Banks required above
to take such action, affect the rights or duties of the Agent under
this Agreement."
1.05. Section 11.11(c)(iii) of the Agreement is hereby amended and restated
in its entirety to read as follows:
"(iii) each assignment shall be to a bank or other financial
institution which (A) is not currently engaged in any lending or
financing arrangement with a Competitor, unless the Borrower shall have
consented thereto in writing, and (B) is otherwise acceptable to the
Agent in its sole discretion, and".
1.06. Section 11.17 of the Agreement is hereby amended to add the following
at the beginning of such Section:
"Except to the extent that the Borrower and a Bank may otherwise agree,
in writing,".
SECTION 2. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 3. Severability. Each provision of this Amendment shall be
severable from every other provision of this Amendment for the purpose of
determining the legal enforceability of any provision hereof, and the
unenforceability of any provision hereof, and the unenforceability of one or
more provisions of this Amendment in one jurisdiction shall not have the effect
of rendering such provision or provisions unenforceable in any other
jurisdiction.
SECTION 4. Reference to and Effect on the Agreement. Upon the
effectiveness of this Amendment, each reference in the Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like import shall mean
and be, and references to the Agreement in any other document, instrument or
agreement executed and/or delivered in connection with the Agreement shall mean
and be, a reference to the Agreement as amended hereby. Except as otherwise
amended by this Amendment, the Agreement shall continue in full force and effect
and is hereby ratified and confirmed.
SECTION 5. Counterparts. This Amendment may be exe cuted in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
J. G. WENTWORTH MFC
ASSOCIATES, L.P.
By: J. G. WENTWORTH FUNDING CORP.,
Its sole General Partner
By:________________________________
Gary Veloric
Chairman and Secretary
J. G. WENTWORTH FUNDING CORP.
By:________________________________
Gary Veloric
Chairman and Secretary
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC., individually
and as Agent
By:________________________________
Its:
PNC BANK, NATIONAL ASSOCIATION
By:________________________________
Its:
-4-
<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF __________ )
Before me on this ____ day of September, 1995 appeared Gary Veloric, who
executed this First Amendment in his aforementioned capacity as an officer of
J.G. Wentworth Funding Corp. executing such First Amendment on behalf of such
corporation and as the General Partner of J.G. Wentworth MFC Associates, L.P.,
and acknowledged that he did so as his own free act and deed.
____________________________
Notary Public
My commission expires_______
-5-
<PAGE>
CONSENT AND REAFFIRMATION
Gary Veloric hereby consents to the foregoing First Amendment
dated as of September __, 1995 to that certain Credit Agreement dated as of May
26, 1995, in each case, among J.G. Wentworth MFC Associates, L.P., J.G.
Wentworth Funding Corp., certain financial institutions from time to time
parties thereto and Internationale Nederlanden (U.S.) Capital Markets, Inc., as
agent, and reaffirms its obligations under that certain Guaranty and Surety
Agreement ("Guaranty") executed by him, dated as of May 26, 1995, which Guaranty
remains in full force and effect.
___________________________
By: Gary Veloric
Dated: ____________, 1995
-6-
<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF __________ )
Before me on this ____ day of September, 1995 appeared Gary Veloric, who
executed this Consent and Reaffirmation and acknowledged that he did so as his
own free act and deed.
____________________________
Notary Public
My commission expires_______
-7-
<PAGE>
CONSENT AND REAFFIRMATION
James DeLaney hereby consents to the foregoing First Amendment
dated as of September __, 1995 to that certain Credit Agreement dated as of May
26, 1995, in each case, among J.G. Wentworth MFC Associates, L.P., J.G.
Wentworth Funding Corp., certain financial institutions from time to time
parties thereto and Internationale Nederlanden (U.S.) Capital Markets, Inc., as
agent, and reaffirms its obligations under that certain Guaranty and Surety
Agreement ("Guaranty") executed by him, dated as of May 26, 1995, which Guaranty
remains in full force and effect.
___________________________
By: James DeLaney
Dated: ____________, 1995
-9-
<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF __________ )
Before me on this ____ day of September, 1995 appeared James DeLaney, who
executed this Consent and Reaffirmation and acknowledged that he did so as his
own free act and deed.
____________________________
Notary Public
My commission expires_______
-9-
<PAGE>
SECOND AMENDMENT
THIS SECOND AMENDMENT (the "Amendment") dated as of March 20, 1996 is
entered into by and among J.G. WENTWORTH MFC ASSOCIATES, L.P., a Pennsylvania
limited partnership (the "Borrower"), J.G. WENTWORTH FUNDING CORP., a
Pennsylvania corporation (the "Parent"), THE FINANCIAL INSTITUTIONS PARTIES
HERETO (collectively, the "Banks"), PNC BANK, NATIONAL ASSOCIATION ("PNC") and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL MARKETS, INC. ("ING"), individually
and as agent for the Banks (in such capacity as agent, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Parent, the Banks and the Agent have entered
into that certain Credit Agreement dated as of May 26, 1995 (as amended prior to
the date hereof, and as further amended, restated, supplemented, or otherwise
modified, the "Agreement"; the terms defined therein being used herein as
therein defined unless otherwise defined herein), pursuant to which the Banks
and the Agent have made and may from time to time hereafter make certain loans,
advances and other financial accommodations to the Borrower;
WHEREAS, the parties hereto have agreed to modify certain terms and
provisions of the Agreement as set forth herein; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Amendment of the Agreement Regarding Reductions in Maximum
Facility Amount and Commitments. Upon the satisfaction of the conditions
precedent set forth in Section 3 of this Amendment, the Agreement is hereby
amended as follows:
1.1. Section 1.1 of.the Agreement is hereby amended to delete the
amount "$90,000,000" which appears in the definition of "Maximum Facility
Amount" set forth in such Section and to substitute the amount
"$80,000,000" therefor;
1.2. Section 1.1 of the Agreement is hereby further amended to insert
the word "Option" immediately after the phrase "at the Fixed Rate"
appearing in the definition of "Fixed Rate Portion;" and
1.3. The respective "Commitments" of each of ING and PNC for purposes
of the Agreement shall be reduced from "$72,000,000" and "$18,000,000", as
respectively set forth
<PAGE>
on Schedule I to the most recent Assignment and Assumption Agreement to
which such Persons were parties, to "$64,000,000" and "$16,000,000",
respectively.
SECTION 2. Amendment of the Agreement Regarding the Addition of the
Servicing Agent. Upon the satisfaction of the conditions precedent set forth in
Section 3 of this Amendment, the Agreement is hereby amended as follows:
2.1. Section 1.1 of the Agreement is hereby amended as follows:
(a) The definition of "Banks" appearing in such Section is hereby
amended to insert the following sentence at the end thereof:
"The Servicing Agent shall be deemed to be a "Bank" to the
extent of any outstanding Servicing Agent Advances made by
it hereunder."
(b) The following definition of the term "Daily Settlement
Option" is hereby inserted immediately preceding the definition of the
term "Default Rate" appearing in such Section:
"'Daily Settlement Option' shall have the meaning assigned
to such term in Section 2.1(f) hereof."
(c) The definition of "Euro-Rate" is hereby amended to insert the
following sentence immediately preceding the final sentence thereof:
"The Agent shall notify the Servicing Agent of such
determined rate with respect to any requested Euro-Rate
Borrowing or Conversion prior to 3:00 P.M. (New York City
time) on the next Business Day following the Agent's receipt
of notice from the Servicing Agent of the submission of a
Loan Request by the Borrower."
(d) The definition of "Obligations" appearing in the Agreement is
hereby amended to insert the words "Servicing Agent, the" therein
immediately preceding the word "Agent" appearing in the third line of
such definition.
(e) The definition of "Required Banks" appearing in the Agreement
is hereby amended and restated in its entirety to read as follows:
-2-
<PAGE>
"'Required Banks' shall mean those Banks whose Commitments
aggregate at least 51% of the Commitments of all of the
Banks."
(f) The following definitions of the terms "Servicing Agent,"
"Servicing Agent's Account," and "Servicing Agent Advances" are hereby
inserted immediately preceding the definition of "Servicing Agreement"
appearing in such Section:
"'Servicing Agent' shall mean such Person then acting in such
capacity hereunder. The initial Servicing Agent hereunder shall
be PNC Bank."
"'Servicing Agent's Account' shall mean the Servicing Agent's
bank account at PNC, Account No. 13076-156, for the account of
the Loan Suspense Account, or such other account as may be
designated by the Servicing Agent from time to time by notice to
the Borrower, the Agent and the Banks."
"'Servicing Agent Advance' shall have the meaning assigned to
such term in Section 2.1(d)(ii) hereof."
(g) The definition of "Swap Rate" is hereby amended to insert the
following sentence immediately preceding the final sentence thereof:
"The Agent shall notify the Servicing Agent of such determined
rate with respect to any requested Swap Rate Borrowing or
Conversion prior to 3:00 P.M. (New York City time) on the next
Business Day following the Agent's receipt of notice from the
Servicing Agent of the submission of a Loan Request by the
Borrower."
(h) The following definition of the term "Weekly Settlement Date"
is hereby inserted immediately preceding the definition of "Weighted
Average Maturity" appearing in such Section:
"'Weekly Settlement Date' shall mean, with respect to any week
ending prior to the election of the Daily Settlement Option, (i)
Monday of the immediately succeeding week, or, if such Monday is
not a Business Day, the next Business Day thereafter and (ii) the
last Business Day of any Interest Period for any Loan bearing
interest at the Fixed Rate Option."
-3-
<PAGE>
2.2. Articles 2 and 3 of the Agreement are hereby amended and restated
in their entirety as set forth on Exhibit F hereto;
2.3. Each reference in Sections 4.3(a) and 4.3(c) of the Agreement to
"Bank or the Agent" or "Bank and the Agent" is hereby amended to be a
reference to "Banks, the Servicing Agent, or the Agent" or with such
variations in syntax and grammar as necessary to properly include the
Servicing Agent as an obligee of the Borrower's duties thereunder;
2.4. For purposes of Sections 4.3(e), 4.3(f) and 4.3(g) of the
Agreement, each reference to "Bank" or "Banks" shall be deemed to refer to
the Servicing Agent as well as to the applicable Bank or Banks;
2.5. The reference in the third line of Section 5.1(n) of the
Agreement to "the Agent or the Banks" is hereby amended to read "the Agent,
the Servicing Agent, or the Banks;"
2.6. Section 6.1 of the Agreement is hereby amended to replace the
word "and" appearing in the second line of such Section with the following
text:
", the making of any Servicing Agent Advances by the Servicing Agent,
and;"
2.7. Section 6.2 of the Agreement is hereby amended to delete the word
"and" appearing in the fourth line thereof, and to insert the following
text immediately preceding the word "shall" appearing in the fifth line of
such Section:
"and the making of any Servicing Agent Advances by the Servicing
Agent;"
2.8. The reference in the first line of Section 6.2(d) of the
Agreement to "The Agent" is hereby amended to read "The Servicing Agent;"
2.9. The reference in the third line of Section 6.2(f) of the
Agreement to the "Agent or any Bank" is hereby amended to read "Agent, the
Servicing Agent, or any Bank;"
2.10. Section 7.1(i) of the Agreement is hereby amended to insert the
following text at the end of clause (e) thereof:
-4-
<PAGE>
"(and the Agent, upon receipt of any such loss payment, shall remit
such payment to the Servicing Agent, (i) if the Agent has not
exercised its Daily Settlement Option, on the next Weekly Settlement
Date after receipt thereof, or (ii) if the Agent has exercised its
Daily Settlement Option, promptly upon receipt thereof);"
2.11. The reference in Section 9.1(a)(ii) to the Agreement to "the
Banks or the Agent" is hereby amended to read "the Banks, the Servicing
Agent, or the Agent;"
2.12. The reference in Section 9.2(b)(ii) of the Agreement to "the
Agent and the Banks" is hereby amended to read "the Agent, the Servicing
Agent, and the Banks;"
2.13. Section 9.2 of the Agreement is hereby amended to insert the
following text after Section 9.2(c) as a new Section 9.2(d) to the
Agreement:
"(d) Upon the occurrence of the Commitment Termination Date, the
Servicing Agent shall cease to make any further Servicing Agent
Advances to the Borrower;"
2.14. Section 10.14 of the Agreement is hereby amended and restated in
its entirety to read as follows:
"10.14 Sharing of Payments. If any Bank, other than the Servicing
Agent in its capacity as the Servicing Agent at any time prior to the
election of the Daily Settlement Option, shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Loans made by it (other than
pursuant to Sections 2.3 or 11.3, or to Article 4) in excess of its
Ratable Share of payments on account of the Loans obtained by all the
Banks, such Bank shall promptly notify each of the other Banks of such
receipt and, in accordance with the periodic settlement procedures
then in effect, purchase from each of the other Banks participations
in the Loans made by them as shall be necessary to cause such
purchasing Bank to share the excess payment ratably with each such
other Bank; provided, however, that, if all or any portion of such
excess payment is thereafter recovered from such purchasing Bank, such
purchase from each of the other Banks shall be rescinded and such
Banks shall repay to the purchasing Bank the purchase price of such
purchased
-5-
<PAGE>
participations to the extent of such recovery together with an amount
equal to such other Bank's ratable share (according to the proportion
of (i) the amount of such Bank's required repayment to (ii) the total
amount so recovered from the purchasing Bank) of any interest or other
amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Borrower agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section 10.14 may, to
the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such
participation as fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation."
2.15. The Agreement is hereby amended to insert the terms and
provisions set forth on Exhibit G hereto immediately following Article 10
of the Agreement as a new Article lOA of the Agreement;
2.16. Section 11.1 is hereby amended to insert the following text at
the end thereof:
"and provided further that no amendment, waiver, or consent shall,
unless in writing and signed by the Servicing Agent in addition to the
Banks required above to take such action, affect the rights or duties
of the Servicing Agent under this Agreement."
2.17. For purposes of Section 11.2 of the Agreement, each reference to
"Bank" or "Banks" shall be deemed to refer to the Servicing Agent as well
as to the applicable Bank or Banks;"
2.18. Each reference in the first proviso in Section 11.6 of the
Agreement to "the Agent" is hereby amended to read "the Agent or the
Servicing Agent, as applicable;" and the reference to "the Banks' or the
Agent's" in the second to last line of such Section is hereby amended to
read "the Banks', the Servicing Agent's or the Agent's;"
2.19. Section 11.6 is hereby further amended to insert the following
text after the words "Assumption Agreement" appearing in the third
parenthetical of such Section:
"or such other agreement;"
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<PAGE>
2.20. The reference in the first sentence of Section 11.10 of the
Agreement to "the Agent or the Banks" is hereby amended to read "the Agent,
the Servicing Agent, or the Banks;"
2.21. The reference in the first sentence of Section ll.ll(a) of the
Agreement to "the Banks, the Agent" is hereby amended to read "the Banks,
the Servicing Agent, the Agent;"
2.22. Section ll.ll(c) of the Agreement is hereby amended to insert
the following sentence following the end thereof:
"The Agent shall provide information regarding such assignments to the
Servicing Agent as is necessary to allow the Servicing Agent to
properly fulfill its duties and obligations hereunder, and the
Servicing Agent shall be entitled to rely on such information provided
by the Agent without any independent investigation or analysis."
2.23. Section ll.ll(d) of the Agreement is hereby amended to delete
the word "and" immediately preceding clause (vi) thereof and to add the
following text at the end thereof:
"; and (vii) such assignee appoints and authorizes the Servicing Agent
to take such action as servicing agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are
delegated to the Servicing Agent by the terms hereof and thereof."
2.24. The reference in the second sentence of Section ll.ll(e) of the
Agreement to "the Borrower, the Agent and the Banks" is hereby amended to
read "the Borrower, the Agent, the Servicing Agent and the Banks;"
2.25. Section ll.ll(e) of the Agreement is hereby further amended to
insert the following sentence at the end thereof:
"The Agent and the Servicing Agent shall provide such information to
the other, from the Register, as applicable, or otherwise, as
necessary to allow each of the Agent and the Servicing Agent to
properly fulfill its duties and obligations hereunder, including,
without limitation, the amounts due to or from any Bank with respect
to its Ratable Share of any Loans or payments by the
-7-
<PAGE>
Borrower, and each of the Agent and the Servicing Agent shall be
entitled to rely on such information provided by the other without any
independent investigation or analysis."
2.26. Each reference in Section 11.12 of the Agreement to "the Agent
and the Banks" and the like is hereby amended to read "the Agent, the
Servicing Agent, and the Banks" or with such variations in syntax and
grammar such that the Servicing Agent undertakes the confidentiality
provisions contained therein; and
2.27. All references to the "Agent," any "Bank," or any of the
"Parties" in Sections 11.14 and 11.15 shall be deemed to include and be a
reference to any such Person and/or the Servicing Agent, and THE SERVICING
AGENT HEREBY AGREES TO BE BOUND BY ALL OF THE CONSENTS AND WAIVERS GIVEN BY
THE BANKS AND THE AGENT IN SECTIONS 11.14 AND 11.15 OF THE AGREEMENT AS IF
EXPRESSLY AGREED TO THEREIN BY THE SERVICING AGENT.
2.28. Exhibit B-2 to the Agreement, the form of
Conversion/Continuation Request, is hereby amended and restated in its
entirety to read as set forth on Exhibit D hereto.
2.29. Exhibit B-1 to the Agreement, the form of Loan Request, is
hereby amended and restated in its entirety to read as set forth on Exhibit
E hereto.
SECTION 3. Conditions Precedent. This Amendment shall become effective upon
the satisfaction of the following conditions precedent:
3.1. The Agent shall have received copies of each of the following
instruments, documents and agreements, in form and substance and in such
number of copies as, in each case, shall be satisfactory to the Agent:
(a) five fully-executed original copies of this Amendment;
(b) five fully-executed copies of a Note Modification and
Substitution Agreement in substantially the form attached hereto as
Exhibit A;
(c) a fully executed copy of each of the Revolving Notes attached
to the above-described Note Modification and Substitution Agreement as
Exhibits A and B thereto; and
-8-
<PAGE>
(d) five fully executed copies of the Consents and Reaffirmations
attached hereto as Exhibits B and C.
3.2. No event or condition has occurred and is continuing, or would
result from the execution, delivery or performance of this Amendment, which
would constitute an Event of Default or Potential Default.
3.3. All of the representations and warranties of the Borrower and the
General Partner set forth in Section 4 of this Amendment are true and
correct in all material respects.
SECTION 4. Representations and Warranties of the Borrower and the General
Partner. Upon the effectiveness of this Amendment, each of the Borrower and the
General Partner hereby remakes and reaffirms as of the date hereof all
covenants, representations and warranties made by it (or deemed made by it) in
the Agreement (except to the extent such covenants, representations or
warranties expressly speak as to another date).
SECTION 5. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 6. Severability. Each provision of this Amendment shall be
severable from every other provision of this Amendment for the purpose of
determining the legal enforceability of any provision hereof, and the
unenforceability of any provision hereof, and the unenforceability of one or
more provisions of this Amendment in one jurisdiction shall not have the effect
of rendering such provision or provisions unenforceable in any other
jurisdiction.
SECTION 7. Reference to and Effect on the Agreement. Upon the effectiveness
of this Amendment, each reference in the Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import, and references to the
Agreement in any other document, instrument or agreement executed and/or
delivered in connection with the Agreement, shall in each case, mean and be a
reference to the Agreement as amended hereby. Except as expressly otherwise
amended by this Amendment, the Agreement shall continue in full force and effect
and is hereby ratified and confirmed.
SECTION 8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
-9-
<PAGE>
SECTION 9. Fees and Expenses. The Banks hereby agree to share, pro rata as
based upon each Bank's respective Commitment Percentage, the obligation to pay
all costs and expenses in connection with the preparation, execution and
delivery of this Amendment and any of the other instruments, documents and
agreements to be executed and/or delivered in connection herewith, provided,
however, that each Bank shall pay its own attorneys' fees and expenses in
connection herewith.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
J. G. WENTWORTH MFC
ASSOCIATES, L.P.
By: J. G. WENTWORTH FUNDING CORP.,
Its sole General Partner
By:
--------------------------------------
Gary Veloric
Chairman and Secretary
J. G. WENTWORTH FUNDING CORP.
By:
--------------------------------------
Gary Veloric
Chairman and Secretary
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC., individually
and as Agent
By:
--------------------------------------
Its:
By:
--------------------------------------
Its:
PNC BANK, NATIONAL ASSOCIATION,
individually and as Servicing Agent
By:
--------------------------------------
Its:
-11-
STATE OF PENNSYLVANIA )
)SS
COUNTY OF )
Before me on this _______ day of March, 1996 appeared Gary Veloric, who executed
this Second Amendment in his aforementioned capacity as an officer of J.G.
Wentworth Funding Corp. executing such Second Amendment on behalf of such
corporation individually and as the General Partner of J.G. Wentworth MFC
Associates, L.P., and acknowledged that he did so as his own free act and deed.
- ---------------------------------
Notary Public
My commission expires
------------
-12
<PAGE>
EXHIBIT A
TO
SECOND AMENDMENT
FORM OF NOTE MODIFICATION AND SUBSTITUTION AGREEMENT
----------------------------------------------------
Attached.
<PAGE>
NOTE MODIFICATION AND SUBSTITUTION AGREEMENT
THIS NOTE MODIFICATION AND SUBSTITUTION AGREEMENT ("Agreement") is made
this 20th day of March, 1996 by and among J.G. WENTWORTH MFC ASSOCIATES, L.P., a
Pennsylvania limited partnership (the "Borrower"), INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL MARKETS, INC., in its individual capacity (in such capacity
"ING") and as agent (in such capacity, the "Agent") for itself and the other
Banks under (and as such term is defined in) the Credit Agreement referred to
below, and PNC BANK, NATIONAL ASSOCIATION, in its individual capacity (in such
capacity, "PNC") and as servicing agent (in such capacity, the "Servicing
Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent, ING, PNC, and J.G. Wentworth Funding
Corp., a Pennsylvania corporation and the sole general partner of the Borrower
("Funding"), have entered into a certain Credit Agreement dated as of May 26,
1995 (as the same has been and may hereafter be amended, restated, supplemented
or otherwise modified from time to time, the "Credit Agreement"; capitalized
terms used and not otherwise defined herein shall have the meanings ascribed to
them in the Credit Agreement);
WHEREAS, concurrently with its execution of the Credit Agreement, the
Borrower executed and delivered a certain Revolving Loan Note dated as of May
26, 1995 (the "Original Note") payable to ING in a maximum principal amount of
$90,000,000, the amount of ING's Commitment under the Credit Agreement;
WHEREAS, upon PNC's becoming a party to the Credit Agreement, the Old Note
was amended and restated by two other Revolving Loan Notes each dated as of
September 25, 1995 made by the Borrower, the first being in the maximum original
principal amount of $72,000,000 payable to ING and the second being in the
maximum original principal amount of $18,000,000 payable to PNC (collectively,
the "Interim Notes," and together with the Old Note, being the "Replaced
Notes");
WHEREAS, concurrently herewith, ING, PNC, the Agent, the Borrower and
Funding are entering into a Second Amendment of even date herewith (the
"Amendment"), pursuant to which the Maximum Facility Amount under the Agreement
is to be reduced from $90,000,000 to $80,000,000 and, correspondingly, ING's and
PNC's Commitments shall be reduced to $64,000,000 and $16,000,000, respectively;
WHEREAS, in connection with such Amendment, the Borrower shall be required
to execute and deliver substitute Revolving Loan Notes (the "Substitute Notes")
to each of ING and
<PAGE>
PNC, in the forms attached hereto as Exhibit A and B, respectively, in exchange
for (but not in satisfaction or novation of) the Replaced Notes, each of which
Substitute Notes shall be made in a maximum principal amount equal to the
applicable Bank's Commitment under the Credit Agreement (as so amended);
NOW, THEREFORE, in consideration of the foregoing premises and subject to
the terms and conditions contained herein, the parties hereto agree as follows:
1. To the extent that the indebtedness heretofore evidenced by the Replaced
Notes shall remain outstanding as of the date on which the Amendment becomes
effective, such indebtedness shall continue to be secured, pursuant to the terms
of the Security Agreement. The Substitute Notes (i) shall, in part, re-evidence
all of the indebtedness of the Borrower outstanding under the Replaced Notes for
any and all loans or other financial accommodations made to the Borrower by ING
and/or PNC, as applicable, (ii) shall, in part, evidence any loans or other
financial accommodations hereafter made by any of the Banks to the Borrower,
(iii) shall be given in substitution for, but not as payment of or in
satisfaction of the Replaced Notes, and (iv) is no way intended to constitute or
otherwise effect a novation of the outstanding indebtedness owing under, and
evidenced by, the Replaced Notes.
2. Each of the Banks and the Borrower agree that on the date on which this
Agreement becomes effective, the repayment terms contained in the Replaced Notes
shall be superseded by the repayment terms contained in the Substitute Notes.
3. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
4. This Agreement shall be binding upon, and inure to the benefit of, the
Borrower and its successor and assigns and each of the Banks and its respective
successors and assigns.
5. This Agreement shall be interpreted, and the rights and liabilities of
the parties hereto determined, in accordance with the internal laws (as
distinguished from the conflicts of law provisions) of the State of New York.
--2--
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date first above written.
J.G. WENTWORTH MFC ASSOCIATES, L.P.
By: J.G. Wentworth Funding Corp.,
its sole general partner
By:
------------------------------------
Title:
-------------------------------
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC., individually
and as Agent
By:
------------------------------------
Title:
-------------------------------
By:
------------------------------------
Title:
-------------------------------
PNC BANK, NATIONAL ASSOCIATION,
individually and as Servicing Agent
By:
------------------------------------
Title:
--3--
<PAGE>
EXHIBIT A
to
Note Modification and Substitution Agreement
Dated March 20, 1996
Form of Substitute Note for ING
-------------------------------
Attached.
<PAGE>
REVOLVING LOAN NOTE
$64,000,000 Dated: March 20, 1996
FOR VALUE RECEIVED, the undersigned, J.G. WENTWORTH MFC ASSOCIATES, L.P., a
Pennsylvania limited partnership (the "Borrower"), HEREBY PROMISES TO PAY to the
order of INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL MARKETS, INC. (the "Lender")
the principal sum of SIXTY-FOUR MILLION AND 00/100 DOLLARS ($64,000,000), or, if
less, the aggregate unpaid principal amount of all of the Loans (as defined in
the Credit Agreement referred to below) made by the Lender to the Borrower
pursuant to the Credit Agreement (as hereinafter defined). Terms used herein and
not otherwise defined are used as defined in the Credit Agreement.
The Borrower further promises to pay interest on the unpaid principal
amount of each Loan from the date of such Loan until the principal amount
thereof is paid in full in accordance with the provisions of the Credit
Agreement dated as of May 26, 1995 (as the same has been and may hereafter be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, J.G. Wentworth Funding Corp., certain
financial institutions party thereto (the "Banks"), Internationale Nederlanden
(U.S.) Capital Markets, Inc., as Agent for the Banks, and PNC Bank, National
Association, as Servicing Agent (the "Servicing Agent").
Both principal and interest are payable in lawful money of the United
States of America to the Servicing Agent at the Servicing Agent's Account or
such other account as the Agent may designate from time to time in same-day
funds. All Loans made by the Lender to the Borrower pursuant to the Credit
Agreement and all payments made on account of principal hereof shall be recorded
by the Lender on its books and records; provided, however, that the failure to
so record any Loans or payments shall not affect the validity of such Loans or
payments.
This Revolving Loan Note is one of the Notes referred to in the Credit
Agreement and is entitled to the benefits and subject to the terms of the Credit
Agreement. This Revolving Loan Note is one of the Substitute Notes executed and
delivered by the Borrower pursuant to that certain Note Modification and
Substitution Agreement of even date herewith among the Borrower, the Agent, the
Servicing Agent and the Banks in exchange for the then outstanding Revolving
Loan Notes executed by the Borrower pursuant to Credit Agreement (the "Replaced
Notes") and payable
<PAGE>
to the Banks. It is expressly acknowledged and agreed that this Revolving Loan
Note (i) shall, in part, re-evidence all of the indebtedness of the Borrower to
the Lender outstanding under the Replaced Notes for any and all loans or other
financial accommodations heretofore made to the Borrower by the Lender under the
Credit Agreement, (ii) shall, in part, evidence any loans or other financial
accommodations hereafter made by the Lender to the Borrower under the Credit
Agreement, (iii) shall be given in substitution for, but not as payment of or in
satisfaction of the Replaced Notes, and (iv) is no way intended to constitute or
otherwise effect a novation of the outstanding indebtedness owing under, and
evidenced by, the Replaced Notes.
The Credit Agreement provides for certain mandatory and voluntary
prepayments of principal and interest due hereunder, which prepayments may, in
certain cases, be subject to prepayment premiums or penalties.
Upon and after the occurrence of an Event of Default described in Sections
9.01(f) or 9.01(s) of the Credit Agreement, this Revolving Loan Note, in
accordance with the terms of the Credit Agreement, may be declared, and
immediately shall become, due and payable, without demand, notice or legal
process of any kind.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]
--2--
<PAGE>
THIS REVOLVING LOAN NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
J.G. WENTWORTH MFC ASSOCIATES, L.P.
By: J.G. WENTWORTH FUNDING CORP.,
its sole general partner
By:
----------------------------------
Name:
Title:
<PAGE>
Exhibit B
to
Note Modification and Substitution Agreement
Dated March 20, 1996
Form of Substitute Note for PNC
-------------------------------
Attached.
<PAGE>
REVOLVING LOAN NOTE
$16,000,000 Dated: March 20, 1996
FOR VALUE RECEIVED, the undersigned, J.G. WENTWORTH MFC ASSOCIATES, L.P., a
Pennsylvania limited partnership (the "Borrower"), HEREBY PROMISES TO PAY to the
order of PNC BANK, NATIONAL ASSOCIATION (the "Lender") the principal sum of
SIXTEEN MILLION AND 00/100 DOLLARS ($16,000,000), or the aggregate unpaid
principal amount of all of the Loans (as defined in the Credit Agreement
referred to below) made by the Lender (as a Lender or as Servicing Agent) to the
Borrower pursuant to the Credit Agreement (as hereinafter defined). Terms used
herein and not otherwise defined are used as defined in the Credit Agreement.
The Borrower further promises to pay interest on the unpaid principal
amount of each Loan from the date of such Loan until the principal amount
thereof is paid in full in accordance with the provisions of the Credit
Agreement dated as of May 26, 1995 (as the same has been and may hereafter be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, J.G. Wentworth Funding Corp., certain
financial institutions party thereto (the "Banks"), Internationale Nederlanden
(U.S.) Capital Markets, Inc., as Agent for the Banks and PNC Bank, National
Association, as Servicing Agent (the "Servicing Agent").
Both principal and interest are payable in lawful money of the United
States of America to the Servicing Agent at the Servicing Agent's Account or
such other account as the Agent may designate from time to time in same-day
funds. All Loans made by the Lender to the Borrower pursuant to the Credit
Agreement and all payments made on account of principal hereof shall be recorded
by the Lender on its books and records; provided, however, that the failure to
so record any Loans or payments shall not affect the validity of such Loans or
payments.
This Revolving Loan Note is one of the Notes referred to in the Credit
Agreement and is entitled to the benefits and subject to the terms of the Credit
Agreement. This Revolving Loan Note is one of the Substitute Notes executed and
delivered by the Borrower pursuant to that certain Note Modification and
Substitution Agreement of even date herewith among the Borrower, the Agent, the
Servicing Agent and the Banks in exchange for the then outstanding Revolving
Loan Notes executed by the Borrower pursuant to Credit Agreement (the "Replaced
Notes") and payable to the Banks. It is expressly acknowledged and agreed that
this
<PAGE>
Revolving Loan Note (i) shall, in part, re-evidence all of the indebtedness of
the Borrower to the Lender outstanding under the Replaced Notes for any and all
loans or other financial accommodations heretofore made to the Borrower by the
Lender under the Credit Agreement, (ii) shall, in part, evidence any loans or
other financial accommodations hereafter made by the Lender to the Borrower
under the Credit Agreement, (iii) shall be given in substitution for, but not as
payment of or in satisfaction of the Replaced Notes, and (iv) is no way intended
to constitute or otherwise effect a novation of the outstanding indebtedness
owing under, and evidenced by, the Replaced Notes.
The Credit Agreement provides for certain mandatory or voluntary
prepayments of principal and interest due hereunder, which prepayments may, in
certain cases, be subject to prepayment premiums or penalties.
Upon and after the occurrence of an Event of Default described in Sections
9.01(f) or 9.01(s) of the Credit Agreement, this Revolving Loan Note, in
accordance with the terms of the Credit Agreement, may be declared, and
immediately shall become, due and payable, without demand, notice or legal
process of any kind.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]
--2--
<PAGE>
THIS REVOLVING LOAN NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
J.G. WENTWORTH MFC ASSOCIATES, L.P.
By: J.G. WENTWORTH FUNDING CORP.,
its sole general partner
By:
----------------------------------
Name:
Title:
--3--
<PAGE>
EXHIBIT B
TO
SECOND AMENDMENT
CONSENT AND REAFFIRMATION
-------------------------
Gary Veloric hereby consents to the foregoing Second Amendment dated as of
March 20, 1996 to that certain Credit Agreement dated as of May 26, 1995 (as
amended), in each case, among J.G. Wentworth MFC Associates, L.P., J.G.
Wentworth Funding Corp., certain financial institutions from time to time
parties thereto, Internationale Nederlanden (U.S.) Capital Markets, Inc., as
agent, and PNC Bank, National Association, as servicing agent, and reaffirms its
obligations under that certain Guaranty and Surety Agreement ("Guaranty")
executed by him, dated as of May 26, 1995, which Guaranty remains in full force
and effect.
------------------------------
By: Gary Veloric
Dated: March __, 1996
--1--
<PAGE>
STATE OF PENNSYLVANIA )
) SS
COUNTY OF __________ )
Before me on this _______ day of March, 1996 appeared Gary Veloric, who executed
this Consent and Reaffirmation and acknowledged that he did so as his own free
act and deed.
-----------------------------
Notary Public
My commission expires _______
--1--
<PAGE>
EXHIBIT C
TO
SECOND AMENDMENT
CONSENT AND REAFFIRMATION
-------------------------
James DeLaney hereby consents to the foregoing Second Amendment dated as of
March 20, 1996 to that certain Credit Agreement dated as of May 26, 1995 (as
amended), in each case, among J.G. Wentworth MFC Associates, L.P., J.G.
Wentworth Funding Corp., certain financial institutions from time to time
parties thereto, Internationale Nederlanden (U.S.) Capital Markets, Inc., as
agent, and PNC Bank, National Association, as servicing agent, and reaffirms its
obligations under that certain Guaranty and Surety Agreement ("Guaranty")
executed by him, dated as of May 26, 1995, which Guaranty remains in full force
and effect.
------------------------------
By: James DeLaney
Dated: March __, 1996
--1--
<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF ___________ )
Before me on this ______ day of March, 1996 appeared James DeLaney, who executed
this Consent and Reaffirmation and acknowledged that he did so as his own free
act and deed.
-----------------------------
Notary Public
My commission expires _______
--1--
<PAGE>
EXHIBIT D
TO
SECOND AMENDMENT
Replacement Form of Conversion/Continuation Request
---------------------------------------------------
Attached.
<PAGE>
EXHIBIT B-2
TO
CREDIT AGREEMENT
Form of Conversion/Continuation Request
---------------------------------------
PNC Bank, National Association
Land Title Building
Broad & Chestnut Streets
Philadelphia, PA 19101
Attention: Thomas Gutman
Re: J.G. Wentworth MFC Associates, L.P.
Ladies and Gentlemen:
The undersigned, J. G. Wentworth MFC Associates, L.P., refers to the Credit
Agreement dated as of May 26, 1995 (as amended, and as the same may be further
amended, restated, supplemented or otherwise modified, the "Credit Agreement")
(capitalized terms being used herein as therein defined), among the undersigned,
J. G. Wentworth Funding Corp., certain financial institutions party thereto as
Banks, PNC Bank, National Association, as Servicing Agent, and Internationale
Nederlanden (U.S.) Capital Markets, Inc., as Agent for the Banks, and hereby
gives you notice, irrevocably, pursuant to Section 2.2 of the Credit Agreement
that the undersigned hereby requests [the Continuation of an Interest Rate
Option] [the Conversion of an Interest Rate Option] as follows:
1. The proposed Borrowing/Conversion Date is _____________, 19__.
2. The Borrowing Tranche to be [Continued] [Converted] consists of Loans to
which the [Euro-Rate] [Swap Rate] [Base-Rate Option] currently applies, and, the
Interest Period for such Loans comprising the Borrowing Tranche, if applicable,
ends on ___________, 19__.
3. The principal amount of Loans comprising the Borrowing Tranche to be
[Continued] [Converted] is ____________________.
4. The [Euro-Rate] [Swap Rate] [Base-Rate Option] shall apply to the Loans
comprising the [Converted] [Continued] Borrowing Tranche.
<PAGE>
5. The Interest Period for the Loans comprising the [Converted] [Continued]
Borrowing Tranche, if applicable, is _______ months, commencing on _________ and
ending on ________.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the Borrowing/Conversion Date:
(a) the representations and warranties contained in each Loan Document
are true and correct in all material respects, before and after giving
effect to the Loans comprising the Borrowing Tranche and to the application of
the proceeds thereof, as though made on and as of such date, except to the
extent that any such representation or warranty expressly speaks to another
date;
(b) no event has occurred and is continuing, or would result from the
making of such Loans or from the application of the proceeds thereof, that
constitutes an Event of Default or a Potential Default; and
(c) each of the conditions precedent contained in Section 6.02 of the
Credit Agreement are satisfied.
Very truly yours,
J.G. WENTWORTH MFC ASSOCIATES, L.P.
By:
--------------------------------
Name:
Title:
B-2-2
<PAGE>
EXHIBIT E
TO
SECOND AMENDMENT
Replacement Form of Loan Request
--------------------------------
Attached.
<PAGE>
EXHIBIT B-1
TO
CREDIT AGREEMENT
Form of Loan Request
--------------------
PNC Bank, National Association
Land Title Building
Broad & Chestnut Streets
Philadelphia, PA 19101
Attention: Thomas Gutman
Re: J.G. Wentworth MFC Associates, L.P.
Ladies and Gentlemen:
The undersigned, J. G. Wentworth MFC Associates, L.P., refers to the Credit
Agreement dated as of May 26, 1995 (as amended, and as the same may be further
amended, restated, supplemented or otherwise modified, the "Credit Agreement")
(capitalized terms being used herein as therein defined), among the undersigned,
J. G. Wentworth Funding Corp., certain financial institutions party thereto as
Banks, PNC Bank, National Association, as Servicing Agent, and Internationale
Nederlanden (U.S.) Capital Markets, Inc., as Agent for the Banks, and hereby
gives you notice, irrevocably, pursuant to Section 2.1 of the Credit Agreement
that the undersigned hereby requests Loans as follows:
1. The proposed Borrowing Date is _____________, 19__.
2. The aggregate amount of the proposed Loans is ____________________.
3. The proposed Loans shall be allocated to the following Borrowing
Tranches and, in the case of any Borrowing Tranche to which the Fixed Rate
Option is to be applicable, Interest Periods:
<PAGE>
<TABLE>
<CAPTION>
Interest Period
---------------
Borrowinq Tranche Interest Rate Option Commence End Duration
----------------- -------------------- -------- --- --------
<S> <C> <C> <C> <C>
$_________________ ________ ____ ___ ____
$_________________ ________ ____ ___ ____
$_________________ ________ ____ ___ ____
$_________________ ________ ____ ___ ____
</TABLE>
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the Borrowing Date:
(a) the representations and warranties contained in each Loan Document
are true and correct in all material respects, before and after giving
effect to the Loans comprising the Borrowing Tranche and to the application of
the proceeds thereof, as though made on and as of such date, except to the
extent that any such representation or warranty expressly speaks to another
date;
(b) no event has occurred and is continuing, or would result from the
making of such Loans or from the application of the proceeds thereof, that
constitutes an Event of Default or a Potential Default; and
(c) each of the conditions precedent contained in Section 6.02 of the
Credit Agreement are satisfied.
Very truly yours,
J.G. WENTWORTH MFC ASSOCIATES, L.P.
By:
--------------------------------
Name:
Title:
B-1-2
<PAGE>
EXHIBIT F
TO
SECOND AMENDMENT
Amended and Restated Articles 2 and 3 to the Agreement
------------------------------------------------------
Attached.
<PAGE>
ARTICLE 2. THE LOANS
2.1 Loans.
(a) Upon the terms and subject to the conditions hereinafter set forth,
each Bank, severally and not jointly with any other Bank, agrees to make to the
Borrower, from time to time during the period from the date hereof to, but not
including, the Commitment Termination Date, Loans in an aggregate principal
amount up to such Bank's Commitment (except for a Bank in its capacity as the
Servicing Agent with respect to any Servicing Agent Advance, which advance may,
in the absolute discretion of the Servicing Agent, exceed such Commitment);
provided, however, that the aggregate outstanding principal balance of all such
Loans (including any outstanding Servicing Agent Advances) shall at no time
exceed the Maximum Available Facility Amount at such time. Within such limits of
time and amount and subject to the other provisions of this Agreement, the
Borrower may borrow, repay without premium or penalty, except as provided in
Section 4.4, and reborrow pursuant to this Section 2.1.
(b) Except as otherwise provided herein, the Borrower may from time to time
prior to the Commitment Termination Date request the Banks to make Loans to the
Borrower by the delivery to the Servicing Agent, not later than 10:00 A.M. New
York City time (i) three (3) Business Days prior to the proposed Borrowing/
Conversion Date with respect to the making of Loans to which a Fixed Rate Option
is requested to apply and (ii) on the proposed Borrowing/Conversion Date with
respect to the making of a Loan to which the Base Rate Option applies, in either
case, of a duly completed Loan Request therefor, or a request by telephone
immediately confirmed in writing (including by any teletransmission) signed by
an Authorized Officer in such form. The Servicing Agent shall have no duty to
verify the authenticity of the signature appearing on any Loan Request and, with
respect to any telephonic request for a Loan, the Servicing Agent shall have no
duty to verify the identity of any individual representing himself as an
Authorized Officer. Any Loan Request received by the Servicing Agent after the
time specified in the immediately preceding sentence shall be deemed to have
been received by the Servicing Agent on the next Business Day, and the date
specified in any such Loan Request as the proposed Borrowing/Conversion Date
shall be deemed to be the Business Day immediately succeeding the proposed
Borrowing/Conversion Date specified in such Loan Request.
(c) Each Loan Request shall be (x) irrevocable, (y) shall specify (i) the
proposed Borrowing Date; (ii) the aggregate amount of such Borrowing, which, in
the case of a Borrowing to which the Base Rate Option shall be applicable,
1
<PAGE>
shall be in a minimum amount of $2000, and, in the case of a Borrowing to which
the Fixed Rate Option shall be applicable, shall be in a minimum amount of
$500,000 and in integral multiples of $100,000 in excess of such amount; (iii)
which Interest Rate Options shall be applicable and the allocation of the
Borrowing Tranches with respect thereto, and (iv) with respect to any such Loans
to which a Fixed Rate Option is to be applicable, an appropriate Interest Period
for each Borrowing Tranche of such Borrowing, and (z) shall be accompanied by a
fully completed Borrowing Base Certificate.
(d) (i) Upon the receipt by the Servicing Agent of a Loan Request from the
Borrower, the Servicing Agent shall, in its absolute discretion (except as
provided below with respect to a requested Borrowing at the Fixed Rate Option),
elect (1) to have the terms of Section 2.1(d)(iii) hereof apply to such
requested Borrowing, or (2) to the extent the Agent shall not have previously
exercised its Daily Settlement Option, to make a Servicing Agent Advance with
respect to such requested Borrowing under the terms of Section 2.1(d)(ii)
hereof, except that no Servicing Agent Advance shall be made in respect of any
requested Borrowing at the Fixed Rate Option, and the terms of Section
2.1(d)(iii) hereof shall apply to such requested Borrowing.
(ii) (A) If the Servicing Agent shall have elected under Section
2.1(d)(i) hereof to make a Servicing Agent Advance with respect to a
requested Borrowing at the Base Rate Option, then, subject to the
satisfaction of the conditions precedent set forth in Sections 6.1 and 6.2
hereof, the Servicing Agent shall fund such requested Borrowing (any such
advance solely by the Servicing Agent to the Borrower being hereinafter
referred to as a "Servicing Agent Advance" and all such outstanding
advances to the Borrower being hereinafter referred to collectively as
"Servicing Agent Advances") by transferring the amount requested in the
Loan Request (subject to the maximum amounts specified in Section 2.1(a)
hereof), in U.S. Dollars and immediately available funds, to the Borrower's
Account No. 085-435-214-90 maintained with PNC Bank, National Association,
Land Title Building, Broad and Chestnut Street, Philadelphia, Pennsylvania
19101, ABA No. 031 0000 53 (the "Borrower's Account") prior to 2:00 P.M.
New York City time on the Borrowing/Conversion Date specified or deemed
specified in such Loan Request. Each Servicing Agent Advance is a Loan
hereunder and shall be evidenced by the Note in favor of the Servicing
Agent and subject to all of the terms and conditions and entitled to all of
the benefits applicable to other Loans except that all payments thereon
shall be payable to the Servicing Agent solely for its own account until
such time as such non-ratable portion of such Servicing Agent Advance is
repaid in accordance with Sections 2.1(d)(ii)(B)(l) or 2.l(d)(ii)(B)(2).
2
<PAGE>
(B) (1) The Servicing Agent shall request settlement with respect to
the previous week's Servicing Agent Advances by notifying the Agent and the
Banks by telecopy, telephone or other similar form of transmission no later
than 11:00 a.m. New York City time on the Weekly Settlement Date applicable
to such Servicing Agent Advances of the amount due from such Bank. Each
Bank (except the Bank which made the Servicing Agent Advances with respect
to which settlement is requested in its capacity as Servicing Agent) shall
make such Bank's Ratable Share (calculated on the basis of all Banks,
including the Bank that made the Servicing Agent Advance) of the
outstanding principal amount of the previous week's Servicing Agent
Advances, minus any amounts received by the Servicing Agent as payment or
prepayment of the Loans prior to such Weekly Settlement Date, to the
Servicing Agent, in same day funds, to the Servicing Agent's Account not
later than 2:00 p.m. New York City time on such Weekly Settlement Date.
Such amounts made available to the Servicing Agent shall be applied against
the amount of the applicable Servicing Agent Advances and shall constitute
the Loans of such Banks making such payments.
(2) If any Bank fails under Section 2.1(d)(ii)(B)(l) hereof to make
available to the Servicing Agent its Ratable Share of such applicable
Servicing Agent Advance on the applicable Weekly Settlement Date, such
defaulting Bank shall be liable to pay the Servicing Agent the amount
thereof immediately upon the Servicing Agent's demand therefor, together
with interest thereon from the date such amount is advanced until paid in
full at a rate equal to the Federal Funds Effective Rate. Until such amount
is paid to the Servicing Agent by such Bank or by the Borrower (the
interest rate applicable thereto if paid by the Borrower being that
selected by the Borrower in the applicable Loan Request, and not the
Federal Funds Effective Rate), such advance shall be deemed for all
purposes to be a Loan made by the Servicing Agent to the Borrower, and the
Servicing Agent shall for all purposes hereunder be deemed a "Bank" and
shall be entitled to all rights, remedies and benefits as such hereunder
and under the other Loan Documents. Upon the payment of the principal and
interest of any such Servicing Agent Advance by such Bank to the Servicing
Agent, such payment shall be treated (to the extent of the principal
amount thereof) as the payment of the Servicing Agent Advance under Section
2.1(d)(ii)(B)(1) hereof. No such payment by the Borrower shall prejudice
its rights in respect of any default by such Bank hereunder. The failure of
any Bank to fulfill its Commitment to fund any Loan or to pay the related
Servicing Agent Advance on any Weekly Settlement Date shall not relieve any
other Bank of its Commitment to fund any such Loan or to pay its Ratable
Share
3
<PAGE>
of the Servicing Agent Advance on such date, but no Bank shall be
responsible for the failure of any other Bank to fulfill such Commitment of
any other Bank.
(iii) If either (x) the Servicing Agent shall have elected under Section
2.1(d)(i) to have the terms of this Section 2.1(d)(iii) apply to a requested
Borrowing, or (y) the Agent shall have exercised its Daily Settlement Option,
the Servicing Agent shall promptly (but in any event by 11:00 A.M. on the date
of its deemed receipt of a Loan Request for a Loan) notify the Agent and the
Banks of its receipt of such Loan Request and shall specify: (A) the proposed
Borrowing/Conversion Date and the time and method of disbursement of such Loan;
(B) the amount of such Loan and the allocation of the Borrowing Tranches thereof
among the applicable Interest Periods and/or the Base Rate Option as requested
by the Borrower; and (C) each Bank's Ratable Share of such Loan. Each Bank
shall, subject to the satisfaction of the conditions precedent set forth in
Sections 6.1 and 6.2 hereof, remit its Ratable Share of the principal amount of
each Loan to the Servicing Agent's Account by no later than 1:00 P.M. (New York
City time) on the Borrowing Date specified or deemed specified in such Loan
Request, and the Servicing Agent shall, to the extent the Banks have made funds
available to it for such purpose, fund such Loan to the Borrower in U.S. Dollars
and immediately available funds to the Borrower's Account prior to 2:00 P.M. New
York City time on the Borrowing/Conversion Date specified or deemed specified in
such Loan Request; provided, that if any Bank fails to remit such funds to the
Servicing Agent in a timely manner, the Servicing Agent may, but shall not be
required to, advance on behalf of any such Bank, such Bank's Ratable Share of
the Loans on the applicable Borrowing/Conversion Date unless such Bank shall
have notified the Servicing Agent and the Agent prior to such
Borrowing/Conversion Date that it does not intend to make available its Ratable
Share of such Loans on such date. If the Servicing Agent makes such advance,
each of the Borrower and such defaulting Bank severally, but not jointly, shall
be liable to repay the Servicing Agent the amount thereof immediately upon the
Servicing Agent's demand therefor, together with interest thereon from the date
such amount is advanced until repaid in full at a rate equal to, in the case of
such Bank, the Federal Funds Effective Rate and, in the case of the Borrower,
the interest rate applicable to the Interest Rate Option applicable to the
Borrowing Tranche to which such Loan was allocated. Until such amount is repaid
to the Servicing Agent by such Bank or the Borrower, such advance shall be
deemed for all purposes to be a Loan made by the Servicing Agent to the
Borrower, and the Servicing Agent shall for all purposes hereunder be deemed a
"Bank" and shall be entitled to all rights, remedies and benefits as such
hereunder and under the other Loan Documents. Upon the repayment of the
principal and interest of any such Loan by such Bank to the Servicing Agent,
such repayment shall be treated (to the extent of the principal amount thereof)
4
<PAGE>
as the funding of such Bank's Ratable Share of the Loans to which such amounts
relate. No such repayment or payment by the Borrower shall prejudice its rights
in respect of any default by such Bank hereunder. The failure of any Bank to
fulfill its Commitment to fund any Loan on any Borrowing/Conversion Date shall
not relieve any other Bank of its Commitment to fund any such Loan on such date,
but no Bank shall be responsible for the failure of any other Bank to fulfill
such Commitment of any other Bank.
(e) The Borrower shall only use the proceeds of the Loans (i) to refinance
the Indebtedness evidenced by the PNC Documents and the CoreStates Documents on
the Closing Date, (ii) to purchase additional Eligible Claims, (iii) to pay the
Obligations, (iv) to pay the fees and expenses of the Claim Servicer under and
in accordance with the terms of the Servicing Agreement, and (v) for any other
legal purpose to the extent permitted hereunder and under the other Loan
Documents.
(f) At any time upon notice by the Agent (either on its own or at the
direction of the Required Banks) to the Servicing Agent, the Agent may, at its
option (the "Daily Settlement Option") declare that the Servicing Agent shall
cease to make Servicing Agent Advances and that the provisions of Section
2.1(d)(ii) shall cease to be applicable, whereupon all settlements and fundings
as among the Banks, the Agent, and the Servicing Agent, and any requested
Borrowing hereunder shall be governed by the terms of Section 2.1(d)(iii).
2.2 Voluntary Conversion and Continuation of Loans.
(a) Prior to the Facility Termination Date, the Borrower shall have the
option with respect to each Borrowing Tranche and on any Weekly Settlement Date,
(i) to Convert all or any portion of the Borrowing Tranche accruing interest at
the Base Rate Option to Borrowing Tranches accruing interest at a Fixed Rate
Option; (ii) to Convert all or any portion of any outstanding Borrowing Tranches
accruing interest at a Fixed Rate Option to a Borrowing Tranche accruing
interest at a different Fixed Rate Option or at the Base Rate Option, in either
case, upon the expiration date of the Interest Period applicable to such Fixed
Rate Portions being Converted; or (iii) upon the expiration of the applicable
Interest Periods applicable to any outstanding Borrowing Tranches accruing
interest at a Fixed Rate, to Continue all or any portion of such Borrowing
Tranches at such Fixed Rate for an additional Interest Period to be selected by
the Borrower in accordance with the terms and conditions hereof. The Borrower's
right to Convert or Continue Loans pursuant to this Section 2.2 shall be
understood to include the right (i) to divide any Borrowing Tranche into two or
more Borrowing Tranches having aggregate principal equal to the aggregate
principal of such initial Borrowing Tranche or (ii) to combine any two or more
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Borrowing Tranches into a single Borrowing Tranche having aggregate principal
equal to the aggregate principal of such initial Borrowing Tranches; provided,
that with respect to any Borrowing Tranche accruing interest at the Euro-Rate,
such divisions or combinations may only be made upon the expiration of the
Interest Periods to which such Borrowing Tranche is allocated; and provided
further, that no Conversion shall occur except on a Weekly Settlement Date.
(b) To Convert or Continue any Borrowing Tranche under Section 2.2(a), the
Borrower shall deliver a written Conversion/Continuation Request signed by an
Authorized Officer or telephonic notice (confirmed immediately thereafter in
writing (including by any tele-transmission) signed by an Authorized Officer in
such form) to the Servicing Agent not later than 10:00 A.M. (New York City time)
(i) on the third Business Day prior to the proposed Borrowing/Conversion Date
with respect to the proposed Conversion or Continuation if the Borrowing Tranche
is to be Converted into or Continued at a Fixed Rate Option and (ii) on the
proposed Borrowing/Conversion Date with respect to a proposed Conversion from a
Fixed Rate Option to the Base Rate Option and, in either case, such
Borrowing/Conversion Date must also be a Weekly Settlement Date. The Servicing
Agent shall then give the Agent and each Bank prompt (and in any event not later
than 11:00 A.M. on such day) notice thereof by telephone, facsimile or telex.
Each such notice by the Borrower shall specify (i) the proposed
Borrowing/Conversion Date of such proposed Conversion/Continuation (which shall
be a Weekly Settlement Date), (ii) the Borrowing Tranches to be Converted and/or
Continued, (iii) the principal amount of the Loans to be Converted and/or
Continued, (iv) whether such Borrowing Tranche is to be Converted or Continued
and (v) in the case of any Conversion to or Continuation of any Loans at a Fixed
Rate, the requested Interest Period for such Converted and/or Continued
Borrowing Tranche. Any Conversion/Continuation Request (or telephonic notice
thereof) shall be irrevocable, and the Borrower shall be bound to Convert or to
Continue the Loans in accordance therewith. The Servicing Agent shall have no
duty to verify the authenticity of the signature appearing on any
Conversion/Continuation Request and, with respect to any telephonic request for
a Conversion/Continuation, the Servicing Agent shall have no duty to verify the
identity of any individual representing himself as an Authorized Officer. Any
Conversion/Continuation Request received by the Servicing Agent after the time
specified in the immediately preceding sentence shall be deemed to have been
received by the Servicing Agent on the next Business Day.
2.3 Notes. The Loans payable to each Bank shall be evidenced by a Note of
the Borrower dated the Closing Date payable to the order of such Bank in a
maximum principal face amount equal to the Commitment of such Bank.
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2.4 Fees. (a) The Borrower shall pay to the Agent, for the account of the
Banks in such proportions as the Agent and each such Bank shall agree, a fee
(the "Unused Commitment Fee") on the average daily excess of the Maximum
Facility Amount over the aggregate outstanding principal balance of the Loans at
the per annum rate set forth in that certain letter agreement of even date
herewith (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Fee Letter") among the Agent, ING and the
Borrower. The Unused Commitment Fee shall be calculated on the basis of a
360-day year and the actual number of days elapsed and shall be payable, in
arrears, on the first Business Day of each calendar month commencing after the
date hereof and on the Commitment Termination Date.
(b) The Borrower shall pay to the Servicing Agent, commencing on the date
such Servicing Agent shall commence its duties as the Servicing Agent hereunder
and ending upon the effective date of the resignation or termination of such
Servicing Agent as Servicing Agent hereunder, a fee (the "Servicing Agent Fee")
equal to $5000.00 per quarter-year, payable quarterly in arrears.
2.5 Reductions of the Maximum Facility Amount; Termination of the
Commitments. (a) The Borrower shall have the option, upon not less than 5 days'
prior written notice to the Agent (which shall promptly thereafter notify the
Servicing Agent and each of the Banks thereof), to reduce, in whole or in part,
any unused portion of the Maximum Facility Amount; provided, that any such
reduction shall be in a minimum amount of $1,000,000 and in integral multiples
of $100,000 in excess of such amount. Any such reduction in the Commitments
pursuant to the immediately preceding sentence shall reduce the Commitment of
each Bank ratably in accordance with their respective Commitment Percentages.
Any such notice of reduction given by the Borrower to the Agent shall be
irrevocable when given.
(b) In addition, the Borrower shall have the option to terminate the
Commitments in their entirety, upon not less than 5 days' prior written notice
thereof to the Agent (who shall promptly thereafter notify the Servicing Agent
and each of the Banks thereof) and the payment in full, in cash, of all then
outstanding interest and principal on the Loans, any breakage fees then owing or
resulting from such prepayment pursuant to Section 4.4, and all other
Obligations then outstanding (and whether or not then otherwise due and
payable). Any such notice of termination given by the Borrower to the Agent
shall be irrevocable when given.
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ARTICLE 3. INTEREST RATES; PAYMENTS
3.1 Interest Rate Option; Computation of Interest; Maximum Interest Rate.
(a) The Borrower shall pay to the Servicing Agent for the account of each
Bank, subject to the terms and provisions of Section 3.7 hereof, interest on the
unpaid principal amount of each Loan made by the Bank from the date of such Loan
until such principal amount shall be paid in full, at the following rates per
annum:
(i) with respect to each Borrowing Tranche of the Euro-Rate Portion, a
rate per annum at all times during the Interest Period to which such
Borrowing Tranche is allocated equal to the Euro-Rate for such Interest
Period;
(ii) with respect to each Borrowing Tranche of the Swap Rate Portion,
a rate per annum at all times during the Interest Period to which such
Borrowing Tranche is allocated equal to the Swap Rate for such Interest
Period; and
(iii) with respect to the Base Rate Portion, a rate per annum equal at
all times to the Base Rate in effect from time to time;
it being understood that, subject to the provisions of this Agreement, the
Borrower may select different Interest Rate Options and different Interest
Periods to apply simultaneously to the Loans comprising different Borrowing
Tranches and may Convert to or Continue one or more Interest Rate Options with
respect to all or any portion of the Loans, comprising any Borrowing Tranche.
(b) All interest accruing hereunder (other than interest at the Base Rate
Option) shall be computed on the basis of a year of 360 days and the actual
number of days elapsed. Interest accruing at the Base Rate Option shall be
computed on the basis of a year of 365 or 366 days, as applicable, and the
actual number of days elapsed.
(c) The Agent's determination of a rate of interest and any change therein
shall, in the absence of manifest error, be conclusive and binding upon all
parties hereto.
(d) In no event shall any interest rate exceed the maximum rate permissible
for business borrowers such as the Borrower under applicable Law (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month
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shall be the Maximum Rate, and, if in future months, that interest rate would
otherwise be less than the Maximum Rate, then that interest rate shall remain at
the Maximum Rate until such time as the amount of interest paid hereunder equals
the amount of interest which would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in full of the
Obligations under this Agreement, the total amount of interest paid or accrued
under the terms of this Agreement is less than the total amount of interest
which would have been paid or accrued if the interest rates set forth in this
Agreement had at all times been in effect, then the Borrower shall, to the
extent permitted by applicable law, pay the Servicing Agent, for the benefit of
the affected Banks, an amount equal to the difference between (a) the lesser of
(i) the amount of interest which would have been charged if the Maximum Rate
had, at all times, been in effect or (ii) the amount of interest which would
have accrued had the interest rates set forth in this Agreement, at all times,
been in effect and (b) the amount of interest actually paid or accrued under
this Agreement. In the event that a court determines that any Bank has received
interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to
reduce, the Obligations other than interest, in the inverse order of maturity,
and if there are no Obligations outstanding, such Bank shall refund such excess
to the Borrower.
(e) The Borrower may call the Agent on or before the date on which a Loan
Request or Conversion/Continuation Request is to be delivered to the Servicing
Agent to receive an indication of the rates then in effect, but it is
acknowledged and agreed that such projection shall not be binding on the Agent,
the Servicing Agent or the Banks nor affect the rate of interest which
thereafter is actually in effect when the election is made.
3.2 Interest After Default. To the extent permitted by Law, upon the
occurrence and during the continuation of an Event of Default, any principal,
interest, fee or other amount payable hereunder shall bear interest for each day
thereafter until paid in full (before and after judgment) at the Default Rate as
in effect from time to time. The Borrower acknowledges that such increased
interest rate reflects, among other things, the fact that such Loans or other
Obligations have become a substantially greater risk given their default status
and that the Banks are entitled to additional compensation for such risk.
3.3 Euro-Rate Unascertainable.
(a) If (x) on any date on which a Euro-Rate would otherwise be determined,
the Agent shall have determined (which determination shall be conclusive absent
manifest error) that:
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(i) adequate and reasonable means do not exist for ascertaining such
Euro-Rate; or
(ii) a contingency has occurred which materially and adversely affects
the London interbank market relating to the Euro-Rate; or
(y) at any time any Bank shall have determined (which determination shall be
conclusive absent manifest error) that:
(i) the making, maintenance or funding of any Loan to which a Euro-Rate
applies has been made impracticable or unlawful by compliance by such Bank in
good faith with any Law or any interpretation or application thereof by any
Governmental Authority or with any request or directive of any such Governmental
Authority (whether or not having the force of Law); or
(ii) such Euro-Rate will not adequately and fairly reflect the cost to
such Bank of the establishment or maintenance of any such Loan; or
(iii) after making all reasonable efforts, that deposits of the relevant
amount in Dollars for the relevant Interest Period for a Loan to which a
Euro-Rate applies are not available to such Bank at the effective cost of
funding such Loan in the London interbank market;
then, in the case of any event specified in subclause (x)(i) or (x)(ii) above,
the Agent shall promptly so notify the Servicing Agent, the Banks and the
Borrower thereof and in the case of an event specified in subclause (y)(i), (ii)
or (iii) above, such Bank shall promptly so notify the Agent and endorse a
certificate to such notice as to the specific circumstances of such notice and
the Agent shall promptly send copies of such notice and certificate to the
Servicing Agent, the other Banks and the Borrower. Upon such date as shall be
specified in such notice (which shall not be earlier than the date such notice
is given) the obligation of (A) the Banks in the case of such notice given by
the Agent or (B) such Bank in the case of such notice given by such Bank to
allow the Borrower to select, Convert to or Continue a Loan accruing interest at
the Euro-Rate Option shall be suspended until the Agent shall have later
notified the Servicing Agent and the Borrower or such Bank shall have later
notified the Agent, of the Agent's or such Bank's, as the case may be,
determination (which determination shall be conclusive absent manifest error)
that the circumstances giving rise to such previous determination no longer
exist.
(b) If at any time the Agent makes a determination under Section 3.3(a) and
the Borrower has previously notified the Servicing Agent (who has previously
notified the Agent) of its
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selection of, any Conversion to or Continuation of a Loan to accrue interest at
the Euro-Rate and such Interest Rate Option has not yet gone into effect, such
notification shall be deemed to provide for selection of, Conversion to or
Continuation of such Loan to the Base Rate Option. If any Bank notifies the
Agent of a determination under subclause (y)(i), (ii) or (iii) of Section
3.3(a), the Borrower shall, subject to the Borrower's indemnification
obligations under Section 4.4, as to any Loan of the Bank to which a Euro-Rate
applies, on the date specified in such notice either Convert such Loan to the
Base Rate Option or pay such Loan in full.
3.4 Selection of Interest Rate Options. If the Borrower fails to select an
Interest Period in accordance with the provisions of Section 2.2 in the case of
a Continuation of a Borrowing Tranche accruing interest at a Fixed Rate Option,
the Borrower shall be deemed to have Converted such Loan or portion thereof to
the Base Rate Option, commencing upon the last day of the current Interest
Period. If an Event of Default shall occur and be continuing, the Agent may in
its discretion limit the Borrower to the Base Rate Option hereunder.
3.5 Payments.
(a) All of the Obligations shall be full recourse obligations of the
Borrower and shall be due and payable at the times set forth herein and in the
Notes. Notwithstanding anything contained in this Agreement, the Notes or the
other Loan Documents to the contrary, all outstanding principal, interest and
other Obligations of the Borrower owing hereunder and under the other Loan
Documents shall be due and payable on the Facility Termination Date. The
Obligations may be prepaid at the option of the Borrower, in whole or in part,
at any time without notice; provided that any such prepayment of less than all
of the outstanding Obligations at such time shall be applied as set forth in
Section 3.5(b). In addition, the Obligations shall be mandatorily prepaid in
accordance with Section 3.5(b). The principal amount of any Loan which is
prepaid may, subject to the limitations set forth Section 2.1(a), be reborrowed.
(b) (i) The Borrower shall instruct all Obligors to make all payments in
respect of the Purchased Claims to be sent to a Lock-Box under the exclusive
ownership and control of the Agent pursuant to the Lock Box Agreement relating
to such Lock-Box. All such payments received in a Lock-Box shall be deposited on
a daily basis to a Lock-Box Account, whereupon, upon such funds becoming
available (in accordance with the applicable Lock-Box Bank's schedule of
availability), they shall be transferred (by electronic transfer of immediately
available funds) to the Servicing Agent's Account. All such amounts received by
the Servicing Agent in the Servicing Agent's Account as aforesaid (as well as
any other amounts deposited therein in accordance
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herewith, other than to the extent specifically designated by the Borrower for
the payment of a specific Obligation (other than interest or principal due
hereunder) shall be credited, first, to the payment of interest, if any, which
is then due and payable with respect to the Loans in accordance with Section
3.7, second, to any breakage costs which is then due and owing (including any
such amounts which would become due and payable after giving effect to any
prepayment of principal in accordance with clauses third and fourth below) in
accordance with Section 4.4, third, to the prepayment and reduction of the
outstanding principal amount of any Servicing Agent Advances, fourth, to the
prepayment and reduction of the outstanding principal amount of any other Loans,
fifth, to the payment of all other fees, expenses and indemnities due and
payable hereunder, including without limitation, to the Unused Commitment Fee,
and sixth, with respect to any excess, remit such amounts to the Borrower's
Account for the account of the Borrower.
(ii) If, on any day, the aggregate outstanding principal balance of the
Loans shall exceed the Maximum Available Facility Amount (after giving effect to
the application of any Collections available for application in accordance with
subclause (b)(i) immediately above), the Borrower shall be required on such day
to make a prepayment of the Loans and the other Obligations by payment thereof
by wire transfer to the Servicing Agent's Account of immediately available funds
in such an amount that, when applied in accordance with subclause (b)(i)
immediately above, will be sufficient to eliminate such excess. In addition, all
such proceeds of the Purchased Claims, other Collateral and other payments
received from or on behalf of the Borrower (including any such payments required
to be turned over to the Agent in respect of damaged, destroyed or condemned
Collateral pursuant to the terms of the Security Agreement) in respect of the
Obligations shall be applied in the manner set forth in Section 3.5(b)(i). Any
such proceeds, other Collateral or other payments received by the Agent shall be
remitted to the Servicing Agent on the next Business Day after the Agent's
receipt thereof.
(iii) Unless otherwise specified by the Borrower or otherwise specified
herein (including in clauses third and fourth of Section 3.5(b)(i) hereof), all
prepayments of principal made in accordance with this Section 3.5(b) shall be
applied first to the Base Rate Portion of the outstanding Loans and then to the
Fixed Rate Portion of such Loans. Without limiting the foregoing in any way, all
prepayments applied to the principal of any Fixed Rate Portion shall be subject
to Section 4.4 hereof to the extent applicable.
(c) (i) All payments and prepayments to be made in respect of principal,
interest, expenses, indemnities, Servicing Agent Fees, any other fees or other
Obligations (except Unused
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Commitment Fees and other fees due to the Agent) due from the Borrower
hereunder shall be made to the Servicing Agent's Account prior to 11:00 A.M.
(New York City time) on the date when due without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived by the Borrower,
and without setoff, counterclaim or other deduction of any nature, and an action
therefor shall immediately accrue. The Borrower hereby authorizes and directs
the Servicing Agent to charge the Servicing Agent's Account for each payment of
principal and interest when due on the Loans and for all fees, expenses,
indemnities and other Obligations (except Unused Commitment Fees and other fees
due to the Agent) due from the Borrower hereunder when due. The Borrower agrees
that, to the extent there are insufficient funds in the Servicing Agent's
Account or such other accounts to make any payment when due, the Borrower shall
immediately pay to the Servicing Agent all amounts due that remain unpaid.
(ii} All payments to be made in respect of Unused Commitment Fees or other
fees due to the Agent from the Borrower hereunder shall be made to the Agent's
Account prior to 11:00 A.M. (New York City time) on the date when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower, and without setoff, counterclaim or other
deduction of any nature, and an action therefor shall immediately accrue. The
Borrower hereby authorizes and directs each of the Agent and the Servicing Agent
to charge either or both of the Agent's Account and the Servicing Agent's
Account, respectively, for all such fees due from the Borrower hereunder when
due and the Servicing Agent agrees to charge such account for such amounts at
the direction of the Agent and to remit such amounts to the Agent. The Borrower
agrees that, to the extent there are insufficient funds in the Agent's Account,
the Servicing Agent's Account or such other accounts to make any payment when
due, the Borrower shall immediately pay to the Agent all amounts due that remain
unpaid. The Agent shall allocate and distribute Unused Commitment Fees to each
Bank (as a Bank, and to the extent applicable, as Servicing Agent) in accordance
with such Bank's daily average unused Commitment.
(d) (i) If the Agent shall not have exercised the Daily Settlement Option,
on each Weekly Settlement Date, the Servicing Agent shall distribute to the
Agent and the Banks in immediately available funds all payments and prepayments
received during the previous week by the Servicing Agent in respect of
principal, interest and other amounts received and available for distribution as
of the opening of business on such date, net of any principal amount that the
Agent or such Bank would be required to remit to the Servicing Agent under
Sections 2.1(d)(ii) or 2.1(d)(iii), as applicable, of this Agreement. The
Servicing Agent's, the Agent's and each Bank's statement of
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account, ledger or other relevant record shall, in the absence of manifest
error, be conclusive as the statement of the amount of principal of and interest
on the Loans and other amounts owing by the Borrower under this Agreement and
shall be deemed an "account stated." The Borrower shall have no liability to the
Servicing Agent, the Agent or any Bank for any loss or expense incurred as a
result of the failure by the Servicing Agent to comply with the provisions of
this Section 3.5(d)(i).
(ii) If the Agent has exercised its Daily Settlement Option, on each
Business Day thereafter, the Servicing Agent shall distribute to the Agent and
the Banks in immediately available funds all payments and prepayments received
by the Servicing Agent in respect of principal, interest and other amounts
received and available for distribution as of the opening of business on such
date, net of any principal amount that the Agent or such Bank would be required
to remit to the Servicing Agent under Sections 2.1(d)(ii) or 2.1(d)(iii), as
applicable, of this Agreement. The Servicing Agent's, the Agent's and each
Bank's statement of account, ledger or other relevant record shall, in the
absence of manifest error, be conclusive as the statement of the amount of
principal of and interest on the Loans and other amounts owing by the Borrower
under this Agreement and shall be deemed an "account stated." The Borrower shall
have no liability to the Servicing Agent, the Agent or any Bank for any loss or
expense incurred as a result of the failure by the Servicing Agent to comply
with the provisions of this Section 3.5(d) (ii).
(e) The Borrower hereby transfers and conveys to the Agent, for its and the
Banks' benefit, exclusive ownership and control of each of the Lock-Boxes and
the Lock-Box Accounts. If, notwithstanding the requirements of Section
3.5(b)(i), the Borrower receives any Collections of any Purchased Claims or any
other proceeds of Collateral which are required to be paid to the Servicing
Agent or the Agent, each for the benefit of the Banks, it shall receive such
payments as the Agent's trustee, and shall promptly (and, in any event, within
one (1) Business Day after its receipt thereof) deliver such payments to a
Lock-Box Account, or to the Servicing Agent, in each case, in their original
form duly endorsed in blank. All Collections received in the Lock-Boxes or the
Lock-Box Accounts and all amounts on deposit in the Agent's Account shall be
the sole property of the Agent, for the benefit of itself and the Banks, and
subject to the Agent's sole control. All amounts on deposit in the Servicing
Agent's Account shall be the sole property of the Servicing Agent, for the
benefit of itself, the Agent, and the Banks, and subject to the Servicing
Agent's sole control. At the Agent's request, the Borrower shall execute and
deliver to the Agent such documents as the Agent shall require to grant the
Agent access to, and exclusive dominion and control over, any lock-boxes and/or
bank
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accounts (including, without limitation, the Lock-Boxes and Lock-Box
Accounts) to which Collections are remitted.
3.6 Pro Rata Treatment of Banks. Subject to the weekly settlement
procedures contained in Section 2.1(d)(ii) and Section 3.5(d)(i) to this
Agreement prior to the exercise by the Agent of the Daily Settlement Option,
each Borrowing, and each selection of, Conversion to or Continuation of any
Interest Rate Option and each payment or prepayment by the Borrower with respect
to principal and other amounts (except interest) due from the Borrower hereunder
to the Banks (other than any such amounts of the type described in Section 2.3,
Article 4, Section 10.6 or Section 11.3) shall be made and distributed in
proportion to the Ratable Shares of each Bank (except with respect to the terms
and provisions of Section 3.7 dealing with the distribution by the Servicing
Agent to the Banks of interest payments).
3.7 Interest Payment Dates. (i) Interest on Loans to which the Base Rate
Option applies shall be due and payable in arrears on the first Business Day of
each month after the date hereof and on the date (following the Commitment
Termination Date) on which all such Loans shall be paid in full. Interest shall
be allocated to each Bank based on its average daily outstanding balance of all
Base Rate Loans during such preceding month.
(ii) Interest on Loans to which a Fixed Rate Option applies shall be due
and payable on the last day of each Interest Period for those Loans; provided,
that with respect to any Interest Period which is more than one (1) month long,
the accrued interest thereon shall also be due and payable thereon on the last
day of each month during which such Loans are outstanding; and provided,
further, that from and after the occurrence of the Commitment Termination Date
for any reason whatsoever, the Agent may, in its sole discretion, instruct the
Servicing Agent to apply Collections to the payment of accrued but unpaid
interest on the Loans (including Loans allocated to any Fixed Rate Options) at
such other times as it, in its sole discretion, may designate, which may be
daily. With respect to any Fixed Rate Portion, interest shall be allocated to
each Bank based on its average daily outstanding balance of each such Loan
allocated to any such Fixed Rate Option during the Interest Period (or portion
thereof) applicable to each such Loan.
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EXHIBIT G
TO
SECOND AMENDMENT
New Article 10A to the Agreement
--------------------------------
Attached.
<PAGE>
ARTICLE l0A. THE SERVICING AGENT
l0A.1 Appointment. Each of the Banks and the Agent hereby designates,
appoints and authorizes the Servicing Agent to act for the Agent and the Banks
in the capacities set forth in this Agreement. Each of the Banks and the Agent
hereby further appoints, designates, and authorizes PNC Bank to act as the
initial Servicing Agent hereunder. Each Bank and the Agent hereby authorizes,
and each holder of any Note by the acceptance of a Note shall be deemed to
authorize, the Servicing Agent to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and any other
instruments, documents and/or agreements referred to herein, and to exercise
such powers and to perform such duties hereunder as are specifically delegated
to or required of the Servicing Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. PNC Bank agrees to act as the
Servicing Agent on behalf of the Agent and the Banks to the extent provided in
this Agreement. The appointment and authority of the Servicing Agent hereunder
shall terminate on the date upon which the Obligations shall have been fully and
indefeasibly paid in cash. The Servicing Agent shall not delegate any of its
powers or duties hereunder except to an authorized officer or employee of the
Servicing Agent.
l0A.2 Actions in Discretion of Servicing Agent; Instructions from the
Banks. The Servicing Agent shall, upon the written request of the Required
Banks, take or refrain from taking any action of the type specified as being
subject to direction by the Required Banks and otherwise the Servicing Agent, in
its sole discretion, shall take or refrain from taking any action of the type
specified as being within the Servicing Agent's rights, powers or discretion
herein; provided that the Servicing Agent shall not be required to take any
action which exposes the Servicing Agent to personal liability or which is
contrary to this Agreement, any other Loan Document or applicable Law.
l0A.3 Reimbursement and Indemnification of Servicing Agent by the Borrower.
The Borrower shall unconditionally pay or reimburse the Servicing Agent and save
the Servicing Agent harmless against:
(a) liability for the payment of all reasonable out-of-pocket costs,
expenses and disbursements, including, but not limited to, fees and expenses of
counsel incurred by the Servicing Agent:
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(i) in connection with the interpretation, performance and
administration of this Agreement and the other Loan Documents; and
(ii) relating to any requested amendments, waivers or consents pursuant
to the provisions hereof.
(b) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Servicing Agent in its capacity as such, or any of its directors, employees,
officers or agents, acting on its behalf in such capacity, in any way relating
to or arising out of this Agreement or any other Loan Documents or any action
taken or omitted by the Servicing Agent or such other foregoing Persons
hereunder or thereunder; provided that the Borrower shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements if the same results solely
from the Servicing Agent's (or such director's, employee's, officer's or
agent's, as applicable) gross negligence or willful misconduct as determined by
a court of competent jurisdiction by final and non-appealable judgment (or
settlement tantamount to a final judgment).
l0A.4 Exculpatory Provisions. Neither the Servicing Agent, nor any of its
directors, officers, employees, agents, attorneys or Affiliates shall be liable
to the Borrower, the General Partner, any Guarantor, any Affiliate of any of the
foregoing, the Agent, or any Bank for consequential damages resulting from any
breach of contract, tort or other wrong in connection with the negotiation,
documentation, administration or collection of the Loans or any of the Loan
Documents, whether or not it knew or was made aware of the possibility of the
occurrence thereof.
l0A.5 Reliance by Servicing Agent. The Servicing Agent shall be entitled to
rely upon any writing, telegram, telex or teletype message, resolution, notice,
consent, certificate, letter, cablegram, statement, order or other document or
conversation by telephone or otherwise believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons, and upon
the advice and opinions of counsel and other professional advisers selected by
the Servicing Agent. The Servicing Agent shall be fully justified in failing or
refusing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Agent and the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action.
l0A.6 Notices. The Servicing Agent shall send to the Agent and each Bank a
copy of all notices received from the
2
<PAGE>
Borrower pursuant to the provisions of this Agreement or the other Loan
Documents promptly upon receipt thereof.
l0A.7 The Servicing Agent in its Individual Capacity. With respect to its
Commitment and the Loans made by any Bank, to the extent it is also acting as
the Servicing Agent, such Bank shall have the same rights and powers hereunder
as any other Bank and may exercise the same as though it were not the Servicing
Agent, and the term "Banks" shall, unless the context otherwise indicates,
include such Bank in its individual capacity. Any such Bank and its Affiliates
may, except as prohibited herein, make Loans to, accept deposits from, discount
drafts for, act as trustee under indentures of, and generally engage in any kind
of banking or trust business with, the Borrower and its Affiliates as though it
were not acting as Servicing Agent hereunder.
l0A.8 Holders of Notes. The Servicing Agent may deem and treat any payee of
any Note as the owner thereof for all purposes hereof unless and until written
notice of the assignment or transfer thereof shall have been received by the
Servicing Agent.
l0A.9 Successor Servicing Agent. The Servicing Agent may resign as
Servicing Agent upon not less than forty-five days' prior written notice to the
Agent, the Borrower and the Banks. In addition, the Agent may terminate PNC Bank
or any successor thereof as Servicing Agent at any time with or without cause.
If the Servicing Agent shall resign or be terminated under this Agreement, then
the Agent shall appoint a successor servicing agent (which may be itself) for
the Agent and the Banks. Upon its acceptance of its appointment, such successor
servicing agent shall succeed to the rights, powers and duties of the Servicing
Agent and the term "Servicing Agent" shall mean such successor servicing agent,
effective upon its appointment, and the former Servicing Agent's rights, powers
and duties as Servicing Agent shall be terminated without any other or further
act or deed on the part of such former Servicing Agent or any of the parties to
this Agreement. Notwithstanding such resignation, the provisions of this Article
lOA shall continue to inure to the benefit of such former Servicing Agent in
respect of the period during which it acted as Servicing Agent hereunder.
l0A.10 Calculations. In the absence of gross negligence or willful
misconduct, the Servicing Agent shall not be liable for any error in computing
the amount payable to the Agent or any Bank whether in respect of the Loans,
fees or any other amounts due to Agent or the Banks under this Agreement. In the
event an error in computing any amount payable to the Agent or any Bank is made,
the sole recourse of the Agent or any such Bank shall be to collect the
misallocated portion of any such payment from the Servicing Agent, the other
Banks or the Borrower that received or otherwise holds such misallocated
payment, with,
3
<PAGE>
in the case of any such amounts to be collected from the Borrower, interest
thereon to be calculated at the Base Rate Option.
10A.ll Beneficiaries. Except with respect to Sections lOA.3 and 10A.10, the
provisions of this Article 10A are solely for the benefit of the Servicing
Agent, the Agent and the Banks, and the Borrower shall have no rights to rely on
or enforce any of the provisions hereof. In performing its functions and duties
under this Agreement the Servicing Agent shall act solely as servicing agent of
the Agent and the Banks and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for the
Borrower, the General Partner, any Guarantor or any Affiliate of any of the
foregoing.
4
<PAGE>
THIRD AMENDMENT
THIS THIRD AMENDMENT (the "Amendment") dated as of May 24, 1996 is
entered into by and among J.G. WENTWORTH MFC ASSOCIATES, L.P., a Pennsylvania
limited partnership (the "Borrower"), J.G. WENTWORTH FUNDING CORP., a
Pennsylvania corporation (the "Parent"), THE FINANCIAL INSTITUTIONS PARTIES
HERETO (collectively, the "Banks"), PNC BANK, NATIONAL ASSOCIATION ("PNC") and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL MARKETS, INC. ("ING"), individually
and as agent for the Banks (in such capacity as agent, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Parent, the Banks and the Agent
have entered into that certain Credit Agreement dated as of May 26, 1995 (as
amended prior to the date hereof, and as further amended, restated,
supplemented, or otherwise modified, the "Agreement"; the terms defined therein
being used herein as therein defined unless otherwise defined herein), pursuant
to which the Banks and the Agent have made and may from time to time hereafter
make certain loans, advances and other financial accommodations to the Borrower;
WHEREAS, the parties hereto have agreed to modify certain terms and
provisions of the Agreement as set forth herein; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Amendment of the Agreement. Upon the satisfaction of the
conditions precedent set forth in Section 2 of this Amendment, the Agreement is
hereby amended to (x) delete the date "May 24, 1996" appearing in clause (iii)
of the definition of "Commitment Termination Date" appearing in Section 1.01 of
the Agreement and (y) substitute the date "May 23, 1997" therefor.
SECTION 2. Conditions Precedent. This Amendment shall become effective
upon the satisfaction of the following conditions precedent:
2.1. The Agent shall have received five fully- executed (and, in
the case of the Borrower, the General Partner and the Guarantors,
notarized) copies of this Amendment and each of the Consents and
Reaffirmations attached hereto as Exhibits A and B;
2.2. No event or condition has occurred and is continuing, or
would result from the execution, delivery or performance of this Amendment,
which would constitute an Event of Default or Potential Default.
2.3. All of the representations and warranties of the Borrower
and the General Partner set forth in Section 3 of this Amendment are true
and correct in all material respects.
SECTION 3. Representations and Warranties of the Borrower and the
General Partner. Upon the effectiveness of this Amendment, each of the Borrower
and the General Partner hereby remakes and reaffirms as of the date hereof all
covenants, representations and warranties made by it (or deemed made by it) in
the Agreement (except to the extent such covenants, representations or
warranties expressly speak as to another date).
<PAGE>
SECTION 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Severability. Each provision of this Amendment shall be
severable from every other provision of this Amendment for the purpose of
determining the legal enforceability of any provision hereof, and the
unenforceability of any provision hereof, and the unenforceability of one or
more provisions of this Amendment in one jurisdiction shall not have the effect
of rendering such provision or provisions unenforceable in any other
jurisdiction.
SECTION 6. Reference to and Effect on the Agreement. Upon the
effectiveness of this Amendment, each reference in the Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like import, and
references to the Agreement in any other document, instrument or agreement
executed and/or delivered in connection with the Agreement, shall in each case,
mean and be a reference to the Agreement as amended hereby. Except as expressly
otherwise amended by this Amendment, the Agreement shall continue in full force
and effect and is hereby ratified and confirmed.
SECTION 7. Counterparts. This Amendment may be exe cuted in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
SECTION 8. Fees and Expenses. The Borrower and the General Partner each
hereby jointly and severally agrees to pay all costs and expenses of the Agent
and the Banks in connection with the preparation, execution and delivery of this
Amendment and any of the other instruments, documents and agreements to be
executed and/or delivered in connection herewith, including, without limitation,
the reasonable attorneys' fees and expenses of each such Person incurred in
connection herewith.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
J. G. WENTWORTH MFC
ASSOCIATES, L.P.
By: J. G. WENTWORTH FUNDING CORP.,
Its sole General Partner
By:________________________________
Gary Veloric
Chairman and Secretary
J. G. WENTWORTH FUNDING CORP.
By:________________________________
Gary Veloric
Chairman and Secretary
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC., individually
and as Agent
By:________________________________
Its:
By:________________________________
Its:
PNC BANK, NATIONAL ASSOCIATION,
individually and as Servicing Agent
By:________________________________
Its:
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<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF __________ )
Before me on this ____ day of May, 1996 appeared Gary Veloric, who executed this
Third Amendment in his aforementioned capacity as an officer of J.G. Wentworth
Funding Corp. executing such Third Amendment on behalf of such corporation
individually and as the General Partner of J.G. Wentworth MFC Associates, L.P.,
and acknowledged that he did so as his own free act and deed.
____________________________
Notary Public
My commission expires_______
-4-
<PAGE>
EXHIBIT A
TO
THIRD AMENDMENT
CONSENT AND REAFFIRMATION
Gary Veloric hereby consents to the foregoing Third Amendment dated as
of May __, 1996 to that certain Credit Agreement dated as of May 26, 1995 (as
amended), in each case, among J.G. Wentworth MFC Associates, L.P., J.G.
Wentworth Funding Corp., certain financial institutions from time to time
parties thereto, Internationale Nederlanden (U.S.) Capital Markets, Inc., as
agent, and PNC Bank, National Association, as servicing agent, and reaffirms its
obligations under that certain Guaranty and Surety Agreement ("Guaranty")
executed by him, dated as of May 26, 1995, which Guaranty remains in full force
and effect.
___________________________
By: Gary Veloric
Dated: May ___, 1996
<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF __________ )
Before me on this ____ day of May, 1996 appeared Gary Veloric, who executed this
Consent and Reaffirmation and acknowledged that he did so as his own free act
and deed.
____________________________
Notary Public
My commission expires_______
<PAGE>
EXHIBIT B
TO
THIRD AMENDMENT
CONSENT AND REAFFIRMATION
James DeLaney hereby consents to the foregoing Third Amendment dated as
of May __, 1996 to that certain Credit Agreement dated as of May 26, 1995 (as
amended), in each case, among J.G. Wentworth MFC Associates, L.P., J.G.
Wentworth Funding Corp., certain financial institutions from time to time
parties thereto, Internationale Nederlanden (U.S.) Capital Markets, Inc., as
agent, and PNC Bank, National Association, as servicing agent, and reaffirms its
obligations under that certain Guaranty and Surety Agreement ("Guaranty")
executed by him, dated as of May 26, 1995, which Guaranty remains in full force
and effect.
___________________________
By: James DeLaney
Dated: May __, 1996
<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF __________ )
Before me on this ____ day of May, 1996 appeared James DeLaney, who executed
this Consent and Reaffirmation and acknowledged that he did so as his own free
act and deed.
____________________________
Notary Public
My commission expires_______
<PAGE>
Draft 05/08/95
FOURTH AMENDMENT
THIS FOURTH AMENDMENT (the "Amendment") dated as of May 22, 1997 is
entered into by and among J.G. WENTWORTH MFC ASSOCIATES, L.P., a Pennsylvania
limited partnership (the "Borrower"), J.G. WENTWORTH FUNDING CORP., a
Pennsylvania corporation (the "Parent"), THE FINANCIAL INSTITUTIONS PARTIES
HERETO (collectively, the "Banks"), ING (U.S.) CAPITAL CORPORATION (as successor
to ING Barings (U.S.) Capital Markets, Inc. (formerly known as Internationale
Nederlanden (U.S.) Capital Markets, Inc., ("ING")), individually and as agent
for the Banks (in such capacity as agent, the "Agent"), and PNC BANK, NATIONAL
ASSOCIATION, as servicing agent (in such capacity, the "Servicing Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Parent, the Banks, the Agent and the
Servicing Agent are parties to that certain Credit Agreement dated as of May 26,
1995 (as the same has been amended prior to the date hereof, the "Agreement";
the terms defined therein being used herein as therein defined unless otherwise
defined herein), pursuant to which the Banks, the Agent and the Servicing Agent
have made, and may from time to time hereafter make, certain loans, advances and
other financial accommodations to the Borrower;
WHEREAS, the parties hereto have agreed to modify certain terms and
provisions of the Agreement as set forth herein; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Amendment of the Agreement. Upon the satisfaction
of the conditions precedent set forth in Section 2 of this Amendment, the
Agreement is hereby amended as follows:
1.1. The definition of "Base Rate Option" set forth in Section 1.1 of
the Agreement is hereby amended and restated in its entirety to read as
follows:
"'Base Rate Option' shall mean, for any date during any calendar month
or any such shorter period ending on the Commitment Termination Date, a
per annum rate determined as of the last day of such calendar month or
on the Commitment Termination Date, as applicable, equal to the daily
average of the higher of (i) the Base Rate as in effect on such date
minus 1.50% and (ii) the sum of (a) the daily average during such
period (as determined on the last day of such period) of the Euro-Rates
which would have been in effect on each Business Day during such period
for one-month Interest Periods commencing on each such day, as such
rate is determined without giving effect to clause (a) of the
definition of "Euro-Rate", and (b) 1.50%;"
1.2. The definition of "Commitment Termination Date" set forth in
Section 1.1 of the Agreement is hereby amended to (i) delete the date "May
23, 1997" set forth therein and (ii) substitute the date "May 20, 1998"
therefor;
1.3. The definition of "Maximum Facility Amount" set forth in Section
1.1 of the Agreement is hereby amended to (i) delete the amount
<PAGE>
"$80,000,000" set forth therein and (ii) substitute the amount
"$20,000,000" therefor;
1.4. Section 7.1(b) is hereby amended to (i) delete the amount
"$1,000,000" set forth in clause (x) thereof and (ii) substitute the amount
"$500,000" therefor; and
1.5. The respective "Commitments" of each of ING and PNC for purposes
of the Agreement shall be reduced from "$64,000,000" and "$16,000,000", as
respectively set forth on Schedule I to the most recent Assignment and
Assumption Agreement to which such Person were parties, to "$16,000,000"
and "$4,000,000," respectively.
SECTION 2. Conditions Precedent. This Amendment shall become effective
upon the satisfaction of the following conditions precedent:
(a) The Agent shall have received copies of each of the following
instruments, documents and agreements, in form and substance and in such
number of copies as, in each case, shall be satisfactory to the Agent:
(i) fully-executed original copies of this Amendment;
(ii) fully-executed copies of a Note Modification and Substitution
Agreement in substantially the form attached hereto as Exhibit A;
(iii) a fully executed copy of each of the Amended and Restated
Revolving Notes attached to the above-described Note Modification and
Substitution Agreement as Exhibits A and B thereto;
(iv) fully executed copies of the Consents and Reaffirmations attached
hereto as Exhibits B and C; and
(v) fully-executed copies of the UCC-3 Amendments and UCC-1 Financing
Statements described on Exhibit D attached hereto; and
(b) No event or condition has occurred and is continuing, or would
result from the execution, delivery or performance of this Amendment, which
would constitute an Event of Default or Potential Default.
SECTION 3. Representations and Warranties of the Seller. Upon the
effectiveness of this Amendment, the Borrower hereby remakes and reaffirms all
covenants, representations and warranties made by it (or deemed made by it) in
the Agreement (except to the extent such covenants, representations or
warranties expressly speak as to another date).
SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 5. Severability. Each provision of this Amendment shall be
severable from every other provision of this Amendment for the purpose of
determining the legal enforceability of any provision hereof, and the
unenforceability of any provision hereof, and the unenforceability of one or
more provisions of this Amendment in one jurisdiction shall not have the effect
of rendering such provision or provisions unenforceable in any other
jurisdiction.
SECTION 6. Reference to and Effect on the Agreement. Upon the
effectiveness of this Amendment, each reference in the Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like import, and
references to the Agreement in any other document, instrument or agreement
executed and/or delivered in connection with the Agreement, shall in each case,
mean and be a reference to the Agreement as amended hereby. Except as
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<PAGE>
expressly otherwise amended by this Amendment, the Agreement shall continue in
full force and effect and is hereby ratified and confirmed.
SECTION 7. Counterparts. This Amendment may be exe cuted in one or more
counterparts, each of which shall be deemed to be an original, and all of which
when taken together shall constitute one and the same instrument.
SECTION 8. Fees and Expenses. The Borrower hereby confirms its
agreement to pay on demand all reasonable costs and expenses in connection with
the preparation, execution and delivery of this Amendment and any of the other
instruments, documents and agreements to be executed and/or delivered in
connection herewith, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel to the Agent and the Banks with respect
thereto.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
J. G. WENTWORTH MFC
ASSOCIATES, L.P.
By: J. G. WENTWORTH FUNDING CORP.,
Its sole General Partner
By:________________________________
Gary Veloric
Chairman and Secretary
J. G. WENTWORTH FUNDING CORP.
By:________________________________
Gary Veloric
Chairman and Secretary
ING (U.S.) CAPITAL CORPORATION,
individually and as Agent
By:________________________________
Its:
By:________________________________
Its:
PNC BANK, NATIONAL ASSOCIATION,
individually and as Servicing Agent
By:________________________________
Its:
-4-
<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF __________ )
Before me on this ____ day of May, 1997 appeared Gary Veloric, who executed this
Fourth Amendment in his aforementioned capacity as an officer of J.G. Wentworth
Funding Corp. executing such Fourth Amendment on behalf of such corporation and
as the General Partner of J.G. Wentworth MFC Associates, L.P., and acknowledged
that he did so as his own free act and deed.
____________________________
Notary Public
My commission expires_______
-5-
<PAGE>
EXHIBIT A
TO
FOURTH AMENDMENT
FORM OF NOTE MODIFICATION AND SUBSTITUTION AGREEMENT
Attached.
-6-
<PAGE>
NOTE MODIFICATION AND SUBSTITUTION AGREEMENT
THIS NOTE MODIFICATION AND SUBSTITUTION AGREEMENT ("Agreement") is made
this ____ day of May, 1997 by and among J.G. WENTWORTH MFC ASSOCIATES, L.P., a
Pennsylvania limited partnership (the "Borrower"), ING (U.S.) CAPITAL
CORPORATION, in its individual capacity (in such capacity "ING") and as agent
(in such capacity, the "Agent") for itself and the other Banks under (and as
such term is defined in) the Credit Agreement referred to below, and PNC BANK,
NATIONAL ASSOCIATION, in its individual capacity (in such capacity, "PNC") and
as servicing agent (in such capacity, the "Servicing Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent, J.G. Wentworth Funding Corp., a
Pennsylvania corporation and the sole general partner of the Borrower
("Funding"), the Banks, the Agent and the Servicing Agent are parties to a
certain Credit Agreement dated as of May 26, 1995 (as the same has been and may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, the "Credit Agreement"; capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the Credit Agreement);
WHEREAS, concurrently with its execution of the Credit Agreement, the
Borrower executed and delivered a certain Revolving Loan Note dated as of May
26, 1995 (the "Original Note") payable to ING in a maximum principal amount of
$90,000,000, the amount of ING's Commitment under the Credit Agreement;
WHEREAS, upon PNC's becoming a party to the Credit Agreement, the
Original Note was amended and restated by two other Revolving Loan Notes each
dated as of September 25, 1995 made by the Borrower, the first being in the
maximum principal amount of $72,000,000 payable to ING and the second being in
the maximum principal amount of $18,000,000 payable to PNC (collectively, the
"First Amended Notes");
WHEREAS, on March 20, 1996, the Credit Agreement was amended to reduce
the Maximum Facility Amount thereunder from $90,000,000 to $80,000,000 and, in
connection therewith, new Revolving Loan Notes were executed and delivered by
the Borrower to ING and PNC in substitution for the First Amended Notes, which
notes were in the respective maximum principal amounts of $64,000,000 and
$16,000,000 (collectively, the "Second Amended
-7-
<PAGE>
Notes"; and together with the Original Note and the First Amended
Notes, being the "Replaced Notes");
WHEREAS, concurrently with the execution hereof, the Borrower, the
Parent, the Banks, the Agent and the Servicing Agent are entering into a certain
Fourth Amendment (the "Amendment") to the Credit Agreement pursuant to which the
Maximum Facility Amount is being further reduced to $20,000,000 and the
respective Commitments of ING and PNC are being reduced to $16,000,000 and
$4,000,000;
WHEREAS, in connection with such Amendment, the Borrower shall be
required to execute and deliver substitute Revolving Loan Notes (the "Substitute
Notes") to each of ING and PNC, in the forms attached hereto as Exhibit A and B,
respectively, in exchange for (but not in satisfaction or novation of) the
Replaced Notes, each which Substitute Note shall be in a maximum principal
amount equal to the applicable Bank's Commitment under the Credit Agreement (as
so amended);
NOW, THEREFORE, in consideration of the foregoing premises and subject
to the terms and conditions contained herein, the parties hereto agree as
follows:
1. To the extent that the indebtedness heretofore evidenced by the
Replaced Notes shall remain outstanding as of the date on which the Amendment
becomes effective, such indebtedness shall continue to be secured, pursuant to
the terms of the Security Agreement. The Substitute Notes (i) shall, in part,
re-evidence all of the indebtedness of the Borrower outstanding under the
Replaced Notes for any and all loans or other financial accommodations made to
the Borrower by ING and/or PNC, as applicable, (ii) shall, in part, evidence any
loans or other financial accommodations hereafter made by any of the Banks to
the Borrower, (iii) shall be given in substitution for, but not as payment of or
in satisfaction of the Replaced Notes, and (iv) is no way intended to constitute
or otherwise effect a novation of the outstanding indebtedness owing under, and
evidenced by, the Replaced Notes.
2. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
3. This Agreement shall be binding upon, and inure to the benefit of,
the Borrower and its successor and assigns and each of the Banks and its
respective successors and assigns.
-8-
<PAGE>
4. THIS AGREEMENT SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS
DISTINGUISHED FROM THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
J.G. WENTWORTH MFC ASSOCIATES, L.P.
By: J.G. Wentworth Funding Corp.,
its sole general partner
By:________________________________
Title:__________________________
ING (U.S.) CAPITAL CORPORATION,
individually and as Agent
By:________________________________
Title:__________________________
By:________________________________
Title:
PNC BANK, NATIONAL ASSOCIATION,
individually and as Servicing Agent
By:________________________________
Title:
-10-
<PAGE>
EXHIBIT A
to
Note Modification and Substitution Agreement
Dated May __, 1997
Form of Substitute Note for ING
Attached.
-11-
<PAGE>
REVOLVING LOAN NOTE
$16,000,000 Dated: May __, 1997
FOR VALUE RECEIVED, the undersigned, J.G. WENTWORTH MFC ASSOCIATES,
L.P., a Pennsylvania limited partnership (the "Borrower"), HEREBY PROMISES TO
PAY to the order of ING (U.S.) CAPITAL CORPORATION (the "Lender") the principal
sum of SIXTEEN MILLION AND 00/100 DOLLARS ($16,000,000), or, if less, the
aggregate unpaid principal amount of all of the Loans (as defined in the Credit
Agreement referred to below) made by the Lender to the Borrower pursuant to the
Credit Agreement (as hereinafter defined). Terms used herein and not otherwise
defined are used as defined in the Credit Agreement.
The Borrower further promises to pay interest on the unpaid principal
amount of each Loan from the date of such Loan until the principal amount
thereof is paid in full in accordance with the provisions of the Credit
Agreement dated as of May 26, 1995 (as the same has been and may hereafter be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, J.G. Wentworth Funding Corp., certain
financial institutions party thereto (the "Banks"), ING (U.S.) Capital
Corporation, as agent (in such capacity, the "Agent"), and PNC Bank, National
Association, as servicing agent (in such capacity, the "Servicing Agent").
Both principal and interest are payable in lawful money of the United
States of America to the Agent at the Agent's Account or such other account as
the Agent may designate from time to time in same-day funds. All Loans made by
the Lender to the Borrower pursuant to the Credit Agreement and all payments
made on account of principal hereof shall be recorded by the Lender on its books
and records; provided, however, that the failure to so record any Loans or
payments shall not affect the validity of such Loans or payments.
This Revolving Loan Note is one of the Notes referred to in the Credit
Agreement and is entitled to the benefits and subject to the terms of the Credit
Agreement. This Revolving Loan Note is one of the Substitute Notes executed and
delivered by the Borrower pursuant to that certain Note Modification and
Substitution Agreement of even date herewith among the Borrower, the Agent and
the Banks in exchange for the then outstanding
-13-
<PAGE>
Revolving Loan Notes executed by the Borrower pursuant to Credit Agreement (the
"Replaced Notes") and payable to the Banks. It is expressly acknowledged and
agreed that this Revolving Loan Note (i) shall, in part, re-evidence all of the
indebtedness of the Borrower to the Lender outstanding under the Replaced Notes
for any and all loans or other financial accommodations heretofore made to the
Borrower by the Lender under the Credit Agreement, (ii) shall, in part, evidence
any loans or other financial accommodations hereafter made by the Lender to the
Borrower under the Credit Agreement, (iii) shall be given in substitution for,
but not as payment of or in satisfaction of the Replaced Notes, and (iv) is no
way intended to constitute or otherwise effect a novation of the outstanding
indebtedness owing under, and evidenced by, the Replaced Notes.
The Credit Agreement provides for certain mandatory and voluntary
prepayments of principal and interest due hereunder, which prepayments may, in
certain cases, be subject to prepayment premiums or penalties.
Upon and after the occurrence of an Event of Default described in
Sections 9.01(f) or 9.01(s) of the Credit Agreement, this Revolving Loan Note,
in accordance with the terms of the Credit Agreement, may be declared, and
immediately shall become, due and payable, without demand, notice or legal
process of any kind.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]
-13-
<PAGE>
THIS REVOLVING LOAN NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS DISTINGUISHED FROM THE CHOICE OF LAW PROVISIONS) OF THE STATE OF NEW
YORK.
J.G. WENTWORTH MFC ASSOCIATES, L.P.
By: J.G. WENTWORTH FUNDING CORP.,
its sole general partner
By: ________________________________
Name:
Title:
-14-
<PAGE>
Exhibit B
to
Note Modification and Substitution Agreement
Dated May __, 1997
Form of Substitute Note for PNC
Attached.
-15-
<PAGE>
REVOLVING LOAN NOTE
$4,000,000 Dated: May __, 1997
FOR VALUE RECEIVED, the undersigned, J.G. WENTWORTH MFC ASSOCIATES,
L.P., a Pennsylvania limited partnership (the "Borrower"), HEREBY PROMISES TO
PAY to the order of PNC BANK, NATIONAL ASSOCIATION (the "Lender") the principal
sum of FOUR MILLION AND 00/100 DOLLARS ($4,000,000), or, if less, the aggregate
unpaid principal amount of all of the Loans (as defined in the Credit Agreement
referred to below) made by the Lender to the Borrower pursuant to the Credit
Agreement (as hereinafter defined). Terms used herein and not otherwise defined
are used as defined in the Credit Agreement.
The Borrower further promises to pay interest on the unpaid principal
amount of each Loan from the date of such Loan until the principal amount
thereof is paid in full in accordance with the provisions of the Credit
Agreement dated as of May 26, 1995 (as the same has been and may hereafter be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, J.G. Wentworth Funding Corp., certain
financial institutions party thereto (the "Banks"), ING (U.S.) Capital
Corporation, as agent (in such capacity, the "Agent"), and PNC Bank, National
Association, as servicing agent (in such capacity, the "Servicing Agent").
Both principal and interest are payable in lawful money of the United
States of America to the Agent at the Agent's Account or such other account as
the Agent may designate from time to time in same-day funds. All Loans made by
the Lender to the Borrower pursuant to the Credit Agreement and all payments
made on account of principal hereof shall be recorded by the Lender on its books
and records; provided, however, that the failure to so record any Loans or
payments shall not affect the validity of such Loans or payments.
This Revolving Loan Note is one of the Notes referred to in the Credit
Agreement and is entitled to the benefits and subject to the terms of the Credit
Agreement. This Revolving Loan Note is one of the Substitute Notes executed and
delivered by the Borrower pursuant to that certain Note Modification and
Substitution Agreement of even date herewith among the Borrower, the Agent and
the Banks in exchange for the then outstanding
-16-
<PAGE>
Revolving Loan Notes executed by the Borrower pursuant to Credit Agreement (the
"Replaced Notes") and payable to the Banks. It is expressly acknowledged and
agreed that this Revolving Loan Note (i) shall, in part, re-evidence all of the
indebtedness of the Borrower to the Lender outstanding under the Replaced Notes
for any and all loans or other financial accommodations heretofore made to the
Borrower by the Lender under the Credit Agreement, (ii) shall, in part, evidence
any loans or other financial accommodations hereafter made by the Lender to the
Borrower under the Credit Agreement, (iii) shall be given in substitution for,
but not as payment of or in satisfaction of the Replaced Notes, and (iv) is no
way intended to constitute or otherwise effect a novation of the outstanding
indebtedness owing under, and evidenced by, the Replaced Notes.
The Credit Agreement provides for certain mandatory and voluntary
prepayments of principal and interest due hereunder, which prepayments may, in
certain cases, be subject to prepayment premiums or penalties.
Upon and after the occurrence of an Event of Default described in
Sections 9.01(f) or 9.01(s) of the Credit Agreement, this Revolving Loan Note,
in accordance with the terms of the Credit Agreement, may be declared, and
immediately shall become, due and payable, without demand, notice or legal
process of any kind.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]
-17-
<PAGE>
THIS REVOLVING LOAN NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
J.G. WENTWORTH MFC ASSOCIATES, L.P.
By: J.G. WENTWORTH FUNDING CORP.,
its sole general partner
By: _______________________________
Name:
Title:
-18-
<PAGE>
EXHIBIT B
TO
FOURTH AMENDMENT
CONSENT AND REAFFIRMATION
Gary Veloric hereby consents to the foregoing Fourth Amendment dated as
of May __, 1997 to that certain Credit Agreement dated as of May 26, 1995 (as
amended), in each case, among J.G. Wentworth MFC Associates, L.P., J.G.
Wentworth Funding Corp., certain financial institutions from time to time
parties thereto, ING (U.S.) Capital Corporation, as agent, and PNC Bank,
National Association, as servicing agent, and reaffirms its obligations under
that certain Guaranty and Surety Agreement ("Guaranty") executed by him, dated
as of May 26, 1995, which Guaranty remains in full force and effect.
___________________________
By: Gary Veloric
Dated: May __, 1997
-19-
<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF __________ )
Before me on this ____ day of May, 1997 appeared Gary Veloric, who executed this
Consent and Reaffirmation and acknowledged that he did so as his own free act
and deed.
____________________________
Notary Public
My commission expires_______
-20-
<PAGE>
EXHIBIT C
TO
FOURTH AMENDMENT
CONSENT AND REAFFIRMATION
James DeLaney hereby consents to the foregoing Fourth Amendment dated
as of May __, 1997 to that certain Credit Agreement dated as of May 26, 1995 (as
amended), in each case, among J.G. Wentworth MFC Associates, L.P., J.G.
Wentworth Funding Corp., certain financial institutions from time to time
parties thereto, ING (U.S.) Capital Corporation, as agent, and PNC Bank,
National Association, as servicing agent, and reaffirms its obligations under
that certain Guaranty and Surety Agreement ("Guaranty") executed by him, dated
as of May 26, 1995, which Guaranty remains in full force and effect.
___________________________
By: James DeLaney
Dated: May __, 1997
-21-
<PAGE>
STATE OF PENNSYLVANIA )
)SS
COUNTY OF __________ )
Before me on this ____ day of May, 1997 appeared James DeLaney, who executed
this Consent and Reaffirmation and acknowledged that he did so as his own free
act and deed.
____________________________
Notary Public
My commission expires_______
-22-
<PAGE>
EXHIBIT D
TO
FOURTH AMENDMENT
UCC Amendments and UCC Financing Statements to be Executed
[To be added]
-23-
<PAGE>
ASSIGNMENT AND ASSUMPTION
Reference is made to the Credit Agreement dated as of May 26, 1995 (the
"Credit Agreement") among J.G. Wentworth MFC Associates, L.P., a Pennsylvania
limited partnership (the "Borrower"), J.G. Wentworth Funding Corp., a
Pennsylvania corporation (the "General Partner"), certain financial institutions
party thereto (the "Banks") and Internationale Nederlanden (U.S.) Capital
Markets, Inc., as Agent for the Banks (the "Agent"). Terms defined in the Credit
Agreement are used herein with the same meaning.
Internationale Nederlanden (U.S.) Capital Markets, Inc. (the
"Assignor") and PNC Bank, National Association (the "Assignee") agree as
follows:
1. In consideration of the payment by the Assignee to the Assignor of
$12,157,812.77, the Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, that percentage
specified in Section 1 of Schedule I attached hereto of all of the Assignor's
rights and obligations under the Credit Agreement as of the Effective Date (as
defined in Section 4 hereof), including, without limitation, such percentage of
the Assignor's Commitment and the outstanding Loans owing to the Assignor. After
giving effect to such sale and assignment, the Assignee's Commitment, Commitment
Percentage and the outstanding principal amount of the Loans owing to the
Assignee on the Effective Date will be as set forth in Section 2 of Schedule I
attached hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or any of the other Loan Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency, or value of the Credit Agreement, any
of the other Loan Documents or any other instrument or document furnished
pursuant thereto; and (iii) makes no representation or warranty
1
<PAGE>
and assumes no responsibility with respect to the financial condition of the
Borrower, the General Partner or any Guarantor or the performance or observance
by any of the foregoing Persons of any of their respective obligations under the
Credit Agreement, any of the other Loan Documents or any other instrument or
document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of such financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption; (ii) agrees
that it will, independently and without reliance upon the Agent, the Assignor or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement or any of the other Loan Documents;
(iii) appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Agreement and the other Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank; and (v) specifies
as its address for notices the office set forth beneath its name on the
signature pages hereof.
4. Following the execution of this Assignment and Assumption by the
Assignor and the Assignee, it will be delivered to the Agent for acceptance and
recording by the Agent. The effective date of this Assignment and Assumption
(the "Effective Date") shall be the date of acceptance thereof by the Agent
unless a later date is specified in Section 3 of Schedule I.
5. Upon such acceptance and recording by the Agent, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Assumption, have the rights and
obligations of a Bank thereunder including its obligation to comply with the
provisions contained in Section 11.12 of the Credit Agreement and (ii) the
Assignor shall, to the extent provided in this Assignment and Assumption,
relinquish its rights and be released from its obligations under the Credit
Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement in
respect of the interest
2
<PAGE>
assigned hereby (including, without limitation, all payments of principal,
interest, and fees hereunder with respect thereto) to the Assignee. The Assignor
and Assignee shall make all appropriate adjustments in payments under the Credit
Agreement for periods prior to the Effective Date directly between themselves.
7. The Assignor hereby agrees (solely in its individual
capacity as a Bank, and not as Agent, under the Credit Agreement) that for so
long as it shall by itself constitute the "Required Banks" under the Credit
Agreement, it will not, without the consent of the Assignee (which consent shall
not unreasonably be withheld; it being understood and agreed by the parties
hereto that (except in the case of clause (g) below) the withholding of any such
consent shall be deemed to be reasonable only to the extent that the Assignee
reasonably determines that the consummation of the action with respect to which
its consent shall be so sought could reasonably be expected to materially and
adversely effect the financial condition of the Borrower, the Collateral (taken
as a whole), the Borrower's performance of its obligations under the Credit
Agreement and the other Loan Documents, or the likelihood of the timely
repayment in full to the Assignee of all of the Obligations owing to it under
the Credit Agreement and the other Loan Documents:
(a) agree to any waiver or modification of the provisions of Section 8.1(a)
of the Credit Agreement with respect to any merger or consolidation by the
Borrower, unless (x) the Borrower shall be the surviving entity thereof,
(y) the net worth of such resulting entity would be greater than or equal
to the Borrower's net worth immediately prior to such merger or
consolidation and (z) no Event of Default or Potential Default would
otherwise occur as a result thereof under any other Section of the Credit
Agreement;
(b) agree to any waiver or modification of the provisions of Section 8.1(b)
of the Credit Agreement that would permit the incurrence by the Borrower of
any Indebtedness or Lien (other than under the Credit Agreement) in excess
of $50,000, in the aggregate, at any time outstanding;
(c) agree to any waiver or modification of the provisions of Section 8.1(c)
of the Credit Agreement that would permit the Borrower to enter into any
Guaranty (other than in favor of the Agent for the benefit of the Banks) of
any amount in excess of $50,000, in the aggregate, at any time outstanding;
3
<PAGE>
(d) agree to (x) any waiver or modification of the provisions of Section
8.1(f) of the Credit Agreement or (y) the release of the Agent's Lien on
any Collateral, except any such Collateral permitted to be disposed of in
accordance with Section 8.1(f) of the Credit Agreement;
(e) agree to any waiver or modification of the provisions of Section 8.1(k)
of the Credit Agreement;
(f) agree to (x) any modification of the terms of, or (y) any waiver or
forbearance of any Event of Default of which the Assignor has actual
knowledge under, Section 9.1(a), 9.1(b) (solely as it relates to the
covenants set forth in Sections 8.1 and 8.2 of the Credit Agreement,
provided, that this clause (f) shall not be interpreted as limiting in any
way the Assignor's right to modify the terms and provisions of any covenant
set forth in Section 8.1, 8.2 or elsewhere in the Credit Agreement or in
any of the other Loan Documents (to the extent not otherwise expressly
prohibited hereunder) at any time prior to the Assignor's acquiring actual
knowledge of the occurrence of any Event of Default or Potential Default as
a result of the non-compliance of any such covenant by the Borrower or the
General Partner, as applicable), 9.1(h), 9.1(i), 9.1(j), 9.1(k), 9.1(l)
(provided that this clause (f) shall not be deemed to limit the Assignor's
right or discretion to make any determination under Section 9.1(l) of the
Credit Agreement as to the likelihood of a Material Adverse Effect under
such Section or to require any consent of the Assignee with respect to any
such determination by the Assignor), or 9.1(m) of the Credit Agreement; or
(g) agree to any modification of the terms and provision of Article 10
which would adversely effect the Banks.
8. Notwithstanding anything contained herein or in the Agreement to the
contrary, the Assignee shall not be bound by, or make any representation,
warranty or covenant hereunder or under the Agreement as to its compliance with,
the restrictions set forth in Sections 11.11(c)(iii) and Section 11.17 of the
Agreement regarding the Assignee's engaging in financing transactions with
Competitors of the Borrower; it being acknowledged and agreed that the Assignee
currently engages, and may from time to time hereafter engage, in transactions
of such type with Competitors of the Borrower.
4
<PAGE>
9. This Assignment and Assumption shall be governed by, and construed
in accordance with, the laws of the State of New York.
10. This Assignment and Assumption may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.
5
<PAGE>
Schedule I
to
Assignment and Assumption
Dated September 25, 1995
<TABLE>
<CAPTION>
Section 1.
<S> <C>
Commitment Percentage of Assignor prior to giving
effect to this assignment: 100%
Percentage of Assignor's interest in the Credit
Agreement being assigned under this assignment: 20%
Commitment Percentage of Assignor after giving
effect to this assignment: 80%
Commitment of Assignor prior to giving
effect to this assignment: $90,000,000
Commitment of Assignor after giving
effect to this assignment: $72,000,000
Aggregate Outstanding Principal
Amount of Loans Owing to the Assignor
immediately prior to giving effect to
this assignment: $60,789,063.84
Aggregate Outstanding Principal
Amount of Loans Owing to the Assignor
immediately after giving effect to
this assignment: $48,631,251.07
Section 2.
Assignee's Commitment after giving effect
to this assignment: $18,000,000
Commitment Percentage of Assignor after giving
effect to this assignment: 20%
Aggregate Outstanding Principal
Amount of Loans Owing to the Assignee
immediately after giving effect to
this assignment: $12,157,812.77
Section 3.
1
<PAGE>
Effective Date: September 25, 1995
</TABLE>
2
<PAGE>
ASSIGNOR: INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
MARKETS, INC.
By:_______________________
Title:_________________
ASSIGNEE: PNC BANK, NATIONAL ASSOCIATION
By:_________________________
Title:___________________
Address for notices:
Land Title Building
Broad & Chestnut Streets
Philadelphia, PA 19101
Attn: Mr. Thomas A. Gutman
Telephone No.: (215)585-5220
Telecopy No.: (215)585-8351
Accepted this ____ day of ______________, 1995
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC.,
as Agent
By:________________________
Title:__________________
3
<PAGE>
The undersigned each hereby acknowledges and agrees to the provision set forth
in Section 8 of this Assignment and Assumption and with the assignment
contemplated herein on the terms and conditions set forth in such Section.
J.G. WENTWORTH MFC ASSOCIATES, L.P.
By: J.G. WENTWORTH FUNDING CORP., its
General Partner
By:______________________________
Name:
Title:
J.G. WENTWORTH FUNDING CORP.
By:______________________________
Name:
Title:
4
================================================================================
J.G. WENTWORTH RECEIVABLES III LLC
as the Issuer
J.G. WENTWORTH & COMPANY, INC.
as the Initial Master Servicer
and
PNC BANK, NATIONAL ASSOCIATION
as the Trustee
MASTER TRUST INDENTURE AND
SECURITY AGREEMENT
Dated as of September 30, 1997
================================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions............................................................................... 2
SECTION 1.02. Other Definitional Provisions............................................................. 21
SECTION 1.03. Incorporation by Reference to Trust Indenture Act......................................... 21
SECTION 1.04. Acts of Noteholders....................................................................... 22
SECTION 1.05. Conflict with Trust Indenture Act......................................................... 22
SECTION 1.06. Benefits of Indenture..................................................................... 23
SECTION 1.07. Incorporation of Recitals................................................................. 23
ARTICLE II
GRANT OF SECURITY INTEREST IN RECEIVABLES;
ORIGINAL ISSUANCE OF NOTES
SECTION 2.01. Grant of Security Interest in Assets; No Assumption of Obligations
Related to Receivables; Certain Matters Regarding the Grant............................. 23
SECTION 2.02. Acceptance by Trustee..................................................................... 24
SECTION 2.03. Representations and Warranties of the Issuer.............................................. 24
(a) Organization and Good Standing............................................................ 24
(b) Due Qualification......................................................................... 24
(c) Due Authorization; Conflicts.............................................................. 25
(d) Consents.................................................................................. 25
(e) Enforceability............................................................................ 25
(f) Proceedings............................................................................... 25
(g) Compliance with Laws, Etc................................................................. 25
(h) Margin Regulations........................................................................ 25
(i) Locations................................................................................. 25
(j) LockBox Banks............................................................................. 26
(k) ERISA Matters............................................................................. 26
(l) ProForma Balance Sheet.................................................................... 26
(m) Taxes..................................................................................... 26
(n) Other Agreements.......................................................................... 26
(o) Accuracy of Information................................................................... 26
(p) Investment Company Act Matters............................................................ 27
(q) Title to Property......................................................................... 27
(r) Tradenames................................................................................ 27
(s) Subsidiaries.............................................................................. 27
(t) Solvency.................................................................................. 27
(u) Valid Transfer and Valid Grant............................................................ 27
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
(v) No Claim or Interest...................................................................... 27
(w) Offering of Notes......................................................................... 27
(x) Originator Receivables.................................................................... 28
SECTION 2.04. [Reserved]................................................................................ 28
SECTION 2.05. Affirmative Covenants of the Issuer....................................................... 28
(a) Compliance with Law....................................................................... 28
(b) Preservation of Existence................................................................. 28
(c) Inspection of Books and Records........................................................... 28
(d) Keeping of Records and Books of Account................................................... 28
(e) Location of Records....................................................................... 29
(f) Maintenance of Separate Members........................................................... 29
(g) Issuer Purchase Agreement and Seller Purchase Agreement................................... 29
(h) Payment of Taxes, Etc..................................................................... 29
(i) Reporting Requirements.................................................................... 29
(j) Acquisition of Receivables from the Seller................................................ 30
(k) Collections............................................................................... 31
(l) Computer Services......................................................................... 31
(m) ERISA..................................................................................... 31
(n) Accounting for Transfers.................................................................. 32
(o) Fidelity Insurance........................................................................ 32
(p) Confidentiality of Settlement Agreements.................................................. 32
SECTION 2.06. Negative Covenants of the Issuer......................................................... 32
(a) No Liens.................................................................................. 32
(b) Activities of the Issuer.................................................................. 33
(c) Indebtedness.............................................................................. 33
(d) Guarantees................................................................................ 33
(e) Investments............................................................................... 33
(f) Extension or Amendment of Receivables..................................................... 33
(g) Change in Credit Policy Manual............................................................ 34
(h) Deposits to LockBox Accounts or the Master Collection Account;
Deposits to Series Collection Accounts.................................................... 35
(i) Receivables Not To Be Evidenced by Promissory Notes....................................... 35
(j) Change in Name or Jurisdiction of Organization............................................ 35
(k) Issuer Purchase Agreement................................................................. 35
(l) Organizational Documents.................................................................. 36
(m) Maintenance of Separate Existence......................................................... 36
(n) Merger and Other Transactions............................................................. 38
(o) Transactions with Affiliates.............................................................. 38
(p) Change in LockBox Accounts and Instructions to Obligors................................... 38
(q) Classification Election................................................................... 39
(r) Ownership of Issuer....................................................................... 39
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
<S> <C> <C>
SECTION 3.01 Acceptance of Appointment and Other Matters Relating
to the Master Servicer................................................................... 39
SECTION 3.02 Servicing Compensation..................................................................... 41
SECTION 3.03 Representations and Warranties of Each Master Servicer..................................... 41
(a) Organization and Good Standing............................................................. 41
(b) Due Qualification.......................................................................... 41
(c) Due Authorization.......................................................................... 41
(d) Binding Obligation......................................................................... 41
(e) No Conflict................................................................................ 41
(f) No Proceedings............................................................................. 42
(g) No Consents................................................................................ 42
(h) Information................................................................................ 42
SECTION 3.04 Covenants of the Master Servicer........................................................... 42
(a) Change in Accounts......................................................................... 42
(b) Collections................................................................................ 43
(c) Preservation of Existence; Compliance with Requirements of Law............................. 43
(d) Extension or Amendment of Receivables...................................................... 43
(e) Protection of Noteholders' Rights.......................................................... 43
(f) Deposits to LockBox Accounts or Collection Account......................................... 43
(g) Receivables Not To Be Evidenced by Promissory Notes........................................ 44
(h) Reporting Requirements..................................................................... 44
(i) Inspection of Books and Records............................................................ 44
(j) Fidelity Insurance......................................................................... 45
(k) Transactions With the Issuer............................................................... 45
SECTION 3.05 Reports and Records for the Trustee........................................................ 45
(a) Daily Report............................................................................... 45
(b) Monthly Report............................................................................. 45
(c) Monthly Reconciliations.................................................................... 45
SECTION 3.06 Servicing Report of Independent Public Accountants......................................... 46
SECTION 3.07 Notices to Wentworth and the Issuer........................................................ 46
SECTION 3.08 Adjustments................................................................................ 46
ARTICLE IV
RIGHTS OF NOTEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.01 Rights of Noteholders...................................................................... 47
SECTION 4.02 Establishment of the Master Collection Account and
the LockBox Accounts.................................................................... 47
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
SECTION 4.03 Establishment of the Trustee's Account..................................................... 49
SECTION 4.04 Other Payments............................................................................. 49
ARTICLE V
DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS
......................................................................................................... 50
ARTICLE VI
THE NOTES
SECTION 6.01 The Notes.................................................................................. 50
SECTION 6.02 Authentication of Notes.................................................................... 50
SECTION 6.03 Registration of Transfer and Exchange Notes................................................ 51
SECTION 6.04 Mutilated, Destroyed, Lost or Stolen Notes................................................ 52
SECTION 6.05 Persons Deemed Owners..................................................................... 52
SECTION 6.06 Appointment of Paying Agent............................................................... 53
SECTION 6.07 Access to List of Noteholders' Names and Addresses......................................... 53
SECTION 6.08 Authenticating Agent....................................................................... 54
SECTION 6.09 New Issuances.............................................................................. 55
SECTION 6.10 Transfer of Notes.......................................................................... 57
ARTICLE VII
OTHER MATTERS RELATING TO THE ISSUER
SECTION 7.01 Obligations Not Assignable................................................................. 58
SECTION 7.02 Limitations on Liability................................................................... 58
SECTION 7.03 Indemnification by the Issuer.............................................................. 58
ARTICLE VIII
OTHER MATTERS RELATING TO THE APPLICABLE MASTER SERVICERS
SECTION 8.01 Liability of Each Applicable Master Servicer............................................... 58
SECTION 8.02 Merger or Consolidation of, or Assumption of the Obligations of,
any Applicable Master Servicer....................................................... 58
SECTION 8.03 Limitations on Liability................................................................... 59
SECTION 8.04 Indemnification by Master Servicers........................................................ 59
SECTION 8.05 Master Servicer Not to Resign.............................................................. 60
SECTION 8.06 Examination of Records..................................................................... 60
</TABLE>
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ARTICLE IX
EVENTS OF DEFAULT
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SECTION 9.01 Events of Default.......................................................................... 60
SECTION 9.02 Additional Rights Upon the Occurrence of any Event of Default.............................. 61
SECTION 9.03 Certain Specific Rights Upon the Occurrence of an Insolvency Event......................... 61
ARTICLE X
SERVICER DEFAULTS
SECTION 10.01 Servicer Defaults.......................................................................... 62
SECTION 10.02 Trustee to Act; Appointment of Successor................................................... 63
SECTION 10.03 Notification to Noteholders................................................................ 64
ARTICLE XI
THE TRUSTEE
SECTION 11.01 Duties of Trustee.......................................................................... 64
SECTION 11.02 Certain Matters Affecting the Trustee...................................................... 66
SECTION 11.03 Trustee Not Liable for Recitals in Notes................................................... 67
SECTION 11.04 Compensation; Trustee's Expenses........................................................... 67
SECTION 11.05 Eligibility Requirements for Trustee....................................................... 68
SECTION 11.06 Resignation or Removal of Trustee.......................................................... 68
SECTION 11.07 Successor Trustee.......................................................................... 69
SECTION 11.08 Merger or Consolidation of Trustee......................................................... 69
SECTION 11.09 Appointment of CoTrustee or Separate Trustee............................................... 69
SECTION 11.10 Tax Returns................................................................................ 70
SECTION 11.11 Trustee May Enforce Claims Without Possession of Notes..................................... 71
SECTION 11.12 Suits for Enforcement...................................................................... 71
SECTION 11.13 Rights of Noteholders to Direct Trustee.................................................... 71
SECTION 11.14 Representations and Warranties of Trustee.................................................. 72
SECTION 11.15 Maintenance of Office or Agency............................................................ 72
SECTION 11.16 Trustee May Own Notes...................................................................... 72
ARTICLE XII
SATISFACTION AND DISCHARGE
SECTION 12.01 Satisfaction and Discharge of the Indenture................................................ 72
SECTION 12.02 Final Distribution......................................................................... 73
SECTION 12.03 Release of Liens........................................................................... 73
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
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SECTION 13.01 Amendment; Waiver of Default Events........................................................ 73
SECTION 13.02 Protection of Right, Title and Interest to Pledged Assets.................................. 75
SECTION 13.03 Limitation on Rights of Noteholders........................................................ 76
SECTION 13.04 Governing Law; Jurisdiction; Consent to Service of Process................................. 76
(a) Governing Law................................................................................ 76
(b) Jurisdiction................................................................................. 76
(c) Consent to Service of Process................................................................ 77
SECTION 13.05 Notices; Payments.......................................................................... 77
SECTION 13.06 Assignment of the Issuer Purchase Agreement................................................ 77
SECTION 13.07 Severability of Provisions................................................................. 78
SECTION 13.08 Assignment................................................................................ 78
SECTION 13.09 [Reserved]................................................................................ 78
SECTION 13.10 Further Assurances........................................................................ 78
SECTION 13.11 Nonpetition Covenant....................................................................... 78
SECTION 13.12 No Waiver; Cumulative Remedies............................................................. 79
SECTION 13.13 Counterparts............................................................................... 79
SECTION 13.14 Third Party Beneficiaries.................................................................. 79
SECTION 13.15 Actions by Noteholders..................................................................... 79
SECTION 13.16 Merger and Integration..................................................................... 79
SECTION 13.17 Headings................................................................................... 79
SECTION 13.18 [Reserved]................................................................................. 79
SECTION 13.19 Tax and Usury Treatment.................................................................... 79
SECTION 13.20 Liability of the Issuer.................................................................... 80
SECTION 13.21 Offers to Purchase Notes................................................................... 80
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SCHEDULES
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Schedule I Credit Policy Manual
Schedule II Issuer's Chief Executive Office and Location of Records
Schedule III Lock-Box Banks and Lock-Box Accounts
Schedule IV Required Contents of a Receivables Package
Schedule V Eligible Receivables Purchase Procedures
Schedule VI ERISA Matters
EXHIBITS
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Exhibit A Form of Settlement Purchase Agreements
Exhibit B Form of Lock-Box Notice
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<PAGE>
MASTER TRUST INDENTURE AND SECURITY AGREEMENT, dated as of September 30,
1997, among J.G. WENTWORTH RECEIVABLES III LLC, a Delaware limited liability
company as the Issuer, J.G. WENTWORTH & COMPANY, INC., a Pennsylvania
corporation, as the Initial Master Servicer, and PNC BANK, NATIONAL ASSOCIATION,
as the Trustee.
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties, the Noteholders and each
Series Enhancer (as defined below) to the extent provided herein and in any
Supplement:
RECITALS OF THE ISSUER
The Issuer has duly authorized the creation and issuance of each Series of
Notes, each Series to be of substantially the tenor and amount set forth herein
and in the respective Supplement relating to each such Series of Notes. In order
to provide for the foregoing, the Issuer has duly authorized the execution and
delivery of this Indenture.
The Notes shall each be limited recourse obligations of the Issuer and
shall be secured solely by and paid solely from the Noteholders' respective
allocable shares of the Pledged Assets as set forth herein. If and to the extent
that such allocable share is insufficient to pay all amounts owing with respect
to such Notes, then, except as otherwise expressly provided hereunder, the
Noteholders of such Notes shall have no claim in respect of such insufficiency
against the Issuer or any of its other assets or properties (including, without
limitation, any Pledged Assets allocable to any other Notes in accordance with
the terms hereof), and the Noteholders, by their acceptance of the Notes, hereby
waive any such claim.
All things necessary to (a) make the Notes, when executed by the Issuer and
authenticated and delivered by the Trustee hereunder and duly issued by the
Issuer, the valid obligations of the Issuer, and (b) make this Indenture a valid
agreement of the Issuer, in each case, in accordance with their respective
terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Issuer, in consideration of the premises herein contained and of
the purchase of the Notes by the Noteholders, and for other good and lawful
consideration, the receipt of which is hereby acknowledged, will, pursuant to
each Supplement, in order to secure, equally and ratably without prejudice,
priority or distinction, except as specifically otherwise set forth in this
Indenture and in the respective Supplement, the payment of the Notes issued
pursuant to such Supplement, the payment of all other amounts due under or in
connection with such Notes or with this Indenture, and the performance and
observance of all of the covenants and conditions contained herein or in such
Notes, from time to time grant a security interest, in each case, in and unto
the Trustee, its successors and assigns and its or their assigns forever, for
the benefit of the Noteholders of the specific Series of Notes issued pursuant
to such Supplement all and singular in the property hereinafter described, to
wit:
All of the Issuer's right, title and interest in, to and under, (i) each
Receivable set forth on the List of Receivables delivered by the Issuer to the
Trustee on or before each Series
<PAGE>
Closing Date or Subsequent Funding Date in connection with the issuance of such
Notes, (ii) all Related Property relating to such Receivables, (iii) all monies
due or to become due and all Collections and other amounts received from time to
time with respect to such Receivables on or after the applicable Series Cut-Off
Date for the Series to which such Receivables are allocated, and (iv) all
proceeds (including, without limitation, "proceeds" as defined in the UCC of the
jurisdiction the law of which governs the perfection of the security interest in
such Receivables) of any of the foregoing. Such property described in the
preceding sentence, together with all monies allocable to such Series from time
to time on deposit in, and all Eligible Investments and other securities,
instruments and other investments purchased from funds allocable to such Series
on deposit in, any Lock-Box Account, the Master Collection Account, the
applicable Series Collection Account, the applicable Series Payment Account, any
other applicable Series Account for such Series and the Trustee's Account, shall
constitute the "Series Pledged Assets" and the Series Pledged Assets for all
Series shall be referred to collectively as the "Pledged Assets".
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the parties
hereto that all Notes are to be issued, countersigned and delivered and that all
of the Pledged Assets are to be held and applied, subject to the further
covenants, conditions, releases, uses and trusts hereinafter set forth, and the
Issuer and each Applicable Master Servicer, in each case, for itself and its
successors, does hereby covenant and agree to and with the Trustee and each of
the foregoing's respective successors in said trust, for the benefit of those
who shall hold the Notes, or any of them, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Whenever used in this Agreement, 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.
"Act of Noteholders" has the meaning specified in Section 1.04.
"Affiliate" shall mean, with reference to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person; provided, that for purposes of this Agreement when used with respect to
Wentworth or any of its direct or indirect subsidiaries or Affiliates, any
limited partners of such Persons (other than ING Capital or any of its
Affiliates) shall also be deemed "Affiliates" of any such Person. For the
purposes of this definition, "control" when used with reference to any specified
Person shall mean the power to direct the management and policies of such
specified Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Affiliated Entity" means any of Wentworth, any of its direct or indirect
subsidiaries or any Affiliate of any of the foregoing.
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"Aggregate Discounted Receivables Balance" shall mean, with respect to any
designated group of Receivables at any time, the sum at such time of the
respective Discounted Receivables Balances of such Receivables.
"Aggregate Principal Balance" shall mean, with respect to any designated
group of Notes, the sum at such time of the respective Principal Balances of
such Notes.
"Agreement" or "Indenture" shall mean this Master Trust Indenture and
Security Agreement, as the same may from time to time be amended, modified or
otherwise supplemented, including, with respect to any Series or Class, the
related Supplement.
"Agreement of Limited Partnership" shall mean the Agreement of Limited
Partnership of J.G. Wentworth S.S.C. Limited Partnership dated as of August 25,
1995 among James Delaney, Gary Veloric, Michael Goodman, ING Capital (as
successor by assignment to ING Baring (U.S.) Capital Markets, Inc., formerly
known as Internationale Nederlanden (U.S.) Capital Markets, Inc.), Stone
International, LLC, and the General Partner, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Amortization Date" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"Amortization Period" shall mean, with reference to any Series, unless
otherwise specified in the related Supplement, the period beginning on the
Amortization Date with respect to such Series, and ending upon the Collection
Date with respect to such Series; provided, however, that if, at any time after
the payment that would have otherwise resulted in the end of the Amortization
Period for any Series, such payment is rescinded or must otherwise be returned
for any reason, then effective upon such rescission or return the Amortization
Period shall automatically be deemed not to have occurred until all such
rescinded or returned amounts are subsequently paid in full.
"Annuity Contract" shall mean an annuity contract issued by an Annuity
Provider to fund the obligations of an Obligor under a Settlement Agreement,
including, without limitation, a Qualified Annuity Contract.
"Annuity Provider" shall mean the issuer of any Annuity Contract, including
any Qualified Annuity Contract.
"Applicable Master Servicer" shall mean, with reference to any Series, the
Person then acting in the capacity as Master Servicer with respect thereto at
such time. Unless otherwise designated in or pursuant to any Supplement, the
Initial Master Servicer for each Series shall be Wentworth.
"Applicable Series Collection Account" shall mean, with reference to any
Series, the Series Collection Account for such Series.
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"Assignee" shall mean the Person to which the obligations to make payments
under a Settlement Agreement have been assigned pursuant to an Assignment and
shall include, without limitation, a Qualified Assignee.
"Assignment" shall mean an assignment of the obligations to make payments
under a Settlement to an Assignee, including, without limitation, a Qualified
Assignment.
"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 Servicer" shall mean Electronic Data Systems Corporation or any
successor thereto as Back-up Servicer under the Back-up Servicing Agreement.
"Back-up Servicing Agreement" shall mean that certain Back-up Servicing
Agreement dated as of June 6, 1997 among PNC and the Back-up Servicer, as
amended by that certain Amendment No. 1 of even date herewith as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"Business Day" shall mean any day other than a Saturday or Sunday or any
other day on which national banking associations or state banking institutions
in New York, New York or Wilmington, DE or Philadelphia, Pennsylvania are
authorized or obligated by law, executive order or governmental decree to be
closed; provided, however, that as it relates to any specific Series, the term
"Business Day" may have such other meaning, if any, as may be specified in the
related Supplement.
"Class" shall mean, with respect to any Series, any class of Notes
designated pursuant to the Supplement relating to that Series.
"Claimant" shall mean the Person (or such Person's heir) entitled to
receive the Settlement under the terms of the Settlement Agreement.
"Closing Date" shall mean September 30, 1997.
"Collateral Trustee" shall mean the Person serving in such capacity under
the Intercreditor Agreement (not individually but solely in its capacity as
Collateral Trustee); provided, that in any event, the Trustee and the Collateral
Trustee shall at all times be the same Person. The initial Collateral Trustee
shall be PNC Bank, National Association.
"Collection Date" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"Collection Period" shall mean, with respect to any Payment Date, the
calendar month immediately preceding the calendar month in which such Payment
Date occurs.
"Collections" shall mean (a) all cash payments by or on behalf of the
Obligors (including, without limitation, pursuant to any Annuity Contract)
deposited to any Lock-Box
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<PAGE>
Account, the Master Collection Account or any applicable Series Collection
Account, or received by the Applicable Master Servicer or the Issuer, in respect
of Receivables or Related Property in the form of cash, checks, wire transfers,
electronic transfers or any other form of cash payment (including, without
limitation, from the Issuer in connection with any repurchase of such Receivable
pursuant to Sections 2.06(f)(iii) or (iv)) and (b) all interest and other
investment earnings (net of losses and investment expenses) on Collections as a
result of the investment thereof pursuant to Section 4.02; provided, however,
that the Noteholders of each Series shall be entitled to receive payments only
out of those Collections relating to the Receivables allocated to such Series
and the Holders of such Series shall have no rights to, or recourse against, the
Collections in respect of any other Receivables. Any amounts paid by any Series
Enhancer in reduction of the principal amount of any Note of such Series, any
interest thereon or any other amount in connection therewith shall not
constitute Collections.
"Commutable Settlement" shall have the meaning specified in Section
2.06(f).
"Company" shall mean J.G. Wentworth S.S.C. Limited Partnership, a Delaware
limited partnership.
"Control Party" shall mean, with reference to any Series, the Person or
Persons designated as such in the related Supplement.
"Corporate Trust Office" shall have the meaning specified in Section 11.15.
"Credit Policy Manual" shall mean the credit and collection policies and
practices of the Company, including, without limitation, those described in
Schedule I hereto, in effect on the date hereof, relating to Receivables, as
modified from time to time in compliance with Section 2.06(g).
"Daily Report" shall mean, with respect to any Business Day and any Series,
a report prepared by a Servicing Officer of the Applicable Master Servicer for
such Business Day, and acknowledged by the Seller in writing, as of the end of
the immediately preceding Business Day in substantially the form set forth in
the related Supplement.
"Defaulted Receivable" shall mean, unless otherwise specified in the
Supplement exclusively with respect to the related Series designated thereunder,
a Receivable with respect to which:
(a) any Scheduled Payment (or any portion thereof) due thereunder has
been or should have been deemed to be uncollectible by the Applicable
Master Servicer or the Trustee in accordance with the Credit Policy Manual;
provided, however, that only such portion of such Receivable that has been
or should have been so deemed uncollectible shall constitute a Defaulted
Receivable pursuant to this clause (a);
(b) the Trustee does not have a first priority perfected security
interest, free and clear of any Liens;
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(c) the related Annuity Provider has become or has been deemed
insolvent, and either (x) its liquidation or rehabilitation plan has caused
the stated amount of the Scheduled Payments due in respect of the related
Annuity Contract to be reduced, delayed or otherwise modified, (y) a
liquidation or rehabilitation plan providing for the full payment of the
related Annuity Contract has been adopted and approved by the applicable
court but such order remains subject to appeal, or (z) no rehabilitation or
reorganization plan dealing with payment of the related Annuity Contracts
has yet been adopted and approved by the applicable court; provided, that
in the case of clause (y) or (z) above, to the extent that such court has
entered an order authorizing or requiring the continued payment in full of
the Scheduled Payments owing by such Annuity Provider under the related
Annuity Contract in accordance with the terms thereof pending the entry and
approval of such a plan or such a plan becoming final, then such
Receivables shall not be deemed to be Defaulted Receivables pursuant to
this clause (c); and provided, further, that only such portion of such
Receivable which is so reduced, delayed or otherwise modified shall be
deemed to be a Defaulted Receivable pursuant to this clause (c);
(d) any Scheduled Payment (or any portion thereof) is more than 90
days past due;
(e) any Scheduled Payment (or any portion thereof) has been diverted
by the Claimant or any other Person and such diverted payment has not been
returned to the Issuer within 15 days after such diversion; or
(f) any Person other than the Trustee obtains an interest in all or
any portion of the Scheduled Payments to be made thereunder; provided, that
only such portion of such Scheduled Payment which is so encumbered (and
only for so long as so encumbered) shall be deemed to be a Defaulted
Receivable pursuant to this clause (f); and provided, further, that this
clause (f) shall not be deemed to include any interest of any such other
Person in any Scheduled Payment (or portion thereof) to the extent
constituting (i) any Split Payment obligation owing to any Claimant with
respect thereto, (ii) any security interest under the Revolving Credit
Facility covering such Scheduled Payments to the extent that the
Intercreditor Agreement remains in full force and effect with respect
thereto, or (iii) any Lien granted by, or imposed against, any of the
Noteholders, the Trustee or the Collateral Trustee covering such Settlement
Payment;
it being understood and agreed, that a Receivable that was a Defaulted
Receivable may thereafter cease to be deemed a Defaulted Receivable upon the
cure of the circumstances that rendered such Receivable to be a Defaulted
Receivable (such Receivable shall be deemed to have been "Rehabilitated");
provided, that in the case of a Receivable deemed to be a Defaulted Receivable
pursuant to clause (e) above, such Receivable shall only be deemed Rehabilitated
if either (a) an order of garnishment requiring such Annuity Provider to make
payment on the related Annuity Contract directly to a Lock-Box Account (or a
related lock-box) for the account of the Issuer or the Company (which shall
receive such money in trust for the Issuer) shall have been obtained and served
upon the applicable Annuity Provider and thereafter either (x) a Scheduled
Payment thereunder shall have been received from such Annuity Provider in such
Lock-Box Account (or the related lock-box) or (y) if no Scheduled Payment was
required to be made prior to such time, the related Annuity Provider has neither
filed an appeal in respect of such garnishment order (and the
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time for doing so shall have expired), nor filed an action to vacate such
garnishment prior to the expiration of the time to file such appeal, or (b)
following any such diversion of payments, the Issuer shall have received three
consecutive Scheduled Payments in respect of such Receivable (in each case, on
or not later than 90 days after the scheduled date therefor); and provided,
further, that any Defaulted Receivable (other than pursuant to clause (e) of
this definition) which has been compromised, extended or otherwise modified as
permitted hereunder shall be deemed to be Rehabilitated hereunder as so
compromised, extended or otherwise modified to the extent that the Issuer shall
have received at least two consecutive Scheduled Payments (as so modified) in
respect of such Receivable (in each case, on or before the 90th day after the
scheduled date therefor); and it being further agreed that in any event no
Receivable may be Rehabilitated more than one time.
"Deposit Date" shall mean each Business Day on which any Collections are
initially deposited in any Lock-Box Account, the Master Collection Account or
any applicable Series Collection Account, whichever occurs first.
"Discount Rate" shall mean, with reference to any Series, the per annum
rate specified as such in the related Supplement.
"Discounted Receivables Balance" shall mean, with respect to any Receivable
at any time, the present value at such time of the Scheduled Payments (net of
the Split Payment obligations associated therewith) included as a Receivable
discounted at the applicable Discount Rate.
"Duff & Phelps" shall mean Duff & Phelps Credit Rating Co. or its
successor.
"Eligible Institution" shall mean a commercial bank organized under the
laws of the United States of America or any one of the states thereof, including
the District of Columbia (or any domestic branch of a foreign bank), which at
all times (i) is a member of the FDIC, has a combined capital and surplus of at
least $500,000,000 and (ii) has a certificate of deposit rating or long-term
unsecured senior debt rating of at least "A" (or the equivalent thereof) by at
least two of S&P, Moody's, Duff & Phelps and Fitch; provided, however, that a
commercial bank which does not satisfy the requirements set forth in clause (ii)
shall nonetheless be deemed to be an Eligible Institution for purposes of
holding any Trust Account or any other account so long as such commercial bank
is a federally or state chartered depository institution subject to regulations
regarding fiduciary funds on deposit substantially similar to 12 C.F.R.
(section)9.10(b) and such account is maintained as a segregated trust account
with the corporate trust department of such bank.
"Eligible Investments" shall mean book-entry securities entered on the
books of the registrar of such security and held in the name or on behalf of the
Trustee or negotiable instruments or securities represented by instruments in
bearer or registered form which evidence:
(a) direct obligations of and obligations fully guaranteed as to
timely payment by, the full faith and credit of the United States of
America or any agency or instrumentality thereof;
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(b) demand and time deposits in, certificates of deposit of, and
federal funds sold by, depository institutions or trust companies
incorporated under the laws of the United States of America or any state
thereof (or domestic branches of foreign banks), subject to supervision and
examination by Federal or state banking or depository institution
authorities, and having, at the time of the Issuer's investment or
contractual commitment to invest therein, a short-term unsecured debt
rating of "P-1" or better by Moody's and, if rated by Duff & Phelps, "D-1"
or better by Duff & Phelps;
(c) commercial paper having, at the time of the Issuer's investment or
contractual commitment to invest therein, a rating of "P-1" or better by
Moody's and, if rated by Duff & Phelps, "D-1" or better by Duff & Phelps;
or
(d) readily marketable investments in money market funds (which may be
12b-1 funds, as contemplated under the rules promulgated by the Securities
Exchange Commission under the Investment Company Act) or in mutual funds
having as their sole investments any of the investments described in the
foregoing clauses (a), (b) and (c), are rated "Aaa" or better by Moody's
and, if rated by Duff & Phelps, "AAA" or better by Duff & Phelps, and which
seek to maintain a constant net asset value (including funds for which the
Trustee or any of its affiliates acts as an investment advisor or manager).
"Eligible Master Servicer" shall mean Wentworth, the Back-up Servicer, the
Trustee, or any other operating entity which, at the time of its appointment as
Master Servicer, (a) is servicing a portfolio of receivables having similar
attributes as the Receivables, (b) is legally qualified and has the capacity to
service the Receivables, and (c) is approved by the Control Party for each
Series for which it shall be acting as Master Servicer, as having demonstrated
the ability to professionally and competently service a portfolio of receivables
of a nature similar to the Receivables in accordance with high standards of
skill and care.
"Eligible Receivable" shall mean, with reference to any Series, those
Series Receivables meeting the criteria therefor set forth in the related
Supplement.
"Eligible Receivable Purchase Procedures" shall mean those procedures set
forth on Schedule V.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.
"ERISA Affiliate" shall mean with respect to any Person, at any time, such
trade or business (whether or not incorporated) that would, at the time, be
treated together with such Person as a single employer under Section 4001 of
ERISA or any of Sections 414(b), (c), (m) or (o) of the Internal Revenue Code.
"Event of Default" shall mean, with respect to any Series, (a) any event
described in clause (a) or (b) of Section 9.01, and (b) any Series Event of
Default with respect to such Series,
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but only to the extent giving rise to an Event of Default with respect to such
Series pursuant to the terms of the applicable Supplement.
"FDIC" shall mean the Federal Deposit Insurance corporation or any
successor.
"Foreign Person" shall mean any Person that is not a "United States person"
within the meaning of Section 7701(a)(30) of the Internal Revenue Code.
"GAAP" shall mean generally accepted accounting principles as are in effect
from time to time in the United States of America and applied on a consistent
basis.
"General Partner" shall mean the Person or Persons then acting as General
Partner of the Company. As of the date hereof, the "General Partner" is J.G.
Wentworth Structured Settlement Funding Corporation.
"Governmental Authority" shall mean any country or nation, any political
subdivision of such country or nation, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government of any country or nation or political subdivision thereof.
"Granting Clause" means the provisions of this Agreement and/or the
applicable Supplement effecting the grant by the Issuer to the Trustee of a
security interest in the Pledged Assets as described in the Recitals hereto.
"Grantors" shall mean the "Grantors" under (and as such term is defined in)
the Intercreditor Agreement.
"Holder" shall mean a Noteholder.
"Indebtedness" shall mean, with respect to any Person, (i) the principal
amount of all obligations of such Person for borrowed money, (ii) the principal
amount of all obligations of such Person evidenced by bonds, debentures, notes,
trust certificates or other similar instruments (in each case, other than the
Notes), (iii) all obligations of such Person to pay the deferred purchase price
of property or services recorded on the books of such Person, except for (a)
trade and other similar accounts payable and accrued expenses arising in the
ordinary course of business and (b) employee compensation and pension
obligations and other obligations arising from employee benefit programs and
agreements or other similar employment arrangements, (iv) all obligations of
such Person as lessee which are capitalized on the books of such Person in
accordance with GAAP; (v) all indebtedness or obligations (other than under this
Agreement) which would constitute Indebtedness under the other provisions of
this definition which are secured by a Lien on the assets of such Person,
whether such Person has assumed the obligation to pay such indebtedness or
obligation, and (vi) all obligations of such Person under any direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the types which would constitute
Indebtedness under the other provisions of this definition.
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"Initial Master Servicer" shall mean Wentworth in its capacity as the
initial Master Servicer hereunder.
"ING Capital" shall mean ING (U.S.) Capital Corporation, and its successors
and assigns.
"Insolvency Event" shall mean with respect to a specified Person, that:
(a) such Person shall fail to, or admit in writing its inability to,
pay its debts generally as they become due, or shall commence a voluntary
case or other proceeding under any applicable bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or other similar law now or
hereafter in effect, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) for, such Person or for any
substantial part of its property, or shall make any general assignment for
the benefit of creditors, or shall take any corporate or partnership action
authorizing the taking of any of the foregoing actions; or
(b) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up, or
composition or readjustment of debts of such Person, the appointment of a
trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or any substantial part of its assets, or any similar
action with respect to such Person under any law (foreign or domestic)
relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 30 days;
or any of the actions sought in such petition or proceeding, including the
entering of an order for relief in respect of such Person or the
appointment of any trustee, receiver, custodian, liquidator, assignee,
sequestrator or the like for such Person or any substantial portion of such
Person's property shall be granted or otherwise occur.
"Intercreditor Agreement" shall mean that certain Amended and Restated
Collateral Trust and Intercreditor Agreement, dated as of September 30, 1997,
among the Revolving Credit Facility Lenders, ING Capital, as agent for the
Revolving Credit Facility Lenders, PNC Bank, National Association, as servicing
agent for the Revolving Credit Facility Lenders and as trustee of the SSC Master
Trust, the Trustee, J.G. Wentworth Receivables I LLC, the Issuer, the Seller,
the Company, Wentworth, as Master Servicer and as "master servicer" for the SSC
Master Trust and the Collateral Trustee, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
together with the rules and regulations promulgated thereunder, as amended from
time to time.
"Investment Company Act" shall mean the Investment Company Act of 1940,
together with the rules and regulations promulgated thereunder, as amended from
time to time.
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"Investor Letter" shall mean, with respect to any Series, an Investor
Letter under (and as such term is defined in) the related Supplement.
"Issuer" shall mean J.G. Wentworth Receivables III LLC, a Delaware limited
liability company.
"Issuer Interest" shall have the meaning set forth in Section 4.01.
"Issuer Purchase Agreement" shall mean that certain Purchase and
Contribution Agreement, dated as of the Closing Date, between the Seller and the
Issuer, as the same may be amended, restated, supplemented or otherwise modified
from time to time.
"Issuer's Account" shall mean the checking account maintained by the Issuer
for deposits by the Master Servicers, the Collateral Trustee, the Back-up
Servicer or the Trustee in accordance with the Master Servicers' or the Back-up
Servicer's instructions, as applicable pursuant hereto or to any applicable
Supplement. The initial Issuer's Account shall be Account No.: 5600814676,
maintained with PNC Bank, Delaware, 222 Delaware Avenue, 17th Floor, Wilmington,
DE 19801, or such other account as the Issuer may designate for such purpose
from time to time, maintained at such bank as the Issuer may designate from time
to time.
"Issuer Split Payment Account" shall mean an account maintained by the
Collateral Trustee with an Eligible Institution pursuant to Section 4.02 and
into which Split Payments are to be deposited in accordance with the Daily
Reports and Section 4.02(a). The Issuer Split Payment Account shall initially be
Account No. 5600814684, established and maintained at PNC Bank, Delaware, 222
Delaware Avenue, 17th Floor, Wilmington, DE 19801.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), preference, participation
interest, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the UCC or comparable law of any jurisdiction to
evidence any of the foregoing.
"Life Insurance Carrier" shall mean any life insurance carrier issuing a
Life Insurance Contract.
"Life Insurance Contract" shall mean a life insurance contract covering the
life of a Claimant for a term covering at least through the final Scheduled
Payment to be made under any Non- Guaranteed Settlement or Commutable
Settlement, if any, included as a Receivable.
"List of Receivables" shall mean, with reference to any Series, a list of
the Receivables pledged by the Issuer on any Series Closing Date or any
Subsequent Funding Date specifying for each such Receivable the name of the
Claimant, the Discounted Receivables Balance thereof, the name of the Annuity
Provider making payments thereon, the Series that such Receivables support, and
the Lock-Box Account to which Scheduled Payments thereunder are to be sent.
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"Lock-Box Account" shall have the meaning specified in Section 4.02(b).
"Lock-Box Bank" shall have the meaning specified in Section 4.02(b).
"Lock-Box Notice" shall have the meaning specified in Section 4.02(c).
"Majority Control Parties" shall mean, the Control Parties for those
outstanding Series, the Aggregate Principal Balance of the Notes of which
represent, in the aggregate, 66 2/3% or more of the Aggregate Principal Balance
of all Notes (exclusive of any Notes owned by any Affiliated Entity) of all
Series outstanding at such time; provided that pursuant to any Supplement, the
definition of Majority Control Parties may be modified to require the inclusion
therein of the respective Control Party of such Series.
"Majority Noteholders" shall have the meaning with reference to any Series
as shall be specified in the related Supplement.
"Master Collection Account" shall mean the segregated account established
and maintained pursuant to Section 4.02(a), which account shall initially be
Account No. 5600814035, established in the name of the Collateral Trustee, for
the benefit of the Grantors under the Intercreditor Agreement, with PNC Bank,
National Association at PNC Bank, Delaware, 222 Delaware Avenue, 17th Floor,
Wilmington, DE 19801.
"Master Collection Account Bank" shall have the meaning specified in
Section 4.02(a) and shall initially be PNC Bank, National Association.
"Master Servicer" initially shall mean Wentworth in its capacity as Master
Servicer pursuant to this Agreement, and after any Service Transfer with respect
to any Series, shall mean the Successor Servicer with respect to such Series,
and "Master Servicers" shall mean all such Master Servicers.
"Master Servicing Fees" shall mean, with reference to any Series, the fee
payable to the Master Servicer for such Series pursuant to the related
Supplement.
"Material Adverse Effect" shall mean, with respect to any Person, the
occurrence or existence of any event or condition which has a material adverse
effect (v) on such Person's ability to perform under the Operative Documents,
(w) on the businesses, properties or condition (financial or otherwise) of such
Person, (x) on the ability of the Trustee or the requisite Noteholders to
enforce any of the Operative Documents, (y) on the rights of the Trustee, for
the benefit of the Noteholders, in the Pledged Assets, or (z) with respect to
any Series, on any material portion of the Series Receivables of such Series.
"Monthly Report" shall mean, with respect to any Payment Date and any
Series, a report prepared by a Servicing Officer for such Payment Date as of the
end of the immediately preceding Collection Period in substantially the form set
forth in the related Supplement.
"Moody's" shall mean Moody's Investors Service, Inc. or its successor.
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"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which contributions are or have been made during
the preceding six years by any Person or any ERISA Affiliate of such Person.
"Non-Guaranteed Settlement" shall mean that portion of any Settlement in
respect of which the Obligor's and/or the Annuity Provider's obligation to make
any of the Scheduled Payments thereunder may be terminated by the death of the
Claimant.
"Note" shall mean any one of the Notes of any Series or Class executed by
the Issuer, authenticated by the Trustee, and delivered by or on behalf of the
Issuer pursuant hereto and the related Supplement, in substantially the form
attached to such Supplement.
"Note Rate" shall mean, with respect to any Series or Class, the note rate
specified therefor in the related Supplement.
"Note Registrar and Transfer Agent" shall have the meaning specified in
Section 6.03(a).
"Note Register" shall have the meaning specified in Section 6.03(a).
"Noteholder" shall mean the Person in whose name a Note is registered in
the Note Register.
"Noteholder Collections" shall have the meaning, with reference to any
Series, specified in the related Supplement.
"Notices" shall have the meaning specified in Section 13.05(a).
"Obligor" shall mean, with respect to any Receivable, the Person or Persons
obligated to make the Scheduled Payments with respect to the Settlement
Agreement relating to such Receivable, including, without limitation, any
Settlement Counterparty, any Assignee and/or any Life Insurance Carrier, but
such term shall not include the applicable Annuity Provider with respect to such
Settlement.
"Officer's Certificate" shall mean, unless otherwise specified in this
Agreement, a certificate signed by the president, any vice president, the chief
financial officer, the treasurer or controller of the Issuer, the Master
Servicer, or the Back-up Servicer, as the case may be, and delivered to the
Trustee.
"Operative Documents" shall mean this Agreement, each Supplement, the
Notes, the Issuer Purchase Agreement, the Seller Purchase Agreement, the
Settlement Purchase Agreements, the Back-up Servicing Agreement, the
Intercreditor Agreement, each certificate purchase agreement described in any
Supplement, each agreement or instrument related to any Series Enhancement and
the other agreements and instruments related to any of the foregoing or any
other instruments, documents and/or agreements, if any, designated as such in
any Supplement, but shall not include the Revolving Credit Agreement or any of
the instruments, documents and
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agreements executed and/or delivered in connection therewith (other than the
Intercreditor Agreement).
"Opinion of Counsel" shall mean a written opinion of counsel, who, except
as otherwise provided herein, may be counsel for, or an employee of, the Person
providing the opinion and who shall be reasonably acceptable to the Trustee.
"Order" shall mean a written direction or order executed by the Issuer and
delivered to the Trustee.
"Organizational Documents" shall mean the Issuer's Certificate of Formation
and Limited Liability Company Agreement.
"Paying Agent" shall mean any paying agent appointed pursuant to Section
6.06.
"Payment Date" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation (or any
successor).
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company association, joint-stock company, trust,
unincorporated organization, Governmental Authority or any other entity of
similar nature.
"Plan" shall mean, with respect to any Person, any defined benefit plan (as
defined in Section 3(35) of ERISA) that (a) is or was at any time during the
past six years maintained by such Person or any ERISA Affiliate of such Person,
or to which contributions by any such Person are or were at any time during the
past six years required to be made or under which such Person has or could have
any liability, (b) is subject to the provisions of Title IV of ERISA and (c) is
not a Multiemployer Plan.
"Plan Event" shall mean, with respect to any Person, (a) the imposition of
an obligation of such Person or any of its ERISA Affiliates under Section 4041
of ERISA to provide any affected parties written notice of an intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA, (b) the receipt of any notice by any Plan to the effect that the PBGC
intends to apply for the appointment of a trustee to administer any Plan, (c)
the termination of any Plan which results in any liability of such Person and/or
any of its ERISA Affiliates in excess of the Plan Liability Threshold, (d) the
withdrawal of such Person or any ERISA Affiliate of such Person from any Plan
described in Section 4063 of ERISA which may reasonably be expected to result in
any liability of such Person and/or any of its ERISA Affiliates in excess of the
Plan Liability Threshold, (e) the complete or partial withdrawal of such Person
or any ERISA Affiliate of such person from any Multiemployer Plan which may
reasonably be expected to result in any liability of such Person and/or any of
its ERISA Affiliates in excess of the Plan Liability Threshold, (f) a Reportable
Event or an event described in Section 4068(f) of ERISA which may reasonably be
expected to result in any liability of such Person and/or any of its ERISA
Affiliates in excess of the Plan Liability Threshold, and (g) any other event or
condition which
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under ERISA or the Internal Revenue Code may reasonably be expected to
constitute grounds for the imposition of a lien on the property of such Person
in respect of any Plan or Multiemployer Plan.
"Plan Liability Threshold" shall mean, with respect to any Person and its
ERISA Affiliates, any liability of such Person and such ERISA Affiliates with
respect to any Plan Event which when aggregated with all other liabilities of
such Person and its ERISA Affiliates incurred as a result of any other Plan
Events during the immediately preceding twelve month period, plus any unpaid
liabilities of such Person and its ERISA Affiliates arising as a result of any
Plan Events occurring at any other time, exceeds $1,000,000.
"Pledged Assets" shall have the meaning specified in the Recitals.
"Pooling and Servicing Agreement" shall mean that certain Pooling and
Servicing Agreement, dated as of June 13, 1997, by and among J.G. Wentworth
Receivables I LLC, a Delaware limited liability company as Seller, Wentworth as
the initial master servicer and PNC Bank, National Association as trustee of the
SSC Master Trust.
"Potential Event of Default" means any event or condition which with the
giving of notice or passage of time, or both, would constitute an Event of
Default or Series Event of Default.
"Power of Attorney" shall mean an irrevocable power of attorney executed by
a Claimant in favor of the Company (with full power of substitution at the
election of the Company) pursuant to a Settlement Purchase Agreement,
authorizing the Company (or any such substitute therefor) to act for and on
behalf of the Claimant in connection with the enforcement of such Claimant's
Settlement.
"Principal Balance" shall mean, with respect to any Note at any time, the
outstanding principal balance of such Note at such time; provided, that the
Principal Balance of any Note shall only be reduced upon distribution of any
amounts on account of the Principal thereof to or for the benefit of the
Noteholder thereof on a Payment Date, and the Principal Balance of any Note
shall be reinstated to the extent any such distribution (or any portion thereof)
is rescinded or returned or such Noteholder is required to return or disgorge or
returns or disgorges any such distribution (or any portion thereof) previously
made to it.
"Principal Terms" shall mean, with respect to any Series: (a) the name or
designation; (b) the Series Receivables and other Series Pledged Assets for such
Series; (c) the initial principal amount (or method for calculating such
amount); (d) the Note Rate (or method for the determination thereof); (e) the
payment date or dates and the date or dates from which interest shall accrue;
(f) the method for allocating Collections to Noteholders; (g) the designation of
any Series Accounts and the terms governing the operation of any such Series
Accounts; (h) the terms on which the Notes of such Series may be exchanged for
Notes of another Series, repurchased by the Issuer or remarketed to other
investors; (i) the number of Classes of Notes of such Series and, if more than
one Class, the rights and priorities of each such Class; and (j) the Master
Servicing Fees and Back-up Servicing Fees for such Series.
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"Prohibited State" shall mean any state defined in any Supplement as being
a Prohibited State.
"Purchase Price Note" shall mean any subordinated intercompany notes which
may be issued under the Issuer Purchase Agreement on substantially the same
terms as the subordinated intercompany notes issued by the Seller under the
Seller Purchase Agreement.
"Qualified Annuity Contract" shall mean an Annuity Contract which qualifies
as a "qualified funding asset" under Section 130(d) of the Internal Revenue
Code.
"Qualified Assignee" shall mean the Person to which the obligations to make
payments under a Settlement have been assigned pursuant to a Qualified
Assignment.
"Qualified Assignment" shall mean an assignment of the obligations to make
payments under a Settlement which satisfies Section 130(c) of the Internal
Revenue Code.
"Rating Agency" shall mean each nationally recognized statistical rating
organization selected by the Issuer to rate the Notes of any Series or Class.
"Receivable" shall mean those Scheduled Payments (or portions thereof) due
to a Claimant under a Settlement Agreement and the rights to which Scheduled
Payments (or such portion thereof) have been transferred by such Claimant to the
Company pursuant to a Settlement Purchase Agreement, by the Company to the
Seller pursuant to the Seller Purchase Agreement and by the Seller to the Issuer
pursuant to the Issuer Purchase Agreement and in which the Issuer has granted a
security interest to the Trustee for the benefit of the Holders of a specific
Series of Notes, whether such Scheduled Payments (or such portions thereof)
constitute accounts, general intangibles, investment property, chattel paper,
instruments, documents, securities, cash, or any other kind of property, and
"Receivables" shall mean all such Receivables. Without limiting the foregoing in
any way, it is understood and agreed that the Holders of Notes of any Series
shall only have rights to, and recourse against, the Series Receivables relating
to such Series and shall have no rights in, or recourse against, the Series
Receivables relating to any other Series. Notwithstanding the foregoing, the
term "Receivable" shall not include any Scheduled Payments received by the
Claimant, the Company, the Seller or the Issuer prior to the applicable Series
Cut-Off Date for the Series to which such Receivable is to be allocated.
"Receivables Package" shall mean, with respect to any Receivable, the
documents set forth on Schedule IV.
"Record Date" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"Records" means all Settlement Purchase Agreements and other documents,
books, records and other information (including without limitation, computer
programs, tapes, discs, punch cards, data processing software and related
property and rights) maintained with respect to the Receivables and the related
Claimants.
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"Rehabilitated" shall have the meaning, with respect to any Receivable,
specified in the definition of "Defaulted Receivable".
"Rehabilitated Receivable" shall mean any Receivable that was a Defaulted
Receivable but which has been Rehabilitated (and has not ever again become a
Defaulted Receivable).
"Related Property" means with respect to any Receivables of any Series: all
of the Issuer's rights, title, interests, remedies, powers and privileges (a)
under the Settlement Purchase Agreement pursuant to which such Receivable was
purchased by the Company and under the related Power of Attorney, (b) all
security interests or liens and property subject thereto from time to time
purporting to secure payment of such Receivable, if any, whether pursuant to the
Settlement Purchase Agreement related to such Receivable or otherwise, (c) under
or pursuant to the Seller Purchase Agreement to the extent relating to such
Series, (d) under or pursuant to the Issuer Purchase Agreement to the extent
relating to such Series, (e) the rights of the Trustee under this Agreement and
the Back-up Servicing Agreement, to the extent relating to such Series, (f) all
Lock-Box Accounts, Lock-Boxes, Series Payment Accounts, and Series Collection
Accounts relating to such Series or into which any Collections relating to such
Series are deposited or concentrated; all monies and other items of payment
therein relating to such Series; all monies and other items of payment relating
to such Series on deposit from time to time in the Master Collection Account to
the extent constituting Collections of Pledged Assets; and all Eligible
Investments purchased with any such amounts and any investment income with
respect thereto, (g) all Life Insurance Contracts relating to any Non-
Guaranteed Settlements or Commutable Settlements, if any, included as a Series
Receivable for such Series, (h) any interest rate hedging instruments or
agreements entered into by the Issuer in connection with such Series, (i) 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 such Receivables
whether pursuant to the Settlement Agreement, the Assignment, the Annuity
Contract, the Settlement Purchase Agreement or any other agreement related to
such Receivable or otherwise, (j) all UCC financing statements filed by the
Company against the Claimants under such Receivables, by the Seller against the
Company and by the Issuer against the Seller; (k) all Records and all other
instruments and rights relating to such Receivables, (l) any other property
designated as such for a specific Series pursuant to the related Supplement, and
(m) all products and proceeds of any of the foregoing.
"Reportable Event" shall mean any of the events set forth in Section 4043
of ERISA.
"Requirements of Law" shall mean any law, treaty, rule or regulation, or
final determination of an arbitrator or Governmental Authority, and, when used
with respect to any Person, the certificate of incorporation and by-laws or
other organizational or governing documents of such Person.
"Responsible Officer" shall mean, (i) when used with respect to the
Trustee, any officer within the corporate trust department (or any
successor department or group) of the Trustee including any vice president,
assistant vice president, secretary, assistant secretary, treasurer,
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assistant treasurer, trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such officer's knowledge of and familiarity with
the particular subject and (ii) when used with respect to any other Person, any
president, vice president, treasurer or any other officer of such Person
customarily performing functions similar to those performed by the Persons who
at the time shall be such officers.
"Revolving Credit Agreement" shall have the meaning specified in the
definition of "Revolving Credit Facility."
"Revolving Credit Facility" shall mean the revolving credit facility
provided to the Company pursuant to that certain Amended and Restated Credit
Agreement dated as of February 11, 1997 as amended by an Amendment No. 1 and an
Assignment and Assumption and Amendment No. 2, dated as of May 26, 1997 and
September 30, 1997, respectively (as amended and as the same may be amended,
restated, supplemented or otherwise modified from time to time, the "Revolving
Credit Agreement") among the Seller (as the successor and assignee of the
Company thereunder), the Revolving Credit Facility Lenders, ING Capital, as
agent, and PNC Bank, National Association, as Servicing Agent, or any
replacement or substitution facility therefor.
"Revolving Credit Facility Lenders" shall mean those financial institutions
from time to time providing credit or other financial accommodations to the
Seller pursuant to the Revolving Credit Facility.
"Revolving Period" shall have the meaning, if any, with reference to any
Series, specified in the related Supplement.
"S&P" shall mean Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies or its successor.
"Scheduled Payments" shall mean, (i) when used with respect to any
Settlement, those payments from time to time due to be paid by the Obligor or by
an Annuity Provider, on behalf of the Obligor, to the Claimant pursuant to the
terms of the related Settlement Agreement, and (ii) when used with respect to a
Receivable, those payments described in the foregoing clause (i) (or portions
thereof), the rights to receive which have been transferred to the Issuer.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Seller" shall mean J.G. Wentworth Receivables II LLC, a Delaware limited
liability company.
"Seller Purchase Agreement" shall mean that certain Purchase and
Contribution Agreement dated as of September 30, 1997 between the Company and
the Seller, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
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"Series" shall mean any series of Notes established pursuant to a
Supplement.
"Series Accounts" shall mean, with reference to any Series, any bank
accounts established for such Series and designated in the Supplement relating
thereto as being "Series Accounts" for such Series, including, for and with
respect to each Series (whether or not so specified in such Supplement), the
Master Collection Account to the extent of any Collections of the Series
Receivables of such Series or the Related Security relating thereto.
"Series Allocable Collections" shall mean, with respect to any Series, the
Collections of the Series Receivables for such Series and the Related Property
relating thereto.
"Series Closing Date" shall mean, with reference to any Series, the date
specified as such in the related Supplement.
"Series Collection Account" shall mean, with reference to any Series, the
account designated as such in the related Supplement.
"Series Collection Account Bank" shall mean, with reference to any Series,
the bank at which the Series Collection account for such Series is maintained.
"Series Cut-Off Date" shall mean, with reference to any Series, the date or
dates specified as such in the related Supplement.
"Series Determination Date" shall have the meaning, with reference to any
Series, specified in the related Supplement.
"Series Enhancement" shall mean the rights and benefits provided to the
Issuer for the benefit of the Noteholders of any Series or Class pursuant to any
letter of credit, surety bond, cash collateral account, spread account,
guaranteed rate agreement, maturity liquidity facility, tax protection
agreement, interest rate swap agreement, interest rate cap agreement or other
similar arrangement. The subordination of any Series or Class to another Series
or Class shall be deemed to be a Series Enhancement. Without limiting the
foregoing in any manner, only the Holders of Notes of the Series or Class of
Series for which such Series Enhancement shall have been provided shall be
entitled to the benefits thereof, and no Holders of any other Series or Class
shall have any rights in or recourse to any such Series Enhancement.
"Series Enhancer" shall mean the Person or Persons providing any Series
Enhancement, other than the Noteholders of any Series or Class which is
subordinated to another Series or Class.
"Series Event of Default" shall have the meaning, with reference to any
Series, specified in the related Supplement.
"Series Payment Account" shall mean, with reference to any Series, the
account designated as such in the related Supplement.
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"Series Pledged Assets" shall have the meaning, with reference to any
Series, specified in the related Supplement.
"Series Receivables" shall mean those Receivables specified on a List of
Receivables in which the Issuer has granted a security interest to the Trustee
pursuant to any Supplement for the benefit of the Holders of Notes of the Series
designated therein.
"Service Transfer" shall have the meaning specified in Section 10.01.
"Servicer Default" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"Servicing Officer" shall mean, with respect to any Master Servicer, any
officer or other employee of such Master Servicer or other agent of such Master
Servicer who in any case is involved in, or responsible for, the administration
and servicing of the Series Receivables for the Series for which such Person
acts as Master Servicer and whose name appears on a list of Servicing Officers
furnished to the Trustee by such Master Servicer, as such list may from time to
time be amended.
"Settlement" shall mean the Scheduled Payments due or to become due under
and in connection with, and all of the Claimant's other rights (but no
obligations or liabilities) under, a Settlement Agreement, including payments
under any Annuity Contract purchased by any Obligor to fund its obligations
under such Settlement Agreement.
"Settlement Agreement" shall mean a Settlement Agreement entered into
between a Claimant and a Settlement Counterparty evidencing, among other things,
the obligation of the Settlement Counterparty to make the Scheduled Payments to
the Claimant thereunder as compensation by the Settlement Counterparty for a
tort, injury or other claim.
"Settlement Counterparty" shall mean the Person or Persons (including any
Obligor) that entered into, and was originally obligated to make Scheduled
Payments under, a Settlement Agreement with a Claimant.
"Settlement Purchase Agreement" shall mean an agreement between the Company
and a Claimant pursuant to which the Company agrees to purchase and the Claimant
agrees to sell all or any portion of the Claimant's Settlement under a
Settlement Agreement.
"Split Payment" shall mean, with respect to any Settlement Purchase
Agreement pursuant to which the Claimant has reserved an interest (which
interest shall solely be in the form of an independent claim against the Company
for payment to the Claimant of certain amounts upon, and to the extent of,
receipt by the Company of the Scheduled Payments sold by the Claimant to the
Company pursuant to such Settlement Purchase Agreement), the amount of such
payment obligation (or portion thereof) payable by the Company to such Claimant
from time to time pursuant to (and in accordance with) such Settlement Purchase
Agreement and the Credit Policy Manual.
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"SSC Master Trust" shall mean that certain trust created pursuant to the
Pooling and Servicing Agreement.
"Subsequent Funding Date" shall mean, with reference to any Series, the
date, if any, specified as such in the related Supplement.
"Successor Servicer" shall have the meaning specified in Section 10.02(a).
"Supplement" shall mean, with respect to any Series, a Supplement to this
Agreement, executed and delivered in connection with the original issuance of
the Notes of such Series pursuant to Section 6.09, and all amendments thereof
and supplements thereto.
"Tax Opinion" shall mean, with respect to any action, an Opinion of Counsel
who is not an employee of any Affiliated Entity to the effect that, (i) for
federal income tax purposes and Pennsylvania and Delaware state income and
franchise tax purposes (a) such action will not adversely affect the Tax Opinion
Characterization of the Notes, (b) such action will not cause a taxable event to
any Noteholder (other than the parties to such action), (c) without limiting the
applicability of clauses (a), and (b) of this definition, in the case of the
original issuance of Notes hereunder, the Notes of each Series and Class thereof
will be properly characterized in accordance with the Tax Opinion
Characterization, and (d) without limiting the applicability of clauses (a), (b)
and (c) of this definition, in the case of a subsequent issuance pursuant to
Section 6.09(b), the Notes of each Series and Class issued in connection
therewith will be properly characterized in accordance with the Tax Opinion
Characterization and (ii) for federal income tax purposes and Delaware state
income and franchise tax purposes, following any such action, the Issuer will
not be treated as an association (or publicly traded partnership) taxable as a
corporation.
"Tax Opinion Characterization" shall mean, with respect to the Notes of any
Series or Class the characterization of such Notes as debt of the Issuer for
Federal, Delaware and Pennsylvania income tax purposes.
"Termination Notice" shall have the meaning specified in Section 10.01.
"Transfer Date" shall have the meaning specified in Section 6.10.
"Trust Account" shall mean any of the Master Collection Account, any Series
Collection Account, any Lock-Box Account, any Series Payment Account, and any
other bank accounts established and maintained for the benefit of the Issuer or
any Series, and "Trust Accounts" shall mean all such accounts, collectively.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as in
force on the Closing Date.
"Trustee" shall mean PNC Bank, National Association, not in its individual
capacity, but solely in its capacity as trustee on behalf of the Noteholders, or
its successor in interest, or any successor trustee appointed as herein
provided.
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"Trustee Fee" shall mean, with reference to any Series, the fee payable to
the Trustee solely for its own account in respect of such Series pursuant to the
related Supplement.
"Trustee's Account" shall have the meaning specified in Section 4.03.
"UCC" shall mean the Uniform Commercial Code, as amended from time to time,
as in effect in any specified jurisdiction.
"U.S. Dollars" or "Dollars" means dollars of the United States of America.
"Wentworth" shall mean J.G. Wentworth & Company, Inc., a Pennsylvania
corporation.
SECTION 1.02. Other Definitional Provisions. (a) All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement, and accounting terms partly defined in this Agreement to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles or regulatory accounting principles, as
applicable, as in effect in the United States. To the extent that the
definitions of accounting terms herein are inconsistent with the meanings of
such terms under generally accepted accounting principles or regulatory
accounting principles as in effect in the applicable jurisdiction, the
definitions contained herein shall control.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; and Section, Schedule and
Exhibit references contained in this Agreement are references to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified; and
the term "including" means "including without limitation".
SECTION 1.03 Incorporation by Reference to Trust Indenture Act. Whenever
this Indenture refers to a provision of the Trust Indenture Act, the provision
is incorporated by reference in and made a part of this Indenture. The following
Trust Indenture Act terms incorporated by reference in this Indenture have the
following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
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"obligor" on the indenture securities means the Issuer or any other obligor
on the Notes, if any.
All other Trust Indenture Act terms used or incorporated by reference in
this Indenture that are defined by the Trust Indenture Act, defined by the Trust
Indenture Act's reference to another statute or defined by Commission rule
shall, in each case, have the meanings assigned to them therein.
SECTION 1.04 Acts of Noteholders. (a) Any request, demand, authorization,
direc tion, notice, consent, waiver or other action provided by this Indenture
to be given or taken by any Noteholders, or a specified percentage or number of
Noteholders, may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders, in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, as herein provided, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 11.02)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
an acknowledgment of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than such signer's individual capacity, such
certificate or affidavit shall also constitute sufficient proof of the signer's
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The ownership of the Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of any Noteholder or the Noteholders of any Series of Notes shall
bind every future holder of the same Note or Series of Notes and the holder of
any Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, suffered or omitted to
be done by the Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
SECTION 1.05 Conflict with Trust Indenture Act. None of the Notes issued
under this Indenture are intended to be registered under the Securities Act and
this Indenture is not intended to be qualified under the Trust Indenture Act.
If, notwithstanding such intent, this Indenture at any time becomes or is
required to become qualified under the Trust Indenture Act and any provision
hereof limits, qualifies or conflicts with the duties imposed by any of Sections
310 through 317. inclusive, of the Trust Indenture Act through the operation of
Section 318(c) thereof, such imposed duties shall control.
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SECTION 1.06 Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person (other than the parties
hereto or thereto and their successors hereunder, any Paying Agent and the
Noteholders) any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 1.07 Incorporation of Recitals. The Recitals of the Issuer set
forth above in this Indenture are hereby incorporated by this reference hereto
as if, and to the same extent that, such Recitals were contained in the body of
this Indenture.
ARTICLE II
GRANT OF SECURITY INTEREST IN RECEIVABLES;
ORIGINAL ISSUANCE OF NOTES
SECTION 2.01. Grant of Security Interest in Assets; No Assumption of
Obligations Related to Receivables; Certain Matters Regarding the Grant.
Pursuant to each Supplement and in accordance with the Granting Clause hereof,
the Issuer shall from time to time grant a first priority security interest in
the Series Pledged Assets for the Series of Notes to be issued under such
Supplement.
(a) Other than the obligation of the Master Servicer and/or the Trustee to
remit Split Payments to the Claimants pursuant hereto, the grant described in
the Granting Clause shall not be deemed to constitute, nor is it intended to
result in, a creation or an assumption by the Trustee or any Noteholder of any
obligation of the Claimant, the Company, the Seller, the Issuer or any other
Person in connection with the Receivables or under any Settlement Agreement,
Settlement Purchase Agreement, Seller Purchase Agreement, Issuer Purchase
Agreement or under any agreement or instrument relating to any of the foregoing,
including, without limitation, any obligation to any Claimant. Each such grant,
shall be made to the Trustee, on behalf of the Series for which it is made, and
each reference in this Agreement to such grant, shall be construed accordingly.
Without limiting the foregoing in any way, it is hereby expressly agreed by each
Noteholder of each Series, by its acceptance of such Note, that it shall not
have any interest in, or any rights to, any Series Pledged Assets for any other
Series.
(b) In connection with the grant to the Trustee as described in the
Granting Clause, the Issuer agrees to record and file from time to time, at its
own expense, financing statements and other documents (and amendments thereto,
assignments thereof and continuation statements, when applicable) with respect
to the Receivables and the other Pledged Assets now existing and hereafter
created meeting the requirements of applicable law in such manner and in such
jurisdictions as are necessary to perfect, and maintain the perfection and
priority of, the security interests granted hereunder and the ownership
interests of the Issuer in the Receivables and the other Pledged Assets
purchased from the Seller, and to deliver a file-stamped copy of each such
financing statement or other document or other evidence of such filing to the
Trustee on or prior to each Series Closing Date or, with respect to any security
interest granted hereunder on a date other than a Series Closing Date or, in the
case of any financing statement, continuation statement or other document filed
by or on behalf of the Issuer after the Closing Date, promptly after the filing
thereof. The
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Trustee shall be under no obligation whatsoever to file such financing
statements, documents, amendments, assignments or continuation statements, or to
make any other filing under the UCC in connection with the grant to the Trustee
as described in the Granting Clause.
(c) In connection with the grant to the Trustee as described in the
Granting Clause, the Issuer further agrees, at its own expense, on or prior to
any Series Closing Date to indicate in its files that the Receivables which are
the subject of any such grant of a security interest in the related Supplement
have been pledged to the Trustee in accordance with this Agreement for the
benefit of the Noteholders of the related Series.
(d) In connection with the grant to the Trustee of the security interest
pursuant to each Supplement, the Applicable Master Servicer shall, on behalf of
the Issuer, on or prior to the Closing Date, mark or cause to be marked, the
master data processing records of the Seller evidencing the Receivables with the
following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD OR
CONTRIBUTED TO J.G. WENTWORTH RECEIVABLES III LLC PURSUANT
TO A PURCHASE AND CONTRIBUTION AGREEMENT, DATED SEPTEMBER
30, 1997 AMONG J.G. WENTWORTH RECEIVABLES II LLC, AS THE SELLER,
AND J.G. WENTWORTH RECEIVABLES III LLC, AS THE PURCHASER; AND
A SECURITY INTEREST IN SUCH RECEIVABLES HAS BEEN FURTHER
GRANTED TO PNC BANK, NATIONAL ASSOCIATION, AS TRUSTEE,
PURSUANT TO THE SUPPLEMENT DATED _________ TO A MASTER
TRUST INDENTURE AND SECURITY AGREEMENT DATED AS OF
SEPTEMBER 30, 1997, AMONG J.G. WENTWORTH RECEIVABLES III LLC,
J.G. WENTWORTH & COMPANY, INC., AS MASTER SERVICER, AND PNC
BANK, NATIONAL ASSOCIATION, AS TRUSTEE."
SECTION 2.02. Acceptance by Trustee. The Trustee hereby acknowledges its
acceptance on behalf of the Noteholders of the security interest in all of the
Pledged Assets and declares that it shall maintain such security interest, upon
the trust herein set forth, for the benefit of the Noteholders of the Series in
respect of which such security interest in such Pledged Assets was granted.
SECTION 2.03. Representations and Warranties of the Issuer. The Issuer
hereby represents and warrants as of the date hereof and on each date hereafter
until the satisfaction and discharge of this Indenture pursuant to Section
12.01, that:
(a) Organization and Good Standing. The Issuer is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has full power and authority to own its properties and
conduct its business as presently owned or conducted, and to execute, deliver
and perform its obligations under the Operative Documents, and to execute and
deliver to the Trustee pursuant hereto the Notes.
(b) Due Qualification. The Issuer is duly qualified to do business and is
in good standing as a foreign limited liability company, and has obtained all
necessary licenses and
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approvals, in each jurisdiction in which failure to so qualify or to obtain such
licenses and approvals has, or could reasonably be expected to have, a Material
Adverse Effect.
(c) Due Authorization; Conflicts. The execution, delivery and performance
by the Issuer of the Operative Documents are within the Issuer's powers, have
been duly authorized by all necessary company and member action, and do not
contravene (i) the Issuer's Organizational Documents, (ii) any law, rule,
regulation, order, or decree binding on, or affecting, the Issuer and the
violation of which has, or could reasonably be expected to have, a Material
Adverse Effect, or (iii) any agreement, contract, indenture, mortgage, or other
instrument, document or agreement to which the Issuer or any of its assets are
subject or may be effected.
(d) Consents. No authorization or approval or other action by, and no
notice to or registration of or filing with, any Governmental Authority or other
regulatory body is required to be made or obtained by the Issuer or the Company
for the due execution, delivery and performance by the Issuer, or to insure the
legality, validity, binding effect or enforceability of, the Operative
Documents, except for the filing of UCC financing statements against the Seller
and the Issuer in respect of the transactions contemplated herein all of which
that need to be filed to perfect the ownership interest of the Issuer and the
security interest of the Trustee, respectively, in the Pledged Assets (as
comprised as of the date of the making or remaking of this representation and
warranty) have been so made.
(e) Enforceability. Each of the Operative Documents to which the Issuer is
a party is and will be the legal, valid and binding obligation of the Issuer
enforceable against the Issuer in accordance with its respective terms, 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 principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
(f) Proceedings. There are no judgments or other judicial or administrative
orders outstanding against the Issuer nor is there any pending or, to the best
of the Issuer's knowledge, threatened action or proceeding affecting the Issuer
before any court, governmental agency or arbitrator, which has, or could
reasonably be expected to have, a Material Adverse Effect.
(g) Compliance with Laws, Etc. The Issuer is not in violation of any law,
rule, regulation, order, writ, judgment, decree, determination or award
applicable to it or any of its properties or any indenture, lease, loan or other
agreement to which it is a party or by which it or its assets, including without
limitation the Receivables, may be bound or affected, the violation of which, in
any of the foregoing cases, would have, or could reasonably be expected to have,
a Material Adverse Effect.
(h) Margin Regulations. The Issuer will not use any of the proceeds that it
receives pursuant hereto or any Supplement for any purpose which will conflict
with or contravene any of Regulations G, T, U or X promulgated by the Federal
Reserve Board from time to time.
(i) Locations. The principal place of business and chief executive office
of the Issuer are located at the address of the Issuer set forth in Section
13.05, and the offices where the
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Issuer keeps all of its records relating to the Receivables are located at the
addresses set forth on Schedule II hereto, or, in each case, at such other
locations notified to the Trustee and each Series Enhancer (other than an
Affiliated Entity) in accordance with Section 2.05(e), in jurisdictions with
respect to which all applicable actions required by Section 2.01 have been taken
and completed.
(j) Lock-Box Banks. The names and addresses of all the Lock-Box Banks, and
the account numbers of all Lock-Box Accounts and the related lock-boxes at such
Lock-Box Banks, are in each case specified in Schedule III hereto or have been
notified to the Trustee and with respect to which all action required to be
taken pursuant to Section 3.04 has been taken. The Lock-Box Banks are the only
institutions holding any lock-box accounts or lock-boxes for the receipt of
Scheduled Payments in respect of the Receivables. All Annuity Providers have
been directed to make payments on the Annuity Contracts relating to the
Receivables to a Lock-Box Account (or a related lock-box) covered by a Lock-Box
Notice, and such instructions are in full force and effect.
(k) ERISA Matters. Except as set forth on Schedule VI, neither the Issuer
nor any of its ERISA Affiliates has maintained or participated in any Plan or
Multiemployer Plan during the past six (6) years. With respect to any such Plan
and/or Multiemployer Plan, (i) such Plan and/or Multiemployer Plan complied and
complies in all material respects with all applicable Requirements of Law, (ii)
no Reportable Event has occurred with respect to any such Plan and/or
Multiemployer Plan, (iii) no such Plan or Multiemployer Plan has been
terminated, and (iv) no funding deficiency has occurred in respect of any such
Plan or Multiemployer Plan, except, in each case, where the occurrence of any of
the foregoing could not be reasonably expected to result in liability to the
Issuer in excess of the Plan Liability Threshold or result in a Lien against the
Pledged Assets (or any portion thereof). With respect to any such Plan or
Multiemployer Plan that is intended to qualify for special tax treatment under
Sections 401(a) or 403(a) of the Internal Revenue Code, such Plan or
Multiemployer Plan is in compliance with the applicable requirements of the
Internal Revenue Code for such qualifications.
(l) Pro-Forma Balance Sheet. The pro-forma balance sheets of the Issuer as
at the Closing Date certified by the Chief Financial Officer of the Issuer,
copies of which have been provided to the Trustee, present fairly the financial
condition of the Issuer on a pro-forma basis as of such date after giving effect
to the transactions contemplated under the Operative Documents to take place on
such date.
(m) Taxes. The Issuer has filed all federal, state and material local tax
returns which it is required by law to file and has paid all material taxes,
assessments and other governmental charges due in respect of its respective
returns, except to the extent that any such taxes, assessments or other
governmental charges are being contested in good faith and as to which the
Issuer has set aside on its books adequate reserves.
(n) Other Agreements. Other than the Operative Documents, the Issuer is not
a party to any material lease, contract, agreement, understanding or commitment
of any kind which, if breached, has, or could reasonably be expected to directly
or indirectly have, a Material Adverse Effect.
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(o) Accuracy of Information. Each certificate, information, exhibit,
financial statement, document, book, record, report or disclosure furnished by
the Issuer to the Trustee, any Master Servicer, the Back-Up Servicer, any Series
Enhancer or any Noteholder (other than an Affiliated Entity) is accurate in all
material respects and contains no untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein and therein not misleading.
(p) Investment Company Act Matters. The Issuer is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act.
(q) Title to Property. The Issuer, immediately prior to the grant of a
security interest in favor of the Trustee in any Receivables and other Pledged
Assets, shall have good, indefeasible, and merchantable title to and ownership
of all such Receivables and Pledged Assets, free and clear of all Liens other
than Liens in favor of the Trustee for the benefit of the Noteholders.
(r) Tradenames. The Issuer has no tradenames, fictitious names, assumed
names or "doing business as" names and since its formation, the Issuer (i) has
not been the subject of any merger or other corporate reorganization that
resulted in a change of name, identity or corporate structure or (ii) had any
other name.
(s) Subsidiaries. The Issuer has no subsidiaries.
(t) Solvency. After giving effect to the initial "Purchase" under the
Issuer Purchase Agreement on the Closing Date, and after giving effect to each
subsequent issuance of Notes hereunder and each related Purchase under the
Issuer Purchase Agreement, the Issuer (i) is not "insolvent" (as such term is
defined in (section)101(31)(A) of the Bankruptcy Code, (ii) is able to pay its
debts as they come due, and (iii) does not have unreasonably small capital for
the business in which it is engaged.
(u) Valid Transfer and Valid Grant. The Seller Purchase Agreement creates a
valid sale, transfer and assignment to the Seller of all right, title and
interest of the Company in and to all Receivables and Related Property conveyed
to the Seller thereunder. The Issuer Purchase Agreement creates a valid sale,
transfer and assignment to the Issuer of all right, title and interest of the
Seller in and to all Receivables and Related Property conveyed to the Issuer
thereunder. The grant in favor of the Trustee made by the Issuer pursuant to
this Indenture constitutes a valid grant of a security interest in and lien on
all right, title and interest of the Issuer in and to the Receivables and the
Related Property and in and to all other Pledged Assets and the proceeds
thereof, which lien and security interest is perfected and of first priority
under the UCC, free and clear of any Lien, except as otherwise permitted
hereunder.
(v) No Claim or Interest. Except as otherwise provided in this Agreement or
any applicable Supplement, neither the Issuer nor any Person claiming through or
under the Issuer has any claim to or interest in the Trust Accounts.
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(w) Offering of Notes. The Issuer has not taken or caused to be taken, and
has no knowledge that any other Person has taken, any action which would subject
the issuance or sale of any Note to the provisions of Section 5 of the Act or to
the qualification provisions of any securities or Blue Sky law of any applicable
jurisdiction.
(x) Originator Receivables. The Issuer has given reasonably equivalent
value to the Seller in consideration for the transfer to the Issuer by the
Seller of the Receivables and Related Property pursuant to the Issuer Purchase
Agreement, and no such transfer has been made for or on account of an antecedent
debt owed by the Seller to the Issuer.
The representations and warranties made pursuant to this Section 2.03 shall
survive the making thereof. 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 and to each Series Enhancer. The
Trustee's obligations in respect of any such breach are limited as provided in
Section 11.02(g).
SECTION 2.04. [Reserved].
SECTION 2.05. Affirmative Covenants of the Issuer. The Issuer hereby
covenants that, without the prior written consent of the Majority Control
Parties:
(a) Compliance with Law. The Issuer will comply in all material respects
with all Requirements of Law applicable to the Issuer, its business and
properties and the Pledged Assets.
(b) Preservation of Existence. The Issuer will preserve and maintain its
existence, rights, franchises and privileges as a limited liability company in
the jurisdiction of its organization, and qualify and remain qualified in good
standing as a foreign limited liability company in each jurisdiction where the
failure to maintain such qualification has, or could reasonably be expected to
have, a Material Adverse Effect.
(c) Inspection of Books and Records. The Trustee, each Series Enhancer, the
Control Party for each Series (or, if such Control Party is a designated
percentage of the Noteholders for any Series, a representative of such Control
Party) and independent accountants appointed by, or other agents of, any of the
foregoing, shall have the right, upon reasonable prior written notice to the
Issuer, to visit the Issuer, to discuss the affairs, finances and accounts of
the Issuer with, and to be advised as to the same by, its officers, and to
examine the books of account and records of the Issuer, and to make or be
provided with copies and extracts therefrom, all at such reasonable times and
intervals (but, so long as no Event of Default has occurred and is continuing,
not more than once in any six month period) and to such reasonable extent during
regular business hours as the Trustee, such Series Enhancer, such Control Party
(or designated representative thereof) or such accountants or agents appointed
by any of the foregoing, as applicable, may desire.
(d) Keeping of Records and Books of Account. The Issuer itself or through
its agents will (i) keep proper books of record and account, which shall be
maintained or caused to be
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maintained by the Issuer and shall be separate and apart from those of any
Affiliate of the Issuer, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Issuer in accordance
with generally accepted accounting principles consistently applied, and (ii)
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing the Receivables in
the event of the destruction of the originals thereof) and keep and maintain all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of all Collections of and
adjustments to each existing Receivable).
(e) Location of Records. The Issuer will keep its principal place of
business and chief executive office at the address of the Issuer referred to in
Section 2.03(j) and shall keep the other offices where it keeps the books,
records and documents regarding the Pledged Assets at the addresses of the
Issuer referred to on Schedule II, or, in either case, upon 30 days' prior
written notice to the Trustee and each Series Enhancer, at any other location
within the United States with respect to which all applicable action required by
Section 2.01 shall have been taken and completed.
(f) Maintenance of Separate Members. The Issuer will maintain at least two
independent members, neither of which otherwise is (or at any time during the
last five years has been) a direct, indirect or beneficial officer, general
partner, member, director, employee, affiliate, associate, creditor, customer or
supplier of any of the Affiliated Entities (unless acting as such in an
independent capacity), nor a direct, indirect or beneficial owner of the
outstanding equity interest (including, limited partnership interests or limited
liability company interest) of any of the Affiliated Entities (any such Person
also being a "Affiliated Entity"), nor a relative of any of the foregoing, nor a
trustee in bankruptcy for any of the foregoing.
(g) Issuer Purchase Agreement and Seller Purchase Agreement. (i) The Issuer
will at its expense timely perform and comply in all material respects with all
provisions, covenants and other promises required to be observed by it under the
Issuer Purchase Agreement, maintain the Issuer Purchase Agreement in full force
and effect, enforce the Issuer Purchase Agreement in accordance with its
respective terms, and, at the request of the Trustee, make to the Seller such
reasonable demands and requests for information and reports or for action as the
Trustee may request to the extent that the Issuer is entitled to do the same
thereunder.
(ii) The Issuer shall cause the Seller, at the Seller's expense, to timely
perform and comply in all material respects with all provisions, covenants and
other promises required to be observed by it under the Seller Purchase
Agreement, maintain the Seller Purchase Agreement in full force and effect,
enforce the Seller Purchase Agreement in accordance with its respective terms,
and, at the request of the Trustee, make to the Company such reasonable demands
and requests for information and reports or for action as the Trustee may
request to the extent that the Seller is entitled to do the same thereunder.
(h) Payment of Taxes, Etc. The Issuer will pay promptly when due all
material taxes, assessments and governmental charges or levies imposed upon it
or any Pledged Asset, or in respect of its income or profits therefrom, and any
and all material claims of any kind (including,
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without limitation, claims for labor, materials and supplies), except where such
tax, assessment, charge or levy is being contested in good faith and by proper
proceedings and adequate reserves have been set up and are being maintained in
respect thereof on the Issuer's books and records.
(i) Reporting Requirements. The Issuer will furnish to the Trustee and the
Series Enhancer for each affected Series whereupon the Trustee shall promptly
thereafter send a copy thereof to each Noteholder of each affected Series and
each Rating Agency rating any of the Notes of such affected Series:
(1) within 60 days after the end of each of the first three quarters
of each fiscal year of the Issuer, unaudited balance sheets of the Issuer
as of the end of such quarter, and unaudited statements of income of the
Issuer each for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, prepared in accordance with
GAAP (subject to year-end adjustments) and certified by the chief financial
officer or chief accounting officer of the Issuer as fairly presenting the
financial condition of the Issuer as at the dates covered thereby;
(2) within 90 days after the end of each fiscal year of the Issuer, a
copy of the audited balance sheets of the Issuer as of the end of such year
and the related statements of income and retained earnings of the Issuer
for such year, together with a letter from the Issuer's independent
certified public accounting firm certifying that after reviewing such
financial statements such accounting firm believes that such financial
statements have been prepared in accordance with GAAP and fairly present
the financial condition of the Issuer with respect to the periods to which
they speak;
(3) (A) promptly, and in any event within five Business Days, after
becoming aware of the occurrence of each Event of Default, Potential Event
of Default, Series Event of Default, and Servicer Default, the statement of
the chief financial officer or chief accounting officer of the Issuer
setting forth details of such occurrence or event and the action which the
Issuer has taken and proposes to take with respect thereto, and (B) as soon
as possible and in any event within two Business Days after obtaining
knowledge thereof, notice of any other event, development or information
which has, or is reasonably likely to have, a Material Adverse Effect with
respect to any Series;
(4) promptly, and in any event within five Business Days, after the
Issuer's receipt thereof, copies of all notices, requests, and other
documents (excluding regular periodic reports) delivered or received by the
Issuer under or in connection with the Issuer Purchase Agreement; and
(5) promptly, and in any event within five Business Days, after the
Issuer acquires knowledge of the occurrence of any event described in the
definition of "Plan Event" (as determined without giving effect to any
limitations as to materiality or dollar thresholds contained in such
definition).
(j) Acquisition of Receivables from the Seller. With respect to each
Receivable acquired by the Issuer from the Seller, the Issuer shall (i) acquire
such Receivable pursuant to and
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in accordance with the terms of the Issuer Purchase Agreement, (ii) take all
action necessary to perfect, protect and more fully evidence the Issuer's
ownership of such Receivable, including, without limitation, (A) filing and
maintaining effective financing statements and continuations thereof (Forms
UCC-1 and UCC-3) against the Seller and the Company and the Claimant in all
necessary or appropriate filing offices, and filing continuation statements,
amendments or assignments with respect thereto in such filing offices and (B)
executing or causing to be executed such other instruments or notices (other
than to the Claimant, the Assignee or the Annuity Provider) as may be necessary
or appropriate and (iii) take all additional action that the Trustee or the
Majority Control Parties may reasonably request to perfect, protect and more
fully evidence the respective interests of the parties to this Agreement, the
Noteholders of the affected Series and the Series Enhancers of the affected
Series in the applicable Receivables.
(k) Collections. In the event that the Issuer or any other Affiliated
Entity receives any Collections, the Issuer agrees to hold, or cause such
Affiliated Entity to hold, all such Collections in trust and to deposit, or
cause such Affiliated Entity to deposit, such Collections to a Lock-Box Account,
the Master Collection Account or the applicable Series Collection Account
relating to the applicable Series to which such Collection relates, in each
case, as soon as practicable, but in no event later than two Business Days after
its receipt thereof.
(l) Computer Services. The Issuer and/or Wentworth either itself owns, or
has taken such action as may be necessary (including, without limitation,
obtaining any necessary consents from licensors or other Persons) to provide the
Master Servicers, the Back-up Servicer, the Trustee and any Successor Servicer
with such licenses, sublicenses and/or assignments of contracts as the Master
Servicers, the Trustee, or any Successor Servicer shall from time to time
require for its use of all services and computer hardware or software that
relate to the servicing of the Receivables or the other Pledged Assets for each
Series. The Issuer and Wentworth each hereby grants the Master Servicers, the
Back-up Servicer, the Trustee and each Successor Servicer an irrevocable license
(with respect to the services, and computer hardware and software that it owns)
or sublicense (with respect to all other such services, hardware and software)
to use such services, hardware or software in connection with the servicing,
collection and monitoring of the Receivables (subject to reasonable
confidentiality restrictions and restrictions limiting such use to the
collection, servicing and monitoring of the Receivables, which restrictions have
already been established with respect to the Back-up Servicer and, with respect
to any other Person other than the Back-up Servicer, shall be determined at such
time as such Person is charged with the servicing of the Receivables). As of the
Closing Date, all such computer software and hardware is currently owned by
Issuer and/or Wentworth and is licensed to the Back-up Servicer irrevocably
until the termination of the Back-up Servicing Agreement. From and after the
Closing Date, the Issuer or Wentworth, as applicable, shall deliver to the
Trustee a copy of each consent (or evidence that such consent is not required)
from all necessary parties with respect to any such services, hardware or
software prior to the date the Issuer or Wentworth enters into any license to
use such service or software to service, monitor and collect any Receivables of
any Series.
(m) ERISA. The Issuer will not maintain any Plans in its own name or
otherwise agree to make contributions to any Plan. The Issuer shall not allow
any Plan maintained by any of its ERISA Affiliates to incur any "accumulated
funding deficiency" (within the meaning of Section 302 of ERISA or Section 412
of the Internal Revenue Code), whether or not waived. Each ERISA
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Affiliate of the Issuer shall timely make all contributions required by it to be
made by it to any Plans and/or Multiemployer Plans to which contributions are or
shall be required to be made by such ERISA Affiliate, and no event requiring
notice to the PBGC under Section 302(f) of ERISA shall occur with respect to any
such Plan, in any case, that could reasonably be expected to result, directly or
indirectly, in any Lien being imposed on the property of the Issuer or the
payment of any amount in excess of the Plan Liability Threshold to avoid such
Lien. No Plan Event with respect to the Issuer or any of its ERISA Affiliates
shall occur that could reasonably be expected to result, directly or indirectly,
in any Lien being imposed on the property of the Issuer or the payment of any
amount in excess of the Plan Liability Threshold.
(n) Accounting for Transfers. The Issuer shall treat the transfers and
conveyances of the Receivables by the Seller to it pursuant to the Issuer
Purchase Agreement as sales and absolute transfers thereof for all tax and
accounting purposes.
(o) Fidelity Insurance. The Issuer shall maintain, at its own expense, a
fidelity insurance policy, with broad coverage with responsible companies on all
officers, employees or other persons acting on behalf of the Issuer in any
capacity with regard to the Receivables to handle documents and papers related
thereto. Any such fidelity insurance shall protect and insure the Issuer against
losses, including forgery, theft, embezzlement, and fraud, and shall be
maintained in an amount of at least $10,000,000 or such lower amount as the
Majority Control Parties may in their commercially reasonable credit judgment
designate to the Issuer from time to time, and in a form acceptable to the
Majority Control Parties in their commercially reasonable judgement. No
provision of this Section 2.05(o) requiring such fidelity insurance shall
diminish or relieve the Issuer from its duties and obligations as set forth in
this Agreement or any of the other Operative Documents. The Issuer shall be
deemed to have complied with this provision if one of its respective Affiliates
has such fidelity policy coverage and, by the terms of such fidelity policy, the
coverage afforded thereunder extends to the Issuer. Upon the request of the
Trustee or any Control Party, the Issuer shall cause to be delivered to the
Trustee or such Control Party, as applicable, a certificate evidencing coverage
under such fidelity policy. Any such insurance policy shall contain a provision
or endorsement providing that such policy may not be canceled or modified in a
materially adverse manner without ten (10) days' prior written notice to the
Trustee.
(p) Confidentiality of Settlement Agreements. The Issuer, and its officers,
directors and employees shall keep, and shall cause to be kept, strictly
confidential all terms of all Settlement Agreements, including, without
limitation, the name of the Settlement Counterparties related thereto and the
nature of the injury to the Claimant, and shall not copy or disclose such terms
in any manner whatsoever, in whole or in part, except (i) to the Back-Up
Servicer in accordance with the Back-Up Servicing Agreement, (ii) to the Master
Servicers to the extent necessary to service the Receivables in accordance with
the terms hereof and the applicable Supplement, (iii) to the Trustee, the
Noteholders and the Rating Agencies solely to the extent required to enforce
their respective rights hereunder (or in the case of the Rating Agencies, to the
extent necessary for their ratings of the Notes of any Series) and under the
applicable Supplement and (iv) as required by law; provided that the Issuer may
in any event disclose in its sole discretion the terms of any Settlement
Agreement so long as (i) all references therein to the Settlement Counterparties
related thereto and the nature of the Claimant's injury shall be stricken from
such
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disclosure, and (ii) such recipient shall agree to the terms of confidentiality
contained in this Section 2.05(p).
SECTION 2.06. Negative Covenants of the Issuer. The Issuer hereby further
covenants that, without the prior written consent of the Majority Control
Parties, until the satisfaction and discharge of this Indenture pursuant to
Section 12.01:
(a) No Liens. Other than (a) pursuant to the Seller Purchase Agreement and
the Issuer Purchase Agreement, and (b) the security interest granted pursuant to
the Granting Clause, the Issuer will not sell, pledge, assign or transfer to any
Person, or grant, create, incur, assume or suffer to exist any Lien on, any
Pledged Asset, whether now existing or hereafter created, or any interest
therein, and the Issuer shall defend the Issuer's right, title and interest in
and to, and the Trustee's security interest in and to, the Pledged Assets,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Issuer.
(b) Activities of the Issuer. The Issuer will not engage in, enter into or
be a party to any business, activity or transaction of any kind other than the
businesses, activities and transactions authorized in its Organizational
Documents as in effect as of Closing Date, or as otherwise amended with the
prior written consent of the Trustee and the Majority Control Parties and, with
respect of which amendment, the Rating Agencies then rating the Notes of any
outstanding Series or Class shall have confirmed that such amendment would not
cause the reduction or withdrawal of such rating of any such Series or Class.
(c) Indebtedness. Except as contemplated herein (including any
Supplement hereto) with respect to any other subsequent issuances of Notes of
other Series hereunder, the Issuer will not create, incur or assume any
Indebtedness or enter into any other securitization transaction or any other
off-balance sheet financing arrangement, other than Indebtedness arising under
the Issuer Purchase Agreement to the extent evidenced by a Purchase Price Note.
(d) Guarantees. The Issuer will not become or remain liable, directly or
contingently, in connection with any Indebtedness or other liability of any
other Person, whether by guarantee, endorsement (other than endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business), agreement to purchase or repurchase, agreement to supply or advance
funds, or otherwise.
(e) Investments. The Issuer will not make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Affiliate or any other Person except for (i) purchases of
assets permitted pursuant to the Issuer's Organizational Documents and (ii)
loans, advances, extensions, investments and contributions incurred in the
ordinary course of business and not exceeding $25,000 in the aggregate at any
one time outstanding.
(f) Extension or Amendment of Receivables. The Issuer will not extend,
amend or otherwise modify (or consent to, or fail to object to, any such
extension, amendment or
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modification by the Company, the Seller or any of the Master Servicers of) the
terms of any Receivable or rescind or cancel, or permit the rescission or
cancellation of, any Receivable except:
(i) as permitted under any Supplement with respect to the Series
Receivables thereunder;
(ii) as ordered by a court of competent jurisdiction or other
Governmental Authority;
(iii) to the extent that any representation or warranty of the Seller
under the Issuer Purchase Agreement with respect to any Series Receivable
or, in the case of the initial issuance hereunder, in any certificates
delivered by any officer of J.G. Wentworth 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) in connection with
any of the opinions of counsel delivered on the Closing Date was incorrect
when made or deemed made, the Issuer shall, within five Business Days after
learning thereof, cause the Seller to either (x) convey to the Issuer, for
the benefit of the Series to which such affected Receivable was allocated,
in exchange for the affected Series Receivable, one or more different
Receivables to be described on a List of Receivables delivered to the
Trustee and having a Discounted Receivables Balance approximately equal to
(but not less than) that of the Receivable being so replaced (provided that
for purposes of this clause, the Discounted Receivables Balance of such
Series Receivable being so replaced shall be calculated by treating any
past due Scheduled Payments thereon as if such payments were due on the
date of such calculation and the Discounted Receivables Balance of the
replacement Series Receivable shall be calculated without giving effect to
any past due Scheduled Payments owing thereon), or (y) repurchase, in cash
delivered to the Series Collection Account for such Series, such affected
Series Receivable from the Issuer for an amount equal to the Discounted
Receivables Balance (as calculated by treating any past due Scheduled
Payments thereon as if such payments were due on the date of such
calculation) of such Series Receivable, whereupon, in either case, (a) the
Series Receivable being replaced or repurchased shall cease to be a "Series
Receivable" and, in the case of clause (x), any such new Receivable shall
become a "Series Receivable" for such Series (it being agreed that the
incorrectness of any such representation or warranty, and the substitution
or repurchase obligation of the Seller pursuant to this clause (iii)
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) and (b) the Trustee shall release such affected
Series Receivable from the lien of the Trustee effected pursuant to the
Granting Clause and pursuant to the applicable Supplement (and shall, at
the Issuer's expense, execute and deliver to the Issuer all necessary UCC
releases and other releases in respect thereof); and
(iv) the Issuer may (but shall not be obligated) from time to time to,
add to the Series Receivables of any Series additional Scheduled Payments
due under the Settlement Agreement (but not previously included in the
Pledged Assets) relating to any Receivable of such Series which became a
Defaulted Receivable pursuant to clause (e) of the definition thereof
(whether or not such Defaulted Receivable has since been Rehabilitated), in
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substitution for (and in consideration of) any diverted Scheduled Payment
originally included as part of such Series Receivable, which additional
Scheduled Payments shall be described on a List of Receivables delivered to
the Trustee, whereupon, such new Scheduled Payments shall become part of
the "Series Receivables" for such Series; provided that, for all purposes
hereunder, any such Receivable which was a Defaulted Receivable prior to
such extension, adjustment or modification shall remain a Defaulted
Receivable until the same shall have been otherwise Rehabilitated; and
it is further understood, agreed and acknowledged that certain of the
Settlements provide that they may be prepaid upon the death of the Claimant and
that such prepayment may be discounted into a present value in accordance with a
formula set forth in the related Settlement Agreement or the related Annuity
Contract (any such Settlement being a "Commutable Settlement").
(g) Change in Credit Policy Manual. The Issuer will not make, or consent or
fail to object to, any change in the Credit Policy Manual which change could be
reasonably likely to materially impair or delay the collectibility of any
Receivable or result in a deterioration in the creditworthiness of the Obligors
generally.
(h) Deposits to Lock-Box Accounts or the Master Collection Account;
Deposits to Series Collection Accounts. The Issuer will not deposit or otherwise
credit, or cause to be so deposited or credited, or consent or fail to object to
any such deposit or credit, to any Lock-Box Account or the Master Collection
Account of cash proceeds other than Collections of Receivables and other Pledged
Assets; provided, that to the extent any amounts other than Collections of
Receivables and the Related Property relating thereto are so deposited on any
date, it shall not constitute a breach hereunder if such other funds are
identified and are removed from such account within two Business Days after such
amounts were so deposited in such account. The Issuer will not deposit or
otherwise credit, or cause to be so deposited or credited, or consent or fail to
object to any such deposit or credit, to any Series Collection Account cash
proceeds other than Collections of the Series Receivables and other Series
Pledged Assets of the Series to which such account relates; provided that to the
extent any such other amounts are so deposited on any date, it shall not
constitute a breach hereunder if such other funds are identified and are removed
from such account within two Business Days after such amounts were so deposited
in such account.
(i) Receivables Not To Be Evidenced by Promissory Notes. The Issuer will
take no action to cause any Receivable to be evidenced by any "instrument" (as
defined in the UCC of the jurisdiction the law of which governs the perfection
of the interest in such Receivable created hereunder), except in connection with
its enforcement, in which event the Issuer shall deliver such instrument to the
Trustee, for the benefit of the Noteholders of the Series to which such
Receivables relates, as required pursuant to Section 2.01.
(j) Change in Name or Jurisdiction of Organization. The Issuer will not (i)
make any change to its name or principal place of business or use any
tradenames, fictitious names, assumed names or "doing business as" names unless,
at least 30 days prior to the effective date of any such name change, change in
principal place of business, or use, the Issuer delivers to the Trustee such
financing statements (Forms UCC-1 and UCC-3) and such other documents or
instruments executed by the Issuer as shall be necessary to maintain the
perfection of the Trustee's
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ownership or security interest in the Pledged Assets free and clear of all other
Liens or which the Trustee or any of the Control Parties may reasonably request
to reflect such change or (ii) change its jurisdiction of organization unless
the Trustee shall have received from the Issuer (A) written notice of such
change at least 10 days prior to the effective date thereof, and (B) prior to
the effective date thereof, an Opinion of Counsel, in form and substance
reasonably satisfactory to the Trustee, as to such organization and the Issuer's
valid existence and good standing and as to the matters referred to in Section
2.03(e).
(k) Issuer Purchase Agreement. The Issuer will not (i) cancel or terminate
the Issuer Purchase Agreement or consent to or accept any cancellation or
termination thereof, (ii) amend or otherwise modify any term or condition of the
Issuer Purchase Agreement or give any consent, waiver or approval thereunder,
(iii) waive any default under or breach of the Issuer Purchase Agreement or (iv)
take any other action under the Issuer Purchase Agreement not required by the
terms thereof to the extent that it could reasonably be expected to impair the
value of any Pledged Asset or the rights or interests of the Issuer thereunder
or of the Trustee or any Noteholders hereunder or thereunder. To the extent of
the rights assigned to it under the Issuer Purchase Agreement with respect to
the Seller Purchase Agreement, the Issuer will not (i) cancel or terminate the
Seller Purchase Agreement or consent to or accept any cancellation or
termination thereof, (ii) amend or otherwise modify any term or condition of the
Seller Purchase Agreement or give any consent, waiver or approval thereunder,
(iii) waive any default under or breach of the Seller Purchase Agreement or (iv)
take any other action under the Seller Purchase Agreement not required by the
terms thereof to the extent that it could reasonably be expected to impair the
value of any Pledged Asset or the rights or interests of the Issuer thereunder
or of the Trustee or any Noteholders hereunder or thereunder.
(l) Organizational Documents. Except as permitted by Section 2.06(j), the
Issuer will not amend any of its Organizational Documents in any manner which
would adversely affect the Noteholders or the Pledged Assets, as confirmed by an
Opinion of Counsel of the Issuer to the Trustee and the confirmation by each of
the Rating Agencies then rating the Notes of any outstanding Series or Class
that such amendment would not cause the reduction or withdrawal of such rating
of any such Series or Class.
(m) Maintenance of Separate Existence. The Issuer shall take all reasonable
steps to continue its identity as a separate legal entity and to make it
apparent to third Persons that it is an entity with assets and liabilities
distinct from those of Wentworth, the Company, the Seller, the other Affiliated
Entities or any other Person, and that it is not a division of any of the
Affiliated Entities or any other Person. In that regard, and without limiting
the foregoing in any manner, the Issuer shall:
(1) maintain its limited liability company existence and make independent
decisions with respect to its daily operations and business affairs and, other
than decisions of its managing member pursuant to the terms of the limited
liability company agreement of the Issuer, not be controlled in making such
decisions by any other Affiliated Entity or any other Person;
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(2) maintain at least two members neither of which otherwise is (or at
any time during the last five years has been) a direct, indirect or
beneficial officer, general partner, member, director, employee, affiliate,
associate, creditor, customer or supplier of any of the Affiliated Entities
(unless acting as such in an independent capacity), nor a direct, indirect
or beneficial owner of the outstanding equity interest (including, limited
partnership interests or limited liability company interest) of any of the
Affiliated Entities, nor a relative of any of the foregoing, nor a trustee
in bankruptcy for any of the foregoing;
(3) maintain separate and clearly delineated office space owned by it
or evidenced by a written lease or sublease (even if located in an office
owned or leased by, or shared with, another Affiliated Entity);
(4) maintain its assets in a manner which facilitates their
identification and segregation from those of any of the other Affiliated
Entities;
(5) maintain a separate telephone number which will be answered only
in its own name and separate stationery and other business forms;
(6) conduct all intercompany transactions with the other Affiliated
Entities on terms which the Issuer reasonably believes to be on an
arm's-length basis;
(7) not guarantee any obligation of any of the other Affiliated
Entities, nor have any of its obligations guaranteed by any other
Affiliated Entity or hold itself out as responsible for the debts of any
other Affiliated Entity or for the decisions or actions with respect to the
business and affairs of any other Affiliated Entity, nor seek or obtain
credit or incur any obligation to any third-party based upon the
creditworthiness or assets of any other Affiliated Entity or any other
Person;
(8) except as expressly otherwise permitted hereunder or under any of
the other Transaction Documents, not permit the commingling or pooling of
its funds or other assets with the assets of any other Affiliated Entity;
(9) maintain separate deposit and other bank accounts to which no
other Affiliated Entity (other than as a Master Servicer) has any access;
(10) maintain financial records which are separate from those of the
other Affiliated Entities;
(11) compensate (either directly or through reimbursement of its
allocable share of any shared expenses) all employees, consultants and
agents, and Affiliated Entities, to the extent applicable, for services
provided to the Issuer by such employees, consultants and agents or
Affiliated Entities, in each case, from the Issuer's own funds;
(12) have agreed with each of the other relevant Affiliated Entities
to allocate among themselves shared overhead and corporate operating
services and expenses which are not reflected in the Master Servicing Fee
(including without limitation the services of
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shared employees, consultants and agents and reasonable legal and auditing
expenses) on the basis of actual use or the value of services rendered, and
otherwise on a basis reasonably related to actual use or the value of
services rendered;
(13) pay for its own account for accounting and payroll services,
rent, lease and other expenses (or its allocable share of any such amounts
provided by one or more other Affiliated Entity) and not have such
operating expenses (or the Issuer's allocable share thereof) paid by any of
the Affiliated Entities, provided, that Wentworth, the Company and/or the
Seller shall be permitted to pay the initial organizational expenses of the
Issuer;
(14) maintain adequate capitalization in light of its business and
purpose;
(15) conduct all of its business (whether in writing or orally) solely
in its own name through its duly authorized officers, employees and agents;
(16) not make or declare any dividends or other distributions of cash
or property to the holders of its equity securities or make redemptions or
repurchases of its equity securities, in either case, on a periodic basis
any more frequently than monthly or otherwise, in certain other irregular
cases, in accordance with appropriate corporate formalities and consistent
with sound business judgment; and all such distributions, redemptions or
repurchases shall only be permitted to be made hereunder out of Available
Issuer Funds and only to the extent that it is not violative of any
applicable law and no Event of Default or Potential Event of Default then
exists or would result therefrom;
(17) maintain at least one employee (which employee may be shared with
an Affiliate pursuant to a written agreement allocating the compensation
and other remuneration and benefits for such employee as among such
parties) in charge of day-to-day operations of the Issuer;
(18) otherwise practice and adhere to corporate formalities such as
complying with its Organizational Documents and member and manager
resolutions, the holding of regularly scheduled meetings of members and
managers, and maintaining complete and correct books and records and
minutes of meetings and other proceedings of its members and managers; and
(19) not fail to maintain all policies and procedures or take or
continue to take all actions necessary or appropriate to ensure that all
factual assumptions set forth in those certain Opinions of Counsel of the
Issuer delivered on the Closing Date concluding that sales of Receivables
by the Seller to the Issuer made pursuant to the Issuer Purchase Agreement
and by the Company to the Seller pursuant to the Seller Purchase Agreement
would constitute true sales and that the Issuer would not be substantively
consolidated with the Seller, the Company or Wentworth following the
occurrence of an Insolvency Event with respect to any such Person.
(n) Merger and Other Transactions. The Issuer will not (i) enter into any
transaction of merger or consolidation, or convey or otherwise dispose of any
material portion of
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its assets (except as contemplated herein) to any Person or Person(s), (ii)
terminate, liquidate or dissolve itself (or suffer any termination, liquidation
or dissolution), (iii) acquire any Person, or (iv) appoint any Person other than
the Seller or an Affiliate of the Seller to be the manager or controlling
co-manager of the Issuer.
(o) Transactions with Affiliates. The Issuer will not enter into, or be a
party to, any transaction with any of its Affiliates, except (i) the
transactions contemplated by the Issuer Purchase Agreement and (ii) any other
transactions (including, without limitation, the lease of office space or
computer equipment or software by the Issuer from an Affiliate and the sharing
of employees and employee resources and benefits) (A) in the ordinary course of
business or as otherwise permitted hereunder, (B) pursuant to the reasonable
requirements and purposes of the Issuer's business, (C) upon fair and reasonable
terms (and, to the extent material, pursuant to written agreements) that are
consistent with market terms for any such transaction (including, any financing
arrangements entered into pursuant to Section 2.06(c)(ii)), and (D) not
inconsistent with the factual assumptions set forth in the opinion letters
referred to in clause (19) of Section 2.06(m).
(p) Change in Lock-Box Accounts and Instructions to Obligors. The Issuer
will not add or terminate any institution as a Lock-Box Bank or terminate or
substitute any Lock-Box Account or any related lock-box from those listed in
Schedule III hereto, except as otherwise permitted pursuant to Section 4.02 or
unless the Trustee shall have received notice of such addition, termination or
change and executed copies of Lock-Box Notices covering any such new Lock-Box
Bank, Lock-Box Account or any new lock-box relating thereto. The Issuer will not
instruct any Obligor to remit Collections to any Person, address or account
other than a Lock-Box Account or the related lock-box or the Series Collection
Account for the Series to which the underlying Receivables or Pledged Assets
relates.
(q) Classification Election. The issuer will not elect to be classified as
an association taxable as a corporation for federal, state, local or other
income tax purposes.
(r) Ownership of Issuer. The number of individuals and entities (other than
Flow-Through Entities (as such term is defined below)) that are beneficial
owners of a direct interest in the Issuer, plus the number of individuals and
entities (other than Flow-Through Entities) that are beneficial owners of an
indirect ownership in the Issuer through one or more Flow Through Entities,
other than the Seller or the Company or any successor thereto, will never exceed
ten. As used herein, "Flow-Through Entity" shall mean an entity that, for
federal income tax purposes, is a partnership, a grantor trust, or an S
corporation or other entity which is not treated for such purposes as a separate
entity.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.01. Acceptance of Appointment and Other Matters Relating to the
Master Servicers. (a) Wentworth agrees to act as the Initial Master Servicer
under this Agreement (subject to Article X) and, unless otherwise specified in
any Supplement with respect to the Series covered thereby shall act and be
appointed as such for each Series without any further action
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hereunder or thereunder (subject to Article X). Unless otherwise specified in
any Supplement with respect to the Series covered thereby and subject to Article
X, the Noteholders of each Series, by their acceptance of the Notes of such
Series, consent to Wentworth so acting as Master Servicer.
(b) Each of the Trustee and the Issuer hereby appoints as its agent, for
the benefit of the Noteholders of each Series, separately, the Person designated
or, in accordance with Section 3.01(a), deemed designated, by the Noteholders of
such Series to act as Master Servicer with respect to such Series (subject to
Article X) to enforce the Trustee's and Issuer's respective rights and interests
in, to and under the Receivables and the other Series Pledged Assets relating to
such Series; it being understood and agreed that the Master Servicer for one
Series need not be the same Person as the Master Servicer for any other Series.
Each Master Servicer shall service, administer and collect the Receivables
relating to such Series and, in connection therewith, such Master Servicer shall
take or cause to be taken all such actions as may be necessary or advisable to
collect each Receivable relating to such Series from time to time, all in
accordance with applicable laws, rules and regulations, with reasonable care and
diligence, and in accordance with the Credit Policy Manual. Each Master Servicer
shall exercise the same care and apply the same policies with respect to the
collection, administration and servicing of the Receivables and other Pledged
Assets relating to such Series that it would exercise and apply if it owned such
Receivables and other Pledged Assets, all in substantial compliance with
applicable law and in accordance with the Credit Policy Manual.
(c) Each Master Servicer shall have full power and authority, acting alone
or through any party properly designated by it hereunder, to do any and all
things in connection with such servicing and administration which it may deem
necessary or desirable, subject to the limitations set forth herein, in any
applicable Supplement and in the Intercreditor Agreement. Without limiting the
generality of the foregoing and subject to Section 10.01, each Master Servicer
or its designee is hereby authorized and empowered to (i) subject to the terms
of the Intercreditor Agreement and the last sentence of Section 3.05(a),
instruct the Collateral Trustee, in writing, to make transfers of Collections
relating to Series for which it is Master Servicer from the Master Collection
Account to either the applicable Series Collection Account or, with respect to
any portion of any such Collections received and owing as Split Payments to the
Claimant thereof, to the Issuer Split Payment Account, as applicable, such
instructions to be set forth in the Daily Reports to be delivered to the Trustee
and the Collateral Trustee in accordance with Section 3.05(a), (ii) subject to
the last sentence of Section 3.05(a) and the terms of any applicable Supplement,
to withdraw, or instruct the Collateral Trustee in writing to withdraw from the
Issuer Split Payment Account, the amounts owing to the applicable Claimants in
respect of Split Payments from the Collections received in the Master Collection
Account on the Series Receivables for the Series for which it acts as Master
Servicer, and, in accordance with Section 4.02(a), to remit or cause the Trustee
to remit such amounts to such Claimants, such instructions to also be set forth
in the Daily Reports to be delivered to the Trustee and the Collateral Trustee
in accordance with Section 3.05(a), (iii) subject to, and in accordance with,
the terms of any applicable Supplement, administer the Series Accounts with
respect to each Series for which it acts as Master Servicer, (iv) to make any
filings, reports, notices, applications and registrations with, and to seek any
consents or authorizations from, the Securities and Exchange Commission and any
state securities authority on behalf of the Issuer with respect to the Series
for which it acts as Master Servicer as may be necessary or advisable to comply
with any Federal or state securities
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laws or reporting requirements, and (v) to subcontract with any other Person
with the prior consent of the applicable Control Party for the applicable Series
for which such Person would be so appointed to act (in any case, at such Master
Servicer's expense), for servicing, administering or collecting, in whole or in
part, the Receivables of such Series whereupon such other Person with which such
Master Servicer so subcontracts shall be entitled such rights and powers of such
Master Servicer hereunder as may be delegated to it; provided, however, that
such Master Servicer shall remain fully liable for the performance of the duties
and obligations of the Master Servicer pursuant to the terms hereof. The Trustee
shall execute any documents furnished by any Master Servicer which are necessary
or appropriate to enable such Master Servicer to carry out its servicing and
administrative duties hereunder and which are acceptable in form and substance
to the Trustee.
(d) No Master Servicer shall extend the maturity, adjust the Discounted
Receivables Balance, or otherwise modify the terms of any Receivable, except (i)
as permitted pursuant to Section 2.06(f), (ii) with respect to any specific
Series, as permitted pursuant to the Supplement relating to such Series, and
(iii) unless otherwise provided in any Supplement with respect to the Series
Receivables allocated to such Series, to the extent no Servicer Default, Event
of Default or Series Event of Default with respect to any affected Series has
occurred and is outstanding, the Master Servicer for a Series shall be permitted
to adjust the Discounted Receivables Balance of, or extend the time of payment
for, any Defaulted Receivable allocated to such Series, all as it may deem
appropriate to maximize the Collections thereon and all in accordance with its
ordinary business practices; provided, that except as otherwise provided herein,
such Receivable shall remain a Defaulted Receivable hereunder notwithstanding
such adjustments or modifications unless and until the same shall be
Rehabilitated.
SECTION 3.02. Servicing Compensation. As full compensation for its
servicing activities hereunder in respect of any Series, and as reimbursement
for any expense incurred by it in connection therewith, each Master Servicer
shall be entitled to receive the Master Servicing Fees specified in the
Supplement for such Series.
SECTION 3.03. Representations and Warranties of Each Master Servicer.
Except as may otherwise be expressly provided in any Supplement for the related
Series covered thereby, each Master Servicer hereby makes, and each successor
servicer by acceptance of its appointment hereunder shall make, the following
representations and warranties as of the date hereof or, if later, the date of
its appointment as a Master Servicer (and shall be deemed to remake on each day
hereafter or thereafter during which such Person is acting as such):
(a) Organization and Good Standing. Such Master Servicer is a corporation
duly organized, validly existing and in good standing under the applicable laws
of its jurisdiction of incorporation and has, in all material respects, full
power and authority to own its properties and conduct its business as such
properties are presently owned and as such business is presently conducted, and
to execute, deliver and perform its obligations under the Operative Documents to
which it is a party or by which it is bound.
(b) Due Qualification. Such Master Servicer is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt from
such requirements), and has
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obtained all necessary licenses and approvals, in each jurisdiction in which
failure to so qualify or to obtain such licenses or approvals has, or could
reasonably be expected to have, a material adverse effect on its ability to
perform its obligations as a Master Servicer under the Operative Documents to
which it is a party or by which it is bound.
(c) Due Authorization. Such Master Servicer's execution, delivery and
performance of the Operative Documents to which it is a party or by which it is
bound have been duly authorized by all necessary corporate and shareholder
action on the part of such Master Servicer.
(d) Binding Obligation. Each of the Operative Documents to which it is a
party or by which it is bound constitutes a legal, valid and binding obligation
of such Master Servicer enforceable against it in accordance with its terms
except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors' rights
generally, and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
(e) No Conflict. Such Master Servicer's execution and delivery of the
Operative Documents by such Master Servicer, and the performance of the
transactions contemplated by the Operative Documents to which it is a party or
by which it is bound, and fulfillment of the terms hereof and thereof applicable
to such Master Servicer, do not conflict with or violate any Requirements of Law
applicable to such Master Servicer, or conflict with, result in any breach of
any of the enforceable terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which such Master
Servicer is a party or by which it or its properties are bound.
(f) No Proceedings. There are no proceedings or investigations pending or,
to the best of the Master Servicer's knowledge, threatened against such Master
Servicer before any Governmental Authority (i) asserting the illegality,
invalidity or unenforceability, or seeking any determination or ruling that
would affect the legality, binding effect, validity or enforceability, of any of
the Operative Documents to which it is a party or by which it is bound, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
any of the Operative Documents to which it is a party or by which it is bound,
or (iii) seeking any determination or ruling that is reasonably likely to
materially and adversely affect the financial condition or operations of such
Master Servicer or the performance by such Master Servicer of its obligations
under any of the Operative Documents to which it is a party or by which it is
bound.
(g) No Consents. No authorization, consent, license, order or approval of
or registration or declaration with any Governmental Authority is required to be
obtained, effected or given by such Master Servicer in connection with the
execution and delivery by it of any of the Operative Documents or the
performance by it of its obligations under the Operative Documents to which it
is a party or by which it is bound.
(h) Information. Each certificate, information, exhibit, financial
statement, document, book or record or report furnished by such Master Servicer
to the Trustee, the Issuer, any Series Enhancer or any Noteholder in connection
with this Agreement is accurate in all
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material respects as of its date, and no such document contains any material
misstatement of fact or omits to state a material fact or any fact necessary to
make the statements contained therein not materially misleading as of its date.
The representations and warranties made pursuant to this Section 3.03 shall
survive the date of the making thereof. Upon a discovery by the Issuer, such
Master 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. The Trustee's obligations in respect
of any such breach are limited as provided in Section 11.02(h).
SECTION 3.04. Covenants of the Master Servicer. Except as may be expressly
otherwise provided in any Supplement with respect to the related Series covered
thereby, from the Closing Date in respect of such Series until the earlier of
(a) the date of the satisfaction and discharge of this Indenture and (b) the
Collection Date of the last outstanding Series for which such Person acts as
Master Servicer, each Master Servicer hereby covenants, and each Successor
Servicer by its acceptance of its appointment hereunder shall be deemed to
covenant, that, without the prior written consent of the Rating Agencies and any
Control Party for the applicable Series for which such Person is acting as
Master Servicer:
(a) Change in Accounts. Such Master Servicer will not (i) terminate or
substitute any Series Collection Account except as required pursuant to Section
4.02 or (ii) add or terminate any institution as a Lock-Box Bank or terminate or
substitute any Lock-Box Account or any related lock- boxes from those listed in
Schedule III hereto, except as otherwise permitted pursuant to Section 4.02 or
unless the Trustee and each Series Enhancer shall have received notice of such
addition, termination or change and executed copies of Lock-Box Notices from
each new Lock-Box Bank or relating to each new Lock-Box Account and/or each new
lock-box. No Master Servicer shall instruct any Annuity Provider or other
Obligor to remit, or consent to any applicable Claimant's, Annuity Provider's or
other Obligor's instructions to remit or remittance of, Collections to any
Person, address or account other than a Lock-Box Account, the related lock-box,
or the Series Collection Account for the Series to which such Collections
relate.
(b) Collections. In the event that such Master Servicer or any Affiliate
thereof receives any Collections relating to any Receivables, such Master
Servicer agrees to hold, or cause such Affiliate to hold, all such Collections
in trust and to deposit, or cause such Affiliate to deposit, such Collections to
the Master Collection Account or the Series Collection Account for the
applicable Series, in either case, as soon as practicable, but in no event later
than two Business Days after its receipt thereof.
(c) Preservation of Existence; Compliance with Requirements of Law.
(i) Except as permitted pursuant to Section 8.02, each Master Servicer
will preserve and maintain its corporate or other existence, rights,
franchises and privileges in the jurisdiction of its organization, and
qualify and remain qualified in good standing as a foreign corporation in
each jurisdiction where the failure to maintain such qualification could
reasonably be expected to materially and adversely affect (i) the interests
of the Trustee or the applicable Noteholders
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hereunder or in the Series Pledged Assets for the Series for which such
Master Servicer acts in such capacity, (ii) the collectibility of any
Series Receivable for the Series for which such Master Servicer acts in
such capacity or (iii) the ability of such Master Servicer to perform its
obligations hereunder, under any applicable Supplement or any other
Operative Documents to which such Person is a party or by which it is
bound.
(ii) Such Master Servicer will duly satisfy in all material respects
all obligations on its part to be fulfilled under or in connection with
each Series Receivable for the Series for which such Master Servicer acts
in such capacity, will maintain in effect all qualifications required under
Requirements of Law in order properly to service each such Series
Receivable and will comply in all material respects with all other
Requirements of Law in connection with servicing each such Series
Receivable.
(d) Extension or Amendment of Receivables. Except as permitted pursuant to
Sections 2.06(f) and 3.01(d), no Master Servicer will extend, amend or otherwise
modify (or consent or fail to object to any such extension, amendment or
modification by the Company, the Seller or the Issuer) the terms of any then
existing Receivable.
(e) Protection of Noteholders' Rights. Except as expressly permitted
hereunder or under any applicable Supplement, no Master Servicer will take any
action which could reasonably be expected to impair the rights of any of the
Noteholders in any Receivable or Pledged Asset for the Series for which it acts
as Master Servicer.
(f) Deposits to Lock-Box Accounts or Collection Account. No Master Servicer
will deposit or otherwise credit, or cause to be so deposited or credited, or
consent or fail to object to any such deposit or credit, to any Lock-Box Account
(or any related lock-box) or the Master Collection Account cash or cash proceeds
other than Collections of Receivables; provided that to the extent that any such
other funds are so deposited, it shall not constitute a breach of this Section
3.04(f) if such funds are removed from such account within two Business Days
after so deposited in such account. No Master Servicer will deposit or otherwise
credit, or cause to be so deposited or credited, or consent or fail to object to
any such deposit or credit, to the Series Collection Account for any Series cash
or cash proceeds other than Collections of the Series Receivables and other
Series Pledged Assets, in each case, for the Series to which such account
relates; provided that to the extent that any such other funds are so deposited,
it shall not constitute a breach of this Section 3.04(f) if such funds are
removed from such account within two Business Days after so deposited in such
account.
(g) Receivables Not To Be Evidenced by Promissory Notes. No Master Servicer
will take any action to cause any Receivable to be evidenced by any "instrument"
(as defined in the UCC of the State the law of which governs the perfection of
the interest in such Receivable created hereunder), except in connection with
its enforcement, in which event such Master Servicer shall deliver such
instrument to the Trustee as required pursuant to Section 2.01.
(h) Reporting Requirements. Each Master Servicer will furnish to the
Trustee and the Series Enhancer, if any, for any Series for which it so acts:
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(i) promptly, and in any event within five Business Days, after
becoming aware thereof, notice of the occurrence of any Event of Default,
Potential Event of Default, Servicer Default or event that, with the giving
of notice or lapse of time or both, would constitute a Servicer Default, in
each case, with respect to such Series, and, in the case of such a Servicer
Default or incipient Servicer Default, the statement of the chief financial
officer or chief accounting officer of such Master Servicer setting forth
details of such occurrence, commencement or event and the action which such
Master Servicer has taken and proposes to take with respect thereto; and
(ii) as soon as possible and in any event within two Business Days
after acquiring knowledge thereof, notice of the occurrence of any Material
Adverse Effect.
(i) Inspection of Books and Records. The Trustee and the Series Enhancer
and/or the Control Party for the applicable Series (or if such Control Party is
a designated percentage of the Noteholders for such Series, then each
Noteholder) independent accountants appointed by, or other agents of, any of the
foregoing, and the Issuer shall have the right, upon reasonable prior written
notice to the Master Servicer for a Series, to visit such Master Servicer and to
discuss the affairs, finances and accounts of such Master Servicer (as they
relate to such Master Servicer's obligations under this Agreement and the other
Operative Documents relating to such Series) with, and to be advised as to the
same by, its officers, and to examine the books of account and records of such
Master Servicer as they relate to the Pledged Assets of such Series, to make or
be provided with copies and extracts there from, and, upon reasonable notice, to
discuss the affairs, finances and accounts of such Master Servicer with, and to
be advised as to the same by, the independent accountants of such Master
Servicer (and by this provision such Master Servicer authorizes such accountants
to discuss such affairs, finances and accounts, whether or not a representative
of such Master Servicer is present, it being understood that nothing contained
in this Section 3.04(i) is intended to confer any right to exclude any such
representative from such discussions), all at such reasonable times and
intervals and to such reasonable extent during regular business hours of such
Master Servicer as the Trustee, such Series Enhancer, such Control Party (or
designated representative thereof) or such accountants or agents appointed by
any of the foregoing, as applicable, may desire (but, so long as no Servicer
Default is then outstanding or continuing, no more often than once in any six
month period).
(j) Fidelity Insurance. The Master Servicer for each Series shall maintain,
at its own expense, a fidelity insurance policy, with broad coverage with
responsible companies on all officers, employees or other persons acting on
behalf of the Master Servicer in any capacity with regard to the Receivables to
handle documents and papers related thereto. Any such fidelity insurance shall
protect and insure such Master Servicer against losses, including forgery,
theft, embezzlement, and fraud, and shall be maintained in an amount of at least
$10,000,000 or such lower amount as the applicable Control Parties may in their
commercially reasonable credit judgment designate to such Master Servicer from
time to time, and in a form acceptable to such applicable Control Parties in its
commercially reasonable judgement. No provision of this Section 3.04(j)
requiring such fidelity insurance shall diminish or relieve any such Master
Servicer from its duties and obligations as set forth in this Agreement or any
of the other Operative Documents. Any Master Servicer shall be deemed to have
complied with this provision if one of its respective Affiliates has such
fidelity policy coverage and, by the terms of such fidelity policy, the coverage
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afforded thereunder extends to such Master Servicer. Upon the request of the
Trustee or any applicable Control Party, the Issuer shall cause to be delivered
to the Trustee or such Control Party, as applicable, a certification evidencing
coverage under such fidelity policy. Any such insurance policy shall contain a
provision or endorsement providing that such policy may not be canceled or
modified in a materially adverse manner without ten (10) days' prior written
notice to the Trustee.
(k) Transactions With the Issuer. The Master Servicer shall at all times
deal with the Issuer in a manner consistent with Section 2.06(m).
SECTION 3.05. Reports and Records for the Trustee.
(a) Daily Report. On each Business Day, to the extent that any Collections
relating to two or more Series are directed to be made to one or more common
Lock-Box Accounts (or related lock-boxes) or, with respect to any Series, any
Split Payments are outstanding with respect to the Series Receivables
thereunder, the Master Servicer of each such Series shall deliver to the Trustee
by no later than 1:00 p.m. (New York time) on each Business Day a Daily Report
(whether or not otherwise required to deliver such a report pursuant to the
Supplement relating to such Series) specifying the amount of any Collections
relating to the Pledged Assets of such Series received on the second preceding
Business Day, the Series Receivables to which they relate, the Lock-Box Account
to which they were deposited and the amounts and allocation of other funds
deposited into such Lock-Box Accounts on such date. In the event that the
Trustee is unable to reconcile the Daily Reports (together with any reports
delivered to it pursuant to the Intercreditor Agreement) received by it on any
Business Day with the amount of deposits received in the applicable Lock-Box
Accounts on such second preceding Business Day, the Trustee shall be entitled to
request a reconciliation from the Back-up Servicer prior to making allocations
thereof to the Series Collection Accounts of the affected Series.
(b) Monthly Report. On or before 3:00 p.m. (New York time) on the Series
Determination Date preceding the applicable Payment Date for each Series, each
Master Servicer, with respect to each outstanding Series for which such Person
acts in such capacity, shall deliver to the Trustee a Monthly Report for the
preceding Calculation Period substantially in the form set forth in the related
Supplement for such Series.
(c) Monthly Reconciliations. On or prior to the 20th day of each month (or,
if such day is not a Business Day, on the immediately succeeding Business Day),
the Master Servicers shall deliver to the Trustee a report from the Back-up
Servicer reconciling the Collections received during the immediately preceding
month and the allocations thereof by the Master Servicers to the Monthly Reports
delivered by the Master Servicers with respect to such period.
SECTION 3.06. Servicing Report of Independent Public Accountants. (a) On or
before March 31 of each calendar year, beginning with March 31, 1998, each
Master Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to such Master Servicer or the
Issuer) to furnish a report (addressed to the Trustee) to the Issuer, the
Trustee, such Master Servicer and each applicable Rating Agency and each
applicable Series Enhancer to the effect that they have examined certain
documents and records relating to the
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servicing of Receivables of such Series under this Agreement and the related
Supplement, compared the information contained in such Master Servicer's
certificates delivered pursuant to Section 3.05(b) during the period covered by
such report with such documents and records and that, on the basis of such
examination, such accountants are of the opinion that the servicing has been
conducted in compliance with the terms and conditions as set forth in Articles
III and IV and Section 8.06 of this Agreement and the applicable provisions of
the related Supplement, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in such statement.
(b) On or before December 31, 1997, and March 31, 1998, and on or before
March 31st of each calendar year thereafter, each Master Servicer shall cause a
firm of nationally recognized independent public accountants (who may also
render other services to such Master Servicer or the Issuer) to furnish a report
(addressed to the Issuer and to the Trustee) to the Issuer, the Trustee, each
applicable Rating Agency and each applicable Series Enhancer to the effect that
they have compared the mathematical calculations of each amount set forth in
such Master Servicer's certificates delivered pursuant to Section 3.05(b) during
the prior calendar year with such Master Servicer's computer reports which were
the source of such amounts and that on the basis of such comparison, such
accountants are of the opinion that such amounts are in agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such statement.
SECTION 3.07. Notices to Wentworth and the Issuer. In the event that
Wentworth or an Affiliate thereof is no longer acting as a Master Servicer with
respect to any Series, any Successor Servicer shall deliver or make available to
Wentworth and the Issuer, each certificate and report required to be delivered
thereafter with respect to such Series pursuant to Section 3.05 and 3.06.
SECTION 3.08. Adjustments. If any Master Servicer makes a mistake with
respect to the amount of any Collection or payment and deposits, pays or causes
to be deposited or paid, an amount that is less than or more than the actual
amount thereof, such Master Servicer and each other Master Servicer that acts
for any other Series which benefitted or harmed by such mistake shall
appropriately adjust the amounts subsequently deposited into the applicable
Series Collection Accounts or Series Payment Accounts or paid out to reflect
such mistake and account for such adjustment in the Daily Reports for the date
of such adjustment. Any Receivable in respect of which a dishonored check is
received shall be deemed not to have been paid.
ARTICLE IV
RIGHTS OF NOTEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.01. Rights of Noteholders. The Notes of each Series shall
represent debt of the Issuer secured by the Series Pledged Assets of such Series
and shall entitle the holders thereof to receive, to the extent necessary to
make the required payments with respect to the Notes of such Series at the times
and in the amounts specified in the related Supplement, the portion of
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Collections of the Series Receivables allocable to the Noteholders of such
Series pursuant to this Agreement and the related Supplement from funds on
deposit in the Series Collection Account for such Series and funds on deposit in
any related Series Account; it being understood that the Notes of any Series or
Class shall not represent or entitle the holder thereof to any interest in any
Series Pledged Assets for any other Series or Class. The residual interest in
the remainder, if any, of the Pledged Assets of any Series not required pursuant
to this Agreement or any Supplement to be allocated towards payment of the Notes
of such Series shall be herein referred to as the "Issuer Interest".
SECTION 4.02. Establishment of the Master Collection Account and the
Lock-Box Accounts; Establishment of the Issuer Split Payment Account. (a) On or
prior to the Closing Date, the Master Servicer, (x) for the benefit of the
Noteholders, shall establish and maintain or cause to be established and
maintained in the name of the Collateral Trustee, on behalf of the Grantors
under the Intercreditor Agreement, with an Eligible Institution a segregated
account accessible by the Collateral Trustee (such account being the "Master
Collection Account" and such institution holding such account being the "Master
Collection Account Bank"), such account bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Grantors under
the Intercreditor Agreement, and (y) for the benefit of Company, shall establish
and maintain or cause to be established and maintained in the name of the
Collateral Trustee, with an Eligible Institution a segregated account accessible
by the Trustee (such account being the "Issuer Split Payment Account" and such
institution holding such account being the "Split Payment Account Bank"), such
account bearing a designation clearly indicating that the funds deposited
therein as described below are held for the benefit of the Company. Except as
otherwise contemplated in Section 4.02(c), all Collections of Receivables of
each Series shall be remitted from the Lock-Box Accounts to the Master
Collection Account on a daily basis. Subject to the Intercreditor Agreement, the
Collateral Trustee shall possess all right, title and interest in and to all
funds from time to time on deposit in the Master Collection Account and in all
proceeds thereof. The Master Collection Account shall be under the sole dominion
and control of the Collateral Trustee, for the benefit of the Grantors under the
Intercreditor Agreement; provided, however, that, pursuant to the authority
granted to each Master Servicer in Section 3.01, but subject to the terms
thereof and of any applicable Supplement, the Master Servicers shall have the
power with respect to the amounts from time to time on deposit in the Issuer
Split Payment Account, (i) so long as no Servicer Default shall have occurred
and be continuing, to withdraw money from the Issuer Split Payment Account, or
(ii) if a Servicer Default shall have occurred and is continuing, to instruct
the Trustee in writing to withdraw money from the Issuer Split Payment Account,
and, in each case, to remit or cause the Trustee to remit such amounts so
withdrawn to the applicable Claimants entitled thereto in accordance with the
terms of the relevant Settlement Purchase Agreements (but, in no event, later
than two Business Days after the withdrawal of such funds from the Issuer Split
Payment Account). Except as expressly provided in this Agreement, no Master
Servicer shall have any or claim any right of setoff or banker's lien against,
or any right to otherwise deduct from, any funds held in the Master Collection
Account or the Issuer Split Payment Account for any amount owed to it by the
Trustee, the Collateral Trustee, the Issuer, any Noteholder, any Claimant or any
other Grantor under the Intercreditor Agreement.
If, at any time, the institution holding the Master Collection Account
ceases to be an Eligible Institution, the Master Servicer (or, if there is more
than one Master Servicer at such time,
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Wentworth), for the benefit of the Noteholders, shall within 30 Business Days
establish a new Master Collection Account meeting the conditions specified above
with an Eligible Institution, transfer any cash and/or any investments held
therein or with respect thereto to such new Collection Account and deliver to
all relevant Lock-Box Banks new Lock-Box Notices (with copies thereof to the
Trustee) referring to such new Master Collection Account. From the date such new
Master Collection Account is established, it shall be the "Master Collection
Account."
If, at any time, the institution holding the Issuer Split Payment Account
ceases to be an Eligible Institution, the Master Servicer (or, if there is more
than one Master Servicer at such time, Wentworth), shall within 30 Business Days
establish a new Issuer Split Payment Account meeting the conditions specified
above with an Eligible Institution, transfer any cash held therein to such new
Issuer Split Payment Account. From the date such new Issuer Split Payment
Account is established, it shall be the "Issuer Split Payment Account."
Funds on deposit in the Master Collection Account, at the written direction
of the Initial Master Servicer hereunder, shall be invested in overnight
Eligible Investments and all investment income earned therein shall be deemed to
be the property of the Issuer, distributable therefrom on each Business Day
concurrently with the transfer of funds from the Master Collection Account in
accordance with the following sentence. Funds on deposit in the Master
Collection Account shall, at the directions of the Master Servicers and the
Company (or the Back-Up Servicer, if applicable) in accordance with the
information set forth on the respective Daily Reports, be transferred to the
Series Collection Account(s) for the Series to which they relate and to the
Issuer Split Payment Account, and all other funds on deposit therein and not
relating to the Pledged Assets shall be removed therefrom and remitted to the
Issuer (or, if otherwise provided in the Intercreditor Agreement, then as so
directed under the Intercreditor Agreement), in each case, within two Business
Days after receipt of any Collections in the Master Collection Account. The
Master Servicers shall, or shall cause, the funds on deposit in the Issuer Split
Payment Account to be remitted to the applicable Claimant in accordance with the
terms of the applicable Settlement Purchase Agreement. Funds on deposit in the
Series Accounts for each Series may be invested by the Trustee in Eligible
Investments in accordance with the provisions set forth in the respective
Supplements relating to such Series. Except as otherwise provided herein, funds
on deposit in the Master Collection Account and the Issuer Split Payment Account
shall not be invested.
(b) The Company has, prior to the execution and delivery of this Agreement,
established, and from time to time hereafter shall establish deposit accounts
with one or more depository institutions in the name of the Collateral Trustee
(each such account, being a "Lock-Box Account" and each such institution holding
such an account being a "Lock-Box Bank") into which all Collections are to be
deposited by such Lock-Box Bank (as holder of the related lock-box or the
recipient of payments by electronic funds transfers) by the close of business on
each Business Day received, or on the next Business Day if not received on a
Business Day, or by the Master Servicer, the Issuer, the Seller or the Company,
as applicable, within two Business Days after such Person's receipt thereof. The
name, location and account number of each Lock-Box Account existing on the
Closing Date is attached to this Agreement on Schedule III attached hereto.
(c) The Company, the Seller, the Issuer, and the applicable Lock-Box Bank
shall execute and deliver to the Trustee (or, if such Lock-Box Account is
commingled with the
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Collections of other Series or the Revolving Credit Facility, the Collateral
Trustee) on or prior to (x) the date upon which Collections of the Series
Receivables of any Series have been directed to be made to such Lock- Box
Account (or the related lock-box) or (y) if later, the Series Closing Date of
any such Series, a letter substantially in the form of Exhibit C hereto with
respect to each Lock-Box Account and or related lock-box (the "Lock-Box
Notice"). Pursuant to the applicable Lock-Box Notice, each Lock-Box Account and
the lock-boxes relating thereto will have been assigned by the Company to the
Seller, and by the Seller to the Issuer, and by the Issuer to the Trustee (or
the Collateral Trustee, as applicable) and is maintained in the name of the
Trustee (or the Collateral Trustee, as applicable) for the benefit of the
Noteholders (and, to the extent applicable, the other Grantors under the
Intercreditor Agreement). Pursuant to each Lock-Box Notice, the Issuer, the
Trustee (or the Collateral Trustee, as applicable) and the applicable Lock-Box
Bank will have agreed that all funds deposited into the affected Lock-Box
Account, upon becoming available, be remitted to the Master Collection Account
on a daily basis; provided, that if the Lock-Box Account and the related
lock-box have been established so as to receive only Collections of the Series
Pledged Assets for a particular Series (and no other Series or other non-Pledged
Assets), then the applicable Lock-Box Notice related to such account and
lock-box may direct that funds deposited therein be remitted directly to the
Series Collection Account for such Series.
SECTION 4.03. Establishment of the Trustee's Account. On or prior to the
Closing Date, the Trustee shall establish and maintain or cause to be
established and maintained in the name of the Trustee, on behalf of the
Noteholders, with an Eligible Institution, a special account (the "Trustee's
Account") for deposits by the Issuer or any of the Master Servicers pursuant to
the terms of each Supplement. The Trustee's Account initially shall be
established at PNC Bank, National Association, 1600 Market Street, 30th Floor,
Philadelphia, Pennsylvania 19103.
If, at any time, the institution holding the Trustee's Account ceases to be
an Eligible Institution, the Trustee shall within 30 Business Days establish a
new Trustee's Account with an Eligible Institution, transfer any cash and/or any
investments held therein or with respect thereto to such new Trustee's Account.
From the date such new Trustee's Account is established, it shall be the
"Trustee's Account."
SECTION 4.04. Other Payments. Indemnification payments and other amounts
not constituting Collections received by the Trustee from time to time, if any,
shall be paid by the Trustee to the intended beneficiary of such payment or
amount in accordance with the written instructions of the Person remitting the
relevant payment or amount to the Trustee, and in the event that such Person
shall fail to identify the intended beneficiary or to provide the Trustee with
written payment instructions, the Trustee shall hold such payment or amount in
the Master Collection Account until such Person or any Applicable Master
Servicer shall have provided the Trustee with the necessary information to make
a distribution thereof.
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ARTICLE V
DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS
Distributions shall be made to, and reports shall be provided to,
Noteholders of each Series as set forth in the applicable Supplement.
ARTICLE VI
THE NOTES
SECTION 6.01. The Notes. The Notes of any Series or Class shall be issued
in fully registered definitive form and shall be in substantially the form of
the exhibits with respect thereto attached to the applicable Supplement and
shall, upon receipt of an Order to such effect executed by the Issuer, be
authenticated and delivered by the Trustee to the Persons designated in such
Order as provided in Section 6.02. The Notes for any Series shall be issued upon
initial issuance as one or more Notes, each Note shall be executed by manual or
facsimile signature on behalf of the Issuer by a Responsible Officer. Notes
bearing the manual or facsimile signature of the individual who was, at the time
when such signature was affixed, a Responsible Officer authorized to sign on
behalf of the Issuer shall not be rendered invalid, notwithstanding that such
individual thereafter ceased to be a Responsible Officer so authorized. Except
as otherwise specified in the applicable Supplement, Notes of any Series shall
be issued in minimum denomination of $100,000. No Notes shall be entitled to any
benefit under this Agreement or the applicable Supplement or be valid for any
purpose, unless there appears on such Note a certificate of authentication in
substantially the form provided for herein executed by or on behalf of the
Trustee by a Responsible Officer of the Trustee, and such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder. All Notes shall be dated the
date of their authentication.
SECTION 6.02. Authentication of Notes. In accordance with any Order
directing the Trustee to do so, the Trustee shall, subject to the conditions set
forth in Section 6.09(c), authenticate and deliver the Notes of each Series to
the Persons specified in such Order against payment to the Issuer of the
purchase price therefor. The Trustee's form of authentication on all Notes shall
be in substantially the following form:
"This is one of the Notes referred to in the within-mentioned Indenture.
[Name of Trustee]
By
-------------------------
Authorized Officer."
provided, that, if at any time the Trustee shall appoint an authenticating agent
for any of the Notes or any Series of Notes pursuant to Section 6.08, the Notes
or the Notes of such Series may bear, in
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the place of the Trustee's certificate of authentication, an alternate
certificate of authentication which shall be in substantially the following
form:
"This is one of the Notes referred to in the within-mentioned Indenture.
[Name of Trustee]
By
---------------------------,
as Authenticating Agent
By
---------------------------
Authorized Officer."
SECTION 6.03. Registration of Transfer and Exchange Notes. (a) The Trustee
shall cause to be kept at the office or agency to be maintained in accordance
with the provisions of Section 11.15 a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, a transfer agent
and registrar (which may be the Trustee) (the "Note Registrar and Transfer
Agent") shall provide for the registration of the Notes and of transfers and
exchanges of the Notes as herein provided. The Note Registrar and Transfer Agent
shall initially be the Trustee.
The Trustee (or, if the Trustee is then acting as Note Registrar and
Transfer Agent, the Majority Control Parties) may at any time revoke the
appointment of and remove any Person serving as Note Registrar and Transfer
Agent if the Trustee (or Majority Control Parties, as applicable) determines in
its sole discretion that such Person failed to perform its obligations under
this Agreement in any material respect. Any Person serving as Note Registrar and
Transfer Agent shall be permitted to resign as Note Registrar and Transfer Agent
upon 30 days' written notice to the Issuer, the Trustee and the Master Servicer;
provided, however, that such resignation shall not be effective and such Person
shall continue to perform its duties as Note Registrar and Transfer Agent until
the Trustee (or Majority Control Parties, as applicable) has appointed a
successor Note Registrar and Transfer Agent reasonably acceptable to the Issuer
and the Person so appointed has given the Issuer and the Trustee written notice
that it accepts the appointment.
Subject to the restrictions herein and in the applicable Note, upon
surrender for registration of transfer of any Note at any office or agency of
the Note Registrar and Transfer Agent maintained for such purpose, the Issuer
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Notes (of the same
Series, Class and principal amount).
At the option of a Noteholder, Notes may be exchanged for other Notes (of
the same Series and Class) of authorized denominations of the same aggregate
principal amount, upon surrender of the Notes to be exchanged at any such office
or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall
execute, and the Trustee shall authenticate and deliver, the Notes which the
Noteholder making the exchange is entitled to receive.
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In addition to the other restrictions on transfer set forth herein, in any
applicable Supplement or in any applicable Note, every Note presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in a form satisfactory to the Trustee and the
Note Registrar and Transfer Agent duly executed by the Noteholder thereof or his
attorney-in-fact duly authorized in writing.
Each Note shall be registered at all times as herein provided, and any
transfer or exchange of such Note will be valid for purposes hereunder only upon
registration of such transfer or exchange by the Note Registrar and Transfer
Agent as provided herein.
No service charge shall be made for any registration of transfer or
exchange of any Note, but the Note Registrar and Transfer Agent may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any such transfer or exchange.
All Notes surrendered for registration of transfer or exchange, or for
payment, shall be canceled and disposed of in a manner satisfactory to the
Trustee.
(b) The Note Registrar and Transfer Agent will maintain at its expense an
office or offices or agency or agencies where Notes may be surrendered for
registration of transfer or exchange.
SECTION 6.04. Mutilated, Destroyed, Lost or Stolen Notes. If (a) any
mutilated Note is surrendered to the Note Registrar and Transfer Agent, or the
Note Registrar and Transfer Agent receives evidence to its satisfaction of the
destruction, loss or theft of any Note; provided that a written statement of
such destruction, loss or theft from any institutional Noteholder having a net
worth at least equal to $5,000,000 shall constitute satisfactory evidence
thereof, and (b) there is delivered to the Note Registrar and Transfer Agent,
the Trustee and the Issuer such indemnity as may be required by them to save
each of them harmless, provided that an unsecured agreement of indemnity from
any institutional Noteholder shall be sufficient indemnity, then, in the absence
of notice to the Trustee or the Issuer that such Note has been acquired by a
bona fide purchaser, the Issuer shall execute, and upon the request of the
Issuer, the Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Note, a new Note of like Series
tenor and (in the case of any new Note of any Series) fractional undivided
interest in such Series. In connection with the issuance of any new Note under
this Section 6.04, the Trustee or the Note Registrar and Transfer Agent may
require the payment by the Noteholder of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto. Any duplicate
Note issued pursuant to this Section 6.04 shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all Notes of the same
Class and Series that are duly issued hereunder, as if originally issued,
whether or not the lost, stolen or destroyed Note shall be found at any time.
SECTION 6.05. Persons Deemed Owners. At all times prior to due presentation
of a Note for registration of transfer, the Issuer, the Trustee, the Paying
Agent, the Note Registrar and Transfer Agent and any agent of any of them shall
treat the Person in whose name any Note is registered as the owner of such Note
for all purposes whatsoever (such determination to be made
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for purposes of distributions pursuant to the terms hereof and of the applicable
Supplement as of the applicable Record Date for the Notes of the applicable
Series), and neither the Issuer, the Trustee, the Note Registrar and Transfer
Agent nor any agent of any of them shall be affected by any notice to the
contrary. Notwithstanding the foregoing, in determining whether the requisite
Noteholders have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Notes owned by any Affiliated Entity shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Issuer and the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
as to which the Trustee has actual knowledge of such ownership shall be so
disregarded. Notes so owned which have been pledged in good faith shall not be
disregarded and may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Issuer and the Trustee the pledgee's right to so act with
respect to such Notes and that the pledgee is not an Affiliated Entity.
SECTION 6.06. Appointment of Paying Agent. The Paying Agent shall make
distributions to Noteholders of each Series, the Applicable Master Servicer for
each Series, the Back- up Servicer, the Trustee and to the extent applicable,
Series Enhancers, from the Series Payment Account for each Series pursuant to
the terms of each Supplement and shall report the amounts of such distributions
to the Trustee. Any Paying Agent shall have the power, revocable by the Issuer,
to withdraw funds from each of the Series Collection Accounts, and the Series
Payment Accounts for each Series, in each case, for the purpose of making the
distributions referred to above. The Issuer may revoke such power and remove the
Paying Agent if the Issuer determines in its sole discretion that the Paying
Agent shall have failed to perform its obligations under this Agreement in any
material respect. The Paying Agent shall initially be PNC Bank, National
Association. In the event that PNC Bank, National Association shall no longer be
the Paying Agent, the Issuer shall appoint a successor to act as Paying Agent
(which shall be a bank or trust company). The Trustee shall cause each successor
Paying Agent or additional Paying Agent to execute and deliver to the Trustee an
instrument in which such successor or additional Paying Agent shall agree with
the Trustee that, as Paying Agent, such successor or additional Paying Agent
will hold all sums, if any, held by it for payment to the Noteholders, the
Applicable Master Servicer, the Back-up Servicer, the Trustee and to the extent
applicable, the Series Enhancers in trust for the benefit of the Persons
entitled to payment thereof, until such sums shall be paid to such Persons. The
Paying Agent shall return all funds remaining unclaimed for six months or more
to the Trustee. The Trustee shall retain such unclaimed amounts solely for the
account of the affected Noteholder in the applicable Series Collection Account
until the Collection Date for such Series would otherwise have occurred but for
such unclaimed payments by the Noteholders of such Series at which time such
unclaimed funds will be distributed to the Issuer and the affected Noteholder
shall look solely to the Issuer for reimbursement thereof. Upon removal of a
Paying Agent, such Paying Agent shall also return all funds in its possession to
the Trustee. In the event a Paying Agent resigns or is removed, such Paying
Agent shall continue to act as the Paying Agent until receipt of written notice
that the Issuer has appointed a successor.
The Trustee agrees to pay any Paying Agent which the Trustee from time to
time may appoint reasonable compensation for such Paying Agent's services under
this Section 6.06, which fee shall be payable by the Trustee out of the Trustee
Fee payable to it in accordance with
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the applicable Supplement relating to the Series for which such Paying Agent
shall have been appointed to act in such capacity.
The provisions of Sections 11.01, 11.02, 11.03 and 11.04 shall apply to the
Trustee also in its role as Paying Agent, for so long as the Trustee shall act
as Paying Agent.
SECTION 6.07. Access to List of Noteholders' Names and Addresses. The
Trustee will furnish or cause to be furnished by the Note Registrar and Transfer
Agent to the Applicable Master Servicer, any Noteholder of any Series, any
Series Enhancer for any Series, the Issuer or the Paying Agent, within five
Business Days after receipt by the Trustee of a written request therefor from
such Applicable Master Servicer, the Issuer, such Noteholder, such Series
Enhancer, or the Paying Agent, respectively, a list of the names and addresses
of the Noteholders.
Every Noteholder, by receiving and holding a Note, agrees that none of the
Trustee, the Note Registrar and Transfer Agent, the Issuer, any Applicable
Master Servicer, the Back-up Servicer, the Company, the Seller, any Series
Enhancer or any of their respective agents, shall be held accountable by reason
of the disclosure of any such information as to the names and addresses of the
Noteholders hereunder, regardless of the sources from which such information was
derived.
SECTION 6.08. Authenticating Agent. (a) The Trustee may appoint one or more
authenticating agents with respect to the Notes of any Series which shall be
authorized to act on behalf of the Trustee in authenticating such Notes in
connection with the issuance, execution, delivery, registration of transfer,
exchange or repayment of such Notes. Whenever reference is made in this
Agreement to the authentication of any Notes by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication on behalf of the Trustee by an authenticating agent and a
certificate of authentication executed on behalf of the Trustee by an
authenticating agent. Each authenticating agent must be acceptable to the
Issuer.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any power or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written notice
of resignation to the Trustee and to the Issuer. The Trustee or the Issuer may
at any time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent and to the Issuer (in the case of such
termination by the Trustee) or the Trustee (in the case of such Termination by
the Issuer). Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an authenticating agent shall cease to be
acceptable to the Trustee or the Issuer, the Trustee may promptly appoint a
successor authenticating agent. Any successor authenticating agent upon
acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an authenticating agent. No successor authenticating agent
shall be appointed unless acceptable to the Trustee and the Issuer.
(d) The Issuer agrees to pay to each authenticating agent from time to time
reasonable compensation for its services under this Section 6.08 pursuant to any
applicable
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Supplement relating to any Notes of any Series for which such authenticating
agent shall have been appointed to act in such capacity.
(e) The provisions of Sections 11.01, 11.02 and 11.03 shall be applicable
to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.08, the Notes may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
"This is one of the Notes described in the within-mentioned Indenture.
------------------------------
------------------------------
as Authenticating Agent
for the Trustee
By:
----------------------------
Authorized Officer."
SECTION 6.09. New Issuances.
(a) The Issuer may from time to time after the initial issuance of Notes
hereunder issue one or more new Series of Notes pursuant to a Supplement. The
Notes of all outstanding Series shall be equally and ratably entitled as
provided herein to the benefits of this Agreement without preference, priority
or distinction, all in accordance with the terms and provisions of this
Agreement and the applicable Supplement except, with respect to any Series or
Class, as provided in the related Supplement.
(b) On or before the Series Closing Date relating to any new Series, the
parties hereto will execute and deliver a Supplement which will specify the
Principal Terms of such new Series. The terms of such Supplement may modify or
amend the terms of this Agreement solely as applied to such new Series.
(c) The obligation of the Trustee to authenticate the Notes of such Series
and to execute and deliver the related Supplement is subject to the satisfaction
of the following conditions:
(i) on or before the Business Day immediately preceding the Series
Closing Date, the Issuer shall have given the Trustee, each Master Servicer
and each Rating Agency rating any Series of Notes, an Order requesting such
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authentication of Notes and setting for the proposed Series Closing Date
and delivery instructions if the Notes of such Series are not to be
delivered to the Issuer;
(ii) the Issuer shall have delivered to the Trustee the related
Supplement, in form and substance satisfactory to the Trustee, executed by
each party hereto other than the Trustee;
(iii) the Issuer shall have delivered to the Trustee Notes of such
Series, in form and substance satisfactory to the Trustee, executed by the
Issuer;
(iv) each Rating Agency rating any Series of Notes shall have notified
the Issuer and the Trustee in writing that such issuance will not result in
a reduction or withdrawal of the rating of any outstanding Series or Class
with respect to which it acts as a Rating Agency;
(v) such issuance will not result in the occurrence of an Event of
Default, a Potential Event of Default, a Series Event of Default with
respect to any Series, or any event that, with the giving of notice or
lapse of time or both, would constitute such a Series Event of Default, and
the Issuer shall have delivered to the Trustee an Officer's Certificate,
dated the Series Closing Date (upon which the Trustee may conclusively
rely), to the effect that such issuance will not result in the occurrence
of any such Event of Default, Potential Event of Default, Series Event of
Default or other event and will not result in the occurrence of any such
Event of Default, Potential Event of Default, Series Event of Default or
other event at any time in the future;
(vi) the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that the issuance of the Notes of such Series (A) has
been, or need not be, registered under the Act and will not result in the
requirement that any other Series of Notes not registered under the Act be
so registered (unless the Issuer has elected, in its sole discretion and at
its sole expense, to register such Notes), and (B) will not result in the
Issuer becoming subject to registration as an investment company under the
Investment Company Act and (C) will not require this Agreement or the
related Supplement to be qualified under the Trust Indenture Act of 1939,
as amended;
(vii) the Issuer shall have delivered to the Trustee a Tax Opinion,
dated the Series Closing Date, with respect to such issuance;
(viii) the Issuer shall have satisfied such other conditions to the
issuance of any new Series as may be specified in any Supplement; and
(ix) the Issuer shall have delivered to the Trustee copies of the
Investor Letters (or any applicable note purchase agreement containing
similar representations, warranties and undertakings as those set forth in
the Investor Letters), in each case, executed by each Noteholder.
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Upon satisfaction of the above conditions, the Trustee shall execute the
Supplement and, upon receipt of, and in accordance with the terms of, an Order
to do so, shall authenticate and deliver the Notes to the Persons specified in
such Order against receipt of payment by the Issuer of the purchase price for
such Notes. Notwithstanding the provisions of this Section 6.09, prior to the
execution of any Supplement, the Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such Supplement is
authorized or permitted by this Agreement and any Supplement related to any
outstanding Series. The Trustee may, but shall not be obligated to, enter into
any such Supplement which affects the Trustee's own rights, duties or immunities
under this Agreement.
Notwithstanding anything contained herein or in any Supplement to the
contrary, no Notes may be issued to (x) any Person which does not represent that
it is a Qualified Purchaser under Section 2(a)(51) of the Investment Company Act
or (y) 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, in each of the cases in clauses (x) thereof, and (y)
each prospective purchaser shall be required to represent and warrant that it is
not such a Person prior to the issuance of any such Note to it and to the extent
any such representation and warranty is incorrect such issuance shall be
rescinded and deemed not to have occurred; provided that the Trustee shall have
no duty to perform any independent investigation with respect to any
representation or warranty by a prospective purchaser as to the matters set
forth in clauses (x) and (y).
SECTION 6.10. Transfer of Notes. The obligation of the Trustee to
authenticate and issue any Note to any transferee pursuant to any written
instrument of transfer or other direction to do so received by the Trustee
pursuant to Section 6.03 shall be subject to the satisfaction of the following
conditions on or prior to the proposed date of such transfer (the "Transfer
Date"):
(i) the Trustee and the Note Registrar and Transfer Agent shall have
received a written instrument of transfer of the subject Notes executed by
the transferring Noteholder (or its attorney-in-fact, duly authorized), and
the original Notes which are the subject of such transfer;
(ii) the Issuer shall have delivered to the Trustee an Opinion of
Counsel of the Issuer or the transferring or transferee Noteholder, dated
as of the Transfer Date, to the effect that the transfer of such Notes of
such Series (A) does not violate the Act, (B) will not result in the Issuer
becoming subject to registration as an investment company under the
Investment Company Act and (C) will not require this Agreement or the
related Supplement to be qualified under the Trust Indenture Act of 1939,
as amended;
(iii) the Issuer shall have delivered to the Trustee a Tax Opinion
from counsel of the Issuer or the transferring or transferee Noteholder,
dated as of the Transfer Date, with respect to such transfer;
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(iv) the Issuer shall have delivered to the Trustee copies of the
Investor Letters executed by each such transferee of a Note; and
(v) the Issuer shall have satisfied such other conditions to the
transfer thereof as may be specified in any Supplement.
Notwithstanding anything contained herein or in any Supplement to the contrary,
no Notes may be transferred to (x) any Person that is not a "qualified
purchaser" under the Investment Company Act or (y) 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, in
each of the cases in clauses (x) and (y), each prospective transferee shall be
required to represent and warrant that it is not such a Person prior to the
transfer of any such Note to it and to the extent any such representation and
warranty is incorrect such transfer shall be rescinded and deemed not to have
occurred; provided that the Trustee shall have no duty to perform any
independent investigation with respect to any representation or warranty by a
prospective purchaser as to the matters set forth in clauses (x) and (y).
Upon satisfaction of the above conditions, the Trustee shall authenticate and
deliver the Notes so transferred to the Persons so designated in the written
order of transfer (and shall destroy the earlier Notes surrendered to it for
transfer) and shall notify and register such transfer with the Note Registrar
and Transfer Agent.
ARTICLE VII
OTHER MATTERS RELATING TO THE ISSUER
SECTION 7.01. Obligations Not Assignable. The obligations of the Issuer
hereunder shall not be assignable nor shall any Person succeed to the
obligations of the Issuer hereunder.
SECTION 7.02. Limitations on Liability. None of the members, managers,
officers, employees, agents, or holders of limited liability company interests
of or in the Issuer, past, present or future, shall be under any liability to
the Trustee, the 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 this Agreement or for any obligation or covenant under this
Agreement, it being understood that, with respect to the Issuer, this Agreement
and the obligations created hereunder shall be, to the fullest extent permitted
under applicable law, solely the limited liability company obligations of the
Issuer. The Issuer and any member, manager, officer, employee, agent, or holder
of a limited liability company interest of or in the Issuer 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) respecting any
matters arising hereunder.
SECTION 7.03. Indemnification by the Issuer. The Issuer hereby agrees to
indemnify the Trustee (in its individual and trust capacities), the Noteholders
for any Series, the Series Enhancer for any Series and such other Persons as may
be named as indemnified parties in
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the Supplement for any Series from and against such claims, losses and
liabilities as may be specified in the applicable Supplement, and subject to
such limitations as may be set forth therein.
ARTICLE VIII
OTHER MATTERS RELATING TO THE APPLICABLE MASTER SERVICERS
SECTION 8.01. Liability of Each Applicable Master Servicer. Each Applicable
Master Servicer shall be liable under this Agreement and the applicable
Supplements for the Series for which such Person acts as Master Servicer only to
the extent of the obligations specifically undertaken by it in its capacity as
Master Servicer with respect to such Series.
SECTION 8.02. Merger or Consolidation of, or Assumption of the Obligations
of, any Applicable Master Servicer. No Master Servicer shall consolidate with or
merge into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person unless:
(a) (i) the Person formed by such consolidation or into which such Master
Servicer is merged or the Person which acquires by conveyance or transfer the
properties and assets of such Master Servicer substantially as an entirety shall
be, if such Master Servicer is not the surviving entity, a corporation, limited
partnership or limited liability company organized and existing under the laws
of the United States of America or any State or the District of Columbia, and
such entity shall have expressly assumed, by an agreement supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, the performance of every covenant and obligation of such Master
Servicer hereunder and under the Supplements for each of the Series for which
such Person shall act as Master Servicer; (ii) if such Master Servicer is an
Affiliated Entity, the surviving entity of such merger or conveyance or transfer
of property and assets is a consolidated subsidiary of Wentworth; and (iii) such
Master Servicer shall have delivered to the Trustee an Officer's Certificate and
an Opinion of Counsel each in form reasonably satisfactory to the Trustee and
stating that such consolidation, merger, conveyance or transfer complies with
this Section 8.02 and that all conditions precedent herein provided for relating
to such transaction have been complied with;
(b) each Rating Agency rating any Series for which such Master Servicer
shall act in such capacity shall have notified the Issuer, such Master Servicer
and the Trustee, in writing, that such merger or consolidation or conveyance or
transfer, as the case may be, will not result in a reduction or withdrawal of
the rating of any such outstanding Series or Class of such Series; and
(c) the corporation, limited partnership or limited liability company
formed by such consolidation or into which such Master Servicer is merged or
which acquires by conveyance or transfer the properties and assets of such
Master Servicer substantially as an entirety shall have all licenses and
approvals of Governmental Authorities required to service the Series Receivables
for each Series of Notes for which such Master Servicer shall act in such
capacity, except to the extent the failure to have any such license does not
have, and could not reasonably be expected to have, a
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material adverse effect on its ability to perform the obligations of Master
Servicer hereunder and under any applicable Supplement.
SECTION 8.03. Limitations on Liability. None of the members, managers,
officers, directors, partners, employees, agents, shareholders, or holders of
limited liability company interests, as applicable, of or in any Master
Servicer, past, present or future, shall be under any liability to the Issuer,
the Trustee, the 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 this Agreement or for any obligation or covenant under this
Agreement, it being understood that, with respect to any such Master Servicer,
this Agreement and the obligations created hereunder shall be, to the fullest
extent permitted under applicable law, solely the corporate, partnership or
limited liability company, as applicable, obligations of such Master Servicer.
Each Master Servicer and any member, manager, officer, director, partner,
employee, agent, shareholder or holder of limited liability company interest of
or in such Master Servicer may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person (other than any
Affiliate thereof) respecting any matters arising hereunder. No Master Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties as Master Servicer in accordance with this
Agreement and which in its reasonable judgment may involve it in any material
expense or liability.
SECTION 8.04. Indemnification by Master Servicers. Each Master Servicer, if
an Affiliated Entity, hereby agrees to indemnify the Trustee (in its individual
and trust capacities), the Issuer, the Noteholders for any Series, the Series
Enhancer for any Series and such other Persons as may be named as indemnified
parties in the Supplement for any Series against such claims, losses and
liabilities as may be specified in Section 11.04(b) or in the applicable
Supplement, and subject to such limitations (if any) as may be set forth herein
or therein.
SECTION 8.05. Master Servicer Not to Resign. No Master Servicer shall
resign from the obligations and duties imposed on it hereby and under any
applicable Supplement except upon determination that (a) its performance of its
duties hereunder and thereunder is no longer permissible under applicable law
and (b) there is no reasonable action which such Master Servicer could take to
make its performance of its duties hereunder permissible under applicable law.
Any determination permitting the resignation of such Master Servicer shall be
evidenced by an Opinion of Counsel who is not an employee of such Master
Servicer or any Affiliate of such Master Servicer with respect to clause (a)
above, delivered to, and in form reasonably satisfactory to, the Trustee. No
resignation shall become effective until the Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of such Master Servicer
in accordance with Section 10.02 hereof. If within 60 days of the date of the
determination that such Master Servicer may no longer act as a Master Servicer
hereunder for any reason the Trustee has not appointed a Successor Servicer, the
Trustee shall serve as Successor Servicer hereunder with respect to those Series
for which such resigning Master Servicer acted in such capacity. Notwithstanding
the foregoing, the Trustee shall, if it is legally unable so to act, petition a
court of competent jurisdiction to appoint any established institution that is
an Eligible Master Servicer (other than the Trustee) as the Successor Servicer
with respect to such Series hereunder.
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SECTION 8.06. Examination of Records. Each Master Servicer shall indicate
in its records that the Issuer has granted to the Trustee, for the benefit of
the Noteholders of the applicable Series secured thereby, a security interest in
the Series Receivables and other Series Pledged Assets for the Series for which
it acts in such capacity, pursuant to this Agreement and each applicable
Supplement.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. Events of Default. If any one of the following events shall
occur:
(a) an Insolvency Event shall occur with respect to the Issuer, the Company
or the Seller; or
(b) the Issuer shall become subject to the registration requirements of the
Investment Company Act; or
(c) with respect to any Series, any Series Event of Default set forth in
the related Supplement;
then, subject to applicable law, in the case of any event described in clause
(a) or (b), an Event of Default shall occur with respect to all outstanding
Series without any notice or other action on the part of the Trustee or the
Noteholders immediately upon the occurrence of such event, and in the case of
any Series Event of Default, such Series Event of Default shall give rise to a
Event of Default only for such Series and the applicable Supplement shall set
forth provisions which shall determine whether such Series Event of Default
shall constitute an Event of Default for such Series.
The Trustee, upon learning of the occurrence of any event described in
clause (a) or (b) or of any Series Event of Default, shall promptly notify each
Series Enhancer and each Rating Agency for any Series affected thereby.
SECTION 9.02. Additional Rights Upon the Occurrence of any Event of
Default. Upon the occurrence and during the continuance of any Event of Default,
in addition to all other rights and remedies under this Agreement, any
applicable Supplement or otherwise and all other rights and remedies provided
under the UCC of all applicable jurisdictions and other applicable laws (which
rights shall be cumulative):
(a) Each of the Applicable Master Servicers, at the direction of the
Trustee, and the Trustee may, and shall upon the direction of the Majority
Control Parties, in the case of an Event of Default described in Section 9.01(a)
or (b), or the Majority Noteholders for any such affected Series, in the case of
an Event of Default described in Section 9.01(c), exercise any and all rights
and remedies of the Issuer under or in connection with the Issuer Purchase
Agreement, including, without limitation, any and all rights of the Issuer to
demand or otherwise require
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payment of any amount under, or performance of any provision of, the Issuer
Purchase Agreement or the Seller Purchase Agreement to the extent assigned to it
under the Issuer Purchase Agreement.
(b) Upon the occurrence of an Event of Default described in Section 9.01
(a) or (b), all amounts owing under the Notes of all outstanding Series shall
automatically become due and payable without any action or notice on the part of
the Noteholders or the Trustee. Subject to the terms of each applicable
Supplement, upon the occurrence and during the continuance of an Event of
Default described in Section 9.01(c), the Trustee, at the direction of the
applicable Control Party for each such Series, may declare all amounts owing
under the Notes of such Series to be immediately due and payable. Subject to the
limitations thereon set forth in any applicable Supplement for any Series in
respect of which such amounts have been so declared immediately due and payable,
the Trustee, at the direction of the Control Parties for each affected Series,
shall, or shall cause the Applicable Master Servicers to, foreclose upon (to the
extent the Transfers hereunder are not deemed to be sales and/or absolute
transfers) and/or sell the Series Pledged Assets for any such affected Series
for the benefit of the Noteholders of such Series and apply such monies in
accordance with the terms of the applicable Supplement for such Series.
(c) The Trustee shall have any other additional rights with respect to any
particular Series and/or Series Pledged Assets as shall be set forth in the
Supplement relating thereto.
SECTION 9.03. Certain Specific Rights Upon the Occurrence of an Insolvency
Event. If an Insolvency Event with respect to the Issuer occurs, all rights
hereunder or under any Supplement to transfer, substitute or exchange any
Receivables included in the Pledged Assets shall cease, and the Issuer shall
promptly give notice to the Trustee, who shall promptly forward such notice to
the Noteholders, the Series Enhancers and each Master Servicer of such event.
ARTICLE X
SERVICER DEFAULTS
SECTION 10.01. Servicer Defaults. Upon the occurrence of a Servicer Default
with respect to any Series, and for so long as such Servicer Default shall not
have been remedied or waived, the Trustee, at the direction of the Majority
Noteholders of such Series, by notice then given in writing to the Applicable
Master Servicer (such notice being a "Termination Notice"), shall terminate all
but not less than all of the rights and obligations of such Applicable Master
Servicer as servicer under this Agreement and any related Supplement with
respect to each such Series with respect to which such notice was so given. The
Trustee shall not be deemed to have knowledge of a Servicer Default with respect
to any Series until a Responsible Officer has received written notice thereof.
After receipt by any Applicable Master Servicer of a Termination Notice,
and on the date that a Successor Servicer shall have been appointed by the
Trustee pursuant to Section 10.02, all authority and power of such Master
Servicer under this Agreement and any Supplements for any Series for which such
Person acts as Master Servicer shall pass to and be vested in such
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Successor Servicer (a "Service Transfer"); and, without limitation, the Trustee
is hereby authorized, empowered and instructed (upon the failure of such Master
Servicer to cooperate) to execute and deliver, on behalf of such Master
Servicer, as attorney-in-fact or otherwise, all documents and other instruments
upon the failure of such Master Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such Service Transfer. Each Master
Servicer hereby agrees to cooperate, at its expense (other than with respect to
out-of-pocket costs and expenses payable to third parties (other than Affiliated
Entities or their Affiliates or employees), which amounts shall be reimbursed by
the Successor Servicer), with the Trustee and such Successor Servicer in (i)
effecting the termination of the responsibilities and rights of such Master
Servicer to conduct servicing hereunder and under the applicable Supplements,
including, without limitation, the transfer to such Successor Servicer of all
authority of such Master Servicer to service the Receivables as provided under
this Agreement and under the applicable Supplements, including all authority
over all Collections which shall on the date of such Service Transfer be held by
such Master Servicer for deposit to any Lock-Box Account, the Master Collection
Account, any Series Collection Account, any Series Payment Account, the
Trustee's Account or the Issuer's Account, for payment to any Claimant in
respect of any Split Payment, or which have been deposited by such Master
Servicer to any Lock-Box Account, the Collection Account, any Series Collection
Account, any Series Payment Account, or any other account, or which shall
thereafter be received with respect to the Receivables, and (ii) assisting the
successor servicer. Such Master Servicer shall, at its expense (other than with
respect to out-of-pocket costs and expenses payable to third parties (other than
Affiliated Entities or their Affiliates or employees), which amounts shall be
reimbursed by the Successor Servicer), as soon as practicable, and in any event
within three Business Days of such Service Transfer, (A) assemble such
documents, instruments and other records (including computer tapes and disks,
which evidence the affected Series Receivables and the other Series Pledged
Assets, and which are necessary or desirable to collect the affected Series
Receivables, and shall make the same available to the Successor Servicer or the
Trustee or its designee at a place selected by the Successor Servicer or the
Trustee and in such form as the Successor Servicer or the Trustee may reasonably
request, and (B) segregate all cash, checks and other instruments received by it
from time to time constituting Collections of Receivables and Split Payments in
a manner acceptable to the Successor Servicer and the Trustee, and, promptly
upon receipt, remit all such cash, checks and instruments to the Successor
Servicer or the Trustee or its designee.
SECTION 10.02. Trustee to Act; Appointment of Successor. (a) On and after
the receipt by any Master Servicer for any Series of a Termination Notice
pursuant to Section 10.01 or upon a resignation by any such Master Servicer
pursuant to Section 8.05, such Master Servicer shall continue to perform all
servicing functions under this Agreement and the applicable Supplement, until
(i) in the case of any such receipt, the date specified in such Termination
Notice or otherwise specified by the Trustee in writing or, if no such date is
specified in such Termination Notice or otherwise specified by the Trustee,
until a date mutually agreed upon by such Master Servicer and the Trustee, and
(ii) in the case of any such resignation, until the Trustee or a Successor
Servicer shall have assumed the responsibilities and obligations of such Master
Servicer pursuant to this Section 10.02. The Trustee shall as promptly as
possible after the giving of a Termination Notice or such a resignation appoint
an Eligible Master Servicer (which, unless the Back-up Servicer has given notice
to the Trustee that it shall be unable to perform such services or
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the Back-up Servicing Agreement shall have previously been terminated, shall be
the Back-up Servicer) as a successor servicer (the "Successor Servicer"), and
such Successor Servicer shall accept its appointment by a written assumption in
a form acceptable to the Trustee (which such notice, in the case of the Back-up
Servicer, shall be given by the Back-up Servicer within two Business Days after
any such notice of appointment as required pursuant to the Back-up Servicing
Agreement). In the event that a Successor Servicer has not been appointed or has
not accepted its appointment by the earlier of 60 days after the date of such
Termination Notice or at the time when such terminated or resigning Master
Servicer ceases to act as a Master Servicer hereunder, the Trustee without
further action shall automatically be appointed the Successor Servicer with
respect to those Series for which such terminated or resigning Master Servicer
acted in such capacity. Subsequent to such appointment, the Trustee may cease to
act as the Master Servicer with respect to such Series provided that another
Successor Servicer is appointed therefor in accordance with and subject to the
terms of this Agreement. The Trustee may delegate any of its servicing
obligations to an Affiliate or agent in accordance with the terms of this
Agreement. Notwithstanding the foregoing, the Trustee shall, if it is legally
unable so to act as Successor Servicer, petition a court of competent
jurisdiction to appoint any established institution that is an Eligible Master
Servicer (other than the Trustee) as the Successor Servicer hereunder with
respect to such Series.
(b) Upon its appointment, the Successor Servicer shall be the successor in
all respects to the terminated or resigning Master Servicer with respect to
servicing functions for those Series formerly serviced by such terminated or
resigning Master Servicer under this Agreement and each related Supplement and
shall be subject to all the responsibilities, duties and liabilities relating
thereto placed on the Master Servicer by the terms and provisions hereof and
thereof accruing from and after the effective date of such appointment. Form and
after such appointment, all references in this Agreement and any such related
Supplement to the Master Servicer or the Applicable Master Servicer for such
Series shall be deemed to refer to such Successor Servicer.
(c) In connection with any Termination Notice, the Trustee will review any
bids which it obtains from Eligible Master Servicers and shall be permitted to
appoint any Eligible Master Servicer submitting such a bid as a Successor
Servicer (other than the Back-up Servicer) for servicing compensation not in
excess of the applicable Master Servicing Fee for such affected Series; it being
understood and agreed that the appointment of the Back-up Servicer as Successor
Servicer with respect to any Series is not subject to the condition set forth in
this clause (c) and that the Back-up Servicer shall be entitled to receive such
fee for such services as shall be set forth in the Back-up Servicing Agreement;
and it being further understood and agreed that if no Successor Servicer (other
than the Back-up Servicer) will perform such services for an amount less than
the applicable Master Servicing Fee for such Series, then the Trustee shall be
permitted to appoint an Eligible Master Servicer reasonably acceptable to the
Trustee and the Issuer submitting the lowest bid as among all such acceptable
Eligible Master Servicers.
(d) All authority and power granted to the Successor Servicer under this
Agreement with respect to any Series shall automatically terminate upon the
earliest of (x) the satisfaction and discharge of this Indenture and (y) the
payment in full in cash of all amounts owing to any Persons (other than the
Affiliated Entities) hereunder and the related Supplement, and shall pass to and
be vested in the Issuer (or its designee) (subject to the proviso to Section
12.01) and,
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without limitation, the Issuer is hereby authorized and empowered to execute and
deliver, on behalf of the Successor Servicer, as attorney-in-fact or otherwise,
all documents and other instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer of
servicing rights. The Successor Servicer agrees to cooperate with the Issuer (or
its designee) in effecting the termination of the responsibilities and rights of
the Successor Servicer to conduct servicing of the Receivables. The Successor
Servicer shall transfer its electronic records relating to such Series
Receivables to the Issuer (or its designee) in such electronic form as the
Issuer (or its designee) may reasonably request and shall transfer all other
records, correspondence and documents to the Issuer (or its designee) in the
manner and at such times as the Issuer (or its designee) shall reasonably
request.
SECTION 10.03. Notification to Noteholders. Promptly and in any event
within one Business Day after the Issuer or a Master Servicer becomes aware of
any Servicer Default with respect to any Master Servicer for any Series, the
Issuer or such Master Servicer, as applicable, shall give written notice thereof
to a Responsible Officer of the Trustee, and the Trustee shall deliver a copy of
such notice to the affected Noteholders and each affected Series Enhancer. Upon
any termination or appointment of a Successor Servicer pursuant to this Article
X, the Trustee shall give prompt written notice thereof to the Issuer, the
affected Noteholders, each affected Series Enhancer and each Rating Agency then
rating any outstanding Series or Class of Notes.
ARTICLE XI
THE TRUSTEE
SECTION 11.01. Duties of Trustee. (a) The Trustee, undertakes to perform
such duties and only such duties as are specifically set forth in this Agreement
and the Supplements. If and to the extent the Trustee is required to act as a
Successor Servicer with respect to any Series, the Trustee shall exercise such
of the rights and powers vested in it by this Agreement and any applicable
Supplement, and use the same degree of care and skill in their exercise, as set
forth herein for each Master Servicer, but in no event shall the Trustee be
required to exercise greater care and skill in their exercise than as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(b) The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement or any Supplement, shall examine them to determine
whether they substantially conform to the requirements of this Agreement or any
Supplement. The Trustee shall give prompt written notice to the Noteholders of
any affected Series of any material lack of conformity of any such instrument to
the applicable requirements of this Agreement or any applicable Supplement
discovered by the Trustee.
(c) Subject to Section 11.01(a), no provision of this Agreement shall be
construed to relieve the Trustee from liability for its own grossly negligent
action, its own grossly negligent failure to act or its own willful misconduct;
provided, however, that:
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(i) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Majority Control Parties, any Control
Party or the Majority Noteholders of a Series (to the extent the Trustee is
authorized or directed to rely on the directions of any such constituency)
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement or any applicable Supplement; and
(iii) the Trustee shall not be charged with knowledge of any failure
by any Master Servicer to comply with the obligations of such Person
referred to in Section 10.01 unless a Responsible Officer of the Trustee
obtains actual knowledge of such failure or a Responsible Officer of the
Trustee receives written notice of such failure.
(d) The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or under any Supplement or in the exercise of any of its rights or
powers, if there is reasonable ground for believing that the repayment of such
funds and/or adequate indemnity (and, to the extent requested by the Trustee,
advancement of funds) against such risk or liability is not reasonably assured
to it, and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any obligations of any Master Servicer under this Agreement or any
applicable Supplement except during such time and only in respect of such
Series, if any, as the Trustee shall be a Successor Servicer to, and be vested
with the rights, duties, powers and privileges of, a Successor Servicer in
accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement or any
applicable Supplement, the Trustee shall take no action reasonably likely to
impair the interests of the Trustee or the Noteholders in any Pledged Asset now
existing or hereafter created or the value of any Pledged Asset now existing or
hereafter created.
(f) Except as expressly provided in this Agreement or any applicable
Supplement, the Trustee shall have no right (i) to release its lien (for the
benefit of the Noteholders) on any Series Pledged Assets, (ii) to accept any
substitute obligation for any Series Pledged Asset (iii) to add any other
investment, obligation or security for the benefit of any Series, or (iv) to
withdraw any Series Pledged Asset.
(g) In the event that the Paying Agent, the Authenticating Agent or the
Note Registrar and Transfer Agent (in each case, if other than the Trustee)
shall fail to perform any obligation, duty or agreement in the manner or on the
day required to be performed by the Paying Agent, the Authenticating Agent or
the Note Registrar and Transfer Agent, as the case may be,
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under this Agreement or under any Supplement, the Trustee shall be obligated,
promptly upon the obtaining of actual knowledge thereof by a Responsible Officer
of the Trustee, to perform such obligation, duty or agreement in the manner so
required.
(h) The Trustee shall have no responsibility or liability for investment
losses on Eligible Investments.
SECTION 11.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 11.01:
(a) the Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accord with, any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other paper
or document believed by it to be genuine and to have been signed or presented to
it pursuant to this Agreement or any applicable Supplement by the proper party
or parties;
(b) the Trustee may consult with counsel and any advice or opinion of
counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion of counsel;
(c) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement or any Supplement, or to institute,
conduct or defend any litigation hereunder or thereunder or in relation hereto
or thereto, at the request, order or direction of any of the Noteholders (or any
constituent portion thereof authorized to give any such directions to the
Trustee), pursuant to the provisions of this Agreement or any Supplement, unless
such Noteholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby; provided, however, that nothing contained herein shall
relieve the Trustee of the obligations, upon the occurrence of a Servicer
Default with respect to any Series (which has not been cured or waived), to
exercise such of the rights and powers vested in it by this Agreement, and to
use the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs;
(d) the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement or
any applicable Supplement;
(e) the Trustee shall not be bound to make any investigation into the facts
of matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, approval, bond or
other paper or document, unless requested in writing so to do by the Control
Party of any affected Series;
(f) the Trustee may execute any of its powers hereunder or perform any of
its duties hereunder either directly or by or through agents or attorneys or a
custodian, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent (including, without limitation, any
Master Servicer, the Back-up Servicer or Successor Servicer), attorney or
custodian appointed by the Issuer or appointed with due care by it hereunder;
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(g) except as may be required by Section 11.01(b), the Trustee shall not be
required to make any initial or periodic examination of any documents or records
related to the Receivables or the Issuer for the purpose of establishing the
presence or absence of defects, the compliance by the Issuer with its
representations and warranties or for any other purpose;
(h) nothing in this Agreement shall be construed to require the Trustee to
monitor the performance of any of the Master Servicers (except as otherwise
expressly provided in this Agreement) or act as a guarantor of any Master
Servicer's performance;
(i) the Trustee in its individual capacity or otherwise may engage in any
business, lending or other transactions or activities in the ordinary course of
its business with any of the Affiliated Entities, and shall be entitled to
exercise all of its rights, powers and remedies in connection therewith to the
same extent as if the Trustee were not acting as the Trustee hereunder and
without any duty to account to the Noteholders therefor; and
(j) any reference in this Agreement or any Supplement to the knowledge of
the Trustee with regard to any matter shall be construed to mean the actual
knowledge of any Responsible Officer of the Trustee's corporate trust department
with respect to such matter.
SECTION 11.03. Trustee Not Liable for Recitals in Notes. The Trustee
assumes no responsibility for the correctness of the recitals contained herein,
in any Supplement and/or in the Notes (other than the certificate of
authentication on the Notes). Except as set forth in Section 11.14, the Trustee
makes no representations as to the validity or sufficiency of this Agreement or
of the Notes (other than the certificate of authentication on the Notes) or of
any Receivable or related document. The Trustee shall not be accountable for the
use or application by the Issuer of any of the Notes, or for the use or
application of any proceeds of the Notes paid to the Issuer in respect of the
Notes, the Receivables or deposited in or withdrawn from any Lock-Box Account,
the Master Collection Account, any Series Collection Account, any Series Payment
Account, the Issuer's Account, the Trustee's Account or any other account
hereafter established to effectuate the transactions contemplated by and in
accordance with the terms of this Agreement and any applicable Supplement.
Without limiting the generality of the foregoing, the Trustee shall have no
responsibility or liability for the content or adequacy of the preliminary
private placement memorandum or any other offering document.
SECTION 11.04. Compensation; Trustee's Expenses. (a) As full compensation
for its services hereunder with respect to any Series, the Trustee shall be
entitled to receive, solely out of Collections of Pledged Assets of such Series
and, to the extent provided in the Supplement for such Series, any available
Series Enhancement for such Series and subject to the priority of payments set
forth in any such Supplement, the fees separately agreed between the Issuer and
the Trustee by separate letter agreements for each such Series.
(b) Expenses. Each of the Applicable Master Servicer for any Series and the
Issuer, will pay or reimburse the Trustee upon its request, for and will within
30 days of demand and submission of evidence of such expenses or other
liabilities, indemnify and hold the Trustee harmless against, all reasonable
out-of-pocket expenses, disbursements, costs, demands, claims, liabilities and
advances incurred or made by or against the Trustee in respect of such Series in
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accordance with any of the provisions of this Agreement or the applicable
Supplement or in connection with any amendment hereto (including, in all such
cases, the reasonable fees and expenses of its agents, any co-Trustee and
counsel), except any such expense, disbursement or advance as may arise from its
gross negligence, willful misconduct or bad faith and except as provided in the
following sentence; it being agreed that any such expenses allocable to one or
more Series shall be divided among all such Series pro rata based on the
respective original Aggregate Principal Balances of the Notes of each such
Series. If the Trustee is appointed Successor Servicer pursuant to Section
10.02, the provision of this Section 11.04 shall not apply to expenses,
disbursements and advances made or incurred by the Trustee in its capacity as
Successor Servicer all of which shall be payable from the Master Servicing Fee
for the affected Series. The terms of this Section 11.04 shall survive the
termination of this Agreement. If the Trustee is named as a defendant in any
litigation or other proceedings which the Master Servicers and the Issuer would
have indemnification obligations hereunder, the Trustee shall promptly notify
the Master Servicers and the Issuer of the same and afford them an opportunity
to participate in, and (at their expense) direct the conduct of, any such
proceedings. No settlement of any such proceedings shall be agreed by the
Trustee without the consent (which shall not be unreasonably withheld) of the
indemnifying parties.
SECTION 11.05. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be an Eligible Institution. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then, for the purpose of
this Section 11.05, the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be an Eligible Institution in accordance with the provisions of this Section
11.05, the Trustee shall resign immediately in the manner and with the effect
specified in Section 11.06.
SECTION 11.06. Resignation or Removal of Trustee. (a) The Trustee may at
any time resign and be discharged from the trust hereby created by giving
written notice thereof to the Issuer, the Noteholders, each Master Servicer and
each Rating Agency then rating any outstanding Series or Class of Notes. Upon
receiving such notice of resignation, the Issuer shall promptly appoint a
successor trustee acceptable to the Control Party for each Series by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor trustee
shall have been so appointed and have accepted appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be an Eligible Institution in
accordance with Section 11.05 hereof and shall fail to resign after written
request therefor by any Master Servicer, the Issuer or any Control Party, or if
at any time the Trustee shall be legally unable to act, or shall be
adjudged a bankrupt or insolvent, or if a receiver or a trustee for it or for
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then any Master Servicer or the
Issuer may (or, at the direction of any Control Party, shall) remove the Trustee
and promptly appoint a successor trustee acceptable to the Majority Control
Parties by written
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instrument, in duplicate, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and appointment of successor
trustee pursuant to any of the provisions of this Section 11.06 shall not become
effective until acceptance of appointment by the successor trustee as provided
in Section 11.07 hereof.
SECTION 11.07. Successor Trustee. (a) Any successor trustee appointed as
provided in Section 11.06 shall execute, acknowledge and deliver to the Issuer,
to each Master Servicer and to its predecessor Trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein. The predecessor Trustee shall
deliver to the successor trustee all documents or copies thereof and statements
held by it hereunder; and the Issuer and the predecessor Trustee shall execute
and deliver such instruments and do such other things as may reasonably be
required for fully and certainly vesting and confirming in the successor trustee
all such rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in this
Section 11.07 unless at the time of such acceptance such successor trustee shall
be an Eligible Institution in accordance with Section 11.05 hereof and
concurrently therewith such successor trustee would accept appointment as the
Collateral Trustee under the Intercreditor Agreement.
(c) Upon acceptance of appointment by a successor trustee as provided in
this Section 11.07, such successor trustee shall mail notice of such succession
hereunder to all Noteholders.
SECTION 11.08. Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be an Eligible Institution in
accordance with Section 11.05, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
SECTION 11.09. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Pledged Assets may at the time be located, the Trustee shall have the
power and may execute and deliver all instruments to appoint one or more persons
to act as a co-trustee or co-trustees, or separate trustee or separate trustees,
of all or any part of the Pledged Assets, and to vest in such Person or Persons,
in such capacity and for the benefit of the Noteholders, such title to the
Pledged Assets, or any part thereof, and, subject to the other provisions of
this Section 11.09, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 11.05 and no notice
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to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 11.07 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or
as Successor Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to any
affected Master Servicer.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 11.10. Tax Returns. The Issuer, based on the information provided
to it by each Applicable Master Servicer in accordance with the related
Supplements shall prepare or shall cause to be prepared all tax information
required by law to be distributed to Noteholders of each separate Series and
shall deliver such information to the Trustee at least ten (10) Business Days
prior to the date it is required by law to be distributed to such Noteholders.
The Trustee,
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upon written request, will furnish the Issuer with all such information known to
the Trustee as may be reasonably required in connection with the preparation of
all tax returns of the Issuer.
SECTION 11.11. Trustee May Enforce Claims Without Possession of Notes. All
rights of action and claims under this Agreement or the Notes may be prosecuted
and enforced by the Trustee without the possession of any of the Notes or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as Trustee. Any
recovery of judgment shall, after provision for the payment the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Noteholders in respect of which
such judgment has been obtained.
SECTION 11.12. Suits for Enforcement. (a) If a Servicer Default with
respect to any Series shall occur and be continuing, the Trustee, in its
discretion may, subject to the provisions of Sections 11.01 and 11.13, proceed
to protect and enforce its rights and the rights of the Noteholders of such
Series under this Agreement and the related Supplement by suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or such
related Supplement or in aid of the execution of any power granted in this
Agreement or such related Supplement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or such
Noteholders.
(b) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder of such
Series any plan of reorganization, arrangement, adjustment or composition
affecting the Notes of such Series or the rights of any Noteholder of such
Series, or to authorize the Trustee to vote in respect of the claim of any
Noteholder of such Series in any such proceeding.
SECTION 11.13. Rights of Noteholders to Direct Trustee. The Trustee will
perform its duties as Trustee hereunder and under each Supplement (including,
without limitation, the exercise of any trust, power or remedy conferred on or
available to the Trustee hereunder and under each Supplement) at the direction
of the Majority Control Parties or, if any such duties, trusts, powers or
remedies relate to less than all then outstanding Series jointly, then with
respect to the exercise of such duties, powers, trusts or remedies with respect
to each Series, at the direction of the Majority Noteholders of such Series;
provided, however, that if any provision of this Agreement or any Supplement
imposes a duty on the Trustee and requires the approval or other action of
Noteholders of a Series holding a specified percentage of the Aggregate
Principal Balance of such Series or Classes thereof, then the Trustee shall
perform such duty with respect to such Series or Class thereof only at the
direction of the same percentage of Noteholders as is specified in such
provision; provided further, however, that subject to Section 11.01, the Trustee
shall have the right to decline to follow any such direction if the Trustee
after being advised by counsel determines that the action so directed may not
lawfully be taken, or if the Trustee in good faith shall, by a Responsible
Officer or Responsible Officers of the Trustee, determine that the proceedings
so directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Noteholders not parties to such direction; and,
provided, further, that nothing in this Agreement shall impair the right of the
Trustee to take any action deemed proper by the Trustee and which is not
inconsistent with such direction of any such constituency of Noteholders.
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SECTION 11.14. Representations and Warranties of Trustee. The Trustee
represents and warrants as of the date hereof and as of the Series Closing Date
for each Series that:
(a) the Trustee is duly organized and validly existing as a national
banking association in good standing under the laws of the United States;
(b) the Trustee has full power, authority and right to execute, deliver and
perform this Agreement, and has taken all necessary action to authorize the
execution, delivery and performance by it of this Agreement and each Supplement;
and
(c) each of this Agreement and each Supplement has been duly executed and
delivered by the Trustee and constitutes a legal, valid and binding obligation
of the Trustee enforceable against it in accordance with its terms except as
such enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights generally, and
except as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
SECTION 11.15. Maintenance of Office or Agency. The Trustee will maintain
at its expense in Wilmington, Delaware, or Philadelphia, Pennsylvania, an office
or agency (the "Corporate Trust Office") where notices and demands to or upon
the Trustee in respect of the Notes and this Agreement may be served. The
Trustee initially designates an office in care of PNC Bank, Delaware, 222
Delaware Avenue, 17th Floor, Wilmington, DE 19801 as such office. The Trustee
will give prompt written notice to each Master Servicer and to Noteholders of
any change in the location of the Note Register or any such office or agency.
SECTION 11.16. Trustee May Own Notes. The Trustee in its individual or any
other capacity may become the Holder or beneficial owner of any Note with the
same rights as it would have if it were not the Trustee hereunder.
ARTICLE XII
SATISFACTION AND DISCHARGE
SECTION 12.01. Satisfaction and Discharge of the Indenture. The Indenture
and the respective obligations and responsibilities of the Issuer, the Master
Servicers and the Trustee created hereby (other than the obligation of the
Trustee to make payments to Noteholders as hereinafter set forth) shall
terminate, except with respect to the duties described in Sections 7.03, 8.04,
11.04, 12.02(b), 13.11 and 13.14 upon the earlier to occur of (i) at the option
of the Issuer exercisable by an Order to the Trustee to such effect, any day
following the Collection Date of the last outstanding Series, and (ii) such
earlier time as all outstanding Notes theretofore authenticated and issued
hereunder have been delivered (other than any Notes which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as provided
in Section 6.02) to the Trustee for cancellation and the Issuer shall have paid
all sums hereunder and under the Notes; provided, however, that if, at any time
after the payment that would have otherwise resulted in the satisfaction and
discharge of this Indenture and such obligations, such payment is rescinded or
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must otherwise be returned for any reason, effective upon such rescission or
return such satisfaction and discharge of this Indenture and such obligations
shall automatically be deemed never to have occurred and the Indenture and such
obligations shall be deemed to be in full force and effect.
SECTION 12.02. Final Distribution. (a) The Issuer shall give the Trustee,
each Noteholder and each Series Enhancer at least twenty days' prior written
notice of the date on which (i) the Indenture is expected to be satisfied and
discharged in accordance with Section 12.01 and (ii) the final payment on the
Notes will be made. Not later than five Business Days after the Trustee shall
receive such notice, the Trustee shall mail notice to the Noteholders specifying
(w) the date upon which such final payment will be made, (x) the amount of any
such final payment, (y) if applicable, that the Payment Date otherwise
applicable to such final payment is not applicable and (z) that following such
payment, all outstanding Notes shall be deemed canceled. The Trustee shall give
such notice to the Note Registrar and Transfer Agent and the Paying Agent at the
time such notice is given to the Noteholders.
(b) Notwithstanding the Issuer's delivery to the Trustee, or the Trustee's
delivery to the Noteholders, of the notices required under Section 12.02(a), all
funds then on deposit in the Master Collection Account (or any sub-account
thereof, including any Series Collection Account), any Series Collection
Account, any Series Payment Account or the Trustee's Account shall continue to
be held in trust for the benefit of the applicable Noteholders and Series
Enhancers, and the Paying Agent or the Trustee shall pay such funds to such
Noteholders and to all other applicable parties on the date specified in such
notice, subject to the priorities set forth in the applicable Supplement (as if
such distribution occurred on an applicable Payment Date).
SECTION 12.03. Release of Liens. Upon payment of all amounts due under the
Notes of any Series and all unpaid fees and expenses of the Trustee, the
Trustee, at the written request of the Issuer, shall release (and shall, at the
expense of the Issuer, execute and deliver to the Issuer all necessary UCC
releases and other releases in respect thereof) the Series Pledged Assets
securing such Notes from the lien of the Trustee effected pursuant to the
Granting Clause hereof and pursuant to the applicable Supplement.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Amendment; Waiver of Default Events.
(a) Supplements and Amendments to Indenture Without Consent of Noteholders.
This Agreement may be amended from time to time by each Master Servicer (to the
extent such consent is required in accordance with the final proviso of this
sentence), the Issuer and the Trustee to:
(1) cure any ambiguity or to correct or supplement any provision
herein which may be inconsistent with any other provision herein or,
provided that such action shall not
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adversely affect the interests of any Noteholder (other than an Affiliated
Entity) or any Series Enhancer; or
(2) comply with the requirements of the Securities Exchange Commission
in order to effect or maintain the qualification of this Indenture under
the Trust Indenture Act if and to the extent such compliance is required by
applicable law;
and provided, further, that the Master Servicers' consent shall not be required
with respect to any such amendment which does not modify any of their respective
obligations, duties, rights or benefits hereunder or under any of the other
Operative Documents. The Trustee may request an Officer's Certificate from the
Issuer and an Opinion of Counsel from outside counsel of the Issuer, in each
case, with respect to an amendment entered into pursuant to this Section
13.01(a) concerning the effect of any such action.
(b) Supplements and Amendments to Indenture With Consent of Noteholders
and/or Control Party. This Agreement may be amended or any term or provision
thereof waived from time to time by each Master Servicer (to the extent such
consent to any such amendment would be required pursuant to the first sentence
of Section 13.01(a)), the Issuer and the Trustee, with the consent of the
Control Party for each adversely affected Series, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders;
provided, however, that no such amendment or waiver shall (i) reduce in any
manner the amount of, or delay the timing of, allocations, payments or
distributions to be made to any Noteholder without the consent of such
Noteholder and the Series Enhancer in respect of the relevant Notes, (ii) change
the definition of or the manner of calculating the Noteholders' Interest or any
Noteholder's interest therein without the consent of each affected Noteholder
and each Series Enhancer in respect of the relevant Notes, (iii) modify the
foregoing consent requirements with respect to any amendment or waiver so as to
eliminate the requirement that the Control Party for each adversely affected
Series shall have consented to such amendment without the consent of each
affected Noteholder and each Series Enhancer in respect of the relevant Notes or
(iv) cause any adverse tax effect for any Noteholder without the consent of each
affected Noteholder and each Series Enhancer in respect of the relevant Notes.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's rights, duties or immunities under this Agreement or
otherwise. The Trustee shall request an Officer's Certificate and an Opinion of
Counsel with respect to an amendment entered into pursuant to this Section
13.01(b) concerning compliance with the requirements of this Agreement. Any
amendment to be effected pursuant to this paragraph shall be deemed to adversely
affect all outstanding Series, other than any Series with respect to which such
action shall not, as evidenced by an Opinion of Counsel (which counsel shall not
be an employee of, or counsel for any Affiliated Entity), addressed and
delivered to the Trustee, adversely affect in any material respect the interests
of any Noteholder (other than an Affiliated Entity) of or the Series Enhancer
for such Series.
(c) Notwithstanding anything to the contrary in Sections 13.01(a) and
13.01(b), neither this Agreement nor any Supplement shall be amended in
violation of any restrictions or limitations set forth in any Supplement.
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(d) Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
a copy of such amendment to each Noteholder, Series Enhancer and, to the extent
the Master Servicers were not parties thereto, each Master Servicer.
(e) It shall not be necessary for the consent of Noteholders or any Series
Enhancer under this Section 13.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Noteholders shall be subject to such
reasonable requirements as the Trustee may prescribe.
(f) Any Supplement executed in accordance with the provisions of Section
6.09 shall not be considered an amendment to this Agreement for the purposes of
this Section.
(g) Prior to the execution of any amendment to this Agreement or any
Supplement, the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel of outside counsel to the Issuer stating that the execution of such
amendment is authorized or permitted by this Agreement or the applicable
Supplement, as the case may be. The Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Trustee's own rights, duties or
immunities under this Agreement, any Supplement or otherwise.
SECTION 13.02. Protection of Right, Title and Interest to Pledged Assets.
(a) The Issuer and the Applicable Master Servicers shall cause this Agreement,
all amendments hereto and all financing statements and continuation statements
and any other necessary documents covering the Issuer's ownership and the
Trustee's security interest, for the benefit of the Noteholders, in and to the
Pledged Assets to be promptly recorded, registered and filed, and at all times
to be kept recorded, registered and filed, all in such manner and in such places
as may be required by law to preserve and protect fully the right, title and
interest of the Issuer, the Noteholders of each Series entitled thereto and the
Trustee hereunder in and to all Pledged Assets. Each Applicable Master Servicer
shall deliver to the Trustee file-stamped copies of, or filing receipts for,
each document recorded, registered or filed by it as required above, promptly
following such recording, registration or filing. The Issuer shall cooperate
fully with the Master Servicers in connection with the obligations set forth
above and will execute any and all documents reasonably required to fulfill the
intent of Section 13.02(a).
(b) Within 30 days after the Issuer makes any change in its name, identity
or corporate structure which would make any financing statement or continuation
statement filed in accordance with the terms of this Agreement seriously
misleading within the meaning of Section 9-402(7) (or any comparable provision)
of the UCC as in effect in the jurisdiction the law of which governs the
perfection of the interest in the Pledged Assets created hereunder or under any
Supplement, the Issuer shall give the Trustee notice of such change and shall
file such financing statements or amendments as may be necessary to continue the
perfection of the Issuer's ownership interest and the Trustee's security
interest, for the benefit of the Noteholders, Trustee's interest in the Pledged
Assets and the proceeds thereof contemplated by Section 2.01 hereof.
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(c) The Issuer and each Master Servicer will give the Trustee prompt
written notice of any relocation of any office from which it services
Receivables (or any portion thereof) or keeps records concerning the Receivables
(or any portion thereof) or of its principal executive office and whether, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall file such financing
statements or amendments as may be necessary to perfect or to continue the
perfection of the Issuer's ownership interest and the Trustee's security
interest, for the benefit of the Noteholders, in the Receivables (or any portion
thereof) and the other Pledged Assets (or any portion thereof) and the proceeds
thereof contemplated by Section 2.01 hereof. The Issuer and each Master Servicer
will at all times maintain each office from which it services Receivables and
its principal executive offices within the United States of America.
(d) Notwithstanding anything contained herein to the contrary, neither the
Company, the Seller, nor the Issuer shall be required to file assignments in
favor of the Issuer and the Trustee, respectively, with respect to the UCC
financing statements filed by the Company against each of the Claimants in
connection with the respective Settlement Purchase Agreements, but the Issuer
hereby covenants to file, or cause the Company and the Seller to file,
continuation statements thereof as and when necessary to maintain the
effectiveness of such statements; it being understood and agreed that neither
the Company, the Seller nor the Issuer shall have any duty to monitor the
continued effectiveness of the financing statements originally filed against
such Claimants (other than with respect to the lapse thereof due to time).
SECTION 13.03. Limitation on Rights of Noteholders. (a) [Reserved].
(b) No Noteholder or Series Enhancer shall have any right by virtue of any
provisions of this Agreement to file or otherwise institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement
or any Supplement, unless such Noteholder or Series Enhancer previously shall
have made, and unless a majority of the Control Parties effected thereby (which,
if such action, suit or proceeding relates to this Agreement, shall be deemed to
be all Control Parties) shall have made, a written request to the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 30 days after such request and offer of indemnity,
shall have failed to file or otherwise refused to institute any such action,
suit or proceeding; it being understood and intended, and being expressly
covenanted, by each Noteholder with every other Noteholder and the Trustee, that
no one or more Noteholders shall have any right in any manner whatever by virtue
or by availing itself or themselves of any provisions of this Agreement or any
Supplement to affect, disturb or prejudice the rights of the holders of any of
the Notes, or to obtain or seek to obtain priority over or preference to any
such Noteholder, or to enforce any right under this Agreement or any Supplement,
except in the manner herein and therein provided and for the equal, ratable and
common benefit of all Noteholders of the Series or Classes affected thereby. For
the protection and enforcement of the provisions of this Section 13.03, each and
every Noteholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
SECTION 13.04. Governing Law; Jurisdiction; Consent to Service of Process.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
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ACCORDANCE WITH, THE INTERNAL LAWS (AS DISTINGUISHED FROM THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF DELAWARE, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(b) Jurisdiction. Each of the parties hereto and to each Supplement hereby
irrevocably and unconditionally submits to the nonexclusive jurisdiction of any
Delaware State court or Federal court of the United States of America sitting in
Delaware, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such Delaware State
court or, to the extent permitted by law, in such Federal court. Each of the
parties hereto and to each Supplement agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(c) Consent to Service of Process. Each party to this Agreement and to each
Supplement irrevocably consents to service of process in the manner provided for
notices in Section 13.05. Nothing in this Agreement will affect the right of any
party to this Agreement or to any Supplement to serve process in any other
manner permitted by law.
SECTION 13.05. Notices; Payments. (a) All demands, notices, instructions,
directions, requests, authorizations and communications (collectively,
"Notices") under this Agreement shall be in writing and shall be deemed to have
been duly given (x) upon delivery, if personally delivered, (y) three Business
Days after being deposited in the mails, postage paid, if mailed by registered
mail, return receipt requested, or (z) one Business Day after being sent for
next Business Day delivery by national overnight courier service, in each case,
to (i) in the case of the Issuer, 15th and Ranstead Streets, Philadelphia,
Pennsylvania 19102, Attention: Gary Veloric, (ii) in the case of the Applicable
Master Servicer (if the Master Servicer is the Initial Master Servicer) 15th and
Ranstead Streets, Philadelphia, Pennsylvania 19102, (iii) in the case of the
Trustee, c/o PNC Bank, Delaware, 222 Delaware Avenue, 17th Floor, Wilmington, DE
19801, Attention: Corporate Trust Department, with a copy to 1600 Market Street,
30th Floor, Philadelphia, Pennsylvania 19103; and (iv) in the case of the Paying
Agent or the Note Registrar and Transfer Agent, PNC Bank, National Association,
c/o PNC Bank, Delaware, 222 Delaware Avenue, 17th Floor, Wilmington, DE 19801,
Attention: Corporate Trust Department with a copy to 1600 Market Street, 30th
Floor, Philadelphia, Pennsylvania 19103; and (v) in the case of any Series
Enhancer or applicable Rating Agency with respect to any Series, the address for
such Series Enhancer or Rating Agency specified in the relevant Supplement; or,
as to each party, such other address as shall be designated by such party in a
written notice to each other party. If the Applicable Master Servicer is not the
Initial Master Servicer, notices shall be given to the Applicable Master
Servicer at the address designated by it, to the Initial Master Servicer.
(b) Any Notice required or permitted to be mailed to a Noteholder shall be
given by first-class mail, postage prepaid, at the address of such Noteholder as
shown in the Note Register. Notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Noteholder receives such notice.
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SECTION 13.06. Assignment of the Issuer Purchase Agreement; Substitution
Under the Powers of Attorney. (a) In order to secure, equally and ratably, and
without prejudice, priority and distinction, the payment of the Issuer's
obligations to the Noteholders hereunder and pursuant to each Supplement, the
Issuer hereby grants to the Trustee, for the benefit of the Noteholders and the
Series Enhancers, a security interest in all of the Issuer's right and title to
and interest in the Issuer Purchase Agreement and the Seller Purchase Agreement.
The Trustee shall have the right to exercise and enforce, or to direct the
Issuer to exercise and enforce, for the benefit of the Noteholders (or any of
them) and the Series Enhancers (or any of them) the Issuer's rights and remedies
under the Issuer Purchase Agreement and the Seller Purchase Agreement
(including, without limitation, the right to give or withhold any and all
consents, requests, notices, directions, approvals, demands, extensions or
waivers under or with respect to the Settlement Purchase Agreements), upon the
failure of the Issuer to do so, but in no event shall there be any obligation on
the part of the Trustee, any Noteholder, any Series Enhancer or any of their
respective Affiliates to perform any of the obligations of the Issuer under the
Issuer Purchase Agreement or under the Seller Purchase Agreement. The Trustee
shall enforce or refrain from enforcing any of the Issuer's rights and remedies
under the Issuer Purchase Agreement and the Seller Purchase Agreement to the
extent so instructed by the Majority Control Parties.
(b) The Issuer also hereby substitutes the Trustee in place of the Issuer
under the Power of Attorney in accordance with the power of substitution
provided in each of the Powers of Attorney whereupon the Trustee shall have all
of the Issuer's rights, title, interests and powers under each such Power of
Attorney.
(c) The grant to the Trustee of any security interest pursuant to this
Section 13.06 shall terminate upon the satisfaction and discharge of this
Indenture in accordance with Section 12.01; provided, however, that the rights
of the Trustee, the Noteholders and the Series Enhancers pursuant to such grant
in clause (a) with respect to rights and remedies in connection with (i) any
breach of any representation and warranty made by the Company pursuant thereto
and (ii) the indemnification and payment provisions of Article VIII thereof
shall, in each case, be continuing and survive any termina tion of such
assignment.
SECTION 13.07. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held to be invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other covenants, agreements, provisions or
terms of this Agreement or of the Notes or rights of the Noteholders.
SECTION 13.08. Assignment. Notwithstanding anything to the contrary
contained herein or any Supplement, (i) this Agreement may not be assigned by
the Issuer, and (ii) except as provided in Section 8.02, this Agreement may not
be assigned by the Master Servicer without the prior consent of the Control
Parties for the Series for which such person acts in such capacity.
SECTION 13.09. [Reserved].
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<PAGE>
SECTION 13.10. Further Assurances. The Issuer and each Applicable Master
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments and documents required or reasonably
requested by the Trustee more fully to effect the purposes of this Agreement or
any applicable Supplement, including, without limitation, the execution of any
financing statements or continuation statements relating to the Receivables (or
any portion thereof) for filing under the provisions of the UCC of any
applicable jurisdiction.
SECTION 13.11. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement, each Master Servicer, the Trustee, the Issuer and by its
acceptance of a Note each Noteholder hereby agrees that it shall not, prior to
the date which is one year and one day after the satisfaction and discharge of
this Agreement, acquiesce, petition or otherwise invoke or cause the Issuer, the
Seller or the Company to invoke the process of any Governmental Authority for
the purpose of commencing or sustaining a case against the Issuer, the Seller or
the Company under any Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer, the Seller or the Company or any
substantial part of its property or ordering the winding-up or liquidation of
the affairs of the Issuer, the Seller or the Company.
SECTION 13.12. No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of any Person, any right, remedy, power or
privilege hereunder or under any Supplement shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege under this Agreement or under any Supplement preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided herein or in any
Supplement are cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.
SECTION 13.13. Counterparts. This Agreement may be executed in two or more
counterparts and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
SECTION 13.14. Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Noteholders of each
Series, the Series Enhancers for each Series and their respective successors and
permitted assigns. Except as otherwise provided in this Agreement, no other
person will have any right or obligation hereunder.
SECTION 13.15. Actions by Noteholders. (a) Wherever in this Agreement a
provision is made that an action may be taken or a Notice given by Noteholders,
such action or Notice may be taken or given by any Noteholder, unless such
provision requires a specific percentage of Noteholders.
(b) Any Notice, consent, waiver or other act by the Holder of a Note shall
bind such Holder and every subsequent Holder of such Note and of any Note issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done or omitted to be done by the Trustee or the
Applicable Master Servicer in reliance thereon, whether or not notation of such
action is made upon such Note.
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SECTION 13.16. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
SECTION 13.17. Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
SECTION 13.18. [Reserved].
SECTION 13.19. Tax and Usury Treatment. The Issuer, the Initial Master
Servicer and the Trustee have entered into this Agreement, and the Notes will be
issued to and acquired by the Noteholders, with the intention that, for federal,
state and local income and franchise tax and usury law purposes, the Notes be
treated as debt of the Issuer secured by the Pledged Assets, and the Issuer will
not be treated as an association (or publicly traded partnership) taxable as a
corporation. The Issuer, the Initial Master Servicer and the Trustee, by
entering into this Agreement, and each Noteholder, by the acceptance of its
Note, agree to treat and report the Notes as debt for federal, state and local
income and franchise tax and usury law purposes, unless and until required to do
otherwise by a relevant taxing or judicial authority.
SECTION 13.20. Liability of the Issuer. Notwithstanding any provision to
the contrary in this Agreement or any Supplement, indemnification payments and
other amounts described herein as payable by the Issuer hereunder (including,
without limitation, amounts payable pursuant to Section 7.03) 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.
SECTION 13.21. Offers to Purchase Notes. Each of Wentworth and the Issuer
shall not, and Wentworth shall cause all of its subsidiaries not to, make any
offers to purchase the Notes of any Series from any Noteholder without making
the same offer to all Noteholders of such series on a pro rata basis.
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<PAGE>
IN WITNESS WHEREOF, the Issuer, the Master Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers as of the
day and year first above written.
J.G. WENTWORTH RECEIVABLES III LLC
By: J.G. Wentworth Receivables II LLC, as Designated
Manager
By: J.G. Wentworth S.S.C. Limited Partnership, as the
Designated Manager
By: J.G. Structured Settlement Funding
Corporation, as its General Partner
By:
-------------------------------------------
Name:
Title:
J.G. WENTWORTH & 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:
================================================================================
J.G. WENTWORTH RECEIVABLES III LLC,
as the Issuer,
J.G. WENTWORTH & 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
================================================================================
<PAGE>
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
ii
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Section Page
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SECTION 10.08. Section Headings..............................................35
SECTION 10.09. Notices.......................................................35
iii
<PAGE>
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
<PAGE>
SERIES 1997-A SUPPLEMENT, dated as of September 30, 1997, among J.G.
Wentworth Receivables III LLC, a Delaware limited liability company (the
"Issuer"), J.G. Wentworth & 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%).
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<PAGE>
"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;
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<PAGE>
(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
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<PAGE>
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 & Phelps and the equivalent by
Moody's (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
<PAGE>
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, 222 Delaware Avenue, 17th Floor,
Wilmington, DE 19801.
"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).
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"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
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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
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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 47-47-003-3012529
established and maintained by PNC Bank, National Association with PNC Bank,
Delaware, 222 Delaware Avenue, 17th Floor, Wilmington, DE 19801.
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"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 47-47-002-3012503 established
and maintained by PNC Bank, National Association at PNC Bank, Delaware, 222
Delaware Avenue, 17th Floor, Wilmington, DE 19801.
"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;
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(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
47-47-002-3012537 established and maintained with PNC Bank, National Association
at PNC Bank, Delaware, 222 Delaware Avenue, 17th Floor, Wilmington, DE 19801.
"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
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Account shall initially be account number 47-47-002-3012498 established and
maintained by PNC Bank, National Association at PNC Bank, Delaware, 222 Delaware
Avenue, 17th Floor, Wilmington, DE 19801.
"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
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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
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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;
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(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 & Phelps and Moody's that the Series 1997-A Notes shall be rated
at least "A" by Duff & Phelps and at least "A2" by Moody's;
(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 J.G. Wentworth
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
J.G. Wentworth Receivables III LLC," (iii) an interest bearing account (the
"Series Payment Account") to be identified as the "Series 1997-A Payment Account
for J.G. Wentworth 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 J.G. Wentworth 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
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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
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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;
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(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.
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(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
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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 J.G. Wentworth 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
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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
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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
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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)
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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
<PAGE>
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;
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(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.
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<PAGE>
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 & Phelps, to
Duff & Phelps Credit Rating Co. at 55 East Monroe Street, Suite 3500, Chicago,
Illinois 60603, Attn.: Asset-Backed Monitoring, and (y) if to Moody's, to
Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attn.: Alex Dill.
36
<PAGE>
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.
J.G. WENTWORTH RECEIVABLES III LLC
By: J.G. Wentworth S.S.C. Limited Partnership, as the
Designated Manager
By: J.G. Structured Settlement Funding Corporation, as its
General Partner
By:
---------------------------------------
Name:
Title:
J.G. WENTWORTH & 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:
PURCHASE AND CONTRIBUTION AGREEMENT
(SELLER PURCHASE AGREEMENT)
Dated as of September 30, 1997
between
J. G. WENTWORTH S.S.C. LIMITED PARTNERSHIP
as the Seller
and
J. G. WENTWORTH RECEIVABLES II LLC
as the Purchaser
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.01. Certain Definitions.....................................................2
1.02. Accounting Terms........................................................7
1.03. Other Terms.............................................................7
1.04. Computation of Time Periods.............................................8
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
2.01. Purchases of Receivables; Agreement to Purchase.........................8
2.02. Payment for the Purchases..............................................10
2.03. Payments and Computations, Etc.........................................11
2.04. Transfer of Records to the Purchaser...................................12
ARTICLE III
CONDITIONS PRECEDENT
3.01. Conditions Precedent to Agreement......................................13
3.02. Conditions Precedent to Ongoing Purchases..............................14
3.03. Effect of Payment of Purchase Price and/or Contribution................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Seller...........................14
4.02. Representations and Warranties of the Seller Relating to
the Receivables......................................................17
4.03. Representations and Warranties of the Purchaser........................18
ARTICLE V
GENERAL COVENANTS OF THE SELLER
5.01. Affirmative Covenants of the Seller....................................19
5.02. Negative Covenants of the Seller.......................................22
<PAGE>
ARTICLE VI
ADMINISTRATION AND COLLECTION
6.01. Collection of Receivables..............................................25
6.02. Servicing of Receivables...............................................26
6.03. Responsibilities of the Seller.........................................26
6.04. Further Action Evidencing Purchases....................................27
ARTICLE VII
INDEMNIFICATION
7.01. Indemnities by the Seller..............................................27
ARTICLE VIII
MISCELLANEOUS
8.01. Waivers; Amendments....................................................30
8.02. Notices................................................................30
8.03. Effectiveness; Binding Effect; Assignability...........................30
8.04. GOVERNING LAW; WAIVER OF JURY TRIAL....................................31
8.05. Costs and Expenses.....................................................32
8.06. Execution in Counterparts; Severability................................32
8.07. Purchase Termination...................................................32
8.08. No Proceedings.........................................................32
8.09. Entire Agreement.......................................................33
8.10. Limitations on Liability...............................................33
-ii-
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A - Form of Subordinated Intercompany Revolving Loan Note
Exhibit B - Form of Seller Transfer Report
Exhibit C - List of Closing Documents
Schedule I - Addresses and Locations of Books and Records of the Seller
Schedule II - ERISA Matters
Schedule III - Lock-Box Banks; Lock-Box Accounts; Lock-Box Numbers;
Deposit Account Banks; Deposit Account Numbers
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<PAGE>
PURCHASE AND CONTRIBUTION AGREEMENT
(SELLER PURCHASE AGREEMENT)
Dated as of September 30, 1997
This PURCHASE AND CONTRIBUTION AGREEMENT (the "Agreement"), dated as
of September 30, 1997, is made by and between J.G. WENTWORTH S.S.C. LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Seller"), and J.G. WENTWORTH
RECEIVABLES II LLC, a Delaware limited liability company (the "Purchaser").
WITNESSETH:
WHEREAS, the Seller has purchased, and from time to time hereafter
may purchase, "Settlements" (or portions thereof) from various "Claimants"
pursuant to various "Settlement Agreements" (each as defined in the Indenture
referred to below) between the Seller and each such Claimant;
WHEREAS, the Seller may from time to time desire to sell, transfer
or otherwise convey to the Purchaser, and the Purchaser may from time to time
desire to purchase or otherwise acquire or accept from the Seller, all of the
Seller's right, title and interest in the Receivables relating to certain such
Settlements (or portions thereof) now owned or hereafter acquired by the Seller,
in each case, on the terms and conditions provided herein; and
WHEREAS, in order to finance purchases of Receivables and the
Related Assets relating thereto, the Purchaser, as successor to the Seller by
assignment, has entered into that certain Amended and Restated Credit Agreement,
dated as of February 11, 1997 (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") among the Purchaser (as
successor to the Seller by assignment), the lenders from time to time parties
thereto (the "Lenders"), ING (U.S.) Capital Corporation, as a Lender and as
contractual representative (the "Agent") on behalf of itself and the other
Lenders, and PNC Bank, National Association, as a Lender and as servicing agent
(the "Servicing Agent"), pursuant to which the Lenders, the Agent and the
Servicing Agent from time to time may make advances and other financial
accommodations for the benefit of the Purchaser secured by specified Receivables
and the Related Assets related thereto;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
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<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Definitions. For all purposes of this
Agreement, as used in this Agreement (including in the recitals hereto), the
following terms shall have the following meanings:
"Aggregate Discounted Receivables Balance" means, for purposes of
this Agreement with respect to any designated group of Receivables, at any time,
the sum at such time of the respective Discounted Receivables Balances of such
Receivables.
"Annuity Contract" means an annuity contract issued to fund the
obligations of an Obligor under a Settlement Agreement, including, without
limitation, a Qualified Annuity Contract.
"Applicable Discount Rate" means, with respect to any Receivable,
the "Discount Rate" specified in the applicable Seller Transfer Report.
"Assumption Agreement" means that certain Assumption Agreement and
Amendment No. 2 to the Credit Agreement dated as of even date herewith by and
among the Seller, the Purchaser and the Lenders.
"Business Day" means any day other than a Saturday or Sunday or any
other day on which national banking associations or state banking institutions
in New York, New York or Philadelphia, Pennsylvania are authorized or obligated
by law, executive order or governmental decree to be closed; provided, however,
that as it relates to any specific Series, the term "Business Day" may have such
other meaning, if any, as may be specified in the related Supplement.
"Claimant" means any Person (or such Person's heir) entitled to
receive the Settlement under the terms of a Settlement Agreement.
"Closing Date" means September 30, 1997.
"Collateral Trustee" means the Person acting in such capacity under
the Intercreditor Agreement.
"Collections" means all cash payments by or on behalf of the
Obligors (including, without limitation, pursuant to any "Annuity Contract" (as
defined in the Credit Agreement)) in respect of the Receivables or the Related
Property relating thereto, whether in the form of cash, checks, wire transfers,
electronic transfers or any other form of cash payment (including, without
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<PAGE>
limitation, from the Seller in connection with any repurchase of any such
Receivables from the Purchaser pursuant hereto).
"Collection Date" means that date following the Purchase Termination
Date upon which the Aggregate Discounted Receivables Balance of the Receivables
transferred to the Purchaser hereunder has been reduced to zero.
"Contributed Assets" has the meaning assigned to it in Section
2.01(a).
"Cut-Off Date" means, with respect to any Receivable described in
any Seller Transfer Report, the date on which the Discounted Receivables Balance
thereof was calculated for purposes of computing the Purchase Price under
Section 2.02(b).
"Designated Supplement" has the meaning assigned to such term in the
Issuer Purchase Agreement.
"Discounted Receivables Balance" means, at any time with respect to
any Receivable, the sum of (i) the discounted present values of the remaining
Scheduled Payments due under such Receivable at such time discounted at the
Purchase Discount Rate and (ii) the principal amount of any past due Scheduled
Payments outstanding on such Receivable at such time.
"Eligible Receivable" means, with respect to this Agreement, a
Receivable which, as of the date of its sale or conveyance to the Purchaser by
the Seller hereunder, would constitute an "Eligible Settlement" under and
pursuant to the Revolving Credit Facility.
"Governmental Authority" means any country or nation, any political
subdivision of such country or nation, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government of any country or nation or political subdivision thereof.
"Indenture" means that certain Master Trust Indenture and Security
Agreement dated as of September 30, 1997 by and among the Issuer, Wentworth, as
the initial Master Servicer and PNC Bank, National Association, as trustee.
"Intercreditor Agreement" means that certain Amended and Restated
Collateral Trust and Intercreditor Agreement, dated as of September 30, 1997,
among the Agent, the Lenders, the Servicing Agent, PNC Bank, National
Association, as servicing agent (the "Servicing Agent") and as a Lender, the
Trustee, PNC Bank, National Association, as Collateral Trustee, the Issuer, the
Seller, the Purchaser, the Master Servicer, J.G. Wentworth Receivables I LLC, as
the Seller under the Pooling and Servicing Agreement, Wentworth, as initial
Master Servicer under the Pooling and Servicing Agreement and the Indenture, and
PNC Bank, National Association, as Trustee under the Pooling and Servicing
Agreement and as Trustee under the
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Indenture (as such intercreditor agreement may be amended, restated,
supplemented or otherwise modified from time to time).
"Issuer" means J.G. Wentworth Receivables, III LLC, a Delaware
limited liability company.
"Issuer Purchase Agreement" means that certain Purchase and
Contribution Agreement as of even date herewith and between the Purchaser and
the Issuer, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"Material Adverse Effect" means, with respect to any Person, the
occurrence or existence of any event or condition which has a material adverse
effect (v) on such Person's ability to perform under the Operative Documents,
(w) on the businesses, properties or condition (financial or otherwise) of such
Person, (x) on the ability of the Purchaser or any of its designees and/or
assigns to enforce this Agreement or any of the other Operative Documents, (y)
on the rights of the Purchaser or any of its designees and/or assigns in the
Purchased Assets.
"Noncomplying Receivable" shall mean any Receivable (i) which, as of
the date of origination thereof, did not meet the criteria for an Eligible
Receivable as of such date or (ii) as to which any representation or warranty,
determined as of the date of origination thereof and made or deemed made by the
Seller under Section 5.01(m), was materially incorrect .
"Obligor" shall have the meaning set forth in the Indenture.
"Operative Documents" shall mean this Agreement, the Credit
Agreement, the "Security Agreement" as defined in the Credit Agreement, the
Intercreditor Agreement, the Issuer Purchase Agreement, and any instruments,
agreements or documents executed by or on behalf of the Seller in connection
therewith.
"Permitted Liens" shall mean with respect to any Receivable or the
Related Asset relating thereto which are sold, transferred, contributed or
otherwise conveyed to the Purchaser hereunder, "Liens" (as defined in the Credit
Agreement) created under this Agreement in favor of the Purchaser or by the
Purchaser under the Revolving Credit Facility in favor of the Agent or by the
Purchaser under the Issuer Purchase Agreement in favor of the Issuer.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Authority or any other entity of similar nature.
"Pooling and Servicing Agreement" shall mean that certain Pooling
and Servicing Agreement, dated as of June 13, 1997 (as amended, restated,
supplemented (including by way of any "Supplement" (as defined in the Pooling
and Servicing Agreement thereto) or otherwise modified from time to time among
J.G. Wentworth Receivables I LLC, as Seller, Wentworth, as
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Master Servicer, and PNC Bank, National Association, as trustee for SSC Master
Trust I (the "Trust").
"Purchase" means, on any Purchase Date, the sale, assignment,
contribution, transfer and/or other conveyance of any Receivable from the Seller
to the Purchaser for which the Purchase Price has not been previously paid
(including by increasing the outstanding balance of the Subordinated
Intercompany Revolving Loan Note) and which have not previously been sold,
assigned, contributed, transferred or otherwise conveyed to the Purchaser by the
Seller, in either case, in accordance with the terms of Sections 2.01 and 2.02
hereof; and "Purchased" means the past tense of Purchase.
"Purchase Date" means, with respect to any Receivable, the date such
Receivable is Purchased by the Purchaser.
"Purchase Discount Rate" means, with respect to any Receivable, a
per annum rate equal to the Applicable Discount Rate for such Receivable, which
rate shall be specified in the Seller Transfer Report; it being understood and
agreed that such rate may be determined as a weighted average which may apply to
all Receivables being Purchased on any given Purchase Date.
"Purchase Price" has the meaning specified in Section 2.02(b)
hereof.
"Purchase Termination Date" means the earliest to occur of (i) the
date upon which the Seller shall cease to sell Receivables to the Purchaser in
accordance with the provisions of Section 8.07 of this Agreement, (ii) the date
upon which the ability of the Seller to permit Purchases hereunder has been
terminated (and cannot be reinstated) pursuant to Section 2.01(c), and (iii) or
the date upon which the Seller breaches its repurchase or substitution
obligation as set forth in Section 5.02(b).
"Purchase Yield" means, with respect to any Receivable, the per
annum discount rate, as calculated by the Seller on the date the Settlement
underlying such Receivable was originally purchased by the Seller from the
Claimant, at which the present value of all Scheduled Payments (or portions
thereof) to be received by the Seller equals the sum of the purchase price paid
by the Seller to the Claimant therefor plus the estimated closing costs and
commissions incurred by the Seller and directly allocated to such Receivable in
accordance with the Seller's customary past business practices.
"Purchased Assets" shall mean all Receivables and Related Assets
purchased hereunder pursuant to Section 2.01.
"Qualified Annuity Contract" shall mean an Annuity Contract which
qualifies as a "qualified funding asset" under Section 130(d) of the Internal
Revenue Code.
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"Receivable" shall mean those Scheduled Payments (or portions
thereof) due to a Claimant under a Settlement Agreement and the rights to which
Scheduled Payments (or such portion thereof) have heretofore been or which are
hereafter transferred by such Claimant to the Seller pursuant to a Settlement
Purchase Agreement and by the Seller to the Purchaser pursuant to this
Agreement, whether such Scheduled Payments (or such portions thereof) constitute
accounts, general intangibles, investment property, chattel paper, instruments,
documents, securities, cash, or any other kind of property.
"Related Assets" has the meaning specified in Section 2.01(a)
hereof.
"Related Property" means with respect to any Receivable: all of the
Seller's rights, title, interests, remedies, powers and privileges (a) under the
Settlement Purchase Agreement pursuant to which such Receivable was purchased by
the Seller and under the related "Power of Attorney" (as defined in the
Indenture), (b) all security interests or liens and property subject thereto
from time to time purporting to secure payment of such Receivable, if any,
whether pursuant to the Settlement Purchase Agreement related to such Receivable
or otherwise, (c) under the "Back-up Servicing Agreement" (as defined in the
Indenture), (d) all "Lock-Box Accounts" (as defined in the Indenture),
lock-boxes and other bank accounts, in each case, into which (but only to the
extent of) any Collections are deposited or concentrated; all monies and other
items of payment therein (but only to the extent relating to the Receivables);
and "Eligible Investments" (as defined in the Indenture) purchased with any of
the foregoing funds and any investment income thereon, (e) all "Life Insurance
Contracts" (as defined in the Indenture) relating to any "Non-Guaranteed
Settlements" (as defined in the Indenture) or "Commutable Settlements" (as
defined in the Indenture) included as a Receivable, (f) any interest rate
hedging instruments or agreements entered into by the Seller in respect of any
such Receivable, (g) any other agreements or arrangements of whatever character
(including guaranties, letters of credit, annuity contracts (including,
"Qualified Annuity Contracts") or other credit support from time to time
supporting or securing payment of such Receivable whether pursuant to any
related Settlement Agreement, "Qualified Assignment" (as defined in the
Indenture), Qualified Annuity Contract, Settlement Purchase Agreement or any
other agreement related to such Receivable or otherwise, (h) all UCC (financing
statements filed by the Seller against the Claimants under such Receivable; and
(j) all "Records" (as defined in the Indenture) and all other instruments and
rights relating to such Receivable.
"Revolving Credit Facility" means the revolving credit facility
evidenced by the Credit Agreement otherwise modified from time to time) and all
documents, instruments and agreements executed and/or delivered in connection
therewith.
"Scheduled Payments" has the meaning assigned to such term in the
Indenture and shall include, without limitation, all "Periodic Payments" as such
term is defined in the Credit Agreement.
"Seller Loans" has the meaning specified in Section 2.02(c) hereof.
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"Seller Transfer Report" means a report to be delivered by the
Seller to the Purchaser and accepted by the Purchaser on each Purchase Date
setting forth for each such Receivable so Purchased, the file number by which
the company can identify the Claimant, the present and future values of the
assigned Scheduled Payments, the "Annuity Provider" (as defined in the
Indenture), if any, the Purchase Price thereof, the Purchase Discount Rate
thereof, and the Designated Supplement, if any, under which such Receivable is
intended to be an Eligible Receivable.
"Series" means any Series of Notes issued under the Indenture.
"Series Specific Lock-Box" has the meaning specified in Section
6.01(a) of the Issuer Purchase Agreement.
"Series Specific Lock-Box Account" has the meaning specified in
Section 6.01(a) of the Issuer Purchase Agreement.
"Subordinated Intercompany Revolving Loan Note" has the meaning
specified in Section 2.02(d) hereof.
"Subsequent Issuances" means any issuance by the Issuer of new
"Notes" (as defined in the Indenture) on any date after the Closing Date.
"Transferred Assets" has the meaning specified in Section 2.01(a).
"Trustee" shall mean the "Trustee" under the Indenture.
"UCC" shall mean the Uniform Commercial Code as amended from time to
time, as in effect in any specified jurisdiction.
"U.S. Dollars" or "Dollars" means dollars of the United States of
America.
"Wentworth" shall mean J.G. Wentworth & Company, Inc., a
Pennsylvania corporation.
SECTION 1.02. Accounting Terms. Under this Agreement, all accounting
terms not specifically defined herein shall be interpreted, all accounting
determinations made, and all financial statements prepared, in accordance with
GAAP.
SECTION 1.03. Other Terms. All other undefined terms contained in
this Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein. The
words "herein," "hereof," and "hereunder" and other words of similar import
refer to this Agreement as a whole, including the exhibits and schedules hereto,
as the same may from time to time be amended or supplemented
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and not to any particular section, subsection, or clause contained in this
Agreement, and all references to Sections, Exhibits and Schedules shall mean,
unless the context clearly indicates otherwise, the Sections hereof and the
Exhibits and Schedules attached hereto, the terms of which Exhibits and
Schedules are hereby incorporated into this Agreement. Whenever appropriate, in
the context, terms used herein in the singular also include the plural, and vice
versa.
SECTION 1.04. Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding", and the word "within" means "from and excluding a
specified date and to and including a later specified date".
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Purchases of Receivables; Agreement to Purchase. (a)
Subject to the terms and conditions hereinafter set forth (including the
conditions set forth in Article III), at any time prior to the Purchase
Termination Date (provided such Purchases are permitted pursuant to Section
2.01(d) hereof) upon at least one Business Days' prior notice by the Seller to
the Purchaser, the Purchaser shall purchase from the Seller, and the Seller
shall sell, transfer, assign and otherwise convey to the Purchaser all of the
Seller's right, title and interest in the Receivables described on the Seller
Transfer Reports from time to time delivered by the Seller to the Purchaser on
or prior to the proposed respective Purchase Dates therefor (as such dates shall
be specified in such notices), in each case together with all of the Related
Property relating to such Receivables and all Collections with respect to and
other proceeds of such Receivables received on or after the applicable Cut-Off
Date and "Related Security" (as defined in the Credit Agreement) (such Related
Property, Collections and proceeds, collectively, the "Related Assets"); it
being agreed that the first such Purchase Date shall be on the Closing Date (and
the execution and delivery of this Agreement shall suffice as notice thereof by
the Seller for purposes of this Agreement). On any Purchase Date on which the
Seller and Purchaser agree to effect a sale or transfer of Receivables preceding
the Purchase Termination Date, the Purchaser shall pay for the Purchases
described in the preceding sentence no later than 5:00 p.m. (New York time) on
such Purchase Date by making available to the Seller the payment of the Purchase
Price in the manner required under Section 2.02. To the extent that any such
Receivables and Related Assets shall have been or are to be contributed to the
Purchaser's capital at or prior to such time in accordance with Section 2.02,
the Purchaser shall increase the Seller's aggregate investment in the Purchaser
accordingly in accordance with Delaware law. Prior to paying the Purchase Price
hereunder, the Purchaser may request of the Seller, and the Seller shall
deliver, such approvals, opinions, information, reports or documents as the
Purchaser may reasonably request. As used in this Agreement, (i) the term
"Purchased Assets" shall mean all Receivables which are paid for
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through cash and/or Seller Loans under this Agreement and all Related Assets
relating thereto, (ii) the term "Contributed Assets" shall mean all Receivables
which are contributed to the Purchaser's capital and all Related Assets relating
thereto and (iii) the term "Transferred Assets" shall mean, collectively, all
Purchased Assets and all Contributed Assets.
(b) It is the intention of the parties hereto that (i) each Purchase
of Receivables and the associated Related Assets made hereunder shall constitute
a "sale" from the Seller to the Purchaser and (ii) each contribution of
Receivables and the associated Related Assets made hereunder shall constitute an
absolute assignment or transfer from the Seller to the Purchaser, in each case,
under applicable state law and Federal bankruptcy law, which sales are, in each
case, absolute and irrevocable and provide the Purchaser with all indicia and
rights of ownership of the Receivables and such Related Assets. Neither the
Seller nor the Purchaser intends the transactions contemplated hereunder to be,
or for any purpose to be characterized as, loans from the Purchaser to the
Seller secured by such property. Except for certain indemnities pursuant to
Section 7.01, each sale or absolute transfer of Receivables and the associated
Related Assets by the Seller to the Purchaser is made without recourse to the
Seller; provided, however, that (i) the Seller shall be liable to the Purchaser
for all representations, warranties and covenants made by the Seller pursuant to
the terms of this Agreement, and (ii) such sale or absolute transfer does not
constitute and is not intended to result in an assumption by the Purchaser or
any assignee thereof of any obligation of the Seller or any other person to any
Claimant, Obligor, or any other Person in connection with the Receivables, the
Related Assets and/or the related Settlement Purchase Agreements, or any other
obligations of the Seller thereunder or in connection therewith, other than to
return (or provide for the return of) any Scheduled Payments (or any portion
thereof) not covered under the Settlement Purchase Agreement and not sold or
transferred to the Purchaser hereunder back to such Claimant (it being
understood and agreed that the applicable "Master Servicer" (as defined in the
Indenture) and/or the Collateral Trustee shall remit or cause to be remitted all
amounts in respect of "Split Payments" (as defined in the Indenture) in
accordance with Section 5.01(f)). In view of the intention of the parties hereto
that the Purchases of Receivables and the associated Related Assets made
hereunder shall constitute sales or absolute transfers of such Receivables and
such Related Assets rather than a loan secured by such Receivables and such
Related Assets, the Seller agrees to note on its financial statements and in its
books and records that such Receivables and the associated Related Assets have
been sold or transferred to the Purchaser and to respond to any inquiries made
by third parties as to the ownership of such Receivables and such Related Assets
so sold or transferred that such Receivables and such Related Assets have been
sold or transferred to the Purchaser.
(c) Notwithstanding any other provision of this Agreement to the
contrary, the Purchaser shall not Purchase from the Seller nor shall the Seller
sell or contribute to the Purchaser any Receivable from and after the time of
any bankruptcy filing by or against the Seller or the Purchaser, provided,
however, that should any such bankruptcy or insolvency proceeding instituted
against the Seller (as distinguished from by the Seller) be withdrawn or
dismissed prior to the occurrence of an "Event of Default" under the Credit
Agreement, then the Purchaser shall
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be entitled to resume Purchasing Receivables from the Seller after the
withdrawal or dismissal of such filing or proceeding.
(d) If, notwithstanding the provisions of the immediately preceding
clause (b), a court of competent jurisdiction were to hold that any Purchase of
Receivables hereunder does not constitute a valid sale or transfer of the
affected Receivables and the Related Assets as set forth above but instead
constitutes a loan in the amount of the Purchase Price or otherwise of such
Receivables, then this Agreement shall be deemed a present grant of a security
interest (within the meaning of Articles 8 and 9 of the UCC as in effect in all
applicable jurisdictions) in favor of the Purchaser in all of the Seller's
rights, title and interest in, to and under the Transferred Assets to secure
such loan in the amount of the Purchase Price (together with interest thereon to
be computed at the Purchase Discount Rate) effective upon each such Purchase,
and the Seller hereby grants such a security interest to the Purchaser in the
Transferred Assets which are the subject of such Purchase, and this Agreement
shall constitute a security agreement within the meaning of Article 8 and
Article 9 of the UCC of all applicable jurisdictions.
SECTION 2.02. Payment for the Purchases. (a) Except as otherwise
provided below in this Section 2.02, the Purchase Price for the Receivables sold
by the Seller under this Agreement shall be payable in full in cash by the
Purchaser to the Seller, in each case on the Purchase Date relating to such
Purchase; provided, to the extent that the Purchaser has insufficient funds and
availability under the Subordinated Intercompany Revolving Loan Note to pay the
Purchase Price for any Receivables to be purchased by it on any date, such
remaining portion of the Receivables of the Seller for which the Purchase Price
has not been received (either in cash or by an increase to the Seller's
Subordinated Intercompany Revolving Loan Note) shall be contributed to the
capital of the Purchaser by the Seller; provided, however, that with respect to
the Purchase made on the Closing Date, (i) $86,018,722.70 of the Purchase Price
due on the Closing Date shall be paid by the Purchaser's assumption of
outstanding debt under the Revolving Credit Facility and (ii) $2,391,093.86 of
the Purchase Price due on the Closing Date shall be paid by the issuance of the
Subordinated Intercompany Revolving Loan Note.
(b) On each Purchase Date with respect to any Receivables being sold
on such date, the Seller shall deliver to the Purchaser a Seller Transfer Report
in the form of that attached hereto as Exhibit B. The Purchaser, if it agrees to
purchase all such Receivables set forth on such report, shall signify its
acceptance thereof by signing such report and returning a copy, as accepted, to
the Seller on such date, together with payment of the aggregate Purchase Price
for such Receivables, by no later than 5:00 p.m. (New York time) on such date.
To the extent that the Purchaser disputes any of the information in such report
with respect to any Receivable described therein, the Seller and the Purchaser
shall reconcile such report as promptly as possible and if unable to reconcile
and agree on the content of such report prior to 4:30 p.m. (New York time) on
the proposed Purchase Date therefor, the Seller and the Purchaser shall exclude
any Receivables therefrom until such report is acceptable to both parties (and
such excluded Receivables shall be deemed not sold on such date). The aggregate
Purchase Price (as hereinafter defined) payable on any Purchase Date shall be
calculated to equal the sum of the
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respective Purchase Prices of the new Receivables noted on such Seller Transfer
Report. The "Purchase Price" for any Receivable shall be equal to the Discounted
Receivables Balance of such Receivable on such date as calculated without giving
effect to any past due Scheduled Payments thereon which are outstanding on such
date.
(c) On each Business Day, to the extent that the Purchaser receives
proceeds from any sale under the Issuer Purchase Agreement (including repayment
of any intercompany notes issued thereunder) or has available funds under the
Revolving Credit Facility, then the Purchaser shall remit such funds to the
Seller in the following order of priority and application: first to pay the
Purchase Price for any Receivables Purchased from the Seller on such Business
Day to the extent it is a Purchase Date; and second to pay amounts owed by the
Purchaser to the Seller under the Subordinated Intercompany Revolving Loan Notes
described in Section 2.02(d) below. If, on any Purchase Date, the amount of cash
available to pay for all Purchases of Receivables to be made on such date is
less than the Purchase Price owing therefor, then the Purchaser shall, with
notice to the Seller, pay such remaining part of the Purchase Price by borrowing
a revolving loan (each a "Seller Loan") under its Subordinated Intercompany
Revolving Loan Note issued in favor of the Seller, and the Seller shall have
irrevocably agreed to advance, and shall be deemed to have advanced, a Seller
Loan in the amount so specified by the Purchaser; provided, however, that such
Seller Loan shall be made to the Purchaser only to the extent that, at the time
of such Seller Loan, or immediately thereafter and after giving effect to such
Seller Loan, the Purchaser would, in the reasonable determination of the
Purchaser, continue to be able to pay its debts as they become due.
(d) The Seller Loans shall be subordinated to the prior right and
payment in full of all amounts required to be paid by the Purchaser under the
Issuer Purchase Agreement and any other "Indebtedness" (as defined in the Credit
Agreement) of the Purchaser which is specified in any document relating thereto
as having priority over the Seller Loans. The Seller Loans advanced by the
Seller shall be evidenced by, and payable in accordance with the terms and
provisions of, a promissory note (a "Subordinated Intercompany Revolving Loan
Note") payable to the Seller in the form of Exhibit A attached hereto.
(e) Unless and until the Purchase Termination Date has occurred, if,
after giving effect to all allocations of cash and Seller Loans provided for in
Section 2.02(c), the Purchase Price payable by the Purchaser to the Seller on
any Business Day is not paid in full as a result of the limitation on the amount
of the Subordinated Intercompany Revolving Loan Note, then the Seller shall be
deemed to have contributed to the Purchaser's capital Receivables having a
Purchase Price equal to the otherwise unpaid portion of the total Purchase Price
owed to the Seller on such day.
SECTION 2.03. Payments and Computations, Etc. All amounts to be paid
by the Seller to the Purchaser hereunder shall be paid in accordance with the
terms hereof no later than 1:00 P.M. (New York time) on the day when due in
Dollars in immediately available funds to the "Master Collection Account" (as
defined in the Indenture). All amounts to be paid by the
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Purchaser to the Seller hereunder shall be paid in accordance with the terms
hereof no later than 5:00 P.M. (New York time) to such account as may be
specified therefor by the Seller from time to time by notice to the Purchaser.
Payments received by the Purchaser or the Seller after such times shall be
deemed to have been received on the next Business Day. In the event that any
payment becomes due on a day which is not a Business Day, then such payment
shall be made on the next succeeding Business Day. The Seller shall, to the
extent permitted by law, pay to the Purchaser, on demand, interest on all
amounts not paid when due hereunder (whether owing by the Seller individually or
as Master Servicer) at 2% per annum above the per annum rate designated by PNC
Bank, National Association as its "prime rate" for commercial borrowers (such
rate not necessarily being the lowest rate offered by such bank) as in effect on
the date such payment was due; provided, however, that such interest rate shall
not at any time exceed the maximum rate permitted by applicable law. All
computations of interest payable hereunder shall be made on the basis of a year
of 360 days for the actual number of days (including the first but excluding the
last day) elapsed.
SECTION 2.04. Transfer of Records to the Purchaser. (a) In
connection with the Purchases of Receivables hereunder, the Seller hereby sells,
transfers, assigns and otherwise conveys to the Purchaser all of the Seller's
right and title to and interest in the Records relating to all Receivables
included in the Transferred Assets, without the need for any further
documentation in connection with any Purchase. In connection with such transfer,
the Seller hereby represents and warrants that the Seller and/or Wentworth
either itself owns, or has taken such action as may be necessary (including,
without limitation, obtaining any necessary consents from licensors or other
Persons) to provide the Purchaser and its assigns, including the Issuer, the
Trustee, the "Master Servicers", the "Back-up Servicer" and any "Successor
Servicer" (each as defined in the Indenture) with such licenses, sublicenses
and/or assignments of contracts as the Issuer, the Master Servicers, the Trustee
or any Successor Servicer shall from time to time require for its use of all
services and computer hardware or software that relate to the servicing of the
Receivables or the other Purchased Assets. The Seller hereby grants the
Purchaser, the Issuer, Master Servicers, the Back-up Servicer, the Trustee and
each Successor Servicer an irrevocable license (with respect to the services,
and computer hardware and software that it owns) or sublicense (with respect to
all other such services, hardware and software) to use such services, hardware
or software in connection with the servicing, collection and monitoring of the
Receivables (subject to reasonable confidentiality restrictions and restrictions
limiting such use to the collection, servicing and monitoring of the
Receivables, which restrictions have already been established with respect to
the Back-up Servicer and, with respect to any other Person other than the
Back-up Servicer, shall be determined at such time as such Person is charged
with the servicing of the Receivables). As of the Closing Date, all such
computer software and hardware is currently owned by Seller and/or Wentworth and
is licensed to the Back-up Servicer irrevocably until the termination of the
Back-up Servicing Agreement. From and after the Closing Date, the Seller or
Wentworth, as applicable, shall deliver to the Purchaser a copy of each consent
(or evidence that such consent is not required) from all necessary parties with
respect to any such services, hardware or software prior to the date the Seller
or Wentworth enters into any license to use such service or software to service,
monitor and collect any
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Receivables. The license granted hereby shall be irrevocable, and shall
terminate on the Business Day following the Collection Date.
(b) The Seller shall take such action requested by the Purchaser (or
its assignees) or any Master Servicer (including any successor Master Servicer
appointed in accordance with the Indenture), from time to time hereafter, that
may be reasonably necessary or appropriate to ensure that the Purchaser (and its
assignees, including, without limitation, the Issuer, the Trustee, the
Collateral Trustee and the Noteholders) has an enforceable ownership or security
interest, as applicable, in the Records relating to the Receivables purchased
from the Seller hereunder.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Agreement. This Agreement is
subject to the conditions precedent that (i) each of the conditions precedent to
the execution, delivery and effectiveness of each other Operative Document
(other than a condition precedent in any such other Operative Document relating
to the effectiveness of this Agreement) shall have been fulfilled, and (ii) the
Purchaser shall have received each of the following, on or before the Closing
Date, each (unless otherwise indicated) dated as of the Closing Date or such
other recent date acceptable to the Purchaser and each in form and substance
satisfactory to the Purchaser:
1. Resolutions. A copy of the resolutions of the Board of Directors
of the general partner of the Seller, certified by its Secretary or
Assistant Secretary, approving for and on behalf of the Seller this
Agreement and the other Operative Documents to be delivered by it
hereunder and the transactions contemplated hereby and thereby and
addressing such other matters as may be reasonably required by the
Purchaser;
2. Good Standing Certificates of the Seller; Certificates as to
Foreign Qualification of the Seller. Good standing or qualification
certificates for the Seller issued by the Secretaries of State of Delaware
and Pennsylvania and of any other state in which the Seller transacts
business and is required to be in good standing;
3. Incumbency Certificate. A certificate of the Secretary or
Assistant Secretary of the general partner of the Seller certifying the
names and true signatures of the officers authorized on the general
partner's behalf to sign this Purchase Agreement for and on behalf of the
Seller and the other Operative Documents to be delivered by the Seller
hereunder (on which certificate the Purchaser, the Trustee, the Agent and
the Master Servicers may conclusively rely until such time as the
Purchaser shall receive from the Seller (with a copy to the Trustee, each
Master Servicer and the Agent), a revised certificate meeting the
requirements of this subsection (3);
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4. Other Operative Documents. Original copies, executed by each of
the parties thereto in such reasonable number as shall be specified by the
Purchaser, of each of the other Operative Documents to be executed and
delivered in connection herewith;
5. Opinions of Counsel. The following opinions of counsel, each in
form and substance satisfactory to the Purchaser as to (i) general
corporate and UCC matters, (ii) true sale and non-consolidation, (iii)
federal and Delaware income tax matters, (iv) assignability and priority
of the Receivables, (v) federal securities law issues, and (vi)
enforceability of Powers of Attorney; and
6. Other Documents. Such other documents as are set forth on the
List of Closing Documents attached hereto as Exhibit C.
SECTION 3.02. Conditions Precedent to Ongoing Purchases. The
obligation of the Purchaser on any Purchase Date to accept and pay the Purchase
Price for the transfers of Receivables under this Agreement is subject to the
conditions precedent that the representations and warranties contained in
Article IV are true and correct in all material respects as of such Business
Day. The Seller, by accepting the Purchase Price paid for each Purchase of
Receivables and Related Assets hereunder (including by way of increase in the
principal balance of the Subordinated Intercompany Revolving Loan Note or the
equity interest of the Seller in the Purchaser), shall be deemed to have
certified, with respect to the Receivables and the Related Assets paid for on
such day, that its representations and warranties contained in Article IV are
true and correct on and as of such day, with the same effect as though made on
and as of such day.
SECTION 3.03. Effect of Payment of Purchase Price and/or
Contribution. Upon the payment of the Purchase Price for any Purchase, (whether
in cash or by an increase in the Seller's Subordinated Intercompany Revolving
Loan Note pursuant to Section 2.02(c)), or by the contribution of any
Receivables and Related Assets by the Seller to the capital of the Purchaser
pursuant to Section 2.02(a), title to the Receivables and the Related Assets
included in such Purchase shall vest in the Purchaser. Upon the purchase and
payment by the Purchaser of the Purchase Price for any Purchase, each of the
conditions set forth in Section 3.02 shall be irrevocably deemed to have been
satisfied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller. The
Seller hereby represents and warrants that as of the Closing Date and (except
for representations and warranties which relate to a specific date only) and on
each Purchase Date thereafter until the Purchase Termination Date:
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(a) Organization and Good Standing. The Seller is a limited
partnership, duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full power and authority to own its
properties and conduct its business as presently owned or conducted, and to
execute, deliver and perform its obligations under this Agreement, the
Settlement Purchase Agreements, and each of the other Operative Documents to
which it is a party.
(b) Due Qualification. The Seller is duly qualified to do business
and is in good standing as a foreign limited partnership, and has obtained all
necessary licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have, or could reasonably
be expected to have a Material Adverse Effect.
(c) Due Authorization; Conflicts. The execution, delivery and
performance by the Seller of this Agreement, the Settlement Purchase Agreements
and each of the other Operative Documents to which it is a party are within the
Seller's powers, have been duly authorized by all necessary partnership action,
and do not contravene (i) the Seller's Agreement of Limited Partnership, (ii)
any law, rule, regulation, order, decree or contractual restriction binding on,
or affecting, the Seller and the violation of which would have, or could
reasonably be expected to have, a Material Adverse Effect, or (iii) any
agreement, contract, credit agreement, mortgage, or other instrument, document
or agreement to which the Seller or any of its assets are subject or may be
effected and the violation of which would have, or could reasonably be expected
to have, a Material Adverse Effect.
(d) Consents. No authorization or approval or other action by, and
no notice to or registration of or filing with, any Governmental Authority or
other regulatory body is required to be made by the Seller for the due
execution, delivery and performance by the Seller, or to insure the legality,
validity, binding effect or enforceability of, this Agreement, the Settlement
Purchase Agreements or any of the other Operative Documents to which it is a
party, except for the filing of UCC financing statements against the Seller in
respect of the transactions contemplated herein, all of which that need to be
filed to perfect the interest of the Purchaser in the Purchased Assets (as
comprised as of the date of the making or remaking of this representation and
warranty) have been so made.
(e) Enforceability. This Agreement, the Settlement Purchase
Agreements or any of the other Operative Documents to which it is a party is and
will be the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its respective terms, 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 principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
(f) Proceedings. There are no judgments or other judicial or
administrative orders outstanding against the Seller nor is there any pending
or, to the best of the Seller's knowledge,
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threatened action or proceeding affecting the Seller before any court,
governmental agency or arbitrator, which would have, or could reasonably be
expected to have, a Material Adverse Effect.
(g) Compliance with Laws, Etc. The Seller is not in violation of any
law, rule, regulation, order, writ, judgment, decree, determination or award
applicable to it or any of its properties or any indenture, lease, loan or other
agreement to which it is a party or by which it or its assets may be bound or
affected, the violation of which, in any of the foregoing cases, would have, or
could reasonably be expected to have, a Material Adverse Effect.
(h) Locations. The principal place of business and chief executive
office of the Seller are located at the address of the Seller set forth on the
signature page hereof, and the offices where the Seller keeps all of its records
relating to the Receivables are located at the addresses set forth on Schedule I
hereto, or, in each case, at such other locations notified to the Purchaser, the
Issuer, the Trustee and each Master Servicer, and the Agent, in jurisdictions
with respect to which all applicable actions required by Section 5.02(f) hereof
have been taken and completed.
(i) Lock-Box Banks. The names and addresses of all the "Lock-Box
Banks" (as defined in the Credit Agreement), and the account numbers of all
"Lock-Box Accounts" (as defined in the Credit Agreement) and related lock-boxes
maintained at such Lock-Box Banks, are in each case specified in Schedule III
hereto or have been notified to the Purchaser, the Trustee and the Collateral
Trustee and with respect to which all action required to be taken pursuant to
Section 5.02(h) has been taken. The Lock-Box Banks are the only institutions
holding any Lock-Box Accounts or lock-boxes for the receipt of Scheduled
Payments in respect of the Receivables. All annuity providers have been directed
to make payments on the Annuity Contracts relating to the Receivables to a
Lock-Box Account (or a related lock-box) covered by a "Lock-Box Notice" (as
defined in the Indenture), and such instructions are in full force and effect.
(j) Financial Statements. The annual audited financial statements of
the Seller for the fiscal year ended December 31, 1996, and the unaudited
quarterly financial statements of the Seller for the fiscal quarter ended June
30, 1997, copies of which have been provided to the Purchaser, the Trustee and
the Agent, present fairly the financial condition of the Seller as of such date.
(k) Accuracy of Information. Each certificate, information, exhibit,
financial statement, document, book, record, report or disclosure furnished by
the Seller to the Purchaser, the Trustee, any Master Servicer or the Agent is
accurate in all material respects and contains no untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading.
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(l) Investment Company Act Matters. The Seller is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act.
(m) Title to Property. The Seller, with respect to any Receivables
immediately prior to the Purchase thereof by the Purchaser hereunder, had good,
indefeasible, and merchantable title to and ownership of such Receivables, free
and clear of all Liens.
(n) Tradenames. The Seller has no tradenames, fictitious names,
assumed names or "doing business as" names and since its incorporation, the
Seller (i) has not been the subject of any merger or other corporate
reorganization that resulted in a change of name, identity or corporate
structure or (ii) had any other name.
(o) Solvency. After giving effect to each Purchase of Transferred
Assets hereunder, the Seller is and will be solvent and able to pay its debts as
they come due, and has and will have adequate capital.
(p) Valid Transfer. This Agreement constitutes a valid sale,
transfer and assignment in the case of Purchased Assets, or, in the case of
Contributed Assets, a valid transfer and assignment, to the Purchaser of all
right, title and interest of the Seller in and to the Receivables now or
hereafter Purchased hereunder and in and to all other Transferred Assets and the
proceeds thereof free and clear of any Lien, other than any Permitted Lien or,
if a court of competent jurisdiction were to hold that any Purchase of
Receivables hereunder does not constitute a valid sale or absolute transfer of
the affected Receivables and the Related Assets as set forth herein but instead
constitutes a loan in the amount of the Purchase Price of such Receivables,
constitutes a valid grant to the Purchaser of a "security interest" (as defined
in the UCC of the jurisdiction the law of which governs the perfection of the
interest in the Receivables and other Purchased Assets or Contributed Assets
created hereunder), which is and shall be a first priority perfected security
interest to secure such loan in the amount of the Purchase Price, free and clear
of any Lien (other than any Permitted Lien) in all right, title and interest of
the Seller in and to the Receivables now or hereafter Purchased by the Purchaser
pursuant hereto and in and to all other Transferred Assets and the proceeds
thereof which will be enforceable by the Purchaser (and its assignees or
pledgees) upon such creation of such security interest.
(q) Originator Receivables. The Purchaser has given reasonably
equivalent value to the Seller (which may include additional indebtedness of the
Purchaser under the Subordinated Intercompany Revolving Loan Note) in
consideration for the Purchase by the Purchaser from the Seller of the
Receivables and Related Property pursuant hereto, and no such transfer has been
made for or on account of an antecedent debt owed by the Seller to the
Purchaser.
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SECTION 4.02. Representations and Warranties of the Seller Relating
to the Receivables. The Seller hereby represents and warrants to the Purchaser,
with respect to each Receivable Purchased by the Purchaser pursuant hereto,
that:
(a) From and after the Closing Date, the "Credit Policy Manual" (as
defined in the Indenture) shall provide that, upon the receipt of payment of
less than the full amount of any Scheduled Payments in respect of any Receivable
in respect of which there is a concurrent obligation of the Seller to remit a
Split Payment to the Claimant thereon, such Scheduled Payment shall be remitted
to the Seller and the applicable Claimant pro rata based on the relative
percentages of the full amount of such Scheduled Payment which each would be
entitled to receive (had the full payment been received) in accordance with the
terms of the applicable Settlement Purchase Agreement.
The representations and warranties made pursuant to this Section
4.02 on the date of any Purchase of Receivables by the Purchaser shall survive
such Purchase.
SECTION 4.03. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants that as of the Closing Date and (except for
representations and warranties which relate to a specific date only) as of each
Purchase Date:
(a) Corporate Existence and Power. The Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all corporate power and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business in each jurisdiction in which its business is
now conducted. The Purchaser is duly qualified to do business in, and is in good
standing in, every other jurisdiction in which the nature of its business
requires it to be so qualified, except where the failure to be so qualified or
in good standing would not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by the Purchaser of this Agreement and the
other Operative Documents to which it is a party (i) are within the Purchaser's
limited liability company powers, (ii) have been duly authorized by all
necessary limited liability company action, (iii) require no action by or in
respect of, or filing with, any Governmental Authority or official thereof, or
(iv) do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the Purchaser's organizational
documents or of any agreement, judgment, injunction, order, writ, decree or
other instrument binding upon the Purchaser the contravention of which, in any
of the foregoing cases would have, or could reasonably be expected to have, a
material adverse effect on the Purchaser's ability to perform hereunder or on
the enforceability hereof.
(c) Binding Effect. Each of this Agreement and the Subordinated
Intercompany Revolving Loan Notes constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency,
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moratorium or other similar laws affecting the rights of creditor generally or
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller. At all times from
the date hereof to the Collection Date, Seller will, unless the Purchaser shall
otherwise consent in writing:
(a) Compliance with Law. The Seller will comply in all material
respects with all Requirements of Law applicable to the Transferred Assets.
(b) Preservation of Existence. The Seller will preserve and maintain
its existence, rights, franchises and privileges as a limited partnership (or
other legal entity, provided the Seller shall have complied with the
requirements of Section 5.02(f)) in the jurisdiction of its organization, and
qualify and remain qualified in good standing as a foreign business entity in
each jurisdiction where the failure to maintain such qualification would have,
or could reasonably be expected to have, a Material Adverse Effect.
(c) Inspection of Books and Records. The Purchaser, the Agent, their
respective assigns (or designated representative thereof) and independent
accountants appointed by, or other agents of, any of the foregoing, shall have
the right, upon reasonable prior written notice to the Seller, to visit the
Seller, to discuss the affairs, finances and accounts of the Seller with, and to
be advised as to the same by, its officers, and to examine the books of account
and records of the Seller, and to make or be provided with copies and extracts
therefrom, all at such reasonable times and intervals (but not more than once in
any six month period) and to such reasonable extent during regular business
hours as the Purchaser, the Agent, their respective assigns (or designated
representative thereof) or such accountants or agents appointed by any of the
foregoing, as applicable, may desire.
(d) Keeping of Records and Books of Account. (i) The Seller itself
or through its agents will keep proper books of record and account, which shall
be maintained or caused to be maintained by the Seller and shall be separate and
apart from those of any Affiliate of the Seller, in which full and correct
entries shall be made of all financial transactions and the assets and business
of the Seller in accordance with generally accepted accounting principles
consistently applied, and (ii) maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables in the event of the destruction of the
originals thereof) and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of all Collections of and adjustments to each existing
Receivable).
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(e) Location of Records. The Seller will keep its principal place of
business and chief executive office at the address of the Seller referred to in
Section 4.01(h) and shall keep the other offices where it keeps the books,
records and documents regarding the Transferred Assets at the addresses of the
Seller referred to on Schedule I, or in either case, upon 30 days' prior written
notice to the Purchaser, or its assigns, including the Issuer, the Trustee and
each Master Servicer and the Agent, at any other location within the United
States with respect to which all applicable action required by Section 5.02(f)
hereof shall have been taken and completed.
(f) Settlement Purchase Agreement. The Seller will at its expense
timely perform and comply in all material respects with all provisions,
covenants and other promises required to be observed by it under each Settlement
Purchase Agreement, maintain each Settlement Purchase Agreement in full force
and effect, enforce each Settlement Purchase Agreement in accordance with its
respective terms, and, at the request of the Purchaser or its assigns, including
the Issuer, the Trustee, any applicable Master Servicer and the Agent, make to
the Claimant such reasonable demands and requests for information and reports or
for action as, the Trustee, or any applicable Master Servicer and the Agent, may
request to the extent that the Seller is entitled to do the same thereunder; it
being agreed however that with respect to the obligations of the Seller to remit
Split Payments to the Claimant pursuant to the Settlement Purchase Agreements
relating to the Purchased Assets, such obligation shall hereafter be performed
by the Master Servicer and/or the Collateral Trustee, in each case, under and
pursuant to the Credit Agreements and/or the Indenture, as applicable.
(g) Payment of Taxes, Etc. The Seller will pay promptly when due all
material taxes, assessments and governmental charges or levies imposed upon it
in respect of the Transferred Assets, or in respect of its income or profits
therefrom, and any and all material claims of any kind (including, without
limitation, claims for labor, materials and supplies) in respect of the
Purchased Assets, except where such tax, assessment, charge or levy is being
contested in good faith and by proper proceedings and adequate reserve have been
set up and are being maintained in respect thereof on the Seller's books and
records.
(h) Collections. In the event that the Seller or any other Affiliate
receives any Collections, the Seller agrees to hold, or cause such Affiliate to
hold, all such Collections in trust and to deposit such Collections to a
Lock-Box Account or the Master Collection Account, in each case, as soon as
practicable, but in no event later than two Business Days after its receipt
thereof.
(i) Fidelity Insurance. The Seller shall maintain, at its own
expense, a fidelity insurance policy, with broad coverage with responsible
companies on all officers, employees or other persons acting on behalf of the
Seller in any capacity with regard to the Receivables in handling documents and
papers related thereto. Any such fidelity insurance shall protect and insure the
Seller against losses, including forgery, theft, embezzlement, and fraud, and
shall be maintained in an amount of at least $10,000,000 or such lower amount as
the Purchaser or any of
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its assigns may in their commercially reasonable credit judgment designate to
the Seller from time to time. No provision of this Section 5.01(i) requiring
such fidelity insurance shall diminish or relieve the Seller from its duties and
obligations as set forth in this Agreement or any of the other Operative
Documents. The Seller shall be deemed to have complied with this provision if
one of its respective Affiliates has such fidelity policy coverage and, by the
terms of such fidelity policy, the coverage afforded thereunder extends to the
Seller. Upon the request of the Purchaser or any of its assigns, the Seller
shall cause to be delivered to the Purchaser or such assigns, as applicable, a
certification evidencing coverage under such fidelity policy. Any such insurance
policy shall contain a provision or endorsement providing that such policy may
not be canceled or modified in a materially adverse manner without ten (10)
days' prior written notice to the Purchaser and such assigns.
(j) Protection of Right, Title and Interest to Purchaser and
Assignees.
(i) The Seller shall cause all financing statements and continuation
statements and any other necessary documents covering the Purchaser's and
its assignees' right, title and interest in and to the Transferred Assets
to be promptly recorded, registered and filed, and at all times to be kept
recorded, registered and filed, all in such manner and in such places as
may be required by law to preserve and protect fully the right, title and
interest of the Purchaser and its assignees in and to all such Transferred
Assets. The Seller shall cooperate fully with the Master Servicers, Agent,
the Issuer and Trustee and take such actions as any such Person shall
reasonably request, in order to carry out the objectives of this Agreement
and the other Operative Documents.
(ii) Within 30 days after the Seller makes any change in its name,
identity or corporate structure which would make any financing statement
or continuation statement filed in accordance with the terms of this
Agreement seriously misleading within the meaning of Section 9-402(7) (or
any comparable provision) of the UCC as in effect in the jurisdiction the
law of which governs the perfection of the interest in the Purchased
Assets created hereunder, the Seller shall give the Purchaser, the Issuer,
the Agent and the Trustee notice of such change and shall file such
financing statements or amendments as may be necessary to continue the
perfection of the Purchaser's and its assignees' interest in the
Transferred Assets and the proceeds thereof.
(iii) Notwithstanding anything contained herein to the contrary, the
Seller shall not be required to file assignments in favor of the Purchaser
or the Trustee, respectively, with respect to the UCC financing statements
filed by the Seller against each of the Claimants in connection with the
respective Settlement Purchase Agreements, but the Seller hereby covenants
to file continuation statements thereof as and when necessary to maintain
the effectiveness of such statements; it being understood and agreed that
the Seller shall not have any duty to monitor the continued effectiveness
of the financing statements originally filed against such Claimants (other
than with respect to the lapse thereof due to time).
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(k) Corporate Separateness. The Seller shall at all times deal with
the Purchaser in a manner consistent with Section 5.2(e) of the Credit Agreement
and shall at all times deal with the Issuer in a manner consistent with Section
2.06(m) of the Indenture.
(l) Accounting For Purchases and Contributions. The Seller shall
treat all Purchases hereunder by the Purchaser, and contributions hereunder to
the Purchaser, as sales and/or absolute transfers thereof for all tax,
accounting and other purposes.
(m) Sales Under Issuer Purchase Agreement. In connection with any
sales by the Purchaser of Transferred Assets under the Issuer Purchase
Agreement, the Purchaser may request written confirmation from the Seller as to
whether the representations and warranties set forth in the Issuer Purchase
Agreement (including any representation or warranty set forth in the Designated
Supplement relating to such Receivable which is incorporated into the Issuer
Purchase Agreement by reference), shall be true and correct in all material
respects. The Seller shall advise the Purchaser in writing with respect to such
representations and warranties and, except to the extent that the Seller has
advised the Purchaser that any such representations and warranties are not
correct, such representations and warranties shall be deemed incorporated herein
by this reference hereto.
SECTION 5.02. Negative Covenants of the Seller. From the date hereof
until the Collection Date, without the written consent of the Purchaser:
(a) No Liens. The Seller will not sell, pledge, assign or transfer
to any Person, or grant, create, incur, assume or suffer to exist any Lien
(other than a Permitted Lien) on, any Transferred Asset, whether now existing or
hereafter created, or any interest therein, and the Seller shall defend the
right, title and interest of the Purchaser in and to the Transferred Assets,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Seller.
(b) Extension or Amendment of Receivables; Repurchase Obligations.
The Seller will not extend, amend or otherwise modify (or consent to any such
extension, amendment or modification of) the terms of any Receivable or rescind
or cancel, or permit the rescission or cancellation of, any Receivable, except
as ordered by a court of competent jurisdiction or other Governmental Authority.
To the extent that any representation or warranty of the Seller with
respect to any Receivable constituting a Transferred Asset under Section 4.02 or
set forth in any certificates delivered by or on behalf of the Seller or its
general partner in connection with any Purchase or in connection with any
opinions of counsel delivered on any Purchase Date was incorrect when made or
remade or deemed made or remade (it being agreed that the incorrectness of any
such representation or warranty, and the substitution or repurchase obligation
of the Seller pursuant to this clause (b) 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
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of the Seller contained in any such representation or warranty), the Seller
shall, within five Business Days after learning thereof, either (X) convey to
the Purchaser in exchange for the affected Receivable, one or more additional
Receivables to be described on a Seller Transfer Report delivered to the
Purchaser and having a Discounted Receivables Balance (as calculated without
giving effect to any past due Scheduled Payments thereon which are outstanding
on such date) approximately equal to, but not less than, the Discounted
Receivables Balance of the Receivable being so replaced (as calculated by
treating any past-due Scheduled Payments then due as if such Scheduled Payments
were due on the date of such calculation) or (Y) in the event the Seller lacks
sufficient Receivables to substitute or replace the affected Receivables,
repurchase in cash delivered to the Purchaser as aforesaid, in an amount equal
to the Discounted Receivables Balance (as calculated by treating any past-due
Scheduled Payments then due as if such Scheduled Payments were due on the date
of such calculation) of such affected Receivable at such time, whereupon the
Receivable being replaced or repurchased shall cease to be a "Receivable"
hereunder.
(c) Change in Credit Policy Manual. The Seller will not make, or
consent or fail to object to, any change in the "Credit Policy Manual" (as
defined in the Indenture) which change could be reasonably likely to materially
impair or delay the collectibility of any Receivable or result in a
deterioration in the creditworthiness of the Obligors generally.
(d) Deposits to Lock-Box Accounts or the Master Collection Account.
The Seller will not deposit or otherwise credit, or cause to be so deposited or
credited, or consent or fail to object to any such deposit or credit, to any
Lock-Box Account or the Master Collection Account of cash proceeds other than
Collections of Receivables and other Transferred Assets; provided that to the
extent any such other amounts are so deposited on any date, it shall not
constitute a breach hereunder if such other funds are identified and are removed
from such account within two Business Days after such amounts were so deposited
in such account.
(e) Receivables Not To Be Evidenced by Promissory Notes. The Seller
will take no action to cause any Receivable to be evidenced by any "instrument"
(as defined in the UCC of the jurisdiction the law of which governs the
perfection of the interest in such Receivable created hereunder), except in
connection with its enforcement, in which event the Seller shall deliver such
instrument to the Collateral Trustee, for the benefit of the Person entitled
thereto or secured thereby in accordance with the Intercreditor Agreement.
(f) Change in Name. The Seller will not (i) make any change to its
name, principal place of business, partnership structure or location of books
and records or use any tradenames, fictitious names, assumed names or "doing
business as" names unless, at least 30 days prior to the effective date of any
such name change, change in principal place of business, change in partnership
structure, change in location of its books and records, or change in trade or
fictitious names, the Seller notifies the Purchaser, the Issuer, the Agent, the
Trustee and each Master Servicer thereof and delivers to the Purchaser or its
designees such financing statements (Forms UCC-1 and UCC-3) executed by the
Seller which the Purchaser may reasonably request
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to reflect such name change, location change, change in partnership structure or
fictitious name change or use, together with such other documents and
instruments that the Purchaser or may reasonably request in connection therewith
and has taken all other steps to ensure that the Purchaser and its assigns
continue to have a first priority, perfected ownership or security interest in
the Transferred Assets, or (ii) change its jurisdiction of organization unless
the Purchaser, the Issuer, the Agent and the Trustee shall have received from
the Seller (A) written notice of such change at least 10 days prior to the
effective date thereof, and (B) prior to the effective date thereof if the
Purchaser shall so request, an Opinion of Counsel, in form and substance
reasonably satisfactory to the Purchaser, the Issuer, the Agent and the Trustee,
as to such organization and the Seller's valid existence and good standing and
as to the matters referred to in the first sentence of Section 4.01(a).
(g) Merger. The Seller shall not consolidate with or merge into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any Person unless:
(i) (X) the Person formed by such consolidation or into which
the Seller is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Seller substantially as an
entirety shall be, if the Seller is not the surviving entity, a
corporation, limited partnership or limited liability company organized
and existing under the laws of the United States of America or any State
or the District of Columbia, and such entity shall have expressly assumed,
by an agreement supplemental hereto, executed and delivered to the
Trustee, in form reasonably satisfactory to the Purchaser and the Trustee
the performance of every covenant and obligation of the Seller hereunder
and (Y) the Seller shall have delivered to the Purchaser, the Issuer, the
Agent and the Trustee an Officer's Certificate and an Opinion of Counsel
each in form reasonably satisfactory to the Purchaser and stating that
such consolidation, merger, conveyance or transfer complies with this
Section 5.02(g) and that all conditions precedent herein provided for
relating to such transaction have been complied with;
(ii) each "Rating Agency" (as defined in the Indenture) rating
any Series of Notes issued thereunder shall have notified the Purchaser,
the Agent, the Issuer and the Trustee, in writing, that such merger or
consolidation or conveyance or transfer, as the case may be, will not
result in a reduction or withdrawal of the rating of any such outstanding
Series or "Class" (as defined in the Indenture) of such Series; and
(iii) the corporation, limited partnership or limited
liability company formed by such consolidation or into which the Seller is
merged or which acquires by conveyance or transfer the properties and
assets of the Seller substantially as an entirety shall have all licenses
and approvals to perform its obligations hereunder and under the other
Operative Documents to which the Seller is a party, except to the extent
the failure to have any such license would not have, and could not
reasonably be expected to have, a material adverse effect on its ability
to perform the obligations of the Seller hereunder and/or any such other
Operative Document.
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(h) Change in Lock-Box Accounts and Instructions to Obligors. The
Seller will not add or terminate any institution as a Lock-Box Bank or terminate
or substitute any Lock-Box Account or any related lock-box from those listed in
Schedule III hereto, except as otherwise permitted hereunder or unless the
Purchaser, the Agent, the Issuer, the Trustee and the Collateral Trustee shall
have received notice of such addition, termination or change and executed copies
of Lock-Box Notices covering any such new Lock-Box Bank, Lock-Box Account or any
new lock-box relating thereto. The Seller will not instruct any Obligor to remit
Collections to any Person, address or account other than a Lock-Box Account or
the related lock-box to which the underlying Receivables or Transferred Assets
relates.
(i) Ownership of Seller. Unless and until the Seller elects to be
treated as a corporation for federal income tax purposes, the number of
individuals and entities (other than Flow-Through Entities (as such term is
defined below)) that are beneficial owners of a direct interest in the Seller,
plus the number of individuals and entities (other than Flow-Through Entities)
that are beneficial owners of an indirect ownership in the Seller through one or
more Flow Through Entities will never exceed seventy-five. As used herein,
"Flow-Through Entity" shall mean an entity that, for federal income tax
purposes, is a partnership, a grantor trust, an S corporation, or other entity
which is not treated for such purposes as a separate entity.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Collection of Receivables. (a) The Seller and the
Purchaser each hereby acknowledges and agrees that (i) the Collateral Trustee
has the exclusive ownership, dominion and control of any and all Lock-Boxes and
Lock-Box Accounts, other than any Series Specific Lock-Box and/or Series
Specific Lock-Box Account described under the Issuer Purchase Agreement and (ii)
the Trustee has the exclusive ownership and control of each Series Specific
Lock-Box and Series Specific Lock-Box Account and in either case, the Seller
hereby agrees to take any further action necessary or that the Trustee, the
Collateral Trustee, the Agent or the Purchaser may reasonably request to
evidence and/or effect such ownership and control. Unless instructed otherwise
by the Collateral Trustee or the Trustee, as applicable, pursuant to either such
Person's authority under the Intercreditor Agreement and the Indenture, each
Lock-Box Bank shall be instructed to remit, on a daily basis, via overnight or
same day transfer, all amounts deposited in its Lock-Box Accounts to the Master
Collection Account in accordance with the terms of a Lock-Box Notice
substantially in the form of Exhibit B to the Indenture. The Master Servicer (or
any successor Master Servicer (including the Back-Up Servicer) appointed for any
such Master Servicer) and the Seller, pursuant to each Daily Report shall advise
the Purchaser daily of the amount of Collections received into the Master
Collection Account on such day with respect to the Receivables and the
allocations thereof as among the Series, the Split Payments, and the Revolving
Credit Facility. If the Seller or its agents or representatives shall at any
time
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receive any cash, checks or other instruments constituting Collections, such
recipient shall segregate such payment and hold such payment in trust for and in
a manner acceptable to the Purchaser and shall, promptly upon receipt (and in
any event within one Business Day following receipt), remit all such cash,
checks and instruments, duly endorsed or with duly executed instruments of
transfer, to a Lock-Box Account or Series Specific Lock-Box Account, as the case
may be, or the Master Collection Account. The Seller hereby authorizes the
Purchaser (and its designees and assigns), and gives each of the Purchaser, such
designees and/or such assigns its irrevocable power of attorney, with full power
of substitution, which authorization shall be coupled with an interest, to take
any and all steps in the Seller's name and on behalf of the Seller, which steps
are necessary or desirable, in the reasonable determination of the Purchaser,
such designees and/or such assigns, to collect all amounts due under the
Transferred Assets, including, without limitation, endorsing the Seller's name
on checks and other instruments representing Collections and enforcing such
Receivables and the related Settlement Purchase Agreements.
(b) The Purchaser shall, following notification that collections of
any receivable or other intangible owed to the Seller, which is not a
Transferred Asset, have been deposited into the Lock-Box Accounts or Series
Specific Lock-Box Accounts, as the case may be, segregate all such collections
and, after such misapplied collections have been reasonably identified to the
Purchaser, the Purchaser shall turn over to the Seller, as applicable, all such
collections less all reasonable and appropriate out-of-pocket costs and
expenses, if any, incurred by the Purchaser in collecting such receivables.
SECTION 6.02. Servicing of Receivables. (a) From and after the
Purchase of any Receivable by the Purchaser from the Seller, the Purchaser (or
its designees or assignees) shall have the sole right to service, administer and
monitor the Receivables and the Seller shall cease to have any rights whatsoever
in connection with such Receivables constituting Transferred Assets. In
connection therewith, the Seller shall deliver all books and records relating to
the Receivables to the Purchaser (or its agent or assign as so designated by the
Purchaser) promptly after the Purchase thereof by the Purchaser, and shall take
such other action as shall be reasonably requested by the Purchaser (or its
agents or assigns) to further evidence such assignment or to assist in the
servicing, monitoring, collecting and administering the Receivables sold
hereunder.
(b) Grant of Power of Attorney. The Seller hereby authorizes the
Purchaser (and its designees and assigns), and gives each of the Purchaser and
such designees and/or assigns its irrevocable power of attorney, with full power
of substitution, which authorization shall be coupled with an interest, to take
any and all steps in the Seller's name and on behalf of the Seller, which steps
are necessary or desirable in the reasonable determination of the Purchaser,
such designees and/or assigns to endorse, negotiate, deposit or otherwise
realize on any Receivable or any writing of any kind in connection with any
Receivable or Transferred Asset.
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SECTION 6.03. Responsibilities of the Seller. Anything herein to the
contrary notwithstanding:
(a) Subject to the allocation of the obligations in respect of Split
Payments pursuant to Section 5.01(f), the Seller shall perform all of its
obligations under the Settlement Purchase Agreements related to the Receivables
sold or contributed by it hereunder with the same standard of care as it would
exercise for assets maintained for its own account, and the exercise by the
Purchaser (or any of its assignees) of its respective rights hereunder shall not
relieve the Seller from such obligations.
(b) The Purchaser and its assignees shall have no obligation or
liability with respect to any Receivable or related Settlement Purchase
Agreement, nor shall the Purchaser or any such assignee be obligated to perform
any of the obligations of the Seller thereunder.
(c) The Seller shall, upon the request of the Purchaser (or its
agents or assigns) deliver to the Purchaser, such agents and/or assigns, as
directed, all Records that evidence or relate to the Receivables and other
Purchased Assets or Contributed Assets conveyed to the Purchaser under this
Agreement.
SECTION 6.04. Further Action Evidencing Purchases. (a) The Seller
agrees that at any time and from time to time, at its expense, it will promptly
execute and deliver all further instruments and documents, and take all further
action that may be reasonably necessary to perfect, protect or more fully
evidence the Purchaser's and its assignees' respective interests in the
Transferred Assets, or to enable the Purchaser and/or such assignees (or any
agent or designee of any of the foregoing) to exercise or enforce any of their
respective rights hereunder. Without limiting the generality of the foregoing,
the Seller will (i) execute and file such financing or continuation statements,
or amendments thereto or assignments thereof, and such other instruments and
notices, as may be necessary or appropriate or as the Purchaser or its assignees
may reasonably request, and (ii) mark its master data processing records
evidencing such Receivables and related Settlement Purchase Agreements with a
legend indicating that such assets have been sold or transferred to the
Purchaser, and (iii) indicate on its financial statements that its Receivables
have been sold or transferred to the Purchaser pursuant to this Agreement.
(b) If the Seller fails to perform any of its agreements or
obligations under this Agreement, following expiration of any applicable cure
period, the Purchaser (or any assignee thereof) may (but shall not be required
to) perform, or cause performance of, such agreement or obligation, and the
reasonable expenses of the Purchaser (or any such assignee) incurred in
connection therewith shall be payable by the Seller upon the Purchaser's (or any
such assignee's) written demand therefor (which demand shall itemize such
expenses in reasonable detail).
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ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Indemnities by the Seller. Without limiting any other
rights which the Purchaser may have hereunder or under applicable law, but
without duplication, the Seller hereby agrees to indemnify the Purchaser and its
permitted successors and assigns and all officers, directors, agents and
employees of the foregoing (each of the foregoing Persons being individually
referred to herein as an "Indemnified Party") 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 (collectively, the "Indemnified Losses", and each an
"Indemnified Loss"), other than any such Indemnified Loss (x) 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 of any Noncomplying Receivable to the
Purchaser pursuant hereto;
(ii) reliance on any representation or warranty made in writing by
the Seller (or any of its officers) under or in connection with this
Agreement, any Seller Transfer Report or any "Monthly Report" (as defined
in the Credit Agreement and/or the Indenture, as applicable), or reliance
on any other information or report delivered by the Seller or by the
Master Servicer with respect to the Seller (to the extent based on
information provided by the Seller) 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 obligations of the Seller 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 Seller contained in any
such representation or warranty);
(iii) the failure by the Seller to comply with any term, provision
or covenant contained in this Agreement, or any agreement executed in
connection with this Agreement or with any applicable law, rule or
regulation with respect to any Receivable, the related Settlement Purchase
Agreement or the "Related Security" (as defined in the Credit Agreement),
or the nonconformity of any Receivable, the related Settlement Purchase
Agreement or the Related Security with any such applicable law, rule or
regulation;
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(iv) the failure to vest and maintain vested in the Purchaser or to
transfer to the Purchaser, legal and equitable title to, and first
priority perfected ownership of, the Receivables and other Transferred
Assets which are, or are purported to be, sold or otherwise transferred by
the Seller hereunder, free and clear of any Lien (other than Liens created
in favor of the Purchaser hereunder and Liens created under the other
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
Receivables and other Transferred Assets which are, or are purported to
be, sold or otherwise transferred by the Seller hereunder, whether at the
time of any Purchase or at any subsequent time;
(vi) the failure by the Seller 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;
(vii) the failure of the Seller to pay when due any sales taxes or
other governmental fees or charges imposed in connection with the transfer
of the Purchased Assets hereunder;
(viii) the failure of the Seller or any of its agents, employees or
representatives to remit to the Purchaser, Collections of Transferred
Assets remitted to the Seller or any such agent, employees or
representatives in accordance with the terms hereof;
(ix) the assignment by a Claimant or the Seller under a Settlement
Agreement 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 such thereof);
and
(x) any Indemnified Loss arising under a Receivable, the Settlement
Agreement underlying 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).
Any Indemnified Amounts payable under this Section 7.01 shall, be paid by the
Seller to the Purchaser within five (5) Business Days following the Purchaser's
written demand therefor, setting forth in reasonable detail the basis for such
demand. The agreements of the Seller
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contained in this Section 7.01 shall survive the Collection Date. In addition,
in no event shall Indemnified Losses include any consequential, special or
punitive damages. The provisions of this Section 7.01 shall survive the
termination of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Waivers; Amendments. No failure or delay on the part
of the Purchaser or the Seller (or any assignee thereof) in exercising any
power, right or remedy under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or remedy
preclude any other further exercise thereof or the exercise of any other power,
right or remedy. The rights and remedies herein provided shall be cumulative and
nonexclusive of any rights or remedies provided by law. Any provision of this
Agreement may be amended if, but only if, (a) such amendment is in writing and
is consented to by the Seller, the Purchaser, the Agent, the Issuer and the
Trustee and (b) the Trustee shall have received from each Rating Agency
confirmation that such amendment will not result in the downgrading or
withdrawal of the then current ratings of any Series.
SECTION 8.02. Notices. Except as provided below, all communications
and notices provided for hereunder shall be in writing and shall be given to the
other party at its address set forth below its name on the signature pages
hereto or at such other address as such party may hereafter specify for the
purposes of notice to such party. Each such notice or other communication shall
be effective (i) if given by mail, three (3) Business Days following such
posting, postage prepaid, U.S. certified or registered, (ii) if given by
overnight courier, one (1) Business Day after deposit thereof with a national
overnight courier service, or (iii) if given by any other means, when received
at the address specified on the signature pages hereof.
SECTION 8.03. Effectiveness; Binding Effect; Assignability. (a) This
Agreement shall become effective on the Closing Date and shall, from and after
such date, be binding upon and inure to the benefit of the Seller and the
Purchaser and their respective successors and permitted assigns. The Seller may
not assign any of its rights or delegate any of its duties hereunder without the
prior written consent of the Purchaser, the Agent, the Issuer and the Trustee.
No provision of this Agreement shall in any manner restrict the ability of the
Purchaser (or any Person claiming by or though the Purchaser as an assignee of
the Purchaser) to assign, participate, grant security interests in, or otherwise
transfer any of their rights or remedies hereunder.
(b) Without limiting the foregoing, the Seller hereby acknowledges
that, contemporaneously herewith, (i) the Purchaser is granting, assigning,
transferring and conveying to the Agent, for its benefit and for the benefit of
the Lenders under the Credit Agreement, a
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security interest in all of the Purchaser's right and title to and interest in,
among other things, the Transferred Assets and this Agreement; (ii) the
Purchaser is and may hereafter be selling, assigning transferring and conveying
to the Issuer, all of its right and title and interest in and under, among other
things, certain of the Transferred Assets and this Agreement to the extent
relating to any "Transferred Assets" as defined in the Issuer Purchase
Agreement; and (iii) the Issuer is granting, assigning, transferring and
conveying to the Trustee, for its benefit and for the benefit of the
"Noteholders" (as defined in the Indenture), and the Trustee's assignees, under
the Indenture, all of the Purchaser's right and title to and interest in and
under, among other things, the Transferred Assets and this Agreement to the
extent relating to any "Pledged Assets" (as defined in the Indenture), and that
each such grant, assignment, transfer or conveyance includes all of the
Purchaser's rights, remedies, powers and privileges, and all claims of the
Purchaser against the Seller, under or with respect to this Agreement (whether
arising pursuant to the terms of this Agreement or otherwise available at law or
in equity), including (x) the right of the Purchaser and the obligations of the
Seller hereunder and (y) the right, at any time, to give or withhold consents,
requests, notices, directions, approvals, demands, extensions or waivers under
or with respect to this Agreement or the obligations in respect of the Seller
hereunder to the same extent as the Purchaser may do, subject, however, in the
case of clauses (ii) and (iii) above, to the extent relating to the "Transferred
Assets" under the Issuer Purchase Agreement and/or the "Pledged Assets" under
the Indenture. The Seller hereby consents to such grants, sales, transfers,
assignments and conveyances described above and acknowledges and agrees that
each of (i) the Agent, as the assignee of the Purchaser for the benefit of the
Lenders, (ii) the Issuer, as assignee of the Purchaser under the Issuer Purchase
Agreement and (iii) the Trustee, as the holder of a security interest for the
benefit of the Noteholders and each of its assignees, shall be a third party
beneficiary of the rights of the Purchaser arising hereunder.
(c) The Seller hereby agrees to execute all agreements, instruments
and documents, and to take all other action, that the Purchaser, the Agent or
the Trustee reasonably determines is necessary or appropriate to evidence the
assignments described in clause (b) immediately above. To the extent that the
Purchaser has granted or grants powers of attorney to the Agent under the Credit
Agreement or to the Issuer or its assigns under the Issuer Purchase Agreement,
the Seller hereby grants a corresponding power of attorney on the same terms to
the Purchaser. The Seller hereby acknowledges and agrees that the Purchaser, in
all of its capacities, shall assign to the Agent for the benefit of the Lenders
and to the Issuer, and that the Issuer shall in turn assign to the Trustee for
the benefit of the Noteholders and each of its assignees, such powers of
attorney and other rights and interests granted by the Seller to the Purchaser
hereunder and agrees to cooperate fully with each of the Agent, the Issuer and
the Trustee in the exercise of such rights.
(d) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the Collection Date; provided, however, that (i)
the indemnification and payment provisions of Article VII and Section 8.05 and
(ii) the provisions of Sections 8.08 and 8.10, shall, in each case, be
continuing and shall survive any termination of this Agreement.
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SECTION 8.04. GOVERNING LAW; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE.
(b) EACH OF THE SELLER AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE BETWEEN EITHER OF THEM ARISING OUT OF, CONNECTED WITH,
RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH
THIS AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS.
SECTION 8.05. Costs and Expenses. In addition to the rights of
indemnification under Article VII hereof, the Seller agrees to pay the Purchaser
(and its agents' and assignees') within 30 days after demand all reasonable
out-of-pocket costs and expenses (including without limitation, reasonable
counsel fees and expenses) in connection with the enforcement of the covenants,
agreements, liabilities and obligations of the Seller under this Agreement.
SECTION 8.06. Execution in Counterparts; Severability. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same agreement. In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 8.07. Purchase Termination. (a) The agreements of the Seller
to sell Receivables hereunder may be terminated at any time by the Seller by
giving written notice thereof to the Purchaser, the Agent, the Issuer and the
Trustee of the Seller's election to terminate this Agreement, in which event the
Purchase Termination Date shall thereafter occur on the date specified therefor
by the Seller in such notice, but in any event not less than 60 days after the
Trustee's receipt of such notice.
(b) Notwithstanding any such termination described under paragraph
(a) above, all other provisions of this Agreement shall remain in full force and
effect as provided in Section 8.03.
SECTION 8.08. No Proceedings. The Seller hereby agrees that it will
not institute against the Purchaser, or join any other Person in instituting
against the Purchaser, any proceeding of the type referred to in the definition
of "Insolvency Event" in the Credit Agreement, so long as there shall not have
elapsed one year plus one day since the last day on which any amounts owing
under the Notes of the last outstanding Series shall have been
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indefeasibly paid in full in cash. The foregoing shall limit the rights of the
Seller under any and all agreements it may have with the Purchaser but shall not
limit the right of the Seller to file any claim in or otherwise take any action
with respect to any insolvency proceeding that was instituted against the
Purchaser by any Person other than the Seller or any Affiliate thereof. The
provisions of this Section 8.08 shall survive the termination of this Agreement.
SECTION 8.09. Entire Agreement. This Agreement, together with the
other Operative Documents, including the exhibits and schedules hereto and
thereto, contains a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all previous oral statements and other
writings with respect thereto.
SECTION 8.10. Limitations on Liability. None of the members,
managers, partners, officers, employees, agents, shareholders, directors or
holders of limited liability company interests of or in (x) the Purchaser or the
Seller or (y) the general or limited partners of the Seller, past, present or
future, shall be under any liability to the Seller or the Purchaser,
respectively, any of their successors or assigns, or any other Person for any
action taken or for refraining from the taking of any action in such capacities
or otherwise pursuant to this Agreement or for any obligation or covenant under
this Agreement, it being understood that this Agreement and the obligations
created hereunder shall be, to the fullest extent permitted under applicable
law, with respect to the Seller, solely the limited partnership obligation of
the Seller and with respect to the Purchaser, solely the limited liability
company obligation of the Purchaser. The Seller, the Purchaser and any member,
manager, partner, officer, employee, agent, shareholder, director or holder of a
limited liability company interest of or in (x) the Seller or the Purchaser and
(y) any general or limited partner of the Seller, may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
(other than the Seller or any Affiliate thereof) respecting any matters arising
hereunder.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
J. G. WENTWORTH S.S.C. LIMITED
PARTNERSHIP
By: J.G. Wentworth Structured Settlement
Funding Corporation, its General Partner
By:
-----------------------------------------
Name:
Title:
300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention: Gary Veloric
Telecopy No.: (215) 567-7525
J. G. WENTWORTH RECEIVABLES II LLC
By: J.G. Wentworth S.S.C. Limited Partnership,
a member
By: J.G. Wentworth Structured Settlement
Funding Corporation, its General Partner
By:
-----------------------------------------
Name:
Title:
300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention:____________________
Telecopy No.: (215) 567-7525
PURCHASE AND CONTRIBUTION AGREEMENT
(ISSUER PURCHASE AGREEMENT)
Dated as of September 30, 1997
between
J. G. WENTWORTH RECEIVABLES II LLC
as the Seller
and
J. G. WENTWORTH RECEIVABLES III LLC
as the Purchaser
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C>
1.01. Certain Definitions.............................................................2
1.02. Accounting Terms................................................................6
1.03. Other Terms.....................................................................7
1.04. Computation of Time Periods.....................................................7
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
2.01. Purchases of Receivables; Agreement to Purchase.................................7
2.02. Payment for the Purchases.......................................................9
2.03. Payments and Computations, Etc.................................................10
2.04. Transfer of Records to the Purchaser...........................................10
ARTICLE III
CONDITIONS PRECEDENT
3.01. Conditions Precedent to Agreement..............................................11
3.02. Conditions Precedent to Ongoing Purchases......................................13
3.03. Effect of Payment of Purchase Price and/or Contribution........................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Seller...................................13
4.02. Representations and Warranties of the Seller Relating to the Receivables.......16
4.03. Representations and Warranties of the Purchaser................................17
ARTICLE V
GENERAL COVENANTS OF THE SELLER
5.01. Affirmative Covenants of the Seller............................................17
5.02. Negative Covenants of the Seller...............................................21
</TABLE>
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ARTICLE VI
ADMINISTRATION AND COLLECTION
<TABLE>
<S> <C>
6.01. Collection of Receivables......................................................24
6.02. Servicing of Receivables.......................................................25
6.03. Responsibilities of the Seller.................................................25
6.04. Further Action Evidencing Purchases............................................26
ARTICLE VII
INDEMNIFICATION
7.01. Indemnities by the Seller......................................................26
ARTICLE VIII
MISCELLANEOUS
8.01. Waivers; Amendments............................................................28
8.02. Notices........................................................................29
8.03. Effectiveness; Binding Effect; Assignability...................................29
8.04. GOVERNING LAW; WAIVER OF JURY TRIAL............................................30
8.05. Costs and Expenses.............................................................30
8.06. Execution in Counterparts; Severability........................................30
8.07. Purchase Termination...........................................................31
8.08. No Proceedings.................................................................31
8.09. Entire Agreement...............................................................31
8.10. Limitations on Liability.......................................................31
</TABLE>
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EXHIBITS AND SCHEDULES
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<TABLE>
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Exhibit A - [Reserved]
Exhibit B - Form of Seller Transfer Report
Exhibit C - List of Closing Documents
Schedule I - Addresses and Locations of Books and Records of the Seller
Schedule II - ERISA Matters
Schedule III - Lock-Box Banks; Lock-Box Accounts; Lock-Box Numbers;
Deposit Account Banks; Deposit Account Numbers
</TABLE>
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PURCHASE AND CONTRIBUTION AGREEMENT
(Issuer Purchase Agreement)
Dated as of September 30, 1997
This PURCHASE AND CONTRIBUTION AGREEMENT (the "Agreement"), dated as of
September 30, 1997, is made by and between J.G. WENTWORTH RECEIVABLES II LLC, a
Delaware limited liability company (the "Seller"), and J.G. WENTWORTH
RECEIVABLES III LLC, a Delaware limited liability company (the "Purchaser").
WITNESSETH:
WHEREAS, the Company has purchased, and from time to time hereafter may
purchase, Settlements (or portions thereof) from various "Claimants" (as defined
in the Indenture) pursuant to various "Settlement Agreements" (as defined in the
Indenture) between the Company and each such Claimant;
WHEREAS, the Seller has purchased, and from time to time hereafter may
purchase, Settlements (or portions thereof) from the Company pursuant to the
Seller Purchase Agreement (as defined below);
WHEREAS, the Seller may from time to time desire to sell,
transfer or otherwise convey to the Purchaser, and the Purchaser may from time
to time desire to purchase or otherwise acquire or accept from the Seller, all
of the Seller's right, title and interest in the Receivables relating to certain
such "Settlements" (as defined in the Indenture (or portions thereof) now owned
or hereafter acquired by the Seller, in each case, on the terms and conditions
provided herein; and
WHEREAS, in order to finance purchases of Receivables and the Related
Assets relating thereto, the Purchaser has entered into that certain Master
Trust Indenture and Security Agreement, dated as of September 30, 1997 (as
amended, restated, supplemented (including by way of any "Supplement" (as
defined in the Indenture) thereto) or otherwise modified from time to time, the
"Indenture") among the Purchaser, J.G. Wentworth & Company, Inc. ("Wentworth"),
as the initial "Master Servicer" thereunder, and PNC Bank, National Association,
as trustee (in such capacity, the "Trustee"), pursuant to which the Purchaser
from time to time may issue notes secured by specified Receivables and the
Related Assets related thereto;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Definitions. Capitalized terms used and not
otherwise defined herein shall have the meanings specified in the Indenture. In
addition, for all purposes of this Agreement, as used in this Agreement
(including in the recitals hereto), the following terms shall have the following
meanings:
"Aggregate Discounted Receivables Balance" means, for purposes of this
Agreement with respect to any designated group of Receivables, at any time, the
sum at such time of the respective Discounted Receivables Balances of such
Receivables.
"Applicable Discount Rate" shall mean, with respect to any Receivable,
the "Discount Rate" specified in the Designated Supplement to which such
Receivable shall be allocated as described in the applicable Seller Transfer
Report.
"Business Day" shall mean any day other than a Saturday or Sunday or
any other day on which national banking associations or state banking
institutions in New York, New York or Philadelphia, Pennsylvania are authorized
or obligated by law, executive order or governmental decree to be closed;
provided, however, that as it relates to any specific Series, the term "Business
Day" may have such other meaning, if any, as may be specified in the related
Supplement.
"Closing Date" shall mean September 30, 1997.
"Collateral Trustee" means the Person acting in such capacity under the
Intercreditor Agreement.
"Collections" shall mean all cash payments by or on behalf of the
Obligors (including, without limitation, pursuant to any "Annuity Contract" (as
defined in the Indenture)) in respect of the Receivables or the Related Property
relating thereto, whether in the form of cash, checks, wire transfers,
electronic transfers or any other form of cash payment (including, without
limitation, from the Seller in connection with any repurchase of any such
Receivables from the Purchaser pursuant hereto).
"Collection Date" means that date following the Purchase Termination
Date upon which the Aggregate Discounted Receivables Balance of the Receivables
transferred to the Purchaser hereunder has been reduced to zero.
"Company" means J.G. Wentworth S.S.C. Limited Partnership, a Delaware
limited partnership.
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"Contributed Assets" has the meaning assigned to it in Section 2.01(a).
"Cut-Off Date" means, with respect to any Receivable described in any
Seller Transfer Report, the date on which the Discounted Receivables Balance
thereof was calculated for purposes of computing the Purchase Price under
Section 2.02(b).
"Discounted Receivables Balance" means, at any time with respect to any
Receivable, the sum of (i) the discounted present values of the remaining
"Scheduled Payments" (as defined in the Indenture) due under such Receivable at
such time discounted at the Purchase Discount Rate and (ii) the principal amount
of any past due Scheduled Payments outstanding on such Receivable at such time.
"Designated Supplement" has the meaning, with respect to any
Receivable, as is specified in the definition of "Eligible Receivable" below.
"Eligible Receivable" means, with respect to this Agreement, a
Receivable which, as of the date of its sale or conveyance to the Purchaser by
the Seller hereunder, would constitute an "Eligible Receivable" under and
pursuant to the Supplement for the "Series" (as defined in the Indenture) to
which such Receivable is to be allocated and for which such Receivable will be a
"Series Receivable" (as defined in the Indenture); it being agreed that each
Seller Transfer Report shall designate the Supplement to which such Receivable
shall be so allocated (such Supplement so designated with respect to any such
Receivable being the "Designated Supplement" for such Receivable).
"Governmental Authority" shall mean any country or nation, any
political subdivision of such country or nation, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government of any country or nation or political subdivision
thereof.
"Intercreditor Agreement" shall mean that certain Amended and Restated
Collateral Trust and Intercreditor Agreement, dated as of September 30, 1997,
among ING (U.S.) Capital Corporation, as contractual representative (the
"Agent") for the benefit of the financial institutions from time to time parties
to the Revolving Credit Facility (the "Lenders") and as a Lender, PNC Bank,
National Association, as servicing agent (the "Servicing Agent") and as a
Lender, the Trustee, PNC Bank, National Association, as Collateral Trustee, the
Company, the Seller, the Purchaser, the Master Servicer, J.G. Wentworth
Receivables I LLC, as the Seller under the Pooling and Servicing Agreement, J.G.
Wentworth & Company, Inc., as initial Master Servicer under the Pooling and
Servicing Agreement, and PNC Bank, National Association, as Trustee under the
Pooling and Servicing Agreement (as the same may be amended, restated,
supplemented or otherwise modified from time to time).
"Material Adverse Effect" shall mean, with respect to any Person, the
occurrence or existence of any event or condition which has a material adverse
effect (v) on such Person's
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ability to perform under the Operative Documents, (w) on the businesses,
properties or condition (financial or otherwise) of such Person, (x) on the
ability of the Purchaser or any of its designees and/or assigns to enforce this
Agreement or any of the other Operative Documents, (y) on the rights of the
Purchaser or any of its designees and/or assigns in the Purchased Assets.
"Noncomplying Receivable" means any Receivable which, as of the date of
origination thereof, did not meet the criteria for an Eligible Receivable as of
such date.
"Permitted Liens" shall mean with respect to any Receivable or the
Related Asset relating thereto which are sold, transferred, contributed or
otherwise conveyed to the Purchaser hereunder, "Liens" (as defined in the
Indenture) created under the "Operative Documents" (as defined in the Indenture)
(x) in favor of the Seller (and assigned to the Trustee) or the Trustee, in
either case, as against the Company, (y) in favor of the Purchaser (and assigned
to the Trustee) or the Trustee, in either case, as against the Seller and (z) in
favor of the Trustee as against the Purchaser.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Authority or any other entity of similar nature.
"Pooling and Servicing Agreement" shall mean that certain Pooling and
Servicing Agreement, dated as of June 13, 1997 (as amended, restated,
supplemented (including by way of any "Supplement" (as defined in the Pooling
and Servicing Agreement thereto) or otherwise modified from time to time among
J.G. Wentworth Receivables I LLC, as Seller, J.G. Wentworth & Company, Inc., as
Master Servicer, and PNC Bank, National Association, as trustee for SSC Master
Trust I (the "Trust").
"Purchase" means, on any Purchase Date, the sale, assignment,
contribution, transfer and/or other conveyance of any Receivable from the Seller
to the Purchaser for which the Purchase Price has not been previously paid and
which have not previously been sold, assigned, contributed, transferred or
otherwise conveyed to the Purchaser by the Seller, in either case, in accordance
with the terms of Sections 2.01 and 2.02 hereof; and "Purchased" means the past
tense of Purchase.
"Purchase Date" means, with respect to any Receivable, the
date such Receivable is Purchased by the Purchaser.
"Purchase Discount Rate" means, with respect to any Receivable, a per
annum rate equal to the Applicable Discount Rate for such Receivable, which rate
shall be specified in the Seller Transfer Report; it being understood and agreed
that such rate may be determined as a weighted average which may apply to all
Receivables being Purchased on any given Purchase Date.
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"Purchase Price" has the meaning specified in Section 2.02(b) hereof.
"Purchase Termination Date" means the earliest to occur of (i) the date
upon which the Seller shall cease to sell Receivables to the Purchaser in
accordance with the provisions of Section 8.07 of this Agreement, (ii) the date
upon which the ability of the Seller to permit Purchases hereunder has been
terminated (and cannot be reinstated) pursuant to Section 2.01(c), and (iii) or
the date upon which the Seller breaches its repurchase or substitution
obligation as set forth in Section 5.02(b).
"Purchase Yield" means, with respect to any Receivable, the per annum
discount rate, as calculated by the Seller on the date the Settlement underlying
such Receivable was originally purchased by the Seller from the Claimant, at
which the present value of all "Scheduled Payments" (as defined in the
Indenture) (or portions thereof) to be received by the Seller equals the sum of
the purchase price paid by the Seller to the Claimant therefor plus the
estimated closing costs and commissions incurred by the Seller and directly
allocated to such Receivable in accordance with the Seller's customary past
business practices.
"Purchased Assets" shall mean all Receivables and Related Assets
purchased hereunder pursuant to Section 2.01.
"Receivable" shall mean those Scheduled Payments (or portions thereof)
due to a Claimant under a Settlement Agreement and the rights to which Scheduled
Payments (or such portion thereof) have heretofore been or which are hereafter
transferred by such Claimant to the Company pursuant to a Settlement Purchase
Agreement and by the Company to the Seller pursuant to the Seller Purchase
Agreement and by the Seller to the Purchaser pursuant to this Agreement, whether
such Scheduled Payments (or such portions thereof) constitute accounts, general
intangibles, investment property, chattel paper, instruments, documents,
securities, cash, or any other kind of property.
"Related Assets" has the meaning specified in Section 2.01(a) hereof.
"Related Property" means with respect to any Receivable: all of the
Seller's rights, title, interests, remedies, powers and privileges (a) under the
Settlement Purchase Agreement pursuant to which such Receivable was purchased by
the Company, under the Seller Purchase Agreement pursuant to which such
Receivable was purchased or otherwise acquired by the Seller and under the
related "Power of Attorney" (as defined in the Indenture), (b) all security
interests or liens and property subject thereto from time to time purporting to
secure payment of such Receivable, if any, whether pursuant to the Settlement
Purchase Agreement related to such Receivable or otherwise, (c) under the
"Back-up Servicing Agreement" (as defined in the Indenture), (d) all "Lock-Box
Accounts" (as defined in the Indenture), lock-boxes and other bank accounts, in
each case, into which (but only to the extent of) any "Collections" (as defined
in the Indenture) are deposited or concentrated; all monies and other items of
payment therein (but only to the extent relating to the Receivables); and
"Eligible Investments" (as defined in the Indenture)
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purchased with any of the foregoing funds and any investment income thereon, (e)
all "Life Insurance Contracts" (as defined in the Indenture) relating to any
"Non-Guaranteed Settlements" (as defined in the Indenture) or "Commutable
Settlements" (as defined in the Indenture) included as a Receivable, (f) any
interest rate hedging instruments or agreements entered into by the Seller in
respect of any such Receivable, (g) any other agreements or arrangements of
whatever character (including guaranties, letters of credit, annuity contracts
(including, "Qualified Annuity Contracts" (as defined in the Indenture)) or
other credit support) from time to time supporting or securing payment of such
Receivable whether pursuant to any related Settlement Agreement, "Qualified
Assignment" (as defined in the Indenture), Qualified Annuity Contract,
Settlement Purchase Agreement or any other agreement related to such Receivable
or otherwise, (h) all "UCC" (as defined in the Indenture) financing statements
filed by the Seller against the Claimants under such Receivable; and (j) all
"Records" (as defined in the Indenture) and all other instruments and rights
relating to such Receivable.
"Revolving Credit Facility" means that certain Amended and Restated
Credit Agreement, dated as of February 11, 1997 (as the same may be amended
restated, supplemented or otherwise modified from time to time) and all
documents, instruments and agreements executed and/or delivered in connection
therewith.
"Seller Purchase Agreement" means that certain Purchase and
Contribution Agreement, dated as of September 30, 1997, by and among the Company
and the Seller (as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"Seller Transfer Report" means a report to be delivered by the Seller
to the Purchaser and accepted by the Purchaser on each Purchase Date setting
forth for each such Receivable so Purchased, the file number by which the Seller
can identify the Claimant, the present and future values of the assigned
Scheduled Payments, the "Annuity Provider" (as defined in the Indenture), if
any, the Purchase Discount Rate thereof, and the Designated Supplement under
which such Receivable is intended to be an Eligible Receivable.
"Series Specific Lock-Box Account" has the meaning specified in Section
6.01(a) hereof.
"Subsequent Issuances" means any issuance of new "Notes" (as defined in
the Indenture) on any date after the Closing Date.
"Transferred Assets" has the meaning specified in Section 2.01(a).
"U.S. Dollars" or "Dollars" means dollars of the United States of
America.
SECTION 1.02. Accounting Terms. Under this Agreement, all accounting
terms not specifically defined herein shall be interpreted, all accounting
determinations made, and all financial statements prepared, in accordance with
GAAP.
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SECTION 1.03. Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein. The
words "herein," "hereof," and "hereunder" and other words of similar import
refer to this Agreement as a whole, including the exhibits and schedules hereto,
as the same may from time to time be amended or supplemented and not to any
particular section, subsection, or clause contained in this Agreement, and all
references to Sections, Exhibits and Schedules shall mean, unless the context
clearly indicates otherwise, the Sections hereof and the Exhibits and Schedules
attached hereto, the terms of which Exhibits and Schedules are hereby
incorporated into this Agreement. Whenever appropriate, in the context, terms
used herein in the singular also include the plural, and vice versa.
SECTION 1.04. Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding", and the word "within" means "from and excluding a
specified date and to and including a later specified date."
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Purchases of Receivables; Agreement to Purchase. (a)
Subject to the terms and conditions hereinafter set forth (including the
conditions set forth in Article III), at any time prior to the Purchase
Termination Date (provided such Purchases are permitted pursuant to Section
2.01(d) hereof) upon at least one Business Days' prior notice by the Seller to
the Purchaser, the Purchaser shall purchase from the Seller, and the Seller
shall sell, transfer, assign and otherwise convey to the Purchaser all of the
Seller's right, title and interest in the Receivables described on the Seller
Transfer Reports from time to time delivered by the Seller to the Purchaser on
or prior to the proposed respective Purchase Dates therefor (as such dates shall
be specified in such notices), in each case together with all of the Related
Property relating to such Receivables and all Collections with respect to and
other proceeds of such Receivables and Related Property received on or after the
applicable Cut-Off Date (such Related Property, Collections and Proceeds,
collectively, the "Related Assets"); it being agreed that the first such
Purchase Date shall be on the Closing Date (and the execution and delivery of
this Agreement shall suffice as notice thereof by the Seller for purposes of
this Agreement). On any Purchase Date on which the Seller and Purchaser agree to
effect a sale or transfer of Receivables preceding the Purchase Termination
Date, the Purchaser shall pay for the Purchases described in the preceding
sentence no later than 5:00 p.m. (New York time) on such Purchase Date by making
available to the Seller the payment of the Purchase Price in the manner required
under Section 2.02. To the extent that any such Receivables and Related Assets
shall have been or are to be contributed to the Purchaser's capital at or prior
to such time in accordance with Section 2.02, the
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Purchaser shall increase the Seller's aggregate investment in the Purchaser
accordingly in accordance with Delaware law. Prior to paying the Purchase Price
hereunder, the Purchaser may request of the Seller, and the Seller shall
deliver, such approvals, opinions, information, reports or documents as the
Purchaser may reasonably request. As used in this Agreement, (i) the term
"Purchased Assets" shall mean all Receivables which are paid for through cash
under this Agreement and all Related Assets relating thereto, (ii) the term
"Contributed Assets" shall mean all Receivables which are contributed to the
Purchaser's capital and all Related Assets relating thereto and (iii) the term
"Transferred Assets" shall mean, collectively, all Purchased Assets and all
Contributed Assets.
(b) It is the intention of the parties hereto that (i) each Purchase of
Receivables and the associated Related Assets made hereunder shall constitute a
"sale" from the Seller to the Purchaser and (ii) each contribution of
Receivables and the associated Related Assets made hereunder shall constitute an
absolute assignment or transfer from the Seller to the Purchaser, in each case,
under applicable state law and Federal bankruptcy law, which sales or absolute
transfers are, in each case, absolute and irrevocable and provide the Purchaser
with all indicia and rights of ownership of the Receivables and such Related
Assets. Neither the Seller nor the Purchaser intends the transactions
contemplated hereunder to be, or for any purpose to be characterized as, loans
from the Purchaser to the Seller secured by such property. Except for certain
indemnities pursuant to Section 7.01, each sale or contribution of Receivables
and the associated Related Assets by the Seller to the Purchaser is made without
recourse to the Seller; provided, however, that (i) the Seller shall be liable
to the Purchaser for all representations, warranties and covenants made by the
Seller pursuant to the terms of this Agreement, and (ii) such sale or absolute
transfer does not constitute and is not intended to result in an assumption by
the Purchaser or any assignee thereof of any obligation of the Seller or any
other person to any Claimant, Obligor, or any other Person in connection with
the Receivables, the Related Assets and/or the related Settlement Purchase
Agreements, or any other obligations of the Seller thereunder or in connection
therewith, other than to return (or provide for the return of) any Scheduled
Payments (or any portion thereof) not covered under the Settlement Purchase
Agreement and not sold or transferred to the Purchaser hereunder back to such
Claimant (it being understood and agreed that the Master Servicer and/or the
Collateral Trustee shall remit or cause to be remitted all amounts in respect of
"Split Payments" (as defined in the Indenture) in accordance with Section
5.01(f)). In view of the intention of the parties hereto that the Purchases of
Receivables and the associated Related Assets made hereunder shall constitute
sales or absolute transfers of such Receivables and such Related Assets rather
than a loan secured by such Receivables and such Related Assets, the Seller
agrees to note on its financial statements and in its books and records that
such Receivables and the associated Related Assets have been sold or transferred
to the Purchaser and to respond to any inquiries made by third parties as to the
ownership of such Receivables and such Related Assets so sold or transferred
that such Receivables and such Related Assets have been sold or transferred to
the Purchaser.
(c) Notwithstanding any other provision of this Agreement to the
contrary, the Purchaser shall not Purchase from the Seller nor shall the Seller
sell or contribute to the
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Purchaser any Receivable from and after the time of any bankruptcy filing by or
against the Seller or the Purchaser, provided, however, that should any such
bankruptcy or insolvency proceeding instituted against the Seller (as
distinguished from by the Seller) be withdrawn or dismissed prior to the
occurrence of an "Event of Default" under the Indenture, then the Purchaser
shall be entitled to resume Purchasing Receivables from the Seller after the
withdrawal or dismissal of such filing or proceeding.
(d) If, notwithstanding the provisions of the immediately preceding
clause (b), a court of competent jurisdiction were to hold that any Purchase of
Receivables hereunder does not constitute a valid sale or transfer of the
affected Receivables and the Related Assets as set forth above but instead
constitutes a loan in the amount of the Purchase Price or otherwise of such
Receivables, then this Agreement shall be deemed a present grant of a security
interest (within the meaning of Articles 8 and 9 of the UCC as in effect in all
applicable jurisdictions) in favor of the Purchaser in all of the Seller's
rights, title and interest in, to and under the Transferred Assets to secure
such loan in the amount of the Purchase Price (together with interest thereon to
be computed at the Purchase Discount Rate) effective upon each such Purchase,
and the Seller hereby grants such a security interest to the Purchaser in the
Transferred Assets which are the subject of such Purchase, and this Agreement
shall constitute a security agreement within the meaning of Article 8 and
Article 9 of the UCC of all applicable jurisdictions.
SECTION 2.02. Payment for the Purchases. (a) Except as otherwise
provided below in this Section 2.02, the Purchase Price for the Receivables sold
by the Seller under this Agreement shall be payable in full in cash by the
Purchaser to the Seller, in each case on the Purchase Date relating to such
Purchase; provided, to the extent that the Purchaser has insufficient funds to
pay the Purchase Price for any Receivables to be purchased by it on any date, if
the Seller so consents, such remaining portion of the Receivables of the Seller
for which the Purchase Price has not been received in cash shall be contributed
to the capital of the Purchaser by the Seller; provided, further, however, that
with respect to the Purchase made on the Closing Date, an amount not exceeding
$1,000,000 of the Purchase Price due on the Closing Date shall be paid by the
issuance of equity in the Purchaser to the Seller pursuant to the terms of the
organizational documents of the Purchaser.
(b) On each Purchase Date with respect to any Receivables being sold on
such date, the Seller shall deliver to the Purchaser a Seller Transfer Report in
the form of that attached hereto as Exhibit B. The Purchaser, if it agrees to
purchase all such Receivables set forth on such report, shall signify its
acceptance thereof by signing such report and returning a copy, as accepted, to
the Seller on such date, together with payment of the aggregate Purchase Price
for such Receivables, by no later than 5:00 p.m. (New York time) on such date.
To the extent that the Purchaser disputes any of the information in such report
with respect to any Receivable described therein, the Seller and the Purchaser
shall reconcile such report as promptly as possible and if unable to reconcile
and agree on the content of such report prior to 4:30 p.m. (New York time) on
the proposed Purchase Date therefor, the Seller and the Purchaser shall exclude
any Receivables therefrom until such report is acceptable to both parties (and
such excluded
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Receivables shall be deemed not sold on such date). The aggregate Purchase Price
(as hereinafter defined) payable on any Purchase Date shall be calculated to
equal the sum of the respective Purchase Prices of the new Receivables noted on
such Seller Transfer Report. The "Purchase Price" for any Receivable shall be
equal to the Discounted Receivables Balance of such Receivable on such date as
calculated without giving effect to any past due Scheduled Payments thereon
which are outstanding on such date.
(c) On each Business Day, to the extent that the Purchaser receives
proceeds from any "Subsequent Issuances" (as defined in the Indenture) or
otherwise has any other "Available Seller Funds" (as defined in the Indenture),
then the Purchaser shall remit such funds to the Seller to pay the Purchase
Price for any Receivables Purchased from the Seller on such Business Day to the
extent it is a Purchase Date.
(d) Unless and until the Purchase Termination Date has occurred, if,
after giving effect to all allocations of cash provided for in Section 2.02(c),
the Purchase Price payable by the Purchaser to the Seller on any Business Day is
not paid in full, then the Seller shall, unless it has otherwise notified the
Purchaser and the Trustee in writing to the contrary, be deemed to have
contributed to the Purchaser's capital Receivables having a Purchase Price equal
to the otherwise unpaid portion of the total Purchase Price owed to the Seller
on such day.
SECTION 2.03. Payments and Computations, Etc. All amounts to be paid by
the Seller to the Purchaser hereunder shall be paid in accordance with the terms
hereof no later than 1:00 P.M. (New York time) on the day when due in Dollars in
immediately available funds to the "Master Collection Account" (as defined in
the Indenture). All amounts to be paid by the Purchaser to the Seller hereunder
shall be paid in accordance with the terms hereof no later than 5:00 P.M. (New
York time) to such account as may be specified therefor by the Seller from time
to time by notice to the Purchaser. Payments received by the Purchaser or the
Seller after such times shall be deemed to have been received on the next
Business Day. In the event that any payment becomes due on a day which is not a
Business Day, then such payment shall be made on the next succeeding Business
Day. The Seller and the Master Servicer (if an "Affiliated Entity" (as defined
in the Indenture)) shall, to the extent permitted by law, pay to the Purchaser,
on demand, interest on all amounts not paid when due hereunder (whether owing by
the Seller individually or as Master Servicer) at 2% per annum above the per
annum rate designated by PNC Bank, National Association as its "prime rate" for
commercial borrowers (such rate not necessarily being the lowest rate offered by
such bank) as in effect on the date such payment was due; provided, however,
that such interest rate shall not at any time exceed the maximum rate permitted
by applicable law. All computations of interest payable hereunder shall be made
on the basis of a year of 360 days for the actual number of days (including the
first but excluding the last day) elapsed.
SECTION 2.04. Transfer of Records to the Purchaser. (a) In connection
with the Purchases of Receivables hereunder, the Seller hereby sells, transfers,
assigns and otherwise conveys to the Purchaser all of the Seller's right and
title to and interest in the Records relating to
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all Receivables included in the Transferred Assets, without the need for any
further in connection with any Purchase. In connection with such transfer, the
Seller hereby represents and warrants that the Seller and/or Wentworth either
itself owns, or has taken such action as may be necessary (including, without
limitation, obtaining any necessary consents from licensors or other Persons) to
provide the Master Servicers, the "Back-up Servicer" (as defined in the
Indenture), the Trustee and any "Successor Servicer" (as defined in the
Indenture) with such licenses, sublicenses and/or assignments of contracts as
the Master Servicers, the Trustee or any Successor Servicer shall from time to
time require for its use of all services and computer hardware or software that
relate to the servicing of the Receivables or the other Purchased Assets. The
Seller hereby grants the Master Servicer, the Back-up Servicer, the Trustee and
each Successor Servicer an irrevocable license (with respect to the services,
and computer hardware and software that it owns) or sublicense (with respect to
all other such services, hardware and software) to use such services, hardware
or software in connection with the servicing, collection and monitoring of the
Receivables (subject to reasonable confidentiality restrictions and restrictions
limiting such use to the collection, servicing and monitoring of the
Receivables, which restrictions have already been established with respect to
the Back-up Servicer and, with respect to any other Person other than the
Back-up Servicer, shall be determined at such time as such Person is charged
with the servicing of the Receivables). As of the Closing Date, all such
computer software and hardware is currently owned by Seller and/or Wentworth and
is licensed to the Back-up Servicer irrevocably until the termination of the
Back-up Servicing Agreement. From and after the Closing Date, the Seller or
Wentworth, as applicable, shall deliver to the Trustee a copy of each consent
(or evidence that such consent is not required) from all necessary parties with
respect to any such services, hardware or software prior to the date the Seller
or Wentworth enters into any license to use such service or software to service,
monitor and collect any Receivables. The license granted hereby shall be
irrevocable, and shall terminate on the Business Day following the Collection
Date.
(b) The Seller shall take such action requested by the Purchaser (or
its assignees) or any Master Servicer (including any successor Master Servicer
appointed in accordance with the Indenture), from time to time hereafter, that
may be reasonably necessary or appropriate to ensure that the Purchaser (and its
assignees, including, without limitation, the Trustee, the Collateral Trustee
and the Noteholders) has an enforceable ownership or security interest, as
applicable, in the Records relating to the Receivables purchased from the Seller
hereunder.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Agreement. This Agreement is
subject to the conditions precedent that (i) each of the conditions precedent to
the execution, delivery and effectiveness of each other Operative Document
(other than a condition precedent in any such
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other Operative Document relating to the effectiveness of this Agreement) shall
have been fulfilled, and (ii) the Purchaser shall have received each of the
following, on or before the Closing Date, each (unless otherwise indicated)
dated as of the Closing Date or such other recent date acceptable to the
Purchaser and each in form and substance satisfactory to the Purchaser:
1. Resolutions. A copy of the resolutions of the Board of Directors of
the general partner of the Company, in its capacity as manager of the
Seller, certified by its Secretary or Assistant Secretary, approving for
and on behalf of the Seller this Agreement and the other Operative
Documents to be delivered by it hereunder and the transactions contemplated
hereby and thereby and addressing such other matters as may be reasonably
required by the Purchaser;
2. Good Standing Certificates of the Seller; Certificates as to Foreign
Qualification of the Seller. Good standing or qualification certificates
for the Seller issued by the Secretaries of State of Delaware and
Pennsylvania and of any other state in which the Seller transacts business
and is required to be in good standing;
3. Incumbency Certificate. A certificate of the Secretary or Assistant
Secretary of the general partner of the Company, in its capacity as manager
of the Seller, certifying the names and true signatures of the officers
authorized on the general partner's behalf to sign this Purchase Agreement
for and on behalf of the Seller and the other Operative Documents to be
delivered by the Seller hereunder (on which certificate the Purchaser, the
Trustee, the Agent and the Master Servicers may conclusively rely until
such time as the Purchaser shall receive from the Seller (with a copy to
the Trustee, each Master Servicer and the Agent), a revised certificate
meeting the requirements of this subsection (3);
4. Other Operative Documents. Original copies, executed by each of the
parties thereto in such reasonable number as shall be specified by the
Purchaser, of each of the other Operative Documents to be executed and
delivered in connection herewith;
5. Release of Liens under the Revolving Credit Facility. With respect
to the Receivables to be Purchased on or after the Closing Date, the
Intercreditor Agreement shall provide for the release upon the Purchase
thereof pursuant hereto of all Liens previously granted by the Seller or
the Company under the Revolving Credit Facility or otherwise with respect
to such Receivables and Related Assets;
6. Opinions of Counsel. The following opinions of counsel, each in form
and substance satisfactory to the Purchaser as to (i) general corporate and
UCC matters, (ii) true sale and non-consolidation, (iii) federal and
Delaware income tax matters, (iv) assignability and priority of the
Receivables, (v) federal securities law issues, and (vi) enforceability of
Powers of Attorney; and
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7. Other Documents. Such other documents as are set forth on the List
of Closing Documents attached hereto as Exhibit C.
SECTION 3.02. Conditions Precedent to Ongoing Purchases. The obligation
of the Purchaser on any Purchase Date to accept and pay the Purchase Price for
the transfers of Receivables under this Agreement is subject to the conditions
precedent that the representations and warranties contained in Article IV are
true and correct in all material respects as of such Business Day. The Seller,
by accepting the Purchase Price paid for each Purchase of Receivables and
Related Assets hereunder (including by way of increase in the equity interest of
the Seller in the Purchaser), shall be deemed to have certified, with respect to
the Receivables and the Related Assets paid for on such day, that its
representations and warranties contained in Article IV are true and correct on
and as of such day, with the same effect as though made on and as of such day.
SECTION 3.03. Effect of Payment of Purchase Price and/or Contribution.
Upon the payment of the Purchase Price for any Purchase, (whether in cash or by
the contribution of any Receivables and Related Assets by the Seller to the
capital of the Purchaser pursuant to Section 2.02(a)), title to the Receivables
and the Related Assets included in such Purchase shall vest in the Purchaser.
Upon the purchase and payment by the Purchaser of the Purchase Price for any
Purchase, each of the conditions set forth in Section 3.02 shall be irrevocably
deemed to have been satisfied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller. The Seller
hereby represents and warrants that as of the Closing Date and (except for
representations and warranties which relate to a specific date only) and on each
"Transfer Date" (as defined in the Indenture) thereafter until the Purchase
Termination Date:
(a) Organization and Good Standing. The Seller is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Delaware and has full power and authority to own its properties and
conduct its business as presently owned or conducted, and to execute, deliver
and perform its obligations under this Agreement, the Settlement Purchase
Agreements, and each of the other Operative Documents to which it is a party.
(b) Due Qualification. The Seller is duly qualified to do business and
is in good standing as a foreign limited liability company, and has obtained all
necessary licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have, or could reasonably
be expected to have a Material Adverse Effect.
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(c) Due Authorization; Conflicts. The execution, delivery and
performance by the Seller of this Agreement, the Settlement Purchase Agreements
and each of the other Operative Documents to which it is a party are within the
Seller's powers, have been duly authorized by all necessary partnership action,
and do not contravene (i) the Seller's Limited Liability Company Agreement, (ii)
any law, rule, regulation, order, decree or contractual restriction binding on,
or affecting, the Seller and the violation of which would have, or could
reasonably be expected to have, a Material Adverse Effect, or (iii) any
agreement, contract, indenture, mortgage, or other instrument, document or
agreement to which the Seller or any of its assets are subject or may be
effected and the violation of which would have, or could reasonably be expected
to have, a Material Adverse Effect.
(d) Consents. No authorization or approval or other action by, and no
notice to or registration of or filing with, any Governmental Authority or other
regulatory body is required to be made by the Seller for the due execution,
delivery and performance by the Seller, or to insure the legality, validity,
binding effect or enforceability of, this Agreement, the Settlement Purchase
Agreements or any of the other Operative Documents to which it is a party,
except for the filing of UCC financing statements against the Seller in respect
of the transactions contemplated herein, all of which that need to be filed to
perfect the interest of the Purchaser in the Purchased Assets (as comprised as
of the date of the making or remaking of this representation and warranty) have
been so made.
(e) Enforceability. This Agreement, the Settlement Purchase Agreements
or any of the other Operative Documents to which it is a party is and will be
the legal, valid and binding obligation of the Seller enforceable against the
Seller in accordance with its respective terms, 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 principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(f) Proceedings. There are no judgments or other judicial or
administrative orders outstanding against the Seller nor is there any pending
or, to the best of the Seller's knowledge, threatened action or proceeding
affecting the Seller before any court, governmental agency or arbitrator, which
would have, or could reasonably be expected to have, a Material Adverse Effect.
(g) Compliance with Laws, Etc. The Seller is not in violation of any
law, rule, regulation, order, writ, judgment, decree, determination or award
applicable to it or any of its properties or any indenture, lease, loan or other
agreement to which it is a party or by which it or its assets may be bound or
affected, the violation of which, in any of the foregoing cases, would have, or
could reasonably be expected to have, a Material Adverse Effect.
(h) Locations. The principal place of business and chief executive
office of the Seller are located at the address of the Seller set forth on the
signature page hereof, and the
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offices where the Seller keeps all of its records relating to the Receivables
are located at the addresses set forth on Schedule I hereto, or, in each case,
at such other locations notified to the Purchaser, the Trustee and each Master
Servicer, and the Agent, in jurisdictions with respect to which all applicable
actions required by Section 5.02(f) hereof have been taken and completed.
(i) Lock-Box Banks. The names and addresses of all the "Lock-Box Banks"
(as defined in the Indenture), and the account numbers of all "Lock-Box
Accounts" (as defined in the Indenture) and related lock-boxes maintained at
such Lock-Box Banks, are in each case specified in Schedule III hereto or have
been notified to the Purchaser, the Trustee and the Collateral Trustee and with
respect to which all action required to be taken pursuant to Section 5.02(h) has
been taken. The Lock-Box Banks are the only institutions holding any Lock-Box
Accounts or lock-boxes for the receipt of Scheduled Payments in respect of the
Receivables. All Annuity Providers have been directed to make payments on the
Annuity Contracts relating to the Receivables to a Lock-Box Account (or a
related lock-box) covered by a "Lock-Box Notice" (as defined in the Indenture),
and such instructions are in full force and effect.
(j) Financial Statements. The annual audited financial statements of
the Company for the fiscal year ended December 31, 1996, and the unaudited
quarterly financial statements of the Company for the fiscal quarter ended June
30, 1997, copies of which have been provided to the Purchaser, the Trustee and
the Agent, present fairly the financial condition of the Company as of such
date.
(k) Accuracy of Information. Each certificate, information, exhibit,
financial statement, document, book, record, report or disclosure furnished by
the Seller to the Purchaser, the Trustee, any Master Servicer or the Agent is
accurate in all material respects and contains no untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading.
(l) Investment Company Act Matters. The Seller is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act.
(m) Title to Property. The Seller, with respect to any Receivables
immediately prior to the Purchase thereof by the Purchaser hereunder, had good,
indefeasible, and merchantable title to and ownership of such Receivables, free
and clear of all Liens.
(n) Tradenames. The Seller has no tradenames, fictitious names, assumed
names or "doing business as" names and since its incorporation, the Seller (i)
has not been the subject of any merger or other corporate reorganization that
resulted in a change of name, identity or corporate structure or (ii) had any
other name.
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(o) Solvency. After giving effect to each Purchase of Transferred
Assets hereunder, the Seller is and will be solvent and able to pay its debts as
they come due, and has and will have adequate capital.
(p) Valid Transfer. This Agreement constitutes a valid sale, transfer
and assignment, or, in the case of Contributed Assets, a valid transfer and
assignment, to the Purchaser of all right, title and interest of the Seller in
and to the Receivables now or hereafter Purchased hereunder and in and to all
other Transferred Assets and the proceeds thereof free and clear of any Lien,
other than any Permitted Lien or, if a court of competent jurisdiction were to
hold that any Purchase of Receivables hereunder does not constitute a valid sale
or absolute transfer of the affected Receivables and the Related Assets as set
forth herein but instead constitutes a loan in the amount of the Purchase Price
of such Receivables, constitutes a valid grant to the Purchaser of a "security
interest" (as defined in the UCC of the jurisdiction the law of which governs
the perfection of the interest in the Receivables and other Purchased Assets or
Contributed Assets created hereunder), which is and shall be a first priority
perfected security interest to secure such loan in the amount of the Purchase
Price, free and clear of any Lien (other than any Permitted Lien) in all right,
title and interest of the Seller in and to the Receivables now or hereafter
Purchased by the Purchaser pursuant hereto and in and to all other Transferred
Assets and the proceeds thereof which will be enforceable by the Purchaser (and
its assignees or pledgees) upon such creation of such security interest.
(q) Originator Receivables. The Purchaser has given reasonably
equivalent value to the Seller in consideration for the Purchase by the
Purchaser from the Seller of the Receivables and Related Property pursuant
hereto, and no such transfer has been made for or on account of an antecedent
debt owed by the Seller to the Purchaser.
SECTION 4.02. Representations and Warranties of the Seller Relating to
the Receivables. The Seller hereby represents and warrants to the Purchaser,
with respect to each Receivable Purchased by the Purchaser pursuant hereto,
that:
(a) On the Purchase Date therefor the representations and warranties
set forth in the Designated Supplement relating to such Receivable (identified
in the applicable Seller Transfer Report delivered by the Seller on such
Purchase Date) under the heading of "Representations and Warranties of the
Issuer Relating to the Series Pledged Assets" or other similar heading or
otherwise relating specifically to the Receivables with respect to (and
allocated to or serving as collateral under) such Designated Supplement, shall
be true and correct in all material respects (and such representations and
warranties shall be deemed incorporated herein by this reference hereto).
(b) From and after the Closing Date, the Credit Policy Manual shall
provide that, upon the receipt of payment of less than the full amount of any
Scheduled Payments in respect of any Receivable in respect of which there is a
concurrent obligation of the Seller to remit a Split Payment to the Claimant
thereon, such Scheduled Payment shall be remitted to the Seller and the
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applicable Claimant pro rata based on the relative percentages of the full
amount of such Scheduled Payment which each would be entitled to received (had
the full payment been received) in accordance with the terms of the applicable
Settlement Purchase Agreement.
The representations and warranties made pursuant to this Section 4.02
on the date of any Purchase of Receivables by the Purchaser shall survive such
Purchase.
SECTION 4.03. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants that as of the Closing Date and (except for
representations and warranties which relate to a specific date only) as of each
Purchase Date:
(a) Corporate Existence and Power. The Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted. The
Purchaser is duly qualified to do business in, and is in good standing in, every
other jurisdiction in which the nature of its business requires it to be so
qualified, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by the Purchaser of this Agreement and the
other Operative Documents to which it is a party (i) are within the Purchaser's
limited liability company powers, (ii) have been duly authorized by all
necessary limited liability company action, (iii) require no action by or in
respect of, or filing with, any Governmental Authority or official thereof, or
(iv) do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the Purchaser's organizational
documents or of any agreement, judgment, injunction, order, writ, decree or
other instrument binding upon the Purchaser the contravention of which, in any
of the foregoing cases would have, or could reasonably be expected to have, a
material adverse effect on the Purchaser's ability to perform hereunder or on
the enforceability hereof.
(c) Binding Effect. Each of this Agreement constitutes the legal, valid
and binding obligation of the Purchaser, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditor generally or general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
ARTICLE V
GENERAL COVENANTS OF THE SELLER
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SECTION 5.01. Affirmative Covenants of the Seller. At all times from
the date hereof to the Collection Date, Seller will, unless the Purchaser shall
otherwise consent in writing:
(a) Compliance with Law. The Seller will comply in all material
respects with all Requirements of Law applicable to the Transferred Assets.
(b) Preservation of Existence. The Seller will preserve and maintain
its existence, rights, franchises and privileges as a limited liability company
(or other legal entity, provided the Seller shall have complied with the
requirements of Section 5.02(f)) in the jurisdiction of its organization, and
qualify and remain qualified in good standing as a foreign business entity in
each jurisdiction where the failure to maintain such qualification would have,
or could reasonably be expected to have, a Material Adverse Effect.
(c) Inspection of Books and Records. The Purchaser, the Agent, their
respective assigns (or designated representative thereof) and independent
accountants appointed by, or other agents of, any of the foregoing, shall have
the right, upon reasonable prior written notice to the Seller, to visit the
Seller, to discuss the affairs, finances and accounts of the Seller with, and to
be advised as to the same by, its officers, and to examine the books of account
and records of the Seller, and to make or be provided with copies and extracts
therefrom, all at such reasonable times and intervals (but not more than once in
any six month period) and to such reasonable extent during regular business
hours as the Purchaser, the Agent, their respective assigns (or designated
representative thereof) or such accountants or agents appointed by any of the
foregoing, as applicable, may desire.
(d) Keeping of Records and Books of Account. (i) The Seller itself or
through its agents will keep proper books of record and account, which shall be
maintained or caused to be maintained by the Seller and shall be separate and
apart from those of any Affiliate of the Seller, in which full and correct
entries shall be made of all financial transactions and the assets and business
of the Seller in accordance with generally accepted accounting principles
consistently applied, and (ii) maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables in the event of the destruction of the
originals thereof) and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of all Collections of and adjustments to each existing
Receivable).
(e) Location of Records. The Seller will keep its principal place of
business and chief executive office at the address of the Seller referred to in
Section 4.01(h) and shall keep the other offices where it keeps the books,
records and documents regarding the Transferred Assets at the addresses of the
Seller referred to on Schedule I, or in either case, upon 30 days' prior written
notice to the Purchaser, the Trustee and each Master Servicer and the Agent, at
any other location within the United States with respect to which all applicable
action required by Section 5.02(f) hereof shall have been taken and completed.
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(f) Seller Purchase Agreement and Settlement Purchase Agreements. (i)
The Seller will at its expense timely perform and comply in all material
respects with all provisions, covenants and other promises required to be
observed by it under the Seller Purchase Agreement, maintain the Seller Purchase
Agreement in full force and effect, enforce the Seller Purchase Agreement in
accordance with its respective terms, and, at the request of the Purchaser, the
Trustee, or any applicable Master Servicer, make to the Company such reasonable
demands and requests for information and reports or for action as, the Trustee,
or any applicable Master Servicer may request to the extent that the Seller is
entitled to do the same thereunder; it being agreed however that with respect to
the obligations of the Seller to remit Split Payments to the Company pursuant to
the Seller Purchase Agreement relating to the Purchased Assets, such obligation
shall hereafter be performed by the Master Servicer and/or the Collateral
Trustee, in each case, under and pursuant to the Indenture.
(ii) The Seller, pursuant to its rights under the Seller Purchase
Agreement, shall cause the Company, at its expense, to timely perform and comply
in all material respects with all provisions, covenants and other promises
required to be observed by the Company under each Settlement Purchase Agreement,
maintain each Settlement Purchase Agreement in full force and effect, enforce
each Settlement Purchase Agreement in accordance with its respective terms, and,
at the request of the Purchaser, the Trustee or any applicable Master Servicer,
make to the Claimant such reasonable demands and requests for information and
reports or for action as the Purchaser, the Trustee, or any applicable Master
Servicer may request to the extent that the Seller is entitled to do the same
thereunder; it being agreed however that with respect to the obligations of the
Seller to remit Split Payments to the Claimant pursuant to the Settlement
Purchase Agreements relating to the Purchased Assets, such obligation shall
hereafter be performed by the Master Servicer and/or the Collateral Trustee, in
each case, under and pursuant to the Indenture.
(g) Payment of Taxes, Etc. The Seller will pay promptly when due all
material taxes, assessments and governmental charges or levies imposed upon it
in respect of the Purchased Assets, or in respect of its income or profits
therefrom, and any and all material claims of any kind (including, without
limitation, claims for labor, materials and supplies) in respect of the
Transferred Assets, except where such tax, assessment, charge or levy is being
contested in good faith and by proper proceedings and adequate reserve have been
set up and are being maintained in respect thereof on the Seller's books and
records.
(h) Collections. In the event that the Seller or any other Affiliated
Entity receives any Collections, the Seller agrees to hold, or cause such
Affiliated Entity to hold, all such Collections in trust and to deposit such
Collections to a Lock-Box Account or the Master Collection Account, in each
case, as soon as practicable, but in no event later than two Business Days after
its receipt thereof.
(i) Fidelity Insurance. The Seller shall (or shall cause the
Company to) maintain, at its or the Company's own expense, a fidelity insurance
policy, with broad coverage with responsible companies on all officers,
employees or other persons acting on behalf of the Seller
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or the Company in any capacity with regard to the Receivables in handling
documents and papers related thereto. Any such fidelity insurance shall protect
and insure the Seller against losses, including forgery, theft, embezzlement,
and fraud, and shall be maintained in an amount of at least $10,000,000 or such
lower amount as the Purchaser or any of its assigns may in their commercially
reasonable credit judgment designate to the Seller from time to time. No
provision of this Section 5.01(i) requiring such fidelity insurance shall
diminish or relieve the Seller from its duties and obligations as set forth in
this Agreement or any of the other Operative Documents. The Seller shall be
deemed to have complied with this provision if one of its respective Affiliates
has such fidelity policy coverage and, by the terms of such fidelity policy, the
coverage afforded thereunder extends to the Seller. Upon the request of the
Purchaser or any of its assigns, the Seller shall cause to be delivered to the
Purchaser or such assigns, as applicable, a certification evidencing coverage
under such fidelity policy. Any such insurance policy shall contain a provision
or endorsement providing that such policy may not be canceled or modified in a
materially adverse manner without ten (10) days' prior written notice to the
Purchaser and such assigns.
(j) Protection of Right, Title and Interest to Purchaser and Assignees.
(i) The Seller shall cause all financing statements and continuation
statements and any other necessary documents covering the Purchaser's and
the Purchaser's assignees' right, title and interest in and to the
Transferred Assets to be promptly recorded, registered and filed, and at
all times to be kept recorded, registered and filed, all in such manner and
in such places as may be required by law to preserve and protect fully the
right, title and interest of the Purchaser and its assignees in and to all
such Transferred Assets. The Seller shall cooperate fully with the Master
Servicers and Agent and take such actions as any such Person shall
reasonably request, in order to carry out the objectives of this Agreement
and the other Operative Documents.
(ii) Within 30 days after the Seller makes any change in its name,
identity or corporate structure which would make any financing statement or
continuation statement filed in accordance with the terms of this Agreement
seriously misleading within the meaning of Section 9-402(7) (or any
comparable provision) of the UCC as in effect in the jurisdiction the law
of which governs the perfection of the interest in the Purchased Assets
created hereunder, the Seller shall give the Purchaser, the Agent and the
Trustee notice of such change and shall file such financing statements or
amendments as may be necessary to continue the perfection of the
Purchaser's and its Assignees' interest in the Transferred Assets and the
proceeds thereof.
(iii) Notwithstanding anything contained herein to the contrary, the
Seller shall not be required to file assignments in favor of itself or the
Purchaser or the Trustee, respectively, with respect to the UCC financing
statements filed by the Company against each of the Claimants in connection
with the respective Settlement Purchase Agreements, but the Seller hereby
covenants to file continuation statements thereof as and when
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necessary to maintain the effectiveness of such statements; it being
understood and agreed that the Seller shall not have any duty to monitor
the continued effectiveness of the financing statements originally filed
against such Claimants (other than with respect to the lapse thereof due to
time).
(k) Corporate Separateness. The Seller shall at all times deal with the
Purchaser in a manner consistent with Section 2.06(m) of the Indenture.
(l) Accounting For Purchases and Contributions. The Seller shall treat
all Purchases hereunder by the Purchaser, and contributions hereunder to the
Purchaser, as sales and/or absolute transfers thereof for all tax, accounting
and other purposes.
SECTION 5.02. Negative Covenants of the Seller. From the date hereof
until the Collection Date, without the written consent of the Purchaser:
(a) No Liens. The Seller will not sell, pledge, assign or transfer to
any Person, or grant, create, incur, assume or suffer to exist any Lien (other
than a Permitted Lien) on, any Transferred Asset, whether now existing or
hereafter created, or any interest therein, and the Seller shall defend the
right, title and interest of the Purchaser in and to the Transferred Assets,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Seller.
(b) Extension or Amendment of Receivables; Repurchase Obligations. The
Seller will not extend, amend or otherwise modify (or consent to any such
extension, amendment or modification of) the terms of any Receivable or rescind
or cancel, or permit the rescission or cancellation of, any Receivable, except
as ordered by a court of competent jurisdiction or other Governmental Authority.
To the extent that any representation or warranty of the Seller with
respect to any Receivable constituting a Transferred Asset under Section 4.02 or
set forth in any certificates delivered by or on behalf of the Seller or the
Company as the Seller's predecessor-in-interest in connection with any Purchase
or in connection with any opinions of counsel delivered on any Purchase Date was
incorrect when made or remade or deemed made or remade (it being agreed that the
incorrectness of any such representation or warranty, and the substitution or
repurchase obligation of the Seller pursuant to this clause (b) 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 Seller contained in any such representation or
warranty), the Seller shall, within five Business Days after learning thereof,
either (X) convey to the Purchaser in exchange for the affected Receivable, one
or more additional Receivables to be described on a Seller Transfer Report
delivered to the Purchaser and having a Discounted Receivables Balance (as
calculated without giving effect to any past due Scheduled Payments thereon
which are outstanding on such date) approximately equal to, but not less than,
the Discounted Receivables Balance of the Receivable being so replaced (as
calculated by treating
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any past-due Scheduled Payments then due as if such Scheduled Payments were due
on the date of such calculation) or (Y) in the event the Seller lacks sufficient
Receivables to substitute or replace the affected Receivables, repurchase in
cash delivered to the Purchaser as aforesaid, in an amount equal to the
Discounted Receivables Balance (as calculated by treating any past-due Scheduled
Payments then due as if such Scheduled Payments were due on the date of such
calculation) of such affected Receivable at such time, whereupon the Receivable
being replaced or repurchased shall cease to be a "Receivable" hereunder.
(c) Change in Credit Policy Manual. The Seller will not make, or
consent or fail to object to, any change in the "Credit Policy Manual" (as
defined in the Indenture) which change could be reasonably likely to materially
impair or delay the collectibility of any Receivable or result in a
deterioration in the creditworthiness of the Obligors generally.
(d) Deposits to Lock-Box Accounts or the Master Collection Account. The
Seller will not deposit or otherwise credit, or cause to be so deposited or
credited, or consent or fail to object to any such deposit or credit, to any
Lock-Box Account or the Master Collection Account of cash proceeds other than
Collections of Receivables and other Transferred Assets; provided that to the
extent any such other amounts are so deposited on any date, it shall not
constitute a breach hereunder if such other funds are identified and are removed
from such account within two Business Days after such amounts were so deposited
in such account.
(e) Receivables Not To Be Evidenced by Promissory Notes. The Seller
will take no action to cause any Receivable to be evidenced by any "instrument"
(as defined in the UCC of the jurisdiction the law of which governs the
perfection of the interest in such Receivable created hereunder), except in
connection with its enforcement, in which event the Seller shall deliver such
instrument to the Collateral Trustee, for the benefit of the Person entitled
thereto or secured thereby in accordance with the Intercreditor Agreement.
(f) Change in Name. The Seller will not (i) make any change to its
name, principal place of business, partnership structure or location of books
and records or use any tradenames, fictitious names, assumed names or "doing
business as" names unless, at least 30 days prior to the effective date of any
such name change, change in principal place of business, change in partnership
structure, change in location of its books and records, or change in trade or
fictitious names, the Seller notifies the Purchaser, the Trustee and each Master
Servicer thereof and delivers to the Trustee and the Purchaser such financing
statements (Forms UCC-1 and UCC-3) executed by the Seller which the Purchaser or
the Trustee may reasonably request to reflect such name change, location change,
change in partnership structure or fictitious name change or use, together with
such other documents and instruments that the Purchaser or the Trustee may
reasonably request in connection therewith and has taken all other steps to
ensure that the Purchaser, and the Trustee continue to have a first priority,
perfected ownership or security interest in the Transferred Assets, or (ii)
change its jurisdiction of organization unless the Purchaser and the Trustee
shall have received from the Seller (A) written notice of such change at least
10 days prior to the effective date thereof, and (B) prior to the effective date
thereof if the
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Purchaser shall so request, an Opinion of Counsel, in form and substance
reasonably satisfactory to the Purchaser and the Trustee, as to such
organization and the Seller's valid existence and good standing and as to the
matters referred to in the first sentence of Section 4.01(a).
(g) Merger. The Seller shall not consolidate with or merge into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any Person unless:
(i) (X) the Person formed by such consolidation or into which the
Seller is merged or the Person which acquires by conveyance or transfer the
properties and assets of the Seller substantially as an entirety shall be,
if the Seller is not the surviving entity, a corporation, limited
partnership or limited liability company organized and existing under the
laws of the United States of America or any State or the District of
Columbia, and such entity shall have expressly assumed, by an agreement
supplemental hereto, executed and delivered to the Trustee, in form
reasonably satisfactory to the Purchaser and the Trustee the performance of
every covenant and obligation of the Seller hereunder and (Y) the Seller
shall have delivered to the Purchaser and the Trustee an Officer's
Certificate and an Opinion of Counsel each in form reasonably satisfactory
to the Purchaser and the Trustee and stating that such consolidation,
merger, conveyance or transfer complies with this Section 5.02(g) and that
all conditions precedent herein provided for relating to such transaction
have been complied with;
(ii) each "Rating Agency" (as defined in the Indenture) rating
any Series shall have notified the Purchaser and the Trustee, in writing,
that such merger or consolidation or conveyance or transfer, as the case
may be, will not result in a reduction or withdrawal of the rating of any
such outstanding Series or "Class" (as defined in the Indenture) of such
Series; and
(iii) the corporation, limited partnership or limited liability
company formed by such consolidation or into which the Seller is merged or
which acquires by conveyance or transfer the properties and assets of the
Seller substantially as an entirety shall have all licenses and approvals
to perform its obligations hereunder and under the other Operative
Documents to which the Seller is a party, except to the extent the failure
to have any such license would not have, and could not reasonably be
expected to have, a material adverse effect on its ability to perform the
obligations of the Seller hereunder and/or any such other Operative
Document.
(h) Change in Lock-Box Accounts and Instructions to Obligors. The
Seller will not add or terminate any institution as a Lock-Box Bank or terminate
or substitute any Lock-Box Account or any related lock-box from those listed in
Schedule III hereto, except as otherwise permitted hereunder or unless the
Purchaser, the Trustee and the Collateral Trustee shall have received notice of
such addition, termination or change and executed copies of Lock-Box Notices
covering any such new Lock-Box Bank, Lock-Box Account or any new lock-box
relating thereto. The Seller will not instruct any Obligor to remit Collections
to any Person, address or account
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other than a Lock-Box Account or the related lock-box to which the underlying
Receivables or Transferred Assets relates.
(i) Ownership of Seller. The number of individuals and entities (other
than Flow-Through Entities (as such term is defined below)) that are beneficial
owners of a direct interest in the Seller, plus the number of individuals and
entities (other than Flow-Through Entities) that are beneficial owners of an
indirect ownership in the Seller through one or more Flow Through Entities,
other than the Company or any successor thereto, will never exceed ten. As used
herein, "Flow-Through Entity" shall mean an entity that, for federal income tax
purposes, is a partnership, a grantor trust, an S corporation or other entity
which is not treated for such purposes as a separate entity.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Collection of Receivables. (a) The Seller and the
Purchaser each hereby acknowledges and agrees that (i) the Collateral Trustee
has the exclusive ownership, dominion and control of any and all Lock-Boxes and
Lock-Box Accounts, other than any Lock-Box and/or Lock-Box Account into which
only Collections with respect to one particular Series are deposited (any such
Series-specific Lock-Box and Lock-Box Account being a "Series Specific Lock-Box"
and "Series Specific Lock-Box Account", respectively) and (ii) the Trustee has
the exclusive ownership and control of each Series Specific Lock-Box and Series
Specific Lock-Box Account and in either case, the Seller hereby agrees to take
any further action necessary or that the Trustee, the Collateral Trustee, the
Agent or the Purchaser may reasonably request to evidence and/or effect such
ownership and control. Unless instructed otherwise by the Collateral Trustee or
the Trustee, as applicable, pursuant to either such Person's authority under the
Intercreditor Agreement and the Indenture, each Lock-Box Bank shall be
instructed to remit, on a daily basis, via overnight or same day transfer, all
amounts deposited in its Lock-Box Accounts to the Master Collection Account in
accordance with the terms of a Lock-Box Notice substantially in the form of
Exhibit B to the Indenture. The Master Servicer (or any successor Master
Servicer (including the Back-Up Servicer) appointed for any such Master
Servicer) and the Seller, pursuant to each Daily Report shall advise the
Purchaser daily of the amount of Collections received into the Master Collection
Account on such day with respect to the Receivables and the allocations thereof
as among the Series, the Split Payments, and the Revolving Credit Facility. If
the Seller or its agents or representatives shall at any time receive any cash,
checks or other instruments constituting Collections, such recipient shall
segregate such payment and hold such payment in trust for and in a manner
acceptable to the Purchaser and shall, promptly upon receipt (and in any event
within one Business Day following receipt), remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to a
Lock-Box Account or Series Specific Lock-Box Account, as the case may be, or the
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Master Collection Account. The Seller hereby authorizes the Purchaser (and its
designees and assigns), and gives each of the Purchaser, such designees and/or
such assigns its irrevocable power of attorney, with full power of substitution,
which authorization shall be coupled with an interest, to take any and all steps
in the Seller's name and on behalf of the Seller, which steps are necessary or
desirable, in the reasonable determination of the Purchaser, such designees
and/or such assigns, to collect all amounts due under the Transferred Assets,
including, without limitation, endorsing the Seller's name on checks and other
instruments representing Collections and enforcing such Receivables and the
related Settlement Purchase Agreements.
(b) The Purchaser shall, following notification that collections of any
receivable or other intangible owed to the Seller, which is not a Transferred
Asset, have been deposited into the Lock-Box Accounts or Series Specific
Lock-Box Accounts, as the case may be, segregate all such collections and, after
such misapplied collections have been reasonably identified to the Purchaser,
the Purchaser shall turn over to the Seller, as applicable, all such collections
less all reasonable and appropriate out-of-pocket costs and expenses, if any,
incurred by the Purchaser in collecting such receivables.
SECTION 6.02. Servicing of Receivables. (a) From and after the Purchase
of any Receivable by the Purchaser from the Seller, the Purchaser (or its
designees or assignees) shall have the sole right to service, administer and
monitor the Receivables and the Seller shall cease to have any rights whatsoever
in connection with such Receivables constituting Transferred Assets. In
connection therewith, the Seller shall deliver all books and records relating to
the Receivables to the Purchaser (or its agent or assign as so designated by the
Purchaser) promptly after the Purchase thereof by the Purchaser, and shall take
such other action as shall be reasonably requested by the Purchaser (or its
agents or assigns) to further evidence such assignment or to assist in the
servicing, monitoring, collecting and administering the Receivables sold
hereunder.
(b) Grant of Power of Attorney. The Seller hereby authorizes the
Purchaser (and its designees and assigns), and gives each of the Purchaser and
such designees and/or assigns its irrevocable power of attorney, with full power
of substitution, which authorization shall be coupled with an interest, to take
any and all steps in the Seller's name and on behalf of the Seller, which steps
are necessary or desirable in the reasonable determination of the Purchaser,
such designees and/or assigns to endorse, negotiate, deposit or otherwise
realize on any Receivable or any writing of any kind in connection with any
Receivable or Transferred Asset.
SECTION 6.03. Responsibilities of the Seller. Anything herein to the
contrary notwithstanding:
(a) Subject to the allocation of the obligations in respect of Split
Payments pursuant to Section 5.01(f), the Seller shall cause the Company to
perform all of its obligations under the Settlement Purchase Agreements related
to the Receivables sold or contributed by it hereunder with the same standard of
care as it would exercise for assets maintained for its own
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account, and the exercise by the Purchaser (or any of its assignees) of its
respective rights hereunder shall not relieve the Seller or the Company from
such obligations.
(b) The Purchaser and its assignees shall have no obligation or
liability with respect to any Receivable or related Settlement Purchase
Agreement or with respect to the Seller Purchase Agreement, nor shall the
Purchaser or any such assignee be obligated to perform any of the obligations of
the Seller thereunder.
(c) The Seller shall, upon the request of the Purchaser (or its agents
or assigns) deliver to the Purchaser, such agents and/or assigns, as directed,
all Records that evidence or relate to the Receivables and other Purchased
Assets or Contributed Assets conveyed to the Purchaser under this Agreement.
SECTION 6.04. Further Action Evidencing Purchases. (a) The Seller
agrees that at any time and from time to time, at its expense, it will promptly
execute and deliver all further instruments and documents, and take all further
action that may be reasonably necessary to perfect, protect or more fully
evidence the Purchaser's and its assignees' respective interests in the
Transferred Assets, or to enable the Purchaser and/or such assignees (or any
agent or designee of any of the foregoing) to exercise or enforce any of their
respective rights hereunder. Without limiting the generality of the foregoing,
the Seller will (i) execute and file such financing or continuation statements,
or amendments thereto or assignments thereof, and such other instruments and
notices, as may be necessary or appropriate or as the Purchaser or its assignees
may reasonably request, and (ii) mark its master data processing records
evidencing such Receivables and related Settlement Purchase Agreements with a
legend indicating that such assets have been sold or transferred to the
Purchaser, and (iii) indicate on its financial statements that its Receivables
have been sold or transferred to the Purchaser pursuant to this Agreement.
(b) If the Seller fails to perform any of its agreements or obligations
under this Agreement, following expiration of any applicable cure period, the
Purchaser (or any assignee thereof) may (but shall not be required to) perform,
or cause performance of, such agreement or obligation, and the reasonable
expenses of the Purchaser (or any such assignee) incurred in connection
therewith shall be payable by the Seller upon the Purchaser's (or any such
assignee's) written demand therefor (which demand shall itemize such expenses in
reasonable detail).
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Indemnities by the Seller. Without limiting any other
rights which the Purchaser may have hereunder or under applicable law, but
without duplication, the Seller hereby agrees to indemnify the Purchaser and its
permitted successors and assigns and all officers, directors, agents and
employees of the foregoing (each of the foregoing Persons being
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individually referred to herein as an "Indemnified Party") 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 (collectively, the "Indemnified Losses",
and each an "Indemnified Loss"), other than any such Indemnified Loss (x)
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 of any Noncomplying Receivable to the
Purchaser pursuant hereto;
(ii) reliance on any representation or warranty made in writing
by the Seller (or any of its officers) under or in connection with this
Agreement, any Seller Transfer Report or any "Monthly Report" (as defined
in the Indenture), or reliance on any other information or report delivered
by the Seller or by the Master Servicer with respect to the Seller (to the
extent based on information provided by the Seller) 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 obligations
of the Seller 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 Seller contained in any such representation or warranty);
(iii) the failure by the Seller to comply with any term,
provision or covenant contained in this Agreement, or any agreement
executed in connection with this Agreement or with any applicable law, rule
or regulation with respect to any Receivable, the related Settlement
Purchase Agreement or the "Related Security" (as defined in the Indenture),
or the nonconformity of any Receivable, the related Settlement Purchase
Agreement or the Related Security with any such applicable law, rule or
regulation;
(iv) the failure to vest and maintain vested in the Purchaser or
to transfer to the Purchaser, legal and equitable title to, and first
priority perfected ownership of, the Receivables and other Transferred
Assets which are, or are purported to be, sold or otherwise transferred by
the Seller hereunder, free and clear of any Lien (other than Liens created
in favor of the Purchaser hereunder and Liens created under the other
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
Receivables and other Transferred
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Assets which are, or are purported to be, sold or otherwise transferred by
the Seller hereunder, whether at the time of any Purchase or at any
subsequent time;
(vi) the failure by the Seller 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;
(vii) the failure of the Seller to pay when due any sales taxes
or other governmental fees or charges imposed in connection with the
transfer of the Purchased Assets hereunder;
(viii) the failure of the Seller or any of its agents, employees
or representatives to remit to the Purchaser, Collections of Transferred
Assets remitted to the Seller or any such agent, employees or
representatives in accordance with the terms hereof;
(ix) the assignment by a Claimant, the Company or the Seller
under a Settlement Agreement 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 such
thereof); and
(x) any Indemnified Loss arising under a Receivable, the
Settlement Agreement underlying 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).
Any Indemnified Amounts payable under this Section 7.01 shall, be paid by the
Seller to the Purchaser within five (5) Business Days following the Purchaser's
written demand therefor, setting forth in reasonable detail the basis for such
demand. The agreements of the Seller contained in this Section 7.01 shall
survive the Collection Date. In addition, in no event shall Indemnified Losses
include any consequential, special or punitive damages. The provisions of this
Section 7.01 shall survive the termination of this Agreement.
ARTICLE VIII
MISCELLANEOUS
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SECTION 8.01. Waivers; Amendments. No failure or delay on the part of
the Purchaser or the Seller (or any assignee thereof) in exercising any power,
right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy preclude
any other further exercise thereof or the exercise of any other power, right or
remedy. The rights and remedies herein provided shall be cumulative and
nonexclusive of any rights or remedies provided by law. Any provision of this
Agreement may be amended if, but only if, (a) such amendment is in writing and
is consented to by the Seller, the Purchaser and the Trustee and (b) the Trustee
shall have received from each Rating Agency confirmation that such amendment
will not result in the downgrading or withdrawal of the then current ratings of
any Series.
SECTION 8.02. Notices. Except as provided below, all communications and
notices provided for hereunder shall be in writing and shall be given to the
other party at its address set forth below its name on the signature pages
hereto or at such other address as such party may hereafter specify for the
purposes of notice to such party. Each such notice or other communication shall
be effective (i) if given by mail, three (3) Business Days following such
posting, postage prepaid, U.S. certified or registered, (ii) if given by
overnight courier, one (1) Business Day after deposit thereof with a national
overnight courier service, or (iii) if given by any other means, when received
at the address specified on the signature pages hereof.
SECTION 8.03. Effectiveness; Binding Effect; Assignability. (a) This
Agreement shall become effective on the Closing Date and shall, from and after
such date, be binding upon and inure to the benefit of the Seller and the
Purchaser and their respective successors and permitted assigns. The Seller may
not assign any of its rights or delegate any of its duties hereunder without the
prior written consent of the Purchaser and the Trustee. No provision of this
Agreement shall in any manner restrict the ability of the Purchaser (or the
Trustee or any Noteholder as assignees of the Purchaser) to assign, participate,
grant security interests in, or otherwise transfer any of their rights or
remedies hereunder.
(b) Without limiting the foregoing, the Seller hereby acknowledges
that, contemporaneously herewith, the Purchaser is granting, assigning,
transferring and conveying to the Trustee, for its benefit and for the benefit
of the "Noteholders" (as defined in the Indenture), and the foregoing's
assignees, under the Indenture, a security interest in all of the Purchaser's
right and title to and interest in, among other things, the Transferred Assets
and this Agreement to the extent relating to any "Pledged Assets" (as defined in
the Indenture), including all of the Purchaser's rights, remedies, powers and
privileges, and all claims of the Purchaser against the Seller, under or with
respect to this Agreement (whether arising pursuant to the terms of this
Agreement or otherwise available at law or in equity), including (i) the right
of the Purchaser and the obligations of the Seller hereunder and (ii) the right,
at any time, to give or withhold consents, requests, notices, directions,
approvals, demands, extensions or waivers under or with respect to this
Agreement or the obligations in respect of the Seller hereunder to the same
extent as the Purchaser may do. The Seller hereby consents to such grant,
transfer, assignment and
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conveyance to the Trustee and acknowledges and agrees that the Trustee, as the
holder of a security interest for the benefit of the Noteholders and each of its
assignees, shall be a third party beneficiary of the rights of the Purchaser
arising hereunder.
(c) The Seller hereby agrees to execute all agreements, instruments and
documents, and to take all other action, that the Purchaser or the Trustee
reasonably determines is necessary or appropriate to evidence the assignments
described in clause (b) immediately above. To the extent that the Purchaser has
granted or grants powers of attorney to the Trustee under the Indenture, the
Seller hereby grants a corresponding power of attorney on the same terms to the
Purchaser. The Seller hereby acknowledges and agrees that the Purchaser, in all
of its capacities, shall assign to the Trustee for the benefit of the
Noteholders, and each of its assignees, such powers of attorney and other rights
and interests granted by the Seller to the Purchaser hereunder and agrees to
cooperate fully with the Trustee in the exercise of such rights.
(d) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the Collection Date; provided, however, that (i)
the indemnification and payment provisions of Article VII and Section 8.05 and
(ii) the provisions of Sections 8.08 and 8.10, shall, in each case, be
continuing and shall survive any termination of this Agreement.
SECTION 8.04. GOVERNING LAW; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE.
(b) EACH OF THE SELLER AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE BETWEEN EITHER OF THEM ARISING OUT OF, CONNECTED WITH,
RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH
THIS AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS.
SECTION 8.05. Costs and Expenses. In addition to the rights of
indemnification under Article VII hereof, the Seller agrees to pay the Purchaser
(and its agents' and assignees') within 30 days after demand all reasonable
out-of-pocket costs and expenses (including without limitation, reasonable
counsel fees and expenses) in connection with the enforcement of the covenants,
agreements, liabilities and obligations of the Seller under this Agreement.
SECTION 8.06. Execution in Counterparts; Severability. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the
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validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 8.07. Purchase Termination. (a) The agreements of the Seller to
sell Receivables hereunder may be terminated at any time by the Seller by giving
written notice thereof to the Purchaser and the Trustee of the Seller's election
to terminate this Agreement, in which event the Purchase Termination Date shall
thereafter occur on the date specified therefor by the Seller in such notice,
but in any event not less than 60 days after the Trustee's receipt of such
notice.
(b) Notwithstanding any such termination described under paragraph (a)
above, all other provisions of this Agreement shall remain in full force and
effect as provided in Section 8.03.
SECTION 8.08. No Proceedings. The Seller hereby agrees that it will not
institute against the Purchaser, or join any other Person in instituting against
the Purchaser, any proceeding of the type referred to in the definition of
"Insolvency Event" in the Indenture, so long as there shall not have elapsed one
year plus one day since the last day on which any amounts owing under the Notes
of the last outstanding Series shall have been indefeasibly paid in full in
cash. The foregoing shall limit the rights of the Seller under any and all
agreements it may have with the Purchaser but shall not limit the right of the
Seller to file any claim in or otherwise take any action with respect to any
insolvency proceeding that was instituted against the Purchaser by any Person
other than the Seller or any Affiliate thereof. The provisions of this Section
8.08 shall survive the termination of this Agreement.
SECTION 8.09. Entire Agreement. This Agreement, together with the other
Operative Documents, including the exhibits and schedules hereto and thereto,
contains a final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof and shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, superseding all previous oral statements and other writings with respect
thereto.
SECTION 8.10. Limitations on Liability. None of the members, managers,
partners, officers, employees, agents, shareholders, directors or holders of
limited liability company interests of or in (x) the Purchaser or the Seller or
(y) the members of the Seller, past, present or future, shall be under any
liability to the Seller or the Purchaser, respectively, any of their successors
or assigns, or any other Person for any action taken or for refraining from the
taking of any action in such capacities or otherwise pursuant to this Agreement
or for any obligation or covenant under this Agreement, it being understood that
this Agreement and the obligations created hereunder shall be, to the fullest
extent permitted under applicable law, solely the limited liability company
obligation of the Seller and the Purchaser, respectively. The Seller, the
Purchaser and any member, manager, partner, officer, employee, agent,
shareholder, director
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or holder of a limited liability company interest of or in (x) the Seller or the
Purchaser and (y) any members of the Seller, may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
(other than the Seller or any Affiliate thereof) respecting any matters arising
hereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
J. G. WENTWORTH RECEIVABLES II LLC
By: J.G. Wentworth S.S.C. Limited Partnership,
its manager
By: J.G. Wentworth Structured Settlement
Funding Corporation, its General Partner
By: __________________________________________
Name:
Title:
300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention:____________________
Telecopy No.: (215) 567-7525
J. G. WENTWORTH RECEIVABLES III LLC
By: J.G. Wentworth Receivables II LLC,
its manager
By: J.G. Wentworth S.S.C. Limited Partnership,
its manager
By: J.G. Wentworth Structured Settlement
Funding Corporation, its General Partner
By: __________________________________________
Name:
Title:
300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention:____________________
Telecopy No.: (215) 567-7525
================================================================================
NOTE PURCHASE AGREEMENT
among
THE PARTIES SET FORTH ON
THE SIGNATURE PAGES HEREOF
as Purchasers
and
J.G. WENTWORTH RECEIVABLES III LLC
as Issuer
$60,506,718 7.2 % STRUCTURED SETTLEMENT-BACKED NOTES, SERIES 1997-A
Dated as of September 30, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.......................................................1
SECTION 1.01 Certain Defined Terms......................................1
SECTION 1.02 Other Definitional Provisions..............................2
ARTICLE II PURCHASE AND SALE.................................................3
SECTION 2.01 Purchase and Sale of the Notes.............................3
ARTICLE III CONDITIONS PRECEDENT TO OBLIGATION OF THE PURCHASERS..............3
SECTION 3.01 Conditions.................................................3
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ISSUER......................5
SECTION 4.01 Reaffirmation..............................................6
SECTION 4.02 Authority, etc.............................................6
SECTION 4.03 Series 1997A Notes.........................................6
SECTION 4.04 Investment Company Act.....................................6
SECTION 4.05 Offering of Notes..........................................7
SECTION 4.06 Full Disclosure............................................7
SECTION 4.07 The Company; The Seller; Issuer Membership.................7
SECTION 4.08 CUSIP No.; Brokerage Fees..................................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER..................7
SECTION 5.01 Representations and Warranties.............................7
ARTICLE VI INDEMNIFICATION..................................................12
SECTION 6.01 Indemnification by the Issuer.............................12
ARTICLE VII MISCELLANEOUS....................................................12
SECTION 7.01 Amendments; etc...........................................12
SECTION 7.02 Notices...................................................13
SECTION 7.03 No Waiver; Remedies.......................................13
SECTION 7.04 Governing Law.............................................13
SECTION 7.05 No Proceedings............................................13
SECTION 7.06 WAIVER OF RIGHT TO JURY TRIAL.............................13
SECTION 7.07 Binding Effect............................................13
SECTION 7.08 Execution in Counterparts.................................13
SECTION 7.09 Survival..................................................14
SECTION 7.10 Limitations on Liability..................................14
EXHIBIT A -- Form of Order
EXHIBIT B -- Trustee Account Information
EXHIBIT C -- List of Closing Documents
<PAGE>
NOTE PURCHASE AGREEMENT (this "Agreement") dated as of September 30,
1997, among THE PERSONS SET FORTH ON THE SIGNATURE PAGES HERETO AS PURCHASERS
(each a "Purchaser" and collectively the "Purchasers"), J.G. WENTWORTH
RECEIVABLES III LLC, a Delaware limited liability company (the "Issuer"), and
PNC BANK, NATIONAL ASSOCIATION, a national banking association, not individually
but solely in its capacity as trustee under the Indenture referred to below (in
such capacity, the "Trustee").
W I T N E S S E T H:
WHEREAS, the Issuer has authorized and executed, and the Trustee has
authenticated, the Notes in accordance with an Order; and
WHEREAS, subject to the terms and conditions of this Agreement and
the Series Supplement and pursuant to such Order, the Issuer desires to sell to
the Purchasers, and the Purchasers desire to purchase from the Issuer, Notes as
hereafter provided;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. Capitalized terms used herein
(including in the preamble and recitals hereof) without definition shall have
the meanings set forth, or incorporated by reference, in the Series Supplement
or the Indenture, as applicable. Additionally, the following terms shall have
the following meanings:
"Closing" has the meaning specified in Section 2.01(a) hereof.
"Closing Date" has the meaning specified in Section 2.01(a) hereof.
"Commitment" means, as to any Purchaser, the several obligations of
such Purchaser to purchase Notes in an Aggregate Principal Balance equal to the
amount set forth opposite such Purchaser's name on the signature pages hereto.
"Company" means J.G. Wentworth S.S.C. Limited Partnership, a
Delaware limited partnership.
"Indemnified Losses" has the meaning specified in Section 7.01
hereof.
"Indemnified Party" has the meaning specified in Section 7.01
hereof.
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<PAGE>
"Indenture" means the Master Trust Indenture and Security Agreement,
dated as of September 30, 1997, among J.G. Wentworth Receivables III LLC, as the
Issuer, J.G. Wentworth & Company, Inc., as the Initial Master Servicer, and PNC
Bank, National Association, as Trustee, as the same may be amended, restated,
modified or otherwise supplemented from time to time.
"Notes" has the meaning specified in Section 2.01(b) hereof.
"PPM" has the meaning specified in Section 4.06 hereof.
"Preliminary PPM" has the meaning specified in Section 4.06 hereof.
"Purchase Price" has the meaning specified in Section 2.01(b)
hereof.
"Purchaser Group" means the group of Purchasers set forth underneath
such heading on the signature pages hereto.
"Seller" means J.G. Wentworth Receivables II LLC, a Delaware limited
liability company.
"Series Supplement" means the Series 1997-A Supplement to the
Indenture, dated as of September 30, 1997, among the Issuer, the Master Servicer
and the Trustee, as the same may be amended, restated, modified or otherwise
supplemented from time to time.
SECTION 1.02 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.01, and accounting terms partially defined in Section 1.01 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles. To the extent that the definitions of accounting
terms herein are inconsistent with the meanings of such terms under United
States generally accepted accounting principles, the definitions contained
herein shall control.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and Section,
subsection, Schedule, Exhibit and Appendix references contained in this
Agreement are references to Sections, subsections, Schedules, Exhibits and the
Appendix in or to this Agreement unless otherwise specified.
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<PAGE>
ARTICLE II
PURCHASE AND SALE
SECTION 2.01 Purchase and Sale of the Notes. (a) The closing (the
"Closing") of the purchase and sale of the Notes shall take place at 11:00 a.m.
New York time at the offices of Sidley & Austin, One First National Plaza,
Chicago, Illinois 60603, on September 30, 1997, or if the conditions to closing
set forth in Article III of this Agreement shall not have been satisfied or
waived by such date, as soon as practicable after such conditions shall have
been satisfied or waived, or at such other time (not later than October 8, 1997
unless agreed to by all parties hereto), date and place as the parties shall
agree upon (the date of the Closing being referred to herein as the "Closing
Date").
(b) On the Closing Date, pursuant to an Order (a copy of which is
attached hereto as Exhibit A), the Issuer shall issue, sell, transfer and
deliver to each Purchaser, and each Purchaser severally agrees to purchase on
the Closing Date, Series 1997-A Notes (collectively, the "Notes") for a purchase
price ("Purchase Price") equal with respect to each Purchaser, to such
Purchaser's Commitment. Without limiting any other provision of this Agreement,
the obligation of each Purchaser to purchase the Notes on the Closing Date is
subject to the satisfaction of the conditions precedent set forth in Article III
hereof.
(c) The Purchase Price for each Note shall be payable in full at
Closing and shall be made in immediately available funds in U.S. Dollars to the
account of the Trustee specified in Exhibit B hereto.
(d) On the Closing Date, the Issuer will deliver to each Purchaser a
Note, dated the Closing Date, in the name of each such Purchaser and in an
original Principal Balance equal to the Purchase Price paid by such Purchaser
therefor, duly authenticated by the Trustee in accordance with the provisions of
the Indenture against delivery by such Purchaser to the Issuer of the Purchase
Price for such Purchaser's respective Notes in accordance with clause (c) above.
ARTICLE III
CONDITIONS PRECEDENT TO
OBLIGATION OF THE PURCHASERS
SECTION 3.01 Conditions. The obligation of any Purchaser to purchase
and pay for the Notes on the Closing Date is subject to the satisfaction at the
time of the Closing of the following conditions:
(a) Documents. Each of the documents on Exhibit C attached hereto
has been duly authorized, executed and delivered by the signatories thereto
(other than the Purchasers) and copies thereof (in form and substance
satisfactory to the Purchasers) have been delivered to the Trustee.
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<PAGE>
(b) Performance of Obligations. All the terms, covenants, agreements
and conditions of the Indenture, the Series Supplement, the Seller Purchase
Agreement, the Issuer Purchase Agreement, the Revolving Credit Agreement, the
Intercreditor Agreement and this Agreement to be complied with and performed by
the Company, the Seller, the Issuer, and the Master Servicer for Series 1997-A
at or before the Closing shall have been complied with and performed in all
respects.
(c) Representations and Warranties. (i) Each of the representations
and warranties of the Issuer and the Master Servicer for Series 1997-A made in
the Indenture, the Series Supplement, the Issuer Purchase Agreement, the
Intercreditor Agreement and this Agreement shall be true and correct in all
material respects as of the time of the Closing (except to the extent they
expressly relate to an earlier or later time), and (ii) each of the
representations and warranties of the Seller made in the Seller Purchase
Agreement, the Revolving Credit Agreement and the Intercreditor Agreement shall
be true and correct in all material respects as of the time of the Closing
(except to the extent they expressly relate to an earlier or later time).
(d) No Event of Default. On the Closing Date and after giving effect
to the purchase of Notes contemplated herein, no Event of Default, Potential
Event of Default, or Series Event of Default (or any event or condition which
with the giving of notice or passage of time, or both, would constitute a Series
Event of Default) with respect to any Series shall have occurred and be
continuing at Closing or would result from the transactions contemplated under
the Operative Documents.
(e) Effectiveness of Operative Documents. The Operative Documents
with respect to Series 1997-A, including, without limitation, the Indenture, the
Series Supplement and the Intercreditor Agreement, shall become effective
pursuant to their terms.
(f) Documentation for Purchasers. Each Purchaser shall have received
an original signed copy of each certificate required to be delivered to the
Trustee or the Placement Agent in accordance with Section 5.01(a), (b) and (c)
of the Series Supplement.
(g) Opinions. Each Purchaser shall have received a signed copy of
each opinion of counsel delivered on the Closing Date in connection with the
Indenture and the Series Supplement.
(h) Rating of Notes. Each Purchaser shall have received written
notice from the Rating Agencies that the Notes shall have been rated by Duff &
Phelps and Moody's A and A2, respectively.
(i) No Change in Financial Markets. There shall have not occurred at
any time on or after the date hereof any of the following: (i) a suspension or
material limitation in trading in securities generally on the New York Stock
Exchange; (ii) a general moratorium on commercial banking activities in New York
declared by either Federal or New York State authorities; (iii) the outbreak or
material escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war; or (iv) any
other change in national or international
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<PAGE>
financial, political or economic conditions or currency exchange rates or
exchange controls, but with respect to any such event specified in clause (iii)
or (iv) only if such event makes it impracticable to proceed with the offering
or the delivery of the Notes on the terms and in the manner contemplated hereby.
(j) Legal Investment. At the Closing Date, (i) the Notes to be
purchased by each Purchaser will be a legal investment for such Purchaser under
the laws of each jurisdiction to which such Purchaser may be subject, without
resort to any so-called basket provision of said laws such as Section 1405(a)(8)
of the New York Insurance Law, (ii) the purchase of and payment for said Notes
by each Purchaser will not violate any applicable law or governmental regulation
and shall not subject such Purchaser to any tax, penalty, liability or other
onerous condition under or pursuant to any applicable law or regulation and
(iii) each Purchaser shall have received such certificates or other evidence as
such Purchaser may reasonably request supporting the foregoing.
(k) Other Purchasers. As to any Purchaser, each other Purchaser
shall have purchased and made payment for the aggregate principal amount of the
Notes to be purchased by such other Purchaser pursuant hereto.
(l) Other Documents. Each Purchaser shall have received such other
information, documents, certificates and opinions as any Purchaser or special
counsel may reasonably request, all in form and substance reasonably
satisfactory to the Person requesting the same.
(m) Conditions under Series Supplement. All conditions to issuance
of the Notes in Article V of the Series Supplement shall have been satisfied.
If any condition specified in this Article III shall not have been
satisfied when and as required in this Agreement, any Purchaser may, by notice
to the Issuer at any time prior to the Closing Date, terminate such Purchaser's
obligation to purchase the Notes pursuant to this Agreement. Notice of such
termination shall be given to the Issuer in writing or by telephone promptly
confirmed in writing. Forthwith upon receipt of any such termination notice, the
Issuer shall give each other Purchaser written notice thereof.
Upon the purchase and payment by the Purchasers of the Notes, each
of the conditions set forth in this Section 3.01 shall be irrevocably deemed to
have been satisfied, provided that nothing in this paragraph will constitute a
waiver of any remedies the Purchasers may have it such conditions were in fact
not so satisfied on the date and purchase of such Notes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
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<PAGE>
As of the Closing Date, the Issuer hereby makes the following
representations and warranties to the Purchasers and the Trustee, on which the
Purchasers and the Trustee shall rely in purchasing the Notes.
SECTION 4.01 Reaffirmation. The Issuer hereby remakes and reaffirms
to the Purchasers and the Trustee the representations and warranties of the
Issuer set forth in Section 2.03 of the Indenture and, with respect to the
Series 1997-A Receivables, in Section 3.03 of the Series Supplement, and hereby
represents and warrants that such representations and warranties are true and
correct in all material respects as of the date hereof (unless such
representations and warranties specifically refer to an earlier or later date).
SECTION 4.02 Authority, etc. (a) The execution, delivery and
performance by the Issuer of this Agreement, and the consummation of the
transactions herein contemplated will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any Lien, charge or encumbrance upon any of the
property or assets of the Issuer or any of its Affiliates pursuant to the terms
of, any indenture, mortgage, deed of trust, loan agreement or Organizational
Documents or other agreement (excluding this Agreement) or instrument to which
it or any of its Affiliates is bound or to which any of its property or assets
is subject, nor will such action result in any violation of any Requirement of
Law applicable to the Issuer, except, in each case, where such conflict, breach,
default, creation or imposition of any Lien or violation does not have, and
could not reasonably be expected to have, a Material Adverse Effect.
(b) All approvals, authorizations or consents of any Person or of
any Governmental Authority required to be obtained by the Issuer in connection
with the execution and delivery of this Agreement by the Issuer or the
consummation by the Issuer of the transactions contemplated hereby have been
obtained.
(c) This Agreement has been duly authorized, executed and delivered
by the Issuer and this Agreement is the valid and legally binding obligation of
the Issuer, enforceable against the Issuer in accordance with its terms, subject
as to enforcement of bankruptcy, receivership, conservatorship, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
SECTION 4.03 Series 1997-A Notes. The Issuer is authorized to
execute and deliver, and has duly and validly authorized and instructed the
Trustee to authenticate and deliver the Notes in accordance with the terms of
the Indenture and the Series Supplement. The Notes, when executed and
authenticated by the Trustee in accordance with the terms of the Indenture and
the Series Supplement and, in the case of the Notes delivered to the Purchasers
and paid for by the Purchasers in accordance with this Agreement, will be duly
and validly issued and outstanding, and will be entitled to the benefits of the
Indenture and the Series Supplement.
SECTION 4.04 Investment Company Act. As of the Closing Date,
assuming the accuracy of the representations and warranties of the Purchasers in
Section 6.01(f) hereof, the Issuer the is not, nor would the issuance of the
Notes pursuant to the terms hereof and of the
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<PAGE>
Indenture and Series Supplement cause the Issuer to become, an "investment
company" or controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 4.05 Offering of Notes. Assuming all of the representations
and warranties of each Purchaser in Article VI hereof and in any other
certificate delivered by the Purchaser on the Closing Date are true and correct
in all material respects, the offer and sale of the Series 1997-A Notes pursuant
to the terms hereof and of the Indenture and Series Supplement are not required
to be registered under Section 5 of the Act pursuant to Section 4(2) of the Act.
SECTION 4.06 Full Disclosure. All written factual information
heretofore furnished by the Issuer to the Trustee and the Purchasers (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,
("Preliminary PPM") dated August 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 time of Closing.
SECTION 4.07 The Company; The Seller; Issuer Membership. To the best
of Issuer's knowledge after due inquiry, each of the Company and the Seller is
and will be solvent and able to pay its debts as they come due, and has and will
have adequate capital. On the date hereof the Issuer's sole members are (i) the
Seller, (ii) Andrew L. Stidd and (iii) Kevin P. Burns
SECTION 4.08 CUSIP No.; Brokerage Fees. The Corporate CUSIP Number
for the Notes is 466156 AA4. In marketing, distributing and selling the Notes,
the Issuer has not used the services of any broker, dealer, underwriter or
placement agent other than ING Baring (U.S.) Securities, Inc. ("ING Barings")
and no sales commissions, underwriting fees or other similar amounts are payable
to any Person other than ING Barings, as Placement Agent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
SECTION 5.01 Representations and Warranties. Each Purchaser hereby
represents and warrants to each of the Trustee, the Issuer, the Placement Agent,
and the Master Servicer that, as of the Closing Date:
(a) (i) it has made its own independent evaluation of the risks and
merits of purchasing the Notes and has had the opportunity to ask questions and
to obtain such information as it has deemed appropriate to make an informed
investment decision regarding the Notes and
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<PAGE>
(ii) it has not relied on the Preliminary PPM (or any earlier version) or any of
the information contained therein in making its investment decision regarding
the Notes.
(b) The Purchaser is an "accredited investor" as defined in Rule 501
(a)(1) or (3) of Regulation D (an "Institutional Accredited Investor")
promulgated by the Securities and Exchange Commission (the "Commission") under
the Act, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment in the Notes
and is aware that it may be required to, and is able to, bear the economic risk
of such investment for an indefinite period of time.
(c) The Purchaser understands that the Notes have not been and will
not be registered under the Act, and have not and will not be registered or
qualified under any applicable "Blue Sky" law, and that the offering and sale of
the Notes has not been reviewed by, passed on or submitted to any federal or
state agency or commission, securities exchange or other regulatory body. The
Purchaser further understands that the Notes may not be offered, sold,
transferred, pledged, hypothecated or otherwise disposed of except as permitted
herein and under the Indenture and the Series Supplement.
(d) The Purchaser is acquiring the Notes for its own account, for
investment, and without a view to any distribution, resale or other transfer
thereof except as contemplated in the following provisions.
(i) The Purchaser will not resell or otherwise transfer any of the Notes
unless (x) such resale or transfer is made to a person who is a
Qualified Purchaser and (ii) such resale or transfer is made:
(A) in the United States of America to Institutional Accredited
Investors (or, in the case of any such sale to an Affiliated
Entity or the Company or an Affiliate thereof, to 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 or transfer, in form and substance reasonably
satisfactory to the Trustee and/or the Issuer, as the case may
be;
(B) in the United States of America to a transferee that such
Purchaser reasonably believes is a Qualified Institutional
Buyer purchasing such 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 or transfer
is being made in
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reliance on Rule 144A under 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/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 or transfer, in form and substance reasonably
satisfactory to the Trustee and/or the Issuer, as the case may
be; or
(C) in the United States of America to a transferee to whom such
sale or transfer is being made in reliance on Rule 144 under
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 or transfer,
in form and substance reasonably satisfactory to the Trustee
and/or the Issuer, as the case may be, and
(ii) The Note Registrar and Transfer Agent shall have received, prior to
the date of any such proposed sale or transfer, a written instrument
of sale executed by transferring Noteholder and the Trustee.
(iii) The Notes shall bear a legend regarding the restrictions on transfer
as set forth herein which shall be substantially to the following
effect:
"THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY ACCEPTING
THIS NOTE, AGREES THAT THE SECURITIES REPRESENTED BY THIS NOTE MAY
BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN
COMPLIANCE WITH THE ACT AND OTHER APPLICABLE LAWS AND ONLY (I) TO A
PERSON WHO IS A "QUALIFIED PURCHASER" AS DEFINED IN SECTION 2(a)(51)
OF THE INVESTMENT COMPANY ACT OF 1940, AND (II):
(A) IN THE UNITED STATES OF AMERICA TO AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1) OR (3) OF REGULATION D PROMULGATED
BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT
("REGULATION D") (OR, IN THE CASE OF A SALE TO J. G. WENTWORTH
& COMPANY, INC. (THE "COMPANY") OR ANY OF ITS DIRECT AND
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INDIRECT SUBSIDIARIES AND AFFILIATES, OR TO J.G. WENTWORTH
S.S.C. LIMITED PARTNERSHIP (THE "PARTNERSHIP") OR AN AFFILIATE
THEREOF, TO AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)
OF REGULATION D) 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 PNC BANK, NATIONAL ASSOCIATION
OR ANY SUCCESSOR (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 OR TRANSFER, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE TRUSTEE AND/OR THE ISSUER, AS THE CASE MAY
BE;
(B) IN THE UNITED STATES OF AMERICA TO A TRANSFEREE THAT SUCH
PURCHASER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" WITHIN THE MEANING OF RULE 144A UNDER THE ACT (A
"QUALIFIED INSTITUTIONAL BUYER") PURCHASING SUCH 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 OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER
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 OR TRANSFER,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE TRUSTEE
AND/OR THE ISSUER, AS THE CASE MAY BE; OR
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(C) IN THE UNITED STATES OF AMERICA TO A TRANSFEREE TO WHOM SUCH
SALE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144 UNDER
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 OR TRANSFER,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE TRUSTEE
AND/OR THE ISSUER, AS THE CASE MAY BE.
(iv) The Purchaser will not sell, transfer or otherwise convey Notes 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
deemed to represent and warrant that it is not such a Person prior
to its purchase of any Notes and to the extent any such
representation and warranty is incorrect such sale shall be
rescinded and deemed not to have occurred).
(v) Each Purchaser will notify any prospective purchaser, pledgee or
other transferee of any Notes from such Purchaser of the transfer
restrictions referred to in this Section 6.01(h).
It is hereby understood and agreed that the disposition of the Notes
shall remain solely within the control of the Noteholders.
(e) The Purchaser hereby represents and warrants that either (x) the
acquisition, holding and/or continued ownership of the Notes by the Purchaser
(or transferee, as the case may be) will not result in a "prohibited
transaction" under, and as defined in, ERISA or Section 4975 of the Internal
Revenue Code or (y), such Purchaser (a) is an insurance company and the source
of funds is an "insurance company general account," as such term is defined in
the Department of Labor Prohibited Transaction Class Exemption 95-60 (issued
July 12, 1995) ("PTCE 95-60") and as of the date of this Agreement there is no
"employee benefit plan" with respect to which the aggregate amount of such
general account's reserves and liabilities for the contracts held by or on
behalf of such "employee benefit plan" and all other "employee benefit plans"
maintained by the same employer (and affiliates thereof as defined in Section
V(a)(1) of PTCE 95-60) or by the same employee organization (in each case
determined in accordance with the provisions of PTCE 95-60) exceeds 10% of the
total reserves and liabilities of such general account (as determined under PTCE
95-60) (exclusive of separate account liabilities) plus surplus as set forth in
the National Association of Insurance Commissioners Annual Statement filed with
the state of
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<PAGE>
domicile of such Purchaser and (b) has no reason to believe that the other
requirements of PTCE 95-60 have not been satisfied.
(f) The Purchaser hereby represents and warrants and covenants that
it is a "Qualified Purchaser" as defined in Section 2(a)(51) of the Investment
Company Act.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01 Indemnification by the Issuer. Without limiting any
other rights which the Purchaser may have hereunder or under applicable law, but
without duplication, the Issuer hereby agrees to indemnify the Purchaser and the
Trustee and each such Person's permitted successors and assigns and all
officers, directors, trustees, agents and employees of the foregoing (each of
the foregoing Persons being individually referred to herein as an "Indemnified
Party") 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 a breach of Issuer's representations
hereunder or the failure by the Issuer to comply with (i) any term, provision or
covenant contained in this Agreement, the Indenture or the Series Supplement, or
(ii) any agreement executed in connection therewith or with any applicable law,
rule or regulation with respect thereto (all of the foregoing losses being
called the "Indemnified Losses").
Any Indemnified Losses payable by the Issuer under this Section 7.01
shall be payable solely from Available Issuer Funds and be paid by the Issuer to
the Purchaser within five (5) Business Days following the Purchaser's written
demand therefor, setting forth in reasonable detail the basis for such demand.
The agreements of the Issuer contained in this Section 7.01 shall survive the
Closing Date. In addition, in no event shall Indemnified Losses include any
consequential, special or punitive damages. Nothing in this Section 7.01 shall
require the Issuer to pay Indemnified Amounts if after payment thereof the
Issuer would be insolvent or fail to maintain a net worth sufficient to carry on
its business as then being conducted and pay its debts as they generally become
due. The provisions of this Section 7.01 shall survive the termination of this
Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Amendments; etc. No amendment or waiver of any
provision of this Agreement shall in any event be effective unless the same
shall be in writing and signed by the Issuer, the Trustee and each affected
Purchaser, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
-12-
<PAGE>
SECTION 7.02 Notices. Except as provided below, all communications
and notices provided for hereunder shall be in writing (excluding telecopy or
electronic facsimile transmission or similar writing) and shall be given to the
other party at its address set forth below its name on the signature pages
hereto or at such other address as such party may hereafter specify in writing
for the purposes of notice to such party. Each such notice or other communi
cation shall be effective (i) if given by mail, three (3) Business Days
following such posting, postage prepaid, U.S. certified or registered, (ii) if
given by overnight courier, one (1) Business Day after deposit thereof with a
national overnight courier service, or (iii) if given by any other means, when
received at the address specified on the signature pages hereof.
SECTION 7.03 No Waiver; Remedies. No failure on the part of any
party hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 7.04 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE.
SECTION 7.05 No Proceedings. Each of the Issuer, the Trustee and
each Purchaser, by entering into this Agreement, covenant and agree that they
will not at any time institute against, or join any other Person in instituting
against, the Issuer any bankruptcy, reorganization, arrangement, insolvency, or
liquidation or other similar proceedings under any federal or state bankruptcy,
insolvency or other similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar Person for the Issuer or any
substantial portion of their respective assets until, in each case, one year and
one day after the Collection Date of the last outstanding Series.
SECTION 7.06 WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING (WHETHER IN
CONTRACT OR IN TORT) ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH, THE
TRANSACTIONS CONTEMPLATED HEREIN AND/OR IN THE INDENTURE OR THE SERIES
SUPPLEMENT AND FOR ANY COUNTERCLAIM RELATING THERETO.
SECTION 7.07 Binding Effect. This Agreement shall be binding upon,
and shall inure to the benefit of, each of the parties hereto and each of their
respective successors and assigns.
SECTION 7.08 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
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<PAGE>
SECTION 7.09 Survival. All representations, warranties, covenants,
guaranties and indemnifications contained in this Agreement and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the sale and transfer of the Notes.
SECTION 7.10 Limitations on Liability. (a) Notwithstanding any
provision to the contrary in this Agreement, indemnification payments and other
amounts described herein as payable by the Issuer hereunder, whether following
demand, within a specified time period or otherwise shall only be payable 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
Indenture and the Series Supplement). Unless and until Available Issuer Funds
become available to pay any such amount, such amount 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 any such holders, past, present or future,
shall be under any liability to the Trustee, the Purchasers or any other Person
for any action taken or for refraining from the taking of any action in such
capacities or otherwise pursuant to this Agreement or for any obligation or
covenant under this Agreement, it being understood that, with respect to the
Issuer, this Agreement and the obligations created thereunder and hereunder
shall be, to the fullest extent permitted under applicable law, solely the
limited liability company obligations of the Issuer. The Issuer and any member,
manager, officer, employee, agent, stockholder, holder of limited liability
company interest, officer or director of or in the Issuer, 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) respecting any
matters arising hereunder.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
ISSUER: J. G. WENTWORTH RECEIVABLES III LLC
By: J.G. Wentworth Receivables II LLC, as Designated
Manager
By: J.G. Wentworth S.S.C. Limited Partnership, as
Designated Manager
By: J.G. Wentworth Structured Settlement Funding
Corporation, its General Partner
By:
-----------------------------
Name: Gary Veloric
Title: Chairman
300 Delaware Avenue, Suite 1704
Wilmington, DE 19801
Attention: Gary Veloric
<PAGE>
PURCHASER GROUP #1
THE PRINCIPAL FINANCIAL GROUP
PURCHASER A PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
Aggregate Principal
Balance of Note
$25,281,510 By:
-------------------------------------
Name:
Title:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392
Attn: Investment Department-Securities
<PAGE>
PURCHASER GROUP #2
LINCOLN INVESTMENT MANAGEMENT, INC.
PURCHASER B THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Aggregate Principal By: Lincoln Investment Management, Inc.,
Balance of Note Its Attorney-In-Fact
$7,000,000
By:
-------------------------------------
Name:
Title:
Lincoln Investment Management, Inc.
200 East Berry Street, Renaissance Square
Fort Wayne, IN 46802
Attention: Investments/Private Placements
PURCHASER C THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Aggregate Principal By: Lincoln Investment Management, Inc.,
Balance of Note Its Attorney-In-Fact
$968,906
By:
-------------------------------------
Name:
Title:
Lincoln Investment Management, Inc.
200 East Berry Street, Renaissance Square
Fort Wayne, IN 46802
Attention: Investments/Private Placements
<PAGE>
PURCHASER D THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Aggregate Principal By: Lincoln Investment Management, Inc.,
Balance of Note Its Attorney-In-Fact
$2,300,000
By:
-------------------------------------
Name:
Title:
Lincoln Investment Management, Inc.
200 East Berry Street, Renaissance Square
Fort Wayne, IN 46802
Attention: Investments/Private Placements
PURCHASER E THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Aggregate Principal By: Lincoln Investment Management, Inc.,
Balance of Note Its Attorney-In-Fact
$2,300,000
By:
-------------------------------------
Name:
Title:
Lincoln Investment Management, Inc.
200 East Berry Street, Renaissance Square
Fort Wayne, IN 46802
Attention: Investments/Private Placements
<PAGE>
PURCHASER F FIRST PENN-PACIFIC LIFE INSURANCE
COMPANY
Aggregate Principal By: Lincoln Investment Management, Inc.,
Balance of Note Its Attorney-In-Fact
$2,600,000
By:
-------------------------------------
Name:
Title:
Lincoln Investment Management, Inc.
200 East Berry Street, Renaissance Square
Fort Wayne, IN 46802
Attention: Investments/Private Placements
<PAGE>
PURCHASER GROUP #3
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
PURCHASER G THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
Aggregate Principal
Balance of Note
$15,000,000 By:
------------------------------------
Name:
Title:
The Chase Manhattan Bank
4 New York Plaza, 13th Floor
New York, NY 10004
Attn: Incoming Processing, J.Piperto,
13th Floor
<PAGE>
PURCHASER GROUP #4
GENERAL AMERICAN/CONNING
PURCHASER H COVA FINANCIAL SERVICES LIFE
INSURANCE COMPANY
Aggregate Principal
Balance of Note
$4,500,000 By:
------------------------------------
Name:
Title:
Conning Asset Management
P.O. Box 418
St. Louis, MO 63166
Attention: Investment Accounting
with copies to:
COVA Financial Services Life Insurance Co.
c/o The Northern Trust Company
P.O. Box 92996
Chicago, IL 60675
PURCHASER I COVA FINANCIAL LIFE INSURANCE
COMPANY
Aggregate Principal
Balance of Note
$556,302 By:
------------------------------------
Name:
Title:
Conning Asset Management
P.O. Box 418
St. Louis, MO 63166
Attention: Investment Accounting
with copies to:
COVA Financial Services Life Insurance Co.
c/o The Northern Trust Company
P.O. Box 92996
Chicago, IL 60675
<PAGE>
EXHIBIT A
[FORM OF ORDER]
-22-
<PAGE>
EXHIBIT B
TRUSTEE ACCOUNT INFORMATION
PNC Bank, Wilmington Delaware
ABA # 031100089
Credit A/C Name Trust Funds
Credit A/C 5678702981
Attn: Judy Wisniewski
J.G. Wentworth 97-A
-23-
<PAGE>
EXHIBIT C
LIST OF CLOSING DOCUMENTS
Attached
-24-
AMENDED AND RESTATED COLLATERAL TRUST AND
INTERCREDITOR AGREEMENT
dated as of September 30, 1997
by and among
ING (U.S.) CAPITAL CORPORATION
as Agent and as a Lender
PNC BANK, NATIONAL ASSOCIATION
as Servicing Agent, as SSC Master Trust Trustee , as Issuer Trustee, as a
Lender and as Collateral Trustee
THE OTHER LENDERS
FROM TIME TO TIME PARTIES HERETO
J.G. WENTWORTH RECEIVABLES I LLC
as Trust Seller
J.G. WENTWORTH RECEIVABLES III LLC
as Issuer
J.G. WENTWORTH S.S.C. LIMITED PARTNERSHIP
as the Company
J.G. WENTWORTH RECEIVABLES II LLC
as Borrower and as Seller
and
J.G. WENTWORTH & COMPANY, INC.
as the initial Trust Master Servicer and as
the initial Issuer Master Servicer
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DECLARATION OF TRUST................................................................................3
ARTICLE 1. DEFINITIONS.............................................................................4
1.1. Certain Defined Terms...............................................................4
ARTICLE 2. INTERCREDITOR PROVISIONS................................................................8
2.1. Release of Lien.....................................................................8
2.2. Allocation of Property..............................................................9
2.3. Enforcement Actions.................................................................9
2.4. Agency for Perfection...............................................................9
2.5. Limitation on Liability of Parties to Each Other...................................10
2.6. Effect Upon Lender Documents, the Issuer Documents and Operative Documents.........10
ARTICLE 3. THE COLLATERAL TRUST AND THE COLLATERAL TRUSTEE........................................11
3.1. Authorization to Execute Collateral Trust Documents................................11
3.2. Certain Representations and Warranties.............................................11
3.3. Procedures for Allocating Shared Interest Collateral...............................11
3.4. Additional Collateral Trust Documents..............................................13
3.5. Powers of Attorney.................................................................13
3.6. Exercise of Powers.................................................................13
3.7. Limitation on Collateral Trustee's Duties in Respect of the Shared Interest
Collateral.....................................................................13
3.8. Limitation by Law..................................................................14
3.9. Information as to Holders; Notices to Holders; Notices to Collateral Trustee.......14
3.10. Compensation and Expenses..........................................................14
3.11. Stamp and Other Similar Taxes......................................................15
3.12. Filing Fees, Excise Taxes, etc.....................................................15
3.13. Indemnification....................................................................15
3.14. Further Assurances.................................................................16
3.15. Limitation on Repayment............................................................16
3.16. Acceptance of Trust................................................................16
3.17. Exculpatory Provisions.............................................................16
3.18. Delegation of Duties...............................................................17
3.19. Reliance by Collateral Trustee.....................................................18
3.20. Limitations on Duties of Collateral Trustee........................................18
3.21. Monies to be Held in Trust.........................................................19
3.22. Resignation and Removal of the Collateral Trustee..................................19
3.23. Merger of the Collateral Trustee...................................................20
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 4. MISCELLANEOUS..........................................................................21
4.1. Notices............................................................................21
4.2. Agreement Absolute.................................................................21
4.3. Successors and Assigns.............................................................21
4.4. Beneficiaries......................................................................22
4.5. GOVERNING LAW......................................................................22
4.6. Section Titles.....................................................................22
4.7. Severability.......................................................................22
4.8. Execution in Counterparts..........................................................22
4.9. Resolution of Disputes In Respect of Shared Interest Collateral....................22
4.10. Limitations on Liability...........................................................23
4.11. Nature of the Obligations and Modification of Lender Documents.....................23
4.12. Nature of the Trust Claim and Modification of Operative Documents..................23
4.13. Nature of the Issuer Claim and Modification of Issuer Documents....................24
4.14. Insolvency Proceeding..............................................................24
</TABLE>
-ii-
<PAGE>
AMENDED AND RESTATED COLLATERAL TRUST AND INTERCREDITOR AGREEMENT dated
as of September 30, 1997 (as modified, amended, restated or supplemented from
time to time, this "Agreement"), by and among:
(1) ING (U.S.) Capital Corporation ("ING Capital"), in its capacity
as agent under the Credit Agreement (as defined below) (in such
capacity, the "Agent") and as a Lender (as defined below);
(2) PNC Bank, National Association, a national banking association
("PNC Bank"), as servicing agent under the Credit Agreement
(in such capacity, the "Servicing Agent"), as trustee under
the Pooling and Servicing Agreement (as defined below) (in
such capacity, the "SSC Master Trust Trustee"), as trustee
under the Indenture (as defined below) and not in its
individual capacity (in such capacity, the "Issuer Trustee"),
as collateral trustee under this Agreement (in such capacity
and not in its individual capacity, the "Collateral Trustee")
for the respective Holders of Interests referred to below, and
as a Lender;
(3) The other financial institutions from time to time parties to
the Credit Agreement and, pursuant to Section 4.3, hereto
(together with ING Capital and PNC Bank, being collectively,
the "Lenders" and each individually being a "Lender");
(4) J.G. Wentworth Receivables I LLC, a Delaware limited liability
company ("JGW I LLC"), as seller (the "Trust Seller") under the
Pooling and Servicing Agreement;
(5) J.G. Wentworth S.S.C. Limited Partnership, a Delaware limited
partnership ("JGW SSC"), as seller (in such capacity, the
"Company") under the June 13 Seller Purchase Agreement (as
defined below);
(6) J.G. Wentworth Receivables II LLC, a Delaware limited
liability company ("JGW II LLC"), as Seller (in such capacity,
the "Seller") under the Issuer Purchase Agreement (as defined
below) and as the borrower as successor by assignment to the
Company (in such capacity, together with any successor thereto
in such capacity, the "Borrower") under the Credit Agreement;
(7) J.G. Wentworth Receivables III LLC, a Delaware limited liability
company ("JGW III LLC"), as issuer (in such capacity, the
"Issuer") under the Indenture; and
(8) J.G. Wentworth & Company, Inc., a Pennsylvania corporation, as
the initial master servicer (the "Trust Master Servicer")
under the Pooling and Servicing Agreement and as the initial
master servicer (the "Issuer Master Servicer") under the
Indenture.
RECITALS:
A. The Borrower (as successor by assignment to JGW SSC), the Agent, the
Servicing Agent and the Lenders are parties to an Amended and Restated Revolving
Credit Agreement, dated as of February 11, 1997, as amended by an Amendment No.
1 and an
<PAGE>
Assignment and Amendment No. 2, dated as of May 26, 1997 and September 30,
1997, respectively (as amended, and as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement")
pursuant to which or in accordance with which, the Lenders have agreed to make
loans, advances and other financial accommodations ("Advances") to the Borrower;
B. The Borrower, in order to secure its prompt repayment of the
Advances and interest thereon by the Borrower and the prompt payment and
performance of the other "Obligations" owing by the Borrower to the Lenders and
the Agent under (and as such term is defined in) the Credit Agreement and the
other instruments, documents, and agreements executed and delivered in
connection therewith (such instruments, documents and agreements (including the
Security Agreement referred to below), together with the Credit Agreement, being
hereinafter referred to as the "Lender Documents"), has assumed all of JGW SSC's
obligations and liabilities under that certain Amended and Restated Security
Agreement dated as of February 11, 1997 (as amended, restated, supplemented or
otherwise modified from time to time the "Security Agreement") in favor of the
Agent, pursuant to which the Borrower has granted a security interest to the
Agent, for the benefit of the Agent and the Lenders, in the "Collateral" (as
such term is defined therein), including, without limitation, the Receivables
and the Related Property and Collections relating thereto (as such terms are
hereinafter defined);
C. The Company and the Trust Seller have entered into that certain
Purchase Agreement dated as of June 13, 1997 (as amended, restated, supplemented
or otherwise modified from time to time, the "June 13 Seller Purchase
Agreement") between the Company and the Trust Seller pursuant to which the
Company may from time to time sell, transfer and otherwise convey (including by
way of contribution) or purport to sell, transfer or otherwise convey (in each
case, a "Transfer") to the Trust Seller all of the right, title and interest of
the Company in certain of the Company's Receivables and the Related Property and
Collections relating thereto and the proceeds of such Receivables and Related
Assets (such Receivables, Related Property, Collections and proceeds so sold or
purported to be Transferred to the Trust Seller by the Company pursuant to the
June 13 Seller Purchase Agreement being referred to as the "Trust Purchased
Assets");
D. The Trust Seller, the Trust Master Servicer and the SSC
Master Trust Trustee have entered into that certain Pooling and Servicing
Agreement dated as of June 13, 1997 (as amended, restated, supplemented, or
otherwise modified from time to time, the "Pooling and Servicing Agreement")
pursuant to which the Trust Seller may from time to time Transfer certain of its
assets or interests therein, including, without limitation, the Trust Purchased
Assets, to SSC Master Trust I, a trust organized under the laws of the State of
Delaware (the "Trust"), to facilitate the sale and funding of certificated
interests in the assets of, and/or indebtedness of, the Trust (as more fully
described in the Operative Documents, the "Trust Assets") which are to be issued
by the Trust from time to time (such certificates evidencing such interests
being referred to as the "Certificates" and the holders of such Certificates
being referred to as the "Certificateholders" and each individually as a
"Certificateholder");
E. In connection with the Pooling and Servicing Agreement, the Agent,
the Trust Seller, the Company, the Trust Master Servicer, the Lenders, the
Servicing Agent, the SSC
-2-
<PAGE>
Master Trust Trustee, and the Collateral Trustee entered into that certain
Collateral Trust and Intercreditor Agreement, dated as of June 13, 1997 (the
"June 13th Intercreditor Agreement");
F. Concurrently herewith, the Seller and the Issuer are entering into
that certain Purchase and Contribution Agreement, dated as of September 30, 1997
(as amended, restated, supplemented or otherwise modified from time to time, the
"Issuer Purchase Agreement") between the Seller and the Issuer pursuant to which
the Seller may from time to time Transfer or purport to Transfer to the Issuer
all of the right, title and interest of the Seller in certain of the Seller's
Receivables and the Related Property and Collections relating thereto and the
proceeds of such Receivables and Related Property (such Receivables, Related
Property, Collections and proceeds so Transferred or purported to be Transferred
to the Issuer by the Seller pursuant to the Issuer Purchase Agreement being
referred to as the "Issuer Purchased Assets");
G. The Issuer, the Issuer Master Servicer and the Issuer Trustee are
entering into that certain Master Trust Indenture and Security Agreement dated
as of September 30, 1997 (as amended, restated, supplemented, or otherwise
modified from time to time, the "Indenture") pursuant to which the Issuer may
from time to time grant a security interest in certain of its assets, including,
without limitation, the Issuer Purchased Assets, to the Issuer Trustee as
security for, and to facilitate the issuance of, notes of the Issuer (as more
fully described in the Issuer Documents, the "Pledged Assets") to be issued from
time to time (such notes being referred to as the "Notes" and the holders of
such Notes being referred to as the "Noteholders" and each individually, as a
"Noteholder"); and
H. The parties hereto, in order to facilitate the transactions
described above, hereby agree to amend and restate the June 13th Intercreditor
Agreement in its entirety and to further agree as follows:
DECLARATION OF TRUST:
NOW, THEREFORE, to facilitate the allocation of the Shared Interest
Collateral (as defined below) and in consideration of the premises and the
mutual covenants and agreements set forth herein, each of the Grantors (as
defined below) hereby reaffirms the declarations and assignments made in the
June 13th Intercreditor Agreement and hereby assigns all of its rights and
remedies in the following property to the Collateral Trustee, in trust for each
Holder of an Interest and for the sole purpose of exercising such rights and
remedies in a manner consistent with each such Person's interests therein, and
the Collateral Trustee does hereby accept such assignment by the Grantors:
(A) this Agreement, the other Collateral Trust Documents
(as defined below) and the Shared Interest Collateral;
and
(B) the Proceeds (as hereinafter defined) of any of the
foregoing.
TO HAVE AND TO HOLD all of the foregoing (collectively, the "Trust
Estate") by the Collateral Trustee and its successors in trust under this
Agreement and its assigns and the
-3-
<PAGE>
assigns of its successors in trust forever.
IN TRUST NEVERTHELESS, under and subject to the terms and conditions
set forth herein and in the other Collateral Trust Documents, and for the
benefit of each Holder of an Interest and for the enforcement of the payment of
all Obligations and Issuer Claims (as defined below) and Trust Claims (as
defined below), and for the performance of and compliance with the covenants and
conditions of this Agreement, the other Collateral Trust Documents, the Lender
Documents, the Issuer Documents (as defined below) and the Operative Documents
(as defined below).
IT IS HEREBY FURTHER COVENANTED AND DECLARED that the Trust Estate is
to be held and applied by the Collateral Trustee, subject to the further
covenants, conditions and trust hereinafter set forth.
NOW THEREFORE, in order to induce the Lenders to continue to make
Advances to the Borrower under the Credit Agreement, and to induce the
Certificateholders to purchase the Certificates, and to induce the Noteholders
to purchase the Notes, and, in consideration of the foregoing premises and the
mutual covenants and agreements set forth herein, and for other good and
valuable consideration, receipt of which is hereby acknowledged, it is hereby
agreed as follows:
ARTICLE 1. DEFINITIONS.
1.1. Certain Defined Terms. Capitalized terms used and not otherwise
defined herein shall have the meanings specified in the Pooling and Servicing
Agreement and the Indenture, as applicable, or if not defined therein, in the
June 13 Seller Purchase Agreement and the Issuer Purchase Agreement, as
applicable. In addition, as used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Borrowing Base" has the meaning ascribed to such term in the Credit
Agreement.
"Borrowing Base Deficiency" means an amount equal to the sum of (A) the
positive excess, if any, of the principal balance of the Advances (other than
Discretionary Non-Ratable Advances) under the Credit Agreement over the
Borrowing Base plus (B) the positive excess, if any, of the principal balance of
the Discretionary Non-Ratable Advances under the Credit Agreement over the
Discretionary Non-Ratable Advance Borrowing Base.
"Business Day" means any day other than a Saturday or Sunday or any
other day on which national banking associations or state banking institutions
in New York, New York, Wilmington, Delaware or Philadelphia, Pennsylvania are
authorized or obligated by law, executive order, or governmental decree to be
closed.
"Claim" means the Obligations, the Issuer Claims or the Trust Claims,
as
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applicable.
"Collateral Trust Documents" means this Agreement, each Lock-Box
Notice, any additional documents executed to facilitate the allocation of the
Shared Interest Collateral in accordance with the terms hereof, and any
agreement or document referred to in Section 3.4 or 3.14 of this Agreement, as
the same may be amended, supplemented or otherwise modified in accordance with
their respective terms.
"Collateral Trustee's Fees" has the meaning set forth in Section 3.10
of this Agreement.
"Collections" means, with respect to any Receivable, all cash
collections and other Proceeds of such Receivable and/or the Related Property
relating thereto (including late charges, fees and interest arising thereon, and
all recoveries with respect to Receivables that have been written off as
uncollectible) from any source whatsoever, including, without limitation, from
any related Annuity Contract, Life Insurance Policy, guarantee or other source.
"Discretionary Non-Ratable Advance" has the meaning ascribed to such
term in the Credit Agreement.
"Discretionary Non-Ratable Advance Borrowing Base" has the meaning
ascribed to such term in the Credit Agreement.
"Enforcement" means collectively or individually, (i) with respect to
the Operative Documents, the occurrence or declaration of a Significant Event or
Series Significant Event; or (ii) with respect to the Lender Documents, the
automatic occurrence of declaration of the Obligations prior to the date when
otherwise due; or (iii) with respect to the Issuer Documents, the occurrence or
declaration of an "Event of Default" or "Series Event of Default" thereunder; or
(iv) with respect to the Lender Documents, the Issuer Documents or the Operative
Documents, any party having the right and authority to do so commences juridical
or nonjudicial enforcement (including setoff) of any of the respective default
rights and remedies under any of the foregoing agreements.
"Event of Default" shall mean an "Event of Default" under and as
defined in the Indenture, and an "Event of Default" under and as defined in the
Credit Agreement, as applicable.
"Grantor" means any of the Agent, the Lenders, the Servicing Agent, the
Issuer Trustee or the SSC Master Trust Trustee, and "Grantors" means all of the
foregoing, collectively.
"Holder of an Interest" means, as of any date, any holder of any Claim.
"Indenture Termination Date" shall mean the date of satisfaction and
discharge of the Indenture pursuant to Section 12.01 thereof.
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"Issuer Claims" means all indebtedness, obligations, fees, costs,
expenses and other liabilities of the Issuer owing under or in connection with
any of the Issuer Documents.
"Issuer Documents" shall mean all of the "Operative Documents" (as
defined in the Indenture and any applicable supplement thereto).
"Issuer Party" shall mean any of the Issuer Trustee, the
Issuer Master Servicer, the Collateral Trustee or the Back-Up Servicer, and
"Issuer Parties" means all such parties collectively.
"Issuer Transfer Report" shall mean the "Seller Transfer Report" under
and as defined in the Issuer Purchase Agreement.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), preference, participation
interest, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the UCC or comparable law of any jurisdiction to
evidence any of the foregoing.
"Lock-Box" means any lock-box to which Collections are remitted or
otherwise received.
"Lock-Box Notice" has the meaning ascribed to such term in each of the
Pooling and Servicing Agreement and the Indenture.
"Master Servicer" means either the Issuer Master Servicer or the Trust
Master Servicer, as the context may require, and "Master Servicers" means both
of the foregoing parties.
"Operative Documents" shall have the meaning ascribed to such term in
the Pooling and Servicing Agreement and any applicable Series Supplement
thereto.
"Proceeds" shall have the meaning ascribed to it in Section 9-306(1) of
the UCC and, whether or not constituting proceeds under such section, any
accessions to and substitutions for any such property, and shall include, but
shall not be limited to, (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to either of the Grantors from time to time with
respect to any of the Collateral, the Pledged Assets or the Trust Assets, as
applicable, and (ii) any and all other amounts from time to time paid or payable
to either of the Grantors upon the sale, exchange, collection or other
disposition of any part of the Collateral, the Pledged Assets and the Trust
Assets, as applicable.
"Purchase Agreement" means either the Issuer Purchase Agreement or the
June 13th Seller Purchase Agreement, as the context may require, and "Purchase
Agreements" means both such Agreements.
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"Purchased Assets" means the Issuer Purchased Assets or the Trust
Purchased Assets or both of the Issuer Purchased Assets and the Trust Purchased
Assets, as the context may require.
"Receivable" has the meaning ascribed to such term in the June 13
Seller Purchase Agreement and the Issuer Purchase Agreement, as applicable.
"Records" has the meaning ascribed to such term in the Pooling and
Servicing Agreement and the Indenture, as applicable.
"Related Property" has the meaning ascribed to such term in the June 13
Seller Purchase Agreement and the Issuer Purchase Agreement, as applicable.
"Responsible Officer" means, with respect to any Person, the chief
executive officer, the chief financial officer or the chief accounting officer
of such Person.
"Seller Transfer Report" has the meaning ascribed to such term in the
June 13 Seller Purchase Agreement.
"Series" has the meaning ascribed to such term in the Pooling and
Servicing Agreement and the Indenture, as applicable.
"Shared Interest Collateral" means (i) all Records in respect of all
Receivables, (ii) the Lock-Boxes, the Lock-Box Accounts and all monies and items
on deposit therein and the Lock-Box Notices relating thereto, (iii) the Master
Collection Account, all cash deposited therein, and all certificates and
instruments, if any, from time to time representing the Master Collection
Account, (iv) the Seller Split Payment Account, all cash deposited therein, and
all certificates and instruments, if any, from time to time representing the
Seller Split Payment Account, (v) the Issuer Split Payment Account, all cash
deposited therein, and all certificates and instruments, if any, from time to
time representing the Issuer Split Payment Account, (vi) all computer hardware
and software used in connection with the servicing, collection and monitoring of
the Receivables and the Related Property associated therewith, (vii) any other
property or interests in property in which the Agent, the Lenders or the
Servicing Agent, and any of the Noteholders or the Issuer Trustee, and any of
the Certificateholders or the SSC Master Trust Trustee, each have any Liens or
other property interest under the Lender Documents, the Issuer Documents and the
Operative Documents, respectively, and (viii) all Proceeds thereof, whether now
owned or hereafter acquired or created and in or upon which an interest in favor
of the Agent, the Lenders or the Servicing Agent, and/or any of the Noteholders
or the Issuer Trustee, and/or any of the Certificateholders or the SSC Master
Trust Trustee is granted.
"SSC Master Trust Trustee" has the meaning set forth in the Preamble to
this Agreement.
"Transfer Report" means either a Seller Transfer Report or an Issuer
Transfer
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Report, as the contest may require, and "Transfer Reports" means both
such reports.
"Trust Claim" means all indebtedness, obligations, fees, costs,
expenses and other liabilities of the Trust owing under or in connection with
any of the Operative Documents.
"Trustee" means either the Issuer Trustee or the SSC Master Trust
Trustee, as applicable, and "Trustees" means both of the foregoing parties.
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"Trustee Fee" has the meaning ascribed to such term in the Pooling and
Servicing Agreement and the Indenture, as applicable.
"Trust Estate" has the meaning set forth in the Declaration of Trust
herein.
"Trust Party" means any of the Trust, the SSC Master Trust Trustee, the
Collateral Trustee, the Trust Master Servicer or the Back-Up Servicer, and
"Trust Parties" means all such parties collectively.
"Trust Termination Date" shall mean the date of termination of the
Trust created under the Pooling and Servicing Agreement pursuant to Section
12.01 thereof.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
ARTICLE 2. INTERCREDITOR PROVISIONS.
2.1. Release of Lien. (a) Notwithstanding anything contained in any of
the Lender Documents, any provision of the UCC or any UCC Financing Statement of
record, or any applicable law, the Agent, the Servicing Agent and the Lenders
hereby agree that, upon the Transfer of any interest in any Receivable (or
portion thereof), or any other Purchased Asset together with the Related
Property and Collections relating thereto, either to the Trust Seller pursuant
to the June 13 Seller Purchase Agreement or to the Issuer pursuant to the Issuer
Purchase Agreement (1) as described in any Seller Transfer Report or Issuer
Transfer Report acknowledged by the Agent (which acknowledgment may only be
withheld by the Agent to the extent that the Transfer of such Receivables would
cause an Event of Default under the Credit Agreement (provided that such
acknowledgment may be conditioned on the receipt by the Servicing Agent of cash
in an amount equal to any Borrowing Base Deficiency that may result from such
Transfer) and upon which acknowledgment the Trust Seller, the Issuer and the
applicable Trustee may conclusively rely in determining the authority of the
Seller to make such Transfer covered by such Transfer Report (it being agreed
and understood that such acknowledgment by the Agent shall constitute conclusive
proof that such Transfer is a "Permitted Transfer" (as defined below)) or (2)
which was otherwise Transferred to the Trust Seller or the Issuer and did not
result in a positive Borrowing Base Deficiency (after giving effect to the
disposition and application of the aggregate "Purchase Price" (as such term is
defined in the applicable Purchase Agreement), (any such Transfer in either case
being a "Permitted Transfer"), (i) any and all Liens and/or other claims or
interest in favor of the Agent, the Servicing Agent or any of the Lenders in
such Purchased Assets shall be released, terminated and of no further force or
effect, in each case, without any further action on the part of any Person, and
(ii) the Agent, the Lenders and the Servicing Agent shall cease to have any
further rights, title or interests in any such Purchased Assets and, without
limiting the foregoing, such Purchased Assets shall not be part of the
Collateral.
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(b) Each of the Agent, the Lenders and the Servicing Agent hereby
agrees that it shall not contest or challenge, or join any other Person in
contesting or challenging, the validity, enforceability, priority or perfection
of the ownership interest of the Trust Seller of any of the Trust Purchased
Assets or of the Issuer of any of the Issuer Purchased Assets which is the
subject of a Permitted Transfer, or the validity, enforceability, priority or
perfection of the ownership or security interest of any assignee or pledgee of
the Trust Seller or the Issuer, as applicable, in such assets (including the
Issuer Trustee and the SSC Master Trust Trustee).
(c) Except as expressly set forth herein, nothing contained in this
Agreement shall, or shall be deemed to, restrict, impair or impose any condition
with respect to the exercise by the Agent, the Servicing Agent or the Lenders,
or the Issuer Parties, or the Trust Parties, of any right, remedy, power or
privilege under any Lender Document, Issuer Document or Operative Document,
respectively.
(d) Each of the Agent, the Lenders and the Servicing Agent hereby
agrees to deliver to the SSC Master Trust Trustee, the Issuer Trustee or the
Collateral Trustee, as applicable, all documents, releases and other agreements,
and to take all other actions, which the Trust Seller or the SSC Master Trust I,
or the Issuer or the Issuer Trustee may reasonably request to evidence the
release of the Agent's and the Lenders' Liens as described in clause (a) above.
2.2. Allocation of Property. All Proceeds of the Collateral and the
Trust Purchased Assets and the Issuer Purchased Assets shall be allocated in
accordance with the following procedures:
(a) All Proceeds of the Collateral shall be allocated to the
Servicing Agent for application to the Obligations in accordance with
the Lender Documents until the payment in full thereof and any
remaining proceeds shall be paid to the Borrower or as otherwise
required by applicable law.
(b) All Proceeds of the Issuer Purchased Assets shall be
allocated to the Issuer Trustee for application in accordance with the
Issuer Documents.
(c) All Proceeds of the Trust Purchased Assets shall be
allocated to the SSC Master Trust Trustee for application in accordance
with the Operative Documents.
2.3. Enforcement Actions. Each of the parties hereto agrees to use
reasonable efforts to give notice to the other parties hereto prior to any such
party's commencement of Enforcement (but failure to do so shall not prevent such
Person from commencing Enforcement or affect its rights hereunder nor create any
cause of action or liability against such Person); provided, however, that none
of the parties hereto may commence any Enforcement against any of the Shared
Interest Collateral, such Enforcement only to be commenced by the Collateral
Trustee at the mutual direction of the Trustees and the Agent or, if the
Trustees and the Agent cannot reach agreement, then in accordance with the
directions of any court of competent jurisdiction solicited by the Collateral
Trustee, the Agent or any Trustee.
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2.4. Agency for Perfection. Each of the parties hereto hereby appoints
each other party hereto as such party's agent for purposes of perfecting by
possession each such party's respective security interests and ownership
interests and Liens on the Collateral, the Pledged Assets, the Trust Assets and
the Shared Collateral described hereunder. In the event that any Master Servicer
or any Trustee obtains possession of any of the Collateral, such Master Servicer
or Trustee, as applicable, shall notify the Agent of such fact, shall hold such
Collateral in trust and shall deliver such Collateral to the Agent upon the
Agent's request therefor. In the event that the Agent, the Servicing Agent, any
of the Lenders, the Issuer Trustee or the Issuer Master Servicer obtains
possession of any of the Trust Assets, the party obtaining possession thereof
shall notify the SSC Master Trust Trustee of such fact, shall hold such Trust
Assets in trust and shall deliver such Trust Assets to the SSC Master Trust
Trustee upon the SSC Master Trust Trustee's request therefor. In the event that
the Agent, the Servicing Agent, any of the Lenders, the SSC Master Trust Trustee
or the Trust Master Servicer obtains possession of any of the Pledged Assets,
the party obtaining possession thereof shall notify the Issuer Trustee of such
fact, shall hold such Pledged Assets in trust and shall deliver such Pledged
Assets to the Issuer Trustee upon the Issuer Trustee's request therefor.
2.5. Limitation on Liability of Parties to Each Other. Except as
provided in this Agreement, no party shall have any liability to any other party
except for liability arising from the gross negligence or willful misconduct of
such party or its representatives except with respect to the Collateral Trustee
or either Trustee each of which shall be solely liable only for its or its
representative's own bad faith and willful misconduct; provided, however, that
any liability of the Collateral Trustee or either Trustee hereunder is solely
the corporate liability of the Collateral Trustee, or such Trustee, as
applicable, and no recourse shall be had for the payment by the Collateral
Trustee, or such Trustee of any other obligation or claim of or against the
Collateral Trustee or such Trustee, as applicable, arising out of or based on
this Agreement, against any stockholder, employee, officer, director or
incorporator of the Collateral Trustee or such Trustee.
2.6. Effect Upon Lender Documents, the Issuer Documents and Operative
Documents. By executing this Agreement, the Company, the Trust Seller, the
Seller and the Issuer acknowledge that the provisions of this Agreement shall
not give any such Person any substantive rights as against the Agent, the
Servicing Agent, the Lenders, any Trustee, any Master Servicers, the
Certificateholders, or the Noteholders pursuant hereto and that nothing in this
Agreement shall amend, modify, change or supersede the terms of the Lender
Documents, the Issuer Documents or the Operative Documents with respect to the
Trust Seller, the Company, the Seller or the Issuer, or any other Affiliated
Entity. Notwithstanding the foregoing, each of the Trustees, the Master
Servicers, the Lenders, the Servicing Agent and the Agent agrees, that, as
between themselves, to the extent the terms and provisions of the Lender
Documents, the Issuer Documents or the Operative Documents are inconsistent with
the terms and provisions of this Agreement, the terms and provisions of this
Agreement shall control.
ARTICLE 3. THE COLLATERAL TRUST AND THE COLLATERAL TRUSTEE
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3.1. Authorization to Execute Collateral Trust Documents. The
Collateral Trustee shall execute and deliver each of the Collateral Trust
Documents requiring execution and delivery by it and shall accept delivery from
each of the Grantors of those Collateral Trust Documents which do not require
the Collateral Trustee's execution; provided, however, that the Collateral
Trustee shall not be required to execute any such Collateral Trust Document
imposing any obligation or liability on the Collateral Trustee or adversely
affecting the Collateral Trustee unless the provisions thereof imposing such
obligation or liability or adversely affecting the Collateral Trustee are, in
each case, in form and substance satisfactory to the Collateral Trustee.
3.2. Certain Representations and Warranties. The Collateral Trustee, in
its capacity as Collateral Trustee hereunder, and PNC Bank, National
Association, in its individual capacity, each represents and warrants to each of
the Grantors and the Holders as follows:
(i) PNC Bank, National Association is a national banking
association duly incorporated, validly existing and in good standing
under the laws of the United States of America and has all requisite
corporate power and authority to enter into and perform its obligations
under this Agreement and the other Collateral Trust Documents to which
it is a party.
(ii) The execution, delivery and performance by the Collateral
Trustee of this Agreement and the other Collateral Trust Documents to
which it is a party have been duly authorized by all necessary
corporate action on the part of PNC Bank, National Association.
(iii) To the best knowledge of the officers assigned to the
Collateral Trustee's Corporate Trust Administration Department, there
are no Liens in favor of the Collateral Trustee against the Trust
Estate.
(iv) This Agreement and all of the other Collateral Trust
Documents to which the Collateral Trustee is a party have been duly
executed and delivered by a duly authorized officer thereof.
3.3. Procedures for Allocating Shared Interest Collateral. (a) Subject
to the limitations hereunder, under the other Collateral Trust Documents, and
under the Lender Documents, the Issuer Documents and the Operative Documents,
the Collateral Trustee shall take any action with respect to the Shared Interest
Collateral, this Agreement and the other Collateral Trust Documents requested in
writing signed by each of the Agent and the Trustees, including, without
limitation, releasing portions of the Shared Interest Collateral from the Liens
imposed pursuant to this Agreement and the other Collateral Trust Documents;
provided, however, that the Agent, the Issuer and the Trustees hereby authorize
and direct the Collateral Trustee to follow the directions as to allocations of
amounts in the Master Collection Account, including without limitation to the
applicable "Series Collection Account" (as defined under each of the Pooling and
Servicing Agreement and the Indenture), the Seller Split Payment Account and the
Issuer Split
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Payment Account, as shall be specified (i) by the applicable Trust Master
Servicer and the Borrower in each "Daily Report" (as defined under the Pooling
and Servicing Agreement ) and (ii) by the applicable Issuer Master Servicer
and the Borrower in each "Daily Report" (as defined under the Indenture);
provided, that in the event that any material amount of Collections is either
misallocated or the applicable Trust Master Servicer and the Borrower, or the
applicable Issuer Master Servicer and the Borrower, as applicable, are unable
to agree on the reconciliation and allocation thereof, then upon the direction
of the SSC Master Trust Trustee or the Agent, or the Issuer Trustee or the
Agent, as applicable, (such direction being a "Transition Notice"), the
Collateral Trustee shall cease to follow the instruction of the applicable Trust
Master Servicer, applicable Issuer Master Servicer and the Borrower, as
aforesaid, and shall instead take direction solely from the Back-Up Servicer
related thereto in respect of such allocations; and provided, further, that (a)
at all times prior to the giving of a Transition Notice, (i) each of the
applicable Trust Master Servicer and the Borrower may make, or instruct the
Collateral Trustee to make, withdrawals from the Seller Split Payment Account to
remit funds to the applicable Claimant as shall be specified by the applicable
Trust Master Servicer and the Borrower in each "Daily Report" (as defined under
the Pooling and Servicing Agreement), and the Collateral Trustee shall be
entitled to rely on any such directions from the applicable Trust Master
Servicer and/or the Borrower in respect of such remittances in connection with
the "Split Payments" (as defined under the Pooling and Servicing Agreement), and
(ii) each of the applicable Issuer Master Servicer and the Borrower may make, or
instruct the Collateral Trustee to make, withdrawals from the Issuer Split
Payment Account to remit funds to the applicable Claimant as shall be specified
by the applicable Issuer Master Servicer and the Borrower in each "Daily Report"
(as defined under the Indenture), and the Collateral Trustee shall be entitled
to rely on any such directions from the applicable Issuer Master Servicer and/or
the Borrower in respect of such remittances in connection with the "Split
Payments" (as defined under the Indenture), and (b) from and after the giving of
a Transition Notice, the Collateral Trustee shall cease to follow the
instruction of the applicable Trust Master Servicer and the Borrower and from
the applicable Issuer Master Servicer and the Borrower as aforesaid, and shall
instead take direction solely from the Back-Up Servicer in respect of such
allocations; and provided, further, that the Collateral Trustee shall not be
obligated to take any such action which is in conflict with any provisions of
law or of this Agreement, the Lender Documents, the Issuer Documents, the
Operative Documents or the other Collateral Trust Documents or with respect to
which the Collateral Trustee has not received adequate security or indemnity as
provided in Section 3.19(d). Neither the Agent nor either Trustee shall
unreasonably withhold consent in respect of the other's actions respecting the
allocation of any Shared Interest Collateral, and each such party hereby agrees
not to take any action in respect of any Shared Interest Collateral that would
adversely affect the other's rights to enforce its claims with respect thereto
or the value of such Shared Interest Collateral.
(b) The Trust Seller, the Company, the Seller and the Issuer hereby
acknowledge and agree that the Collateral Trustee shall have the exclusive
ownership, dominion and control over any and all Lock-Boxes and the Lockbox
Accounts which are Shared Interest Collateral. The Trust Seller, the Company,
the Seller and the Issuer hereby agree to take any further action necessary or
that either Trustee, the Collateral Trustee or the Agent may reasonably request
to evidence and/or effect such ownership, dominion and control. Unless
instructed otherwise by the Collateral Trustee pursuant to its authority
hereunder, each Lockbox Bank shall
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be instructed to remit, on a daily basis, via overnight or same day transfer,
all amounts deposited in its Lockbox Accounts to the Master Collection Account
in accordance with the terms of a Lock-Box Notice substantially in the form of
Exhibit B to the Pooling and Servicing Agreement or Exhibit B to the Indenture.
3.4. Additional Collateral Trust Documents. In the event that any of
the Grantors at any time has or acquires any interest in any Shared Interest
Collateral which is not covered by a Collateral Trust Document in a manner which
will perfect the Collateral Trustee's lien upon and security interest in such
Shared Interest Collateral without further act or deed of the Collateral
Trustee, then at the time such interest in such Shared Interest Collateral is
acquired (or at any time the Collateral Trustee, any Holder, the Agent, either
Trustee determines that the Collateral Trustee's lien upon or security interest
in such interest in the Shared Interest Collateral is unperfected), to the
extent that such security interest may be perfected by the execution and/or
filing of a Collateral Trust Document, then the applicable Grantor shall
immediately, or immediately upon the Collateral Trustee's request therefor,
prepare, execute and deliver to the Collateral Trustee such Collateral Trust
Documents, in form and substance similar to the Collateral Trust Documents
heretofore executed and delivered by such Grantor unless otherwise specified or
agreed by the Collateral Trustee, as are necessary to perfect the Collateral
Trustee's Lien upon such Shared Interest Collateral. If the signature of the
Collateral Trustee is required on any such Collateral Trust Document, such
Grantor shall present such Collateral Trust Document to the Collateral Trustee
for signature, together with a certificate executed by such Grantor certifying
that such Collateral Trust Document is required by, and complies with, the
provisions hereof, and, if applicable, is in form suitable for filing or
recordation, and the Collateral Trustee shall execute such Collateral Trust
Document and such Grantor shall file such Collateral Trust Document with
appropriate filing and/or recording offices if such filing and/or recording is
required or advisable to perfect or protect the Collateral Trustee's lien upon
or security interest in such Shared Interest Collateral. Such Grantor shall
supply the Collateral Trustee with an executed copy of each such Collateral
Trust Document and satisfactory proof that such Collateral Trust Document has
been properly filed or recorded, if and to the extent that filing or recording
is required under this Section 3.4.
3.5. Powers of Attorney. Each of the Grantors hereby irrevocably
constitutes and appoints the Collateral Trustee and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in the name of such Grantor or
the name of such attorney-in-fact, from time to time in the Collateral Trustee's
discretion (subject to Section 3.17 of this Agreement), for the purposes of
signing documents and taking other action to perfect, promote and protect the
liens and security interests of the Collateral Trustee in the Shared Interest
Collateral. This power of attorney is a power coupled with an interest, shall be
irrevocable.
3.6. Exercise of Powers. All of the powers, remedies and rights of the
Collateral Trustee as set forth in this Agreement may be exercised by the
Collateral Trustee in respect of any Collateral Trust Document as though set
forth at length therein and all the powers, remedies and rights of the
Collateral Trustee as set forth in any Collateral Trust Document may be
exercised from time to time as herein and therein provided.
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3.7. Limitation on Collateral Trustee's Duties in Respect of the Shared
Interest Collateral. Beyond its duties set forth in this Agreement as to the
custody of any Shared Interest Collateral in its possession or control and the
accounting to each of the Grantors and the Holders for monies received by it
hereunder, the Collateral Trustee shall not have any duty to the Grantors or the
Holders as to any Collateral in its possession or control or in the possession
or control of any agent or nominee of it or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto.
3.8. Limitation by Law. All of the provisions of this Article 3 are
intended to be subject to all applicable mandatory provisions of law which may
be controlling in the premises and to be limited to the extent necessary so that
they will not render this Agreement invalid or unenforceable in whole or in
part.
3.9. Information as to Holders; Notices to Holders; Notices to
Collateral Trustee. Each of the Agent and the Trustees shall be responsible for
maintaining a list setting forth the names and addresses of each party to whom
notices must be sent under the Credit Agreement with respect to the transactions
relating to the Lender Documents, the Issuer Documents, the Operative Documents,
this Agreement and the other Collateral Trust Documents, and the Collateral
Trustee shall have no responsibility or liability with respect thereto.
Notwithstanding anything contained herein or in any other agreement to the
contrary, all notices, reports or other documents required to be delivered by
the Collateral Trustee hereunder or under any of the other Collateral Trust
Documents to any of the Holders shall be deemed delivered by the Collateral
Trustee for purposes hereof or thereof by the delivery thereof to the Agent or
the applicable Trustee, as the case may be, in respect of such Holder(s). The
Collateral Trustee may act in reliance upon any instrument or signature
reasonably believed by it to be genuine and may assume that any Person
purporting to give any notice, advice or instruction in connection with the
provisions hereof has been duly authorized to do so. In addition, the Collateral
Trustee shall be entitled to rely upon any certification, demand, notice,
instrument or other writing delivered to it hereunder or in connection herewith
without being required to determine the correctness of any fact stated therein
or the propriety or validity thereof.
3.10. Compensation and Expenses. Each of the Grantors hereby jointly
and severally agrees to pay to the Collateral Trustee (i) such reasonable
compensation for its performance of services hereunder and under the Collateral
Trust Documents and for administering the Trust Estate as shall be set forth in
a separate letter agreement among the Collateral Trustee and the Grantors to be
entered into prior to or concurrently with the appointment of a Collateral
Trustee which is not acting as one or both of the Trustees (such compensation
being the "Collateral Trustee's Fees") but in any event not to exceed 120% of
such Person's out-of-pocket expenses incurred in the performance of such duties,
and (ii) from time to time, upon the Collateral Trustee's demand therefor, but
subject in all cases to Section 3.15 of this Agreement, all of the fees, costs
and expenses of the Collateral Trustee (including, without limitation, the
reasonable fees and disbursements of its counsel, accountants and other experts,
and such special counsel as the Collateral Trustee elects to retain) (A) arising
in connection with the preparation, execution, delivery, modification,
restatement, amendment or termination of this Agreement and each Collateral
Trust Document or the enforcement (whether in the context of a civil action,
adversary
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proceeding, workout or otherwise) of any of the provisions hereof or
thereof, or (B) incurred or required to be advanced in connection with the
administration of the Trust Estate, the disposition of the Shared Interest
Collateral pursuant to any Collateral Trust Document and the preservation,
protection or defense of the Collateral Trustee's rights under this Agreement
and in and to the Shared Interest Collateral and the Trust Estate. In the event
that the Collateral Trustee is also acting as both Trustees, the Collateral
Trustee's Fees and the Collateral Trust Document Fees shall be deemed to have
been paid out of the Trustee Fees. In the event that the Trustees and the
Collateral Trustee are not one and the same Person, the Collateral Trustee's
Fees and the Collateral Trust Document Fees shall be paid pursuant to a fee
letter between the Collateral Trustee, the Agent, the SSC Master Trust Trustee
and the Issuer Trustee in respect of each Series, to the extent that payment
thereof is provided for under the Operative Documents or the Issuer Documents,
as applicable. The obligations of the Grantors under this Section 3.10 shall
survive the termination of this Agreement.
3.11. Stamp and Other Similar Taxes. Subject in all cases to Section
3.15 of this Agreement, each of the Grantors jointly and severally agrees to
indemnify and hold harmless the Collateral Trustee and each Holder from, and
shall reimburse the Collateral Trustee and each Holder for, any present or
future claim for liability for any stamp or other similar tax and any penalties
or interest with respect thereto, which may be assessed, levied or collected by
any jurisdiction in connection with this Agreement, the Trust Estate, or the
attachment or perfection of the security interest granted to the Collateral
Trustee in any Shared Interest Collateral. The obligations of the Grantors under
this Section 3.11 shall survive the termination of this Agreement.
3.12. Filing Fees, Excise Taxes, etc. Subject in all cases to Section
3.15, each of the Grantors hereby jointly and severally agrees to pay or to
reimburse the Collateral Trustee for any and all amounts in respect of all
search, filing, recording and registration fees, taxes, excise taxes and other
similar imposts which may be payable or determined to be payable by such Grantor
in respect of the execution, delivery, performance and enforcement of this
Agreement and each Collateral Trust Document and agrees to save the Collateral
Trustee harmless from and against any and all liabilities with respect to or
resulting from any delay on the part of such Grantor in paying or failing to pay
such taxes and fees. The obligations of the Grantors under this Section 3.12
shall survive the termination of this Agreement.
3.13. Indemnification. (a) Each of the Grantors agrees to pay,
indemnify and hold the Collateral Trustee and each of its agents harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and the Collateral Trust
Documents by, against or with respect to such Grantor, unless arising from the
gross negligence or willful misconduct of such of the Collateral Trustee or such
of the agents as are seeking indemnification. As security for such payment, the
Collateral Trustee shall have a lien on all Shared Interest Collateral and other
property and funds held or collected by the Collateral Trustee as part of the
Trust Estate.
(b) In any suit, proceeding or action brought by the Collateral Trustee
under or with respect to the Shared Interest Collateral for any sum owing
thereunder, or to enforce any
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provisions thereof, or of any of the Collateral Trust Documents or this
Agreement, each of the Grantors agrees to save, indemnify and keep the
Collateral Trustee and the Holders harmless from and against all expense, loss
or damage suffered by reason of any defense, setoff, counterclaim, recoupment
or reduction of liability whatsoever of the obligee thereunder, arising out of
a breach by such Grantor of any of its obligations hereunder or thereunder or
arising out of any other agreement, indebtedness or liability at any time
owing to or in favor of such obligee or its successors from such Grantor, and
all such obligations of such Grantor shall be and remain enforceable against
and only against such Grantor and shall not be enforceable against the
Collateral Trustee or any Holder.
(c) The agreements in this Section 3.13 shall, in all cases,
be subject to Section 3.15 and shall survive the termination of the other
provisions of this Agreement.
3.14. Further Assurances. (a) Each Grantor agrees that from time to
time, at the expense of such Grantor, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, as requested by the Collateral Trustee, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Trustee to exercise and enforce its rights
and remedies hereunder with respect to any Shared Interest Collateral, including
without limitation, the execution of financing or continuation statements, or
amendments thereto.
(b) Each of the Grantors hereby acknowledges that it shall be and
remain primarily and exclusively liable for the preparation, execution and
filing of financing and continuation statements with respect to the Shared
Interest Collateral. Without in any way limiting the foregoing, each of the
Grantors hereby authorizes the Collateral Trustee to file, in its sole
discretion and without any obligation to do so, one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Shared Interest Collateral without the signature of such Grantor where
permitted by law. A carbon, photographic or other reproduction of this Agreement
or any financing statement covering the Shared Interest Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
3.15. Limitation on Repayment. (a) Notwithstanding anything contained
herein to the contrary, the Collateral Trustee hereby agrees that all amounts
(other than the Collateral Trustee's Fees) owing to it by any of the Grantors
pursuant to this Agreement, including, without limitation, any and all
Collateral Trust Document Fees, shall, to the extent payable on account of the
SSC Master Trust Trustee, be payable by the Trust Seller but only to the extent
of Available Seller Funds (as defined under the Pooling and Servicing Agreement)
to the extent that at the time of such payment, or immediately thereafter and
giving effect to such payment, the Trust Seller would, in the reasonable
determination of the Trust Seller, continue to be able to pay its debts as they
become due. The SSC Master Trust I Trustee shall have no independent obligation
for any such amounts.
(b) Notwithstanding anything contained herein to the contrary, the
Collateral Trustee hereby agrees that all amounts (other than the Collateral
Trustee's Fees) owing to it by any of the Grantors pursuant to this Agreement,
including, without limitation, any and all
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Collateral Trust Document Fees, shall, to the extent payable on account of the
Issuer Trustee, be payable by the Issuer but only to the extent of Available
Issuer Funds (as defined under the Indenture) to the extent that at the time
of such payment, or immediately thereafter and giving effect to such payment,
the Issuer would, in the reasonable determination of the Issuer, continue to
be able to pay its debts as they become due. The Issuer Trustee shall have no
independent obligation for any such amounts.
3.16. Acceptance of Trust. The Collateral Trustee, for itself and its
successors, hereby accepts the trusts created by this Agreement upon the terms
and conditions hereof, including those contained in this Article 3.
3.17. Exculpatory Provisions. (a) The Collateral Trustee shall not be
responsible in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties contained herein or in the other
Collateral Trust Documents, except for those made by the Collateral Trustee, or
for filing any financing statement or continuation statement or recording or
re-recording any Collateral Trust Document in any public office at any time or
for taking any other action to perfect or maintain the perfection or
effectiveness of any security interest or Lien in any of the Shared Interest
Collateral or in any other property granted to it by the Grantors hereunder or
under any of the other Collateral Trust Documents. The Collateral Trustee makes
no representations as to the value or condition of the Trust Estate or any part
thereof, or as to the title of any of the Grantors thereto or as to the security
afforded by the Collateral Trust Documents or this Agreement or, except as set
forth in Section 3.2 of this Agreement, as to the validity, execution,
enforceability, legality or sufficiency of this Agreement, any other Collateral
Trust Document or of the Interests secured hereby and thereby, and the
Collateral Trustee shall incur no liability or responsibility in respect of any
such matters. The Collateral Trustee shall not be responsible for insuring the
Trust Estate or for the payment of taxes, charges, assessments or liens upon the
Trust Estate or for the maintenance of the Trust Estate, except that (i) in the
event the Collateral Trustee enters into possession of all or any part of the
Trust Estate, the Collateral Trustee shall preserve such portion of the Trust
Estate in its possession and (ii) the Collateral Trustee will promptly, and at
its own expense, take such action as may be necessary to remove and discharge
(by bonding or otherwise) any Collateral Trustee's Lien on any part of the Trust
Estate or any other Lien on any part of the Trust Estate resulting from claims
against it individually.
(b) The Collateral Trustee shall not be required to ascertain or
inquire as to the performance by either of the Grantors of any of the covenants
or agreements contained herein or in any Collateral Trust Document. Whenever it
is necessary, or in the opinion of the Collateral Trustee advisable, for the
Collateral Trustee to ascertain the amount of Interests then held by a Holder,
the Collateral Trustee may rely on a certificate of such Holder (or the Agent or
the applicable Trustee on behalf of such Holder) as to such amount.
(c) PNC Bank, National Association shall, in its individual capacity
and at its own cost and expense, promptly take all action as may be necessary to
discharge any Collateral Trustee's Liens or any other Lien resulting from claims
against it individually.
(d) The Collateral Trustee shall not be personally liable for any acts,
omissions,
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errors of judgment or mistakes of fact or law made, taken or omitted
to be made or taken by it in accordance with this Agreement or any other
Collateral Trust Document (including, without limitation, acts, omissions,
errors or mistakes with respect to the Shared Interest Collateral), except for
those arising out of or in connection with the Collateral Trustee's gross
negligence or willful misconduct. Notwithstanding anything set forth herein to
the contrary, the Collateral Trustee shall have a duty of reasonable care with
respect to any notes and instruments which are delivered to the Collateral
Trustee or its designated representatives and are in the Collateral Trustee's or
its designated representatives' possession and control.
3.18. Delegation of Duties. The Collateral Trustee may execute any of
the trusts or powers hereof and perform any duty hereunder either directly or by
or through agents, nominees or attorneys-in-fact, provided that the Collateral
Trustee shall obtain a written acknowledgment from such agents, nominees or
attorneys-in-fact that they shall be liable to the Holders for losses or damages
incurred by any such Holder as a result of such agent's, nominee's or
attorney-in-fact's gross negligence or willful misconduct as and to the extent
the Collateral Trustee would be liable for such losses or damages if the actions
or omissions of such agents, nominees or attorneys-in-fact constituting such
gross negligence or willful misconduct had been actions or omissions of the
Collateral Trustee. The Collateral Trustee shall be entitled to advice of
counsel concerning all matters pertaining to such trusts, powers and duties. The
Collateral Trustee shall not be responsible for the negligence or misconduct of
any agents, nominees or attorneys-in-fact selected by it without gross
negligence or willful misconduct.
3.19. Reliance by Collateral Trustee. (a) Whenever in the
administration of the trusts under this Agreement the Collateral Trustee shall
deem it necessary or desirable that a matter be proved or established with
respect to any of the Grantors in connection with the taking, suffering or
omission of any action hereunder by the Collateral Trustee, such matter (unless
other evidence in respect thereof is specifically prescribed under this
Agreement) may be deemed to be conclusively provided or established by a
certificate of a Responsible Officer of such Grantor(s) or any officer of the
Agent or the Issuer Trustee or the SSC Master Trust Trustee, as applicable, in
each case, delivered to the Collateral Trustee, and such certificate shall be
full warranty to the Collateral Trustee for any action taken, suffered or
omitted in reliance thereon; subject, however, to the provisions of Section 3.20
of this Agreement. Without in any way limiting the foregoing, all certificates,
notices or directions required to be delivered by any of the Grantors, the Agent
or any Trustee to the Collateral Trustee pursuant to the terms hereof shall in
all cases be signed by a Responsible Officer of such Person, if such Person is a
Grantor, or, otherwise, by any officer thereof.
(b) The Collateral Trustee may consult with counsel, accountants and
other experts, and any opinion or advice of any such counsel, any such
accountant, and any such other expert shall be full and complete authorization
and protection in respect of any action taken or suffered by the Collateral
Trustee hereunder in accordance therewith. The Collateral Trustee shall have the
right at any time to seek instructions concerning the administration of the
Trust Estate from any court of competent jurisdiction.
(c) The Collateral Trustee may rely, and shall be fully protected in
acting, upon
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any resolution, statement, certificate, instrument, opinion, report, notice,
request, consent, order, bond or other paper or document which it has no
reasonable reason to believe to be other than genuine and to have been signed
or presented by the proper party or parties or, in the case of cables,
telecopies and telexes, to have been sent by the proper party or parties. In the
absence of its gross negligence or willful misconduct, the Collateral Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Collateral Trustee and conforming to the requirements of this Agreement or
any other Collateral Trust Document.
(d) If the Collateral Trustee has been requested or directed to take
action under this Agreement, including, without limitation, pursuant to Section
3.3, the Collateral Trustee shall not be under any obligation to exercise any of
the rights or powers vested in the Collateral Trustee by this Agreement or any
Collateral Trust Document unless the Collateral Trustee shall have been provided
adequate security and indemnity against the costs, expenses and liabilities
which may be incurred by it in compliance with such request or direction,
including such reasonable advances as may be requested by the Collateral
Trustee.
3.20. Limitations on Duties of Collateral Trustee. (a) The Collateral
Trustee shall be obligated to perform such duties and only such duties as are
specifically set forth in this Agreement or in any other Collateral Trust
Document, and no implied covenants or obligations shall be read into this
Agreement or any other Collateral Trust Document against the Collateral Trustee.
The Collateral Trustee shall exercise the rights and powers vested in it by this
Agreement or by any other Collateral Trust Document, and the Collateral Trustee
shall not be liable with respect to any action taken or omitted to be taken by
it in accordance with the direction of the Agent or the Issuer Trustee or the
SSC Master Trust Trustee, as the case may be, in accordance with the terms of
this Agreement.
(b) Except as herein otherwise expressly provided, the Collateral
Trustee shall not be under any obligation to take any action which is
discretionary with the Collateral Trustee under the provisions hereof or under
any Collateral Trust Document.
3.21. Monies to be Held in Trust. All monies received under or
pursuant to any provision of this Agreement or any Collateral Trust Document
shall be held in trust for the purposes for which they were paid or are held.
3.22. Resignation and Removal of the Collateral Trustee. (a) The
Collateral Trustee may at any time (and, if the Collateral Trustee shall at any
time cease to be an "Eligible Institution" (as defined in the Indenture), the
Collateral Trustee shall at such time), by giving thirty (30) days' prior
written notice to each of the Grantors, the Master Servicers, the Company, the
Trust Seller, the Agent, the Seller, the Issuer, and the Trustees, resign and be
discharged of the responsibilities hereby created, such resignation to become
effective upon the appointment of a successor Collateral Trustee or Collateral
Trustees (each of which Collateral Trustees shall be an Eligible Collateral
Trustee) by the Agent and the Trustees and the acceptance of such appointment by
such successor Collateral Trustee or Collateral Trustees (which acceptance shall
(i) be in writing, (ii) be signed by such successor Collateral Trustee and
delivered to each of the Agent
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and the Trustees and (iii) expressly acknowledge such successor Collateral
Trustee's agreement to be party to, and bound by, the terms of this Agreement,
including, without limitation, this Section 3.22). The Collateral Trustee may
be removed at any time and a successor Collateral Trustee appointed by the
affirmative vote of the Agent and the Trustees, which successor Collateral
Trustee shall, upon its acceptance of such appointment, deliver a written
acceptance thereof as set forth in the parenthetical in the immediately
preceding sentence; provided, that the Collateral Trustee shall be entitled to
its fees and expenses to the date of removal. If no successor Collateral Trustee
or Collateral Trustees shall be appointed and approved within thirty (30) days
from the date of the giving of the aforesaid notice of resignation or within
thirty (30) days from the date of such removal, the Collateral Trustee, the
Agent, the Issuer Trustee or the SSC Master Trust Trustee may apply to any court
of competent jurisdiction to appoint a successor Collateral Trustee or
Collateral Trustees (any of which shall be an Eligible Collateral Trustee) to
act until such time, if any, as a successor Collateral Trustee or Collateral
Trustees shall have been appointed as above provided. Any successor Collateral
Trustee or Collateral Trustees so appointed by such court shall immediately and
without further act be superseded by any successor Collateral Trustee or
Collateral Trustees appointed by the Agent and the Trustees.
(b) If at any time the Collateral Trustee shall resign, be removed or
otherwise become incapable of action, or if at any time a vacancy shall occur in
the office of the Collateral Trustee for any other cause, a successor Collateral
Trustee or Collateral Trustees (any of which shall be an Eligible Collateral
Trustee) may be appointed by the Agent and the Trustee, and the powers, duties,
authority and title of the predecessor Collateral Trustee or Collateral Trustees
shall be terminated and canceled with or without procuring the resignation of
such predecessor Collateral Trustee or Collateral Trustees, and without any
other action (except as may be required by applicable law) upon delivery to such
predecessor Collateral Trustee or Collateral Trustees of written notice, duly
executed by the Agent and the Trustees, of such appointment and designation of a
successor Collateral Trustee or Collateral Trustees, which notice shall be filed
for record in each public office, if any, in which this Agreement is required to
be filed.
(c) The appointment and designation referred to in Section 3.22(b) of
this Agreement shall be full evidence of the right and authority to make the
same and of all the facts therein recited, and this Agreement shall vest in such
successor Collateral Trustee or Collateral Trustees, without any further act,
deed or conveyance, all of the estate and title of its predecessor or their
predecessors, and upon such appointment and designation the successor Collateral
Trustee or Collateral Trustees shall become fully vested with all the estates,
properties, rights, powers, trusts, duties, authority and title of its
predecessor or their predecessors; but such predecessor or predecessors shall,
nevertheless, on the written request of the Agent, the Issuer Trustee or the SSC
Master Trust Trustee, either of the Grantors, or the successor Collateral
Trustee or Collateral Trustees, execute and deliver an instrument transferring
to such successor or successors all the estates, properties, rights, powers,
trusts, duties, authorities and title of such predecessor or predecessors
hereunder and shall deliver all securities and monies held by it or them to such
successor Collateral Trustee or Collateral Trustees. Should any deed, conveyance
or other instrument in writing from either of the Grantors be required by any
successor Collateral Trustee or Collateral Trustees for more fully and certainly
vesting in such successor Collateral Trustee or Collateral Trustees the estates,
properties, rights, powers, trusts, duties, authorities and title vested
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or intended to be vested in the predecessor Collateral Trustee or Collateral
Trustees, any and all such deeds, conveyances and other instruments in writing
shall, on the request of such successor Collateral Trustee or Collateral
Trustees, be so executed, acknowledged and delivered.
(d) Any required filing for record of the instrument appointing a
successor Collateral Trustee or Collateral Trustee as hereinabove provided shall
be at the expense of the Grantors. The resignation of any Collateral Trustee or
Collateral Trustees and the instrument or instruments removing any Collateral
Trustee or Collateral Trustees, together with all other instruments, deeds and
conveyances provided for in this Article 3 shall, if required by law, be
forthwith recorded, registered and filed by and at the expense of the Grantors,
wherever this Agreement is recorded, registered and filed.
(e) Notwithstanding any provision herein to the contrary, the
Collateral Trustee shall at all times be the same Person as the Person acting as
"Trustee" pursuant to the terms of (and as defined in) the Pooling and Servicing
Agreement and as the "Trustee" pursuant to the terms of (and as defined in) the
Indenture.
3.23. Merger of the Collateral Trustee. Any corporation (i)
into which the Collateral Trustee shall be merged, or with which it shall be
consolidated, (ii) resulting from any merger or consolidation to which the
Collateral Trustee shall be a party, or (iii) succeeding to all or substantially
all of the corporate trust business of the Collateral Trustee shall, to the
extent it would constitute an "Eligible Institution" (as defined in the
Indenture) be the Collateral Trustee under this Agreement without the execution
or filing of any paper or any further act on the part of the parties hereto.
ARTICLE 4. MISCELLANEOUS.
4.1. Notices. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
telecommunications and communication by facsimile copy) and mailed, telexed,
transmitted or delivered, as to each party hereto, at its address set forth
under its name on the signature pages hereof or at such other address as shall
be designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective upon receipt, or, in the case
of notice by mail, five (5) days after being deposited in the mails, postage
prepaid, or in the case of notice by telex, when telexed against receipt of the
answerback, or in the case of notice by facsimile copy, when verbal confirmation
of receipt is obtained, in each case addressed as aforesaid.
4.2. Agreement Absolute. The SSC Master Trust Trustee shall be deemed
to have entered into the Operative Documents in express reliance upon this
Agreement, the Issuer Trustee shall be deemed to have entered into the Issuer
Documents in express reliance upon this Agreement, and the Lenders, the
Servicing Agent and the Agent shall be deemed to have entered into the Lender
Documents in express reliance upon this Agreement. This Agreement shall be and
remain absolute and unconditional under any and all circumstances, and no acts
or omissions on the part of any party to this Agreement shall affect or impair
the agreement of any party to this
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Agreement, unless otherwise agreed to in writing by all of the parties hereto.
This Agreement shall be applicable both before and after the filing of any
petition by or against the Company, the Trust Seller, the Seller, or the
Issuer under the Bankruptcy Code and all references herein to the Company or
the Seller shall be deemed to apply to a debtor-in-possession for such party
and all allocations of payments between the Lenders, the Issuer Trustee, the
SSC Master Trust Trustee and the Master Servicer shall, subject to any court
order to the contrary, continue to be made after the filing of such petition
on the same basis that the payments were to be applied prior to the date of
the petition.
4.3. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns. The successors and assigns for the Company, the Trust
Seller, the Seller and the Issuer shall include a debtor-in-possession or
trustee of or for such party. The successors and assigns for the Lenders, the
Trustees, the Agent or the Master Servicers, as the case may be, shall include
any successor Lenders, Trustees, the Agent or the Master Servicers, as the case
may be, appointed under the terms of the Lender Documents, the Issuer Documents
or the Operative Documents, as applicable. Each of the Trustees and the Master
Servicers, as the case may be, agrees not to transfer any interest it may have
in the Lender Documents, the Issuer Documents or the Operative Documents unless
such transferee has been notified of the existence of this Agreement and has
agreed to be bound hereby. In the event that the financing provided under the
Credit Agreement shall be refinanced, replaced or refunded, the Seller, the
Issuer, the Master Servicers, the Trustees, the Company, the Trust Seller and
the Collateral Trustee, hereby agree, at the request of the agent or lenders
under the credit facility that so refinances, replaces or refunds the financing
under the Credit Agreement, to execute and deliver a new intercreditor agreement
with such agent and/or lenders or substantially the same terms as herein
provided. In the event that the financing provided under the Lender Documents
shall be refinanced, replaced or refunded, each of the Lenders, the Servicing
Agent and the Agent hereby agree, at the request of the agent or purchasers
under the facility that so refinances, replaces or refunds the financing under
the Lender Documents, to execute and deliver a new intercreditor agreement with
such agent and/or purchaser on substantially the same terms as herein provided.
The Agent, the Servicing Agent, the Collateral Trustee and each of the Lenders
hereby agree that in the event that any of the Agent, the Servicing Agent or a
Lender assigns any or all of its rights or interests under the Credit Agreement,
the assignee thereof shall execute and deliver to each of the Agent, the
Trustees and the Collateral Agent a Collateral Trust and Intercreditor Agreement
Acknowledgment, substantially in the form of Exhibit A hereto, pursuant to which
such assignee shall expressly acknowledge its obligations hereunder and agree to
be bound by all of the terms hereof.
4.4. Beneficiaries. The terms and provisions of this Agreement shall be
for the sole benefit of the parties hereto and their respective successors and
assigns, and no other Person shall have any right, benefit, or priority by
reason of this Agreement.
4.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE.
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4.6. Section Titles. The article and section headings contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
4.7. Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
4.8. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same agreement.
4.9. Resolution of Disputes In Respect of Shared Interest Collateral.
In the event that a dispute as to the allocation or disposition of any Shared
Interest Collateral shall arise which cannot be resolved in good faith by mutual
agreement between the Agent, the Trustees, then any of the Agent, the Trustees
or the Collateral Trustee may apply for resolution of such dispute to any court
of competent jurisdiction. Other than as described in the preceding sentence,
and notwithstanding any other provision of this Agreement, the Collateral
Trustee shall have no right to take any action in respect of any Shared Interest
Collateral other than as authorized by the Agent and/or either of the Trustees
pursuant to the terms of this Agreement.
4.10. Limitations on Liability. None of the members, managers,
officers, employees, agents, stockholders, holders of limited liability company
interests or directors of or in the Trust Seller, the Company or the Trust
Master Servicer or the Seller, the Issuer or the Issuer Master Servicer, past,
present or future, shall be under any liability to the Trust, the Issuer
Trustee, the SSC Master Trust Trustee, the Agent, the Servicing Agent, any
Lender, any Certificateholder, or any Noteholder or any other Person for any
action taken or for refraining from the taking of any action in such capacities
or otherwise pursuant to this Agreement or for any obligation or covenant under
this Agreement, it being understood that, with respect to the Trust Seller, the
Company and the Master Servicer, the Seller, the Issuer and the Issuer Master
Servicer, this Agreement and the obligations created hereunder shall be, to the
fullest extent permitted under applicable law, solely the limited liability
company, limited partnership or corporate obligations of the Trust Seller, the
Company or the Trust Master Servicer, the Seller, the Issuer or the Issuer
Master Servicer, as applicable. The Trust Seller, the Company, the Trust Master
Servicer and any member, manager, officer, employee, agent, stockholder, or
holder of any limited liability company interest, or director of or in the Trust
Seller, the Company or the Trust 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 Trust Seller or any Affiliate thereof,
in the case of the Trust Seller, or the Company or any Affiliate thereof, in the
case of the Company, or the Trust Master Servicer or any Affiliate thereof, in
the case of the Trust Master Servicer) respecting any matters arising hereunder.
The Seller, the Issuer, the Issuer Master Servicer and any member, manager,
officer, employee, agent, stockholder, or holder of any limited liability
company interest, or director of or in the Seller, the Issuer or the Issuer
Master Servicer, as applicable, may rely in good faith on any
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document of any kind prima facie properly executed and submitted by any Person
(other than the Seller or any Affiliate thereof, in the case of the Seller, or
the Issuer or any Affiliate thereof, in the case of the Issuer, or the Issuer
Master Servicer or any Affiliate thereof, in the case of the Issuer Master
Servicer) respecting any matters arising hereunder.
4.11. Nature of the Obligations and Modification of Lender Documents.
Each of the Trust Seller, the Company, the Trustees, the Master Servicers, the
Seller and the Issuer acknowledges that the Obligations and other obligations
and liabilities owing under the Lender Documents are, in part, revolving in
nature and that the amount of such revolving indebtedness which may be
outstanding at any time or from time to time may be increased or reduced and
subsequently reborrowed. The terms of the Lender Documents may be modified,
extended or amended from time to time, and the amount thereof may be increased
or reduced, all without notice to or consent by any of the Trust Seller, the
Trustees, the Master Servicers, the Seller or the Issuer and without affecting
the provisions of this Agreement. Without in any way limiting the foregoing,
each of the Trust Trustees, the Master Servicers, the Seller and the Issuer
hereby agrees that the maximum amount of Obligations and other obligations and
liabilities owing under the Lender Documents may be increased at any time and
from time to time to any amount.
4.12. Nature of the Trust Claim and Modification of Operative
Documents. Each of the Seller, the Company, the Lenders, and the Agent, the
Seller, the Issuer, the Issuer Master Servicer, and the Issuer Trustee
acknowledges that the Trust Claim and other obligations and liabilities owing
under the Operative Documents may be, in part, revolving in nature and that the
amount of such revolving indebtedness which may be outstanding at any time or
from time to time may be increased or reduced and subsequently reborrowed. The
terms of the Operative Documents may be modified, extended or amended from time
to time, and the amount thereof may be increased or reduced, all without notice
to or consent by any of the Company, the Lenders, the Agent, the Seller, the
Issuer, the Issuer Master Servicer or the Issuer Trustee and without affecting
the provisions of this Agreement. Without in any way limiting the foregoing,
each of the Company, the Lenders, the Agent, the Seller, the Issuer, the Issuer
Master Servicer, and the Issuer Trustee hereby agrees that the maximum amount of
Trust Claim and other obligations and liabilities owing under the Operative
Documents may be increased at any time and from time to time to any amount.
4.13. Nature of the Issuer Claim and Modification of Issuer Documents.
Each of the Trust Seller, the Company, the SSC Master Trust Trustee, the Trust
Master Servicer, the Lenders, and the Agent acknowledges that the Issuer Claims
and other obligations and liabilities owing under the Issuer Documents may be,
in part, revolving in nature and that the amount of such revolving indebtedness
which may be outstanding at any time or from time to time may be increased or
reduced and subsequently reborrowed. The terms of the Issuer Documents may be
modified, extended or amended from time to time, and the amount thereof may be
increased or reduced, all without notice to or consent by any of the Trust
Seller, the Company, the SSC Master Trust Trustee, the Trust Master Servicer,
the Lenders or the Agent and without affecting the provisions of this Agreement.
Without in any way limiting the foregoing, each of the Trust Seller, the
Company, the SSC Master Trust Trustee, the Trust Master Servicer, the Lenders
and the Agent
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<PAGE>
hereby agrees that the maximum amount of Issuer Claims and other obligations
and liabilities owing under the Issuer Documents may be increased at any time
and from time to time to any amount.
4.14. Insolvency Proceeding. To and until the date which is one year
and one day after the later of (i) the Collection Date of the last outstanding
Series under the Pooling and Servicing Agreement and (ii) the Indenture
Termination Date, none of the parties hereto shall file or institute or join any
other Person in the filing or institution of any bankruptcy, dissolution or
insolvency proceeding against the Trust Seller or the Seller or the Issuer.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
ING (U.S.) CAPITAL CORPORATION,
as Agent, as a Lender and as Grantor
By:
---------------------------------------
Name:
Title:
Address: 135 E. 57th Street
New York, New York 10022
Attention: Evan Binder
Telecopy: (212) 593-3362
PNC BANK, NATIONAL ASSOCIATION,
as Servicing Agent, and as a Lender and
as Grantor
By:
---------------------------------------
Name:
Title:
Address: PNC Bank Center
1600 Market Street
31st Floor
Philadelphia, PA 19103
Attention: Thomas E. Guttman
Telecopy: (215) 585-4771
Amended and Restated Collateral Trust and Intercreditor Agreement
<PAGE>
PNC BANK, NATIONAL
ASSOCIATION, not in its
individual capacity but
solely as SSC Master
Trust Trustee, as Issuer
Trustee, and as Grantor
By:
---------------------------------------
Name:
Title:
Address: c/o PNC Bank, DE
222 Delaware Avenue
17th Floor
Wilmington, DE 19801
Attention: Corporate Trust
Telecopy: (302) 429-7118
PNC BANK, NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Collateral Trustee
By:
---------------------------------------
Name:
Title:
Address: c/o PNC Bank, DE
222 Delaware Avenue
17th Floor
Wilmington, DE 19801
Attention: Corporate Trust
Telecopy: (302) 429-7118
Amended and Restated Collateral Trust and Intercreditor Agreement
<PAGE>
J.G. WENTWORTH S.S.C. LIMITED
PARTNERSHIP
By: J.G. Wentworth & Company, Inc.,
its general partner
By:
---------------------------------------
Name:
Title:
Address: 300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention: Gary Veloric
Telecopy: (215) 567-7525
Amended and Restated Collateral Trust and Intercreditor Agreement
<PAGE>
J.G. WENTWORTH RECEIVABLES I LLC,
as Trust Seller
By: J.G. Wentworth S.S.C. Limited
Partnership, its manager
By: J.G. Wentworth & Company, Inc.,
as general partner
By:
---------------------------------------
Name:
Title:
Address: 300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention: Gary Veloric
Telecopy: (215) 567-7525
J.G. WENTWORTH RECEIVABLES II LLC,
as Borrower and as Seller
By: J.G. Wentworth S.S.C. Limited
Partnership, a member
By: J.G. Wentworth & Company, Inc.,
its general partner
By:
---------------------------------------
Name:
Title:
Address: 300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention: Gary Veloric
Telecopy: (215) 567-7525
Amended and Restated Collateral Trust and Intercreditor Agreement
<PAGE>
J.G. WENTWORTH RECEIVABLES III LLC,
as Issuer
By: J. G. Wentworth Receivables II LLC,
a member
By: J.G. Wentworth S.S.C. Limited
Partnership, a member
By: J.G. Wentworth & Company, Inc.,
its general partner
By:
---------------------------------------
Name:
Title:
Address: 300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention: Gary Veloric
Telecopy: (215) 567-7525
J.G. WENTWORTH & COMPANY, INC.,
as initial Master Servicer
By:
---------------------------------------
Name:
Title:
Address: 300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention: Gary Veloric
Telecopy: (215) 567-7525
Amended and Restated Collateral Trust and Intercreditor Agreement
<PAGE>
EXHIBIT A
TO
COLLATERAL TRUST AND INTERCREDITOR AGREEMENT
FORM OF COLLATERAL TRUST AND
INTERCREDITOR AGREEMENT ACKNOWLEDGMENT
[DATE]
PNC BANK, NATIONAL ASSOCIATION,
as SSC Master Trust I Trustee
c/o PNC Bank, DE
222 Delaware Ave.
17th Floor
Wilmington, DE 19801
Attention: _________________
PNC BANK, NATIONAL ASSOCIATION,
as Collateral Trustee
c/o PNC Bank, DE
222 Delaware Ave.
17th Floor
Wilmington, DE 19801
Attention: _________________
PNC BANK, NATIONAL ASSOCIATION,
as Issuer Trustee
c/o PNC Bank, DE
222 Delaware Ave.
17th Floor
Wilmington, DE 19801
Attention:__________________
ING (U.S.) CAPITAL CORPORATION,
as Agent
135 E. 57th Street
New York, New York 10022
Attention: __________________
Reference is hereby made to (i) that certain Pooling and Servicing
Agreement (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Pooling and Servicing Agreement"), dated as of
June 13, 1997, among J.G. Wentworth Receivables I LLC, as seller (the "Trust
Seller"), J.G. Wentworth & Company, Inc., as the initial
<PAGE>
master servicer (the "Trust Master Servicer"), and PNC Bank, National
Association, as trustee (the "SSC Master Trust Trustee"), (ii) that certain
Series 1997-1 Supplement (as the same may be amended, restated, supplemented
or otherwise modified from time to time, the "Supplement"), dated as of
September 30, 1997, among the Trust Seller, the Trust Master Servicer and the
SSC Master Trust Trustee, (iii) that certain Master Trust Indenture and
Security Agreement (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), dated as of September
30, 1997, among J.G. Wentworth Receivables III LLC as issuer (the "Issuer"),
J.G. Wentworth & Company, Inc., as the initial Master Servicer (the "Issuer
Master Servicer"), and PNC Bank, National Association, as trustee (the "Issuer
Trustee"), and (iv) that certain Amended and Restated Collateral Trust and
Intercreditor Agreement, dated as of June 13, 1997, among ING (U.S.) Capital
Corporation, as Agent and as Lender, PNC Bank, National Association, in its
separate capacities as Servicing Agent, as Lender, as Issuer Trustee, as SSC
Master Trust Trustee and as Collateral Trustee, the "Lenders" from time to
time parties thereto, the Trust Seller, the Trust Master Servicer, the Seller,
the Issuer Master Servicer, the Issuer Trustee and J.G. Wentworth S.S.C.
Limited Partnership (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "Intercreditor Agreement"). Unless
otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed thereto in the Pooling and Servicing Agreement, the
Indenture and/or the Intercreditor Agreement, as applicable.
In accordance with Section 4.3 of the Intercreditor Agreement, the
undersigned is to become a party to the Intercreditor Agreement as [an
additional Lender] [the "Agent"] [the "Servicing Agent"] thereunder. In
connection therewith, as required pursuant to Section 4.3 of the Intercreditor
Agreement, the undersigned hereby (i) acknowledges that it has received and
reviewed a copy of the Intercreditor Agreement and (ii) agrees to bound by the
terms and provisions thereof applicable to the undersigned as [a Lender] [the
Agent] [the Servicing Agent].
IN WITNESS WHEREOF, the undersigned has executed this Collateral Trust
and Intercreditor Agreement Acknowledgment as of the date and year first above
written.
[--------------------------]
By:
--------------------------------
Name:
Title:
COLLATERAL TRUST AND INTERCREDITOR AGREEMENT
dated as of June 13, 1997
by and among
ING (U.S.) CAPITAL CORPORATION
as Agent and as a Lender
PNC BANK, NATIONAL ASSOCIATION
as Servicing Agent, as Trustee, as a Lender and
as Collateral Trustee
THE OTHER LENDERS
FROM TIME TO TIME PARTIES HERETO
J.G. WENTWORTH RECEIVABLES I LLC
as Seller
J.G. WENTWORTH S.S.C. LIMITED PARTNERSHIP
as Borrower
and
J.G. WENTWORTH & COMPANY, INC.
as the initial Master Servicer
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DECLARATION OF TRUST..............................................................................................2
ARTICLE 1. DEFINITIONS...........................................................................................3
1.1. Certain Defined Terms..............................................................................3
ARTICLE 2. INTERCREDITOR PROVISIONS..............................................................................6
2.1. Release of Lien....................................................................................6
2.2. Allocation of Property.............................................................................7
2.3. Enforcement Actions................................................................................7
2.4. Agency for Perfection..............................................................................7
2.5. Limitation on Liability of Parties to Each Other...................................................7
2.6. Effect Upon Lender Documents and Operative Documents...............................................8
ARTICLE 3. THE COLLATERAL TRUST AND THE COLLATERAL TRUSTEE.......................................................8
3.1. Authorization to Execute Collateral Trust Documents................................................8
3.2. Certain Representations and Warranties.............................................................8
3.3. Procedures for Allocating Shared Interest Collateral...............................................9
3.4. Additional Collateral Trust Documents.............................................................10
3.5. Powers of Attorney................................................................................10
3.6. Exercise of Powers................................................................................10
3.7. Limitation on Collateral Trustee's Duties in Respect of the Shared Interest
Collateral......................................................................................11
3.8. Limitation by Law.................................................................................11
3.9. Information as to Holders; Notices to Holders; Notices to Collateral Trustee......................11
3.10. Compensation and Expenses.........................................................................11
3.11. Stamp and Other Similar Taxes.....................................................................12
3.12. Filing Fees, Excise Taxes, etc....................................................................12
3.13. Indemnification...................................................................................12
3.14. Further Assurances................................................................................13
3.15. Limitation on Repayment...........................................................................13
3.16. Acceptance of Trust...............................................................................13
3.17. Exculpatory Provisions............................................................................13
3.18. Delegation of Duties..............................................................................14
3.19. Reliance by Collateral Trustee....................................................................15
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<PAGE>
3.20. Limitations on Duties of Collateral Trustee.......................................................15
3.21. Monies to be Held in Trust........................................................................16
3.22. Resignation and Removal of the Collateral Trustee.................................................16
3.23. Merger of the Collateral Trustee..................................................................17
ARTICLE 4. MISCELLANEOUS........................................................................................18
4.1. Notices...........................................................................................18
4.2. Agreement Absolute................................................................................18
4.3. Successors and Assigns............................................................................18
4.4. Beneficiaries.....................................................................................19
4.5. GOVERNING LAW.....................................................................................19
4.6. Section Titles....................................................................................19
4.7. Severability......................................................................................19
4.8. Execution in Counterparts.........................................................................19
4.9. Resolution of Disputes In Respect of Shared Interest Collateral...................................19
4.10. Limitations on Liability..........................................................................19
4.11. Nature of the Obligations and Modification of Lender Documents....................................20
4.12. Nature of the Trust Claim and Modification of Operative Documents.................................20
4.13. Insolvency Proceeding.............................................................................20
</TABLE>
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<PAGE>
COLLATERAL TRUST AND INTERCREDITOR AGREEMENT dated as of June 13, 1997
(as modified, amended, restated or supplemented from time to time, this
"Agreement"), by and among:
(1) ING (U.S.) Capital Corporation ("ING Capital"), in its capacity
as agent under the Credit Agreement (as defined below) (in such
capacity, the "Agent") and as a Lender (as defined below);
(2) PNC Bank, National Association, a national banking association
("PNC Bank"), as servicing agent under the Credit Agreement (in
such capacity, the "Servicing Agent"), as trustee under the
Pooling and Servicing Agreement (as defined below) (in such
capacity, the "Trustee"), as collateral trustee under this
Agreement (in such capacity, the "Collateral Trustee") for the
respective Holders of Interests referred to below, and as a
Lender;
(3) The other financial institutions from time to time parties to the
Credit Agreement and, pursuant to Section 4.3, hereto (together
with ING Capital and PNC Bank, being collectively, the "Lenders"
and each individually being a "Lender");
(4) J.G. Wentworth Receivables I LLC, a Delaware limited liability
company ("JGW LLC"), as seller (the "Seller") under the Pooling
and Servicing Agreement;
(5) J.G. Wentworth S.S.C. Limited Partnership, a Delaware limited
partnership ("JGW SSC"), as seller (in such capacity, the
"Company") under the Seller Purchase Agreement (as defined below)
and as the borrower (in such capacity, together with any
successor thereto in such capacity, the "Borrower") under the
Credit Agreement; and
(6) J.G. Wentworth & Company, Inc., a Pennsylvania corporation, as
the initial master servicer (the "Master Servicer") under the
Pooling and Servicing Agreement.
R E C I T A L S:
A. The Borrower, the Agent, the Servicing Agent and the Lenders are
parties to an Amended and Restated Revolving Credit Agreement, dated as of
February 11, 1997 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement") pursuant to which or in accordance with
which, the Lenders have agreed to make loans, advances and other financial
accommodations ("Advances") to the Borrower;
B. The Borrower, in order to secure its prompt repayment of the
Advances and interest thereon by the Borrower and the prompt payment and
performance of the other "Obligations" owing by the Borrower to the Lenders and
the Agent under (and as such term is defined in) the Credit Agreement and the
other instruments, documents, and agreements executed and delivered in
connection therewith (such instruments, documents and agreements (including the
Security Agreement referred to below), together with the Credit Agreement, being
hereinafter referred to as the "Lender Documents"), entered into a certain
Amended and Restated Security
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<PAGE>
Agreement dated as of February 11, 1997 (as amended, restated, supplemented or
otherwise modified from time to time the "Security Agreement") in favor of the
Agent, pursuant to which the Borrower granted a security interest to the
Agent, for the benefit of the Agent and the Lenders, in the "Collateral"
(as such term is defined therein), including, without limitation, the
Receivables and the Related Property and Collections relating thereto (as such
terms are hereinafter defined);
C. Concurrently herewith, the Company and the Seller are entering into
a certain Purchase Agreement dated as of June 13, 1997 (as amended, restated,
supplemented or otherwise modified from time to time, the "Seller Purchase
Agreement") between the Company and the Seller. pursuant to which the Company
may from time to time sell, transfer and otherwise convey or purport to sell,
transfer or otherwise convey (in each case, a "Transfer") to the Seller all of
the right, title and interest of the Company in certain of the Seller's
Receivables and the Related Property and Collections relating thereto and the
proceeds of such Receivables and Related Assets (such Receivables, Related
Property, Collections and proceeds so sold or purported to be Transferred to the
Seller by the Company pursuant to the Seller Purchase Agreement being referred
to as the "Purchased Assets");
D. The Seller, the Master Servicer and the Trustee are entering into a
certain Pooling and Servicing Agreement dated as of June 13, 1997 (as amended,
restated, supplemented, or otherwise modified from time to time, the "Pooling
and Servicing Agreement") pursuant to which the Seller may from time to time
Transfer certain of its assets or interests therein, including, without
limitation, the Purchased Assets, to SSC Master Trust I, a trust organized under
the laws of the State of Delaware (the "Trust"), to facilitate the sale and
funding of certificated interests in the assets of, and/or indebtedness of, the
Trust (as more fully described in the Operative Documents, the "Trust Assets")
which are to be issued by the Trust from time to time (such certificates
evidencing such interests being referred to as the "Certificates" and the
holders of such Certificates being referred to as the "Certificateholders" and
each individually as a "Certificateholder"); and
E. The parties hereto, in order to facilitate the transactions
described above, hereby agree as follows:
DECLARATION OF TRUST:
NOW, THEREFORE, to facilitate the allocation of the Shared Interest
Collateral (as defined below) and in consideration of the premises and the
mutual covenants and agreements set forth herein, each of the Grantors (as
defined below) hereby assigns all of its rights and remedies in the following
property to the Collateral Trustee, in trust for each Holder of an Interest and
for the sole purpose of exercising such rights and remedies in a manner
consistent with each such Person's interests therein, and the Collateral Trustee
does hereby accept such assignment by the Grantors:
(A) this Agreement, the other Collateral Trust Documents (as defined
below) and the Shared Interest Collateral; and
(B) the Proceeds (as hereinafter defined) of any of the foregoing.
2
<PAGE>
TO HAVE AND TO HOLD all of the foregoing (collectively, the "Trust
Estate") by the Collateral Trustee and its successors in trust under this
Agreement and its assigns and the assigns of its successors in trust forever.
IN TRUST NEVERTHELESS, under and subject to the terms and conditions
set forth herein and in the other Collateral Trust Documents, and for the
benefit of each Holder of an Interest and for the enforcement of the payment of
all Obligations and Trust Claims (as defined below), and for the performance of
and compliance with the covenants and conditions of this Agreement, the other
Collateral Trust Documents, the Lender Documents, and the Operative Documents
(as defined below).
IT IS HEREBY FURTHER COVENANTED AND DECLARED that the Trust Estate is
to be held and applied by the Collateral Trustee, subject to the further
covenants, conditions and trust hereinafter set forth.
NOW THEREFORE, in order to induce the Lenders to continue to make
Advances to the Borrower under the Credit Agreement, and to induce the
Certificateholders to purchase the Certificates, and, in consideration of the
foregoing premises and the mutual covenants and agreements set forth herein, and
for other good and valuable consideration, receipt of which is hereby
acknowledged, it is hereby agreed as follows:
ARTICLE 1. DEFINITIONS.
1.1. Certain Defined Terms. Capitalized terms used and not otherwise
defined herein shall have the meanings specified in the Pooling and Servicing
Agreement, or if not defined therein, in the Seller Purchase Agreement. In
addition, as used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Borrowing Base" has the meaning ascribed to such term in the Credit
Agreement.
"Borrowing Base Deficiency" means an amount equal to the sum of (A) the
positive excess, if any, of the principal balance of the Advances (other than
Discretionary Non-Ratable Advances) under the Credit Agreement over the
Borrowing Base plus (B) the positive excess, if any, of the principal balance of
the Discretionary Non-Ratable Advances under the Credit Agreement over the
Discretionary Non-Ratable Advance Borrowing Base.
"Business Day" means any day other than a Saturday or Sunday or any
other day on which national banking associations or state banking institutions
in New York, New York or Philadelphia, Pennsylvania are authorized or obligated
by law, executive order, or governmental decree to be closed.
"Claim" means the Obligations or the Trust Claims, as applicable.
-3-
<PAGE>
"Collateral Trust Documents" means this Agreement, each Lock-Box
Notice, any additional documents executed to facilitate the allocation of the
Shared Interest Collateral in accordance with the terms hereof, and any
agreement or document referred to in Section 3.4 or 3.14 of this Agreement, as
the same may be amended, supplemented or otherwise modified in accordance with
their respective terms.
"Collateral Trustee's Fees" has the meaning set forth in Section 3.10
of this Agreement.
"Collections" means, with respect to any Receivable, all cash
collections and other Proceeds of such Receivable and/or the Related Property
relating thereto (including late charges, fees and interest arising thereon, and
all recoveries with respect to Receivables that have been written off as
uncollectible) from any source whatsoever, including, without limitation, from
any related Annuity Contract, Life Insurance Policy, guarantee or other source.
"Discretionary Non-Ratable Advance" has the meaning ascribed to such
term in the Credit Agreement.
"Discretionary Non-Ratable Advance Borrowing Base" has the meaning
ascribed to such term in the Credit Agreement.
"Enforcement" means collectively or individually, (i) with respect to
the Operative Documents, the occurrence or declaration of a Significant Event or
Series Significant Event; or (ii) with respect to the Lender Documents, the
automatic occurrence of declaration of the Obligations prior to the date when
otherwise due, or (iii) with respect to the Lender Documents or the Operative
Documents, any party having the party to do so commences juridical or
nonjudicial enforcement of any of the respective default rights and remedies
under any of the foregoing agreements.
"Event of Default" has the meaning ascribed to such term in the Credit
Agreement.
"Grantor" means any of the Agent, the Lenders, the Servicing Agent or
the Trustee, and "Grantors" means all of the foregoing, collectively.
"Holder of an Interest" means, as of any date, any holder of any Claim.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), preference, participation
interest, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the UCC or comparable law of any jurisdiction to
evidence any of the foregoing.
-4-
<PAGE>
"Lock-Box" means any lock-box to which Collections are remitted or
otherwise received.
"Lock-Box Notice" has the meaning ascribed to such term in the Pooling
and Servicing Agreement.
"Operative Documents" shall have the meaning ascribed to such term in
the Pooling and Servicing Agreement and any applicable Series Supplement
thereto.
"Proceeds" shall have the meaning ascribed to it in Section 9-306(1) of
the UCC and, whether or not constituting proceeds under such section, any
accessions to and substitutions for any such property, and shall include, but
shall not be limited to, (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to either of the Grantors from time to time with
respect to any of the Collateral or the Trust Assets, as applicable, and (ii)
any and all other amounts from time to time paid or payable to either of the
Grantors upon the sale, exchange, collection or other disposition of any part of
the Collateral and the Trust Assets, as applicable.
"Receivable" has the meaning ascribed to such term in the Seller
Purchase Agreement.
"Records" has the meaning ascribed to such term in the Pooling and
Servicing Agreement.
"Related Property" has the meaning ascribed to such term in the Seller
Purchase Agreement.
"Repurchase Claim" means any obligation of the Company to repurchase
Receivables pursuant to the Seller Purchase Agreement.
"Responsible Officer" means, with respect to any Person, the chief
executive officer, the chief financial officer or the chief accounting officer
of such Person.
"Seller Transfer Report" has the meaning ascribed to such term in the
Seller Purchase Agreement.
"Series" has the meaning ascribed to such term in the Pooling and
Servicing Agreement.
"Shared Interest Collateral" mean (i) all Records in respect of all
Receivables, (ii) the Lock-Boxes, the Lock-Box Accounts and all monies and items
on deposit therein and the Lock- Box Notices relating thereto, (iii) the Master
Collection Account, all cash deposited therein, and all certificates and
instruments, if any, from time to time representing the Master Collection
Account, (iv) the Seller Split Payment Account, all cash deposited therein, and
all certificates and instruments, if any, from time to time representing the
Seller Split Payment Account, (v) all
-5-
<PAGE>
computer hardware and software used in connection with the servicing, collection
and monitoring of the Receivables and the Related Property associated therewith,
(vi) any other property or interests in property in which the Agent, the Lenders
or the Servicing Agent, on the one hand, and any of the Certificateholders or
the Trustee, on the other hand, each have any Liens or other property interest
under the Lender Documents and the Operative Documents, respectively, and (viii)
all Proceeds thereof, whether now owned or hereafter acquired or created and in
or upon which a Bank Interest and a Seller Interest is granted.
"Trust Claim" means all indebtedness, obligations, fees, costs,
expenses and other liabilities of the Trust owing under or in connection with
any of the Operative Documents.
"Trustee" has the meaning set forth in the Preamble to this Agreement.
"Trustee Fee" has the meaning ascribed to such term in the Pooling and
Servicing Agreement.
"Trust Estate" has the meaning set forth in the Declaration of Trust
herein.
"Trust Party" means any of the Trust, the Trustee, the Collateral
Trustee, the Master Servicer or the Back-Up Servicer, and "Trust Parties" means
all such parties collectively.
"Trust Termination Date" shall mean the date of termination of the
Trust created under the Pooling and Servicing Agreement pursuant to Section
12.01 thereof.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
ARTICLE 2. INTERCREDITOR PROVISIONS.
2.1. Release of Lien. (a) Notwithstanding anything contained in any of
the Lender Documents, any provision of the UCC or any UCC Financing Statement of
record, or any applicable law, the Agent, the Servicing Agent and the Lenders
hereby agree that, upon the Transfer of any interest in any Receivable (or
portion thereof) (1) as described in any Seller Transfer Report acknowledged by
the Agent (which acknowledgment may only be withheld by the Agent to the extent
that the Transfer of such Receivables would cause an Event of Default (provided
that such acknowledgment may be conditioned on the receipt by the Servicing
Agent of cash in an amount equal to any Borrowing Base Deficiency that may
result from such Transfer) and upon which acknowledgment the Seller and the
Trustee may conclusively rely in determining the authority of the Company to
make such Transfer of such Purchased Assets covered by such Seller Transfer
Report) or (2) which was otherwise Transferred to the Seller and did not result
in a positive Borrowing Base Deficiency (after giving effect to the disposition
and application of the aggregate "Purchase Price" (as such term is defined in
the Seller Purchase Agreement) (any such Transfer in either case being a
"Permitted Transfer"), together with the Related Property and
-6-
<PAGE>
Collections relating thereto, to the Seller pursuant to the Seller Purchase
Agreement, (i) any and all Liens and/or other claims or interest in favor of
the Agent, the Servicing Agent or any of the Lenders in such Purchased Assets
shall be released, terminated and of no further force or effect, in each case,
without any further action on the part of the Seller, the Company or the
Trustee and (ii) the Agent, the Lenders and the Servicing Agent shall cease to
have any further rights, title or interests in any such Purchased Assets and,
without limiting the foregoing, such Purchased Assets shall not be part of the
Collateral.
(b) Each of the Agent, the Lenders and the Servicing Agent hereby
agrees that it shall not contest or challenge, or join any other Person in
contesting or challenging, the validity, enforceability, priority or perfection
of the ownership interest of the Seller of any of the Purchased Assets which is
the subject of a Permitted Transfer, or the validity, enforceability, priority
or perfection of the ownership or security interest of any assignee of the
Seller in such assets.
(c) Except as expressly set forth herein, nothing contained in this
Agreement shall, or shall be deemed to, restrict, impair or impose any condition
with respect to the exercise by the Agent, the Servicing Agent or the Lenders,
on the one hand, or the Trust Parties, on the other hand, of any right, remedy,
power or privilege under any Lender Document or Operative Document,
respectively.
(d) Each of the Agent, the Lenders and the Servicing Agent hereby
agrees to deliver to the Trustee or the Collateral Trustee, as applicable, all
documents, releases and other agreements, and to take all other actions, which
the Seller or the Trustee may reasonably request to evidence the release of the
Agent's and the Lenders' Liens as described in clause (a) above.
2.2. Allocation of Property. All Proceeds of the Collateral and the
Purchased Assets shall be allocated in accordance with the following procedures:
(a) All Proceeds of the Collateral shall be allocated to the Servicing
Agent for application to the Obligations in accordance with the Lender
Documents until the payment in full thereof and any remaining proceeds
shall be paid to the Company or as otherwise required by applicable law.
(b) All Proceeds of the Purchased Assets shall be allocated to the
Trustee for application in accordance with the Operative Documents.
2.3. Enforcement Actions. Each of the parties hereto agrees to use
reasonable efforts to give notice to the other parties hereto prior to any such
party's commencement of Enforcement (but failure to do so shall not prevent such
Person from commencing Enforcement or affect its rights hereunder nor create any
cause of action or liability against such Person); provided, however, that none
of the parties hereto may commence any Enforcement against any of the Shared
Interest Collateral, such Enforcement only to be commenced by the Collateral
Trustee at the mutual direction of the Trustee and the Agent or, if the Trustee
and the Agent cannot reach agreement, then in accordance with the directions of
any court of competent jurisdiction solicited by the Collateral Trustee, the
Agent or the Trustee.
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2.4. Agency for Perfection. Each of the parties hereto hereby appoints
each other party hereto as such party's agent for purposes of perfecting by
possession each such party's respective security interests and ownership
interests and Liens on the Collateral, the Trust Assets and the Shared
Collateral described hereunder. In the event that the Master Servicer or the
Trustee obtains possession of any of the Collateral, the Master Servicer or the
Trustee, as applicable shall notify the Agent of such fact, shall hold such
Collateral in trust and shall deliver such Collateral to the Agent upon the
Agent's request therefor. In the event that the Agent, the Servicing Agent or
any of the Lenders obtains possession of any of the Trust Assets, the Agent
shall notify the Trustee of such fact, shall hold such Trust Assets in trust and
shall deliver such Trust Assets to the Trustee upon its request therefor.
2.5. Limitation on Liability of Parties to Each Other. Except as
provided in this Agreement, no party shall have any liability to any other party
except for liability arising from the gross negligence or willful misconduct of
such party or its representatives except with respect to the Collateral Trustee
and the Trustee each of which shall be solely liable only for its or its
representative's own bad faith and willful misconduct; provided, however, that
any liability of the Collateral Trustee or the Trustee hereunder is solely the
corporate liability of the Collateral Trustee or the Trustee, as applicable, and
no recourse shall be had for the payment by the Collateral Trustee or the
Trustee of any other obligation or claim of or against the Collateral Trustee or
the Trustee, as applicable, arising out of or based on this Agreement, against
any stockholder, employee, officer, director or incorporator of the Collateral
Trustee or the Trustee.
2.6. Effect Upon Lender Documents and Operative Documents. By executing
this Agreement, the Company and Seller acknowledge that the provisions of this
Agreement shall not give either such Person any substantive rights as against
the Agent, the Servicing Agent, the Lenders, the Trustee, any Master Servicer or
the Certificateholders pursuant hereto and that nothing in this Agreement shall
amend, modify, change or supersede the terms of the Lender Documents or the
Operative Documents with respect to the Seller or the Company or any other
Affiliated Entity. Notwithstanding the foregoing, each of the Trustee, the
Master Servicer, the Lenders, the Servicing Agent and the Agent agrees, that, as
between themselves, to the extent the terms and provisions of the Lender
Documents or the Operative Documents are inconsistent with the terms and
provisions of this Agreement, the terms and provisions of this Agreement shall
control.
ARTICLE 3. THE COLLATERAL TRUST AND THE COLLATERAL TRUSTEE
3.1. Authorization to Execute Collateral Trust Documents. The
Collateral Trustee shall execute and deliver each of the Collateral Trust
Documents requiring execution and delivery by it and shall accept delivery from
each of the Grantors of those Collateral Trust Documents which do not require
the Collateral Trustee's execution; provided, however, that the Collateral
Trustee shall not be required to execute any such Collateral Trust Document
imposing any obligation or liability on the Collateral Trustee or adversely
affecting the Collateral Trustee unless the provisions thereof imposing such
obligation or liability or adversely affecting the Collateral Trustee are, in
each case, in form and substance satisfactory to the Collateral Trustee.
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3.2. Certain Representations and Warranties. The Collateral Trustee, in
its capacity as Collateral Trustee hereunder, and PNC Bank, National
Association, in its individual capacity, each represents and warrants to each of
the Grantors and the Holders as follows:
(i) PNC Bank, National Association is a national banking association
duly incorporated, validly existing and in good standing under the laws of
the United States of America and has all requisite corporate power and
authority to enter into and perform its obligations under this Agreement
and the other Collateral Trust Documents to which it is a party.
(ii) The execution, delivery and performance by the Collateral Trustee
of this Agreement and the other Collateral Trust Documents to which it is a
party have been duly authorized by all necessary corporate action on the
part of PNC Bank, National Association.
(iii) To the best knowledge of the officers assigned to the Collateral
Trustee's Corporate Collateral Trustee Administration Department, there are
no Collateral Trustee's Liens against the Trust Estate.
(iv) This Agreement and all of the other Collateral Trust Documents to
which the Collateral Trustee is a party have been duly executed and
delivered by a duly authorized officer thereof.
3.3. Procedures for Allocating Shared Interest Collateral. (a) Subject
to the limitations hereunder, under the other Collateral Trust Documents, and
under the Lender Documents and the Operative Documents, the Collateral Trustee
shall take any action with respect to the Shared Interest Collateral, this
Agreement and the other Collateral Trust Documents requested in writing by both
the Agent and the Trustee, including, without limitation, releasing portions of
the Shared Interest Collateral from the Liens imposed pursuant to this Agreement
and the other Collateral Trust Documents; provided, however, that the Agent and
the Trustee hereby authorize and direct the Collateral Trustee to follow the
directions as to allocations of amounts in the Master Collection Account,
including without limitation to the applicable Series Collection Account and the
Seller Split Payment Account, as shall be specified by the Applicable Master
Servicers and the Borrower in each Daily Report; provided, that in the event
that any material amount of Collections is either misallocated or the Applicable
Master Servicers and the Borrower are unable to agree on the reconciliation and
allocation thereof, then upon the direction of the Trustee or the Agent (such
direction being a "Transition Notice"), the Collateral Trustee shall cease to
follow the instruction of the Applicable Master Servicers and the Borrower as
aforesaid, and shall instead take direction solely from the Back-up Servicer in
respect of such allocations; and provided, further, that (a) at all times prior
to the giving of a Transition Notice, each of the Applicable Master Servicer and
the Borrower may make, or instruct the Collateral Trustee to make, withdrawals
from the Seller Split Payment Account to remit funds to the applicable Claimant
as shall be specified by the Applicable Master Servicer and the Borrower in each
Daily Report, and the Collateral Trustee shall be entitled to rely on any such
directions from the Applicable Master Servicer and/or the Borrower in respect of
such remittances in connection with the Split Payments,
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and (b) from and after the giving of a Transition Notice, the Collateral Trustee
shall cease to follow the instruction of the Applicable Master Servicer and the
Borrower as aforesaid, and shall instead take direction solely from the Back-up
Servicer in respect of such allocations; and provided, further, that the
Collateral Trustee shall not be obligated to take any such action which is in
conflict with any provisions of law or of this Agreement, the Lender Documents,
the Operative Documents or the other Collateral Trust Documents or with respect
to which the Collateral Trustee has not received adequate security or indemnity
as provided in Section 3.19(d). Neither the Agent nor the Trustee shall
unreasonably withhold consent in respect of the other's actions respecting the
allocation of any Shared Interest Collateral, and each such party hereby agrees
not to take any action in respect of any Shared Interest Collateral that would
adversely affect the other's rights to enforce its claims with respect thereto
or the value of such Shared Interest Collateral.
(b) The Seller and the Company hereby acknowledge and agree that the
Collateral Trustee shall have the exclusive ownership, dominion and control over
any and all Lock-Boxes and the Lockbox Accounts which are Shared Interest
Collateral. The Seller and the Company hereby agree to take any further action
necessary or that the Trustee, the Collateral Trustee or the Agent may
reasonably request to evidence and/or effect such ownership, dominion and
control. Unless instructed otherwise by the Collateral Trustee pursuant to its
authority hereunder, each Lockbox Bank shall be instructed to remit, on a daily
basis, via overnight or same day transfer, all amounts deposited in its Lockbox
Accounts to the Master Collection Account in accordance with the terms of a
Lock-Box Notice substantially in the form of Exhibit B to the Pooling and
Servicing Agreement.
3.4. Additional Collateral Trust Documents. In the event that either of
the Grantors at any time has or acquires any interest in any Shared Interest
Collateral which is not covered by a Collateral Trust Document in a manner which
will perfect the Collateral Trustee's lien upon and security interest in such
Shared Interest Collateral without further act or deed of the Collateral
Trustee, then at the time such interest in such Shared Interest Collateral is
acquired (or at any time the Collateral Trustee, any Holder, the Agent or the
Trustee determines that the Collateral Trustee's lien upon or security interest
in such interest in the Shared Interest Collateral is unperfected), to the
extent that such security interest may be perfected by the execution and/or
filing of a Collateral Trust Document, then the applicable Grantor shall
immediately, or immediately upon the Collateral Trustee's request therefor,
prepare, execute and deliver to the Collateral Trustee such Collateral Trust
Documents, in form and substance similar to the Collateral Trust Documents
heretofore executed and delivered by such Grantor unless otherwise specified or
agreed by the Collateral Trustee, as are necessary to perfect the Collateral
Trustee's Lien upon such Shared Interest Collateral. If the signature of the
Collateral Trustee is required on any such Collateral Trust Document, such
Grantor shall present such Collateral Trust Document to the Collateral Trustee
for signature, together with a certificate executed by such Grantor certifying
that such Collateral Trust Document is required by, and complies with, the
provisions hereof, and, if applicable, is in form suitable for filing or
recordation, and the Collateral Trustee shall execute such Collateral Trust
Document and such Grantor shall file such Collateral Trust Document with
appropriate filing and/or recording offices if such filing and/or recording is
required or advisable to perfect or protect the Collateral Trustee's lien upon
or security interest in such Shared Interest Collateral. Such Grantor shall
supply the Collateral Trustee with an executed copy of each such Collateral
Trust
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Document and satisfactory proof that such Collateral Trust Document has
been properly filed or recorded, if and to the extent that filing or recording
is required under this Section 3.4.
3.5. Powers of Attorney. Each of the Grantors hereby irrevocably
constitutes and appoints the Collateral Trustee and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in the name of such Grantor or
the name of such attorney-in-fact, from time to time in the Collateral Trustee's
discretion (subject to Section 3.17 of this Agreement), for the purposes of
signing documents and taking other action to perfect, promote and protect the
liens and security interests of the Collateral Trustee in the Shared Interest
Collateral. This power of attorney is a power coupled with an interest, shall be
irrevocable.
3.6. Exercise of Powers. All of the powers, remedies and rights of the
Collateral Trustee as set forth in this Agreement may be exercised by the
Collateral Trustee in respect of any Collateral Trust Document as though set
forth at length therein and all the powers, remedies and rights of the
Collateral Trustee as set forth in any Collateral Trust Document may be
exercised from time to time as herein and therein provided.
3.7. Limitation on Collateral Trustee's Duties in Respect of the Shared
Interest Collateral. Beyond its duties set forth in this Agreement as to the
custody of any Shared Interest Collateral in its possession or control and the
accounting to each of the Grantors and the Holders for monies received by it
hereunder, the Collateral Trustee shall not have any duty to the Grantors or the
Holders as to any Collateral in its possession or control or in the possession
or control of any agent or nominee of it or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto.
3.8. Limitation by Law. All of the provisions of this Article 3 are
intended to be subject to all applicable mandatory provisions of law which may
be controlling in the premises and to be limited to the extent necessary so that
they will not render this Agreement invalid or unenforceable in whole or in
part.
3.9. Information as to Holders; Notices to Holders; Notices to
Collateral Trustee. Each of the Agent and the Trustee shall be responsible for
maintaining a list setting forth the names and addresses of each party to whom
notices must be sent under the Credit Agreement with respect to the transactions
relating to the Lender Documents, the Operative Documents, this Agreement and
the other Collateral Trust Documents, and the Collateral Trustee shall have no
responsibility or liability with respect thereto. Notwithstanding anything
contained herein or in any other agreement to the contrary, all notices, reports
or other documents required to be delivered by the Collateral Trustee hereunder
or under any of the other Collateral Trust Documents to any of the Holders shall
be deemed delivered by the Collateral Trustee for purposes hereof or thereof by
the delivery thereof to the Agent or the Trustee, as the case may be, in respect
of such Holder(s). The Collateral Trustee may act in reliance upon any
instrument or signature reasonably believed by it to be genuine and may assume
that any Person purporting to give any notice, advice or instruction in
connection with the provisions hereof has been duly authorized to do so. In
addition, the Collateral Trustee shall be entitled to rely upon any
certification, demand, notice, instrument or other writing delivered to it
hereunder or in connection herewith without being required to determine the
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correctness of any fact stated therein or the propriety or validity thereof.
3.10. Compensation and Expenses. Each of the Grantors hereby jointly
and severally agrees to pay to the Collateral Trustee (i) such reasonable
compensation for its performance of services hereunder and under the Collateral
Trust Documents and for administering the Trust Estate as shall be set forth in
a separate letter agreement among the Collateral Trustee and the Grantors to be
entered into prior to or concurrently with the appointment of a Collateral
Trustee other than the Trustee (such compensation being the "Collateral
Trustee's Fees") but in any event not to exceed 120% of such Person's
out-of-pocket expenses incurred in the performance of such duties, and (ii) from
time to time, upon the Collateral Trustee's demand therefor, but subject in all
cases to Section 3.15 of this Agreement, all of the fees, costs and expenses of
the Collateral Trustee (including, without limitation, the reasonable fees and
disbursements of its counsel and such special counsel as the Collateral Trustee
elects to retain) (A) arising in connection with the preparation, execution,
delivery, modification, restatement, amendment or termination of this Agreement
and each Collateral Trust Document or the enforcement (whether in the context of
a civil action, adversary proceeding, workout or otherwise) of any of the
provisions hereof or thereof, or (B) incurred or required to be advanced in
connection with the administration of the Trust Estate, the disposition of the
Shared Interest Collateral pursuant to any Collateral Trust Document and the
preservation, protection or defense of the Collateral Trustee's rights under
this Agreement and in and to the Shared Interest Collateral and the Trust
Estate. In the event that the Trustee and the Collateral Trustee are the same
Person, the Collateral Trustee's Fees and the Collateral Trust Document Fees
shall be deemed to have been paid out of the Trustee Fee. In the event that the
Trustee and the Collateral Trustee are not the same Person, the Collateral
Trustee's Fees and the Collateral Trust Document Fees shall be paid pursuant to
a fee letter between the Collateral Trustee, the Agent and the Trustee in
respect of each Series, to the extent that payment thereof is provided for under
the Operative Documents. The obligations of the Grantors under this Section 3.10
shall survive the termination of this Agreement.
3.11. Stamp and Other Similar Taxes. Subject in all cases to Section
3.15 of this Agreement, each of the Grantors jointly and severally agrees to
indemnify and hold harmless the Collateral Trustee and each Holder from, and
shall reimburse the Collateral Trustee and each Holder for, any present or
future claim for liability for any stamp or other similar tax and any penalties
or interest with respect thereto, which may be assessed, levied or collected by
any jurisdiction in connection with this Agreement, the Trust Estate, or the
attachment or perfection of the security interest granted to the Collateral
Trustee in any Shared Interest Collateral. The obligations of the Grantors under
this Section 3.11 shall survive the termination of this Agreement.
3.12. Filing Fees, Excise Taxes, etc. Subject in all cases to Section
3.15, each of the Grantors hereby jointly and severally agrees to pay or to
reimburse the Collateral Trustee for any and all amounts in respect of all
search, filing, recording and registration fees, taxes, excise taxes and other
similar imposts which may be payable or determined to be payable by such Grantor
in respect of the execution, delivery, performance and enforcement of this
Agreement and each Collateral Trust Document and agrees to save the Collateral
Trustee harmless from and against any and all liabilities with respect to or
resulting from any delay on the part of such Grantor in paying or failing to pay
such taxes and fees. The obligations of the Grantors under this Section 3.12
shall
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survive the termination of this Agreement.
3.13. Indemnification. (a) Each of the Grantors agrees to pay,
indemnify and hold the Collateral Trustee and each of its agents harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and the Collateral Trust
Documents by, against or with respect to such Grantor, unless arising from the
gross negligence or willful misconduct of such of the Collateral Trustee or such
of the agents as are seeking indemnification. As security for such payment, the
Collateral Trustee shall have a lien on all Shared Interest Collateral and other
property and funds held or collected by the Collateral Trustee as part of the
Trust Estate.
(b) In any suit, proceeding or action brought by the Collateral Trustee
under or with respect to the Shared Interest Collateral for any sum owing
thereunder, or to enforce any provisions thereof, or of any of the Collateral
Trust Documents or this Agreement, each of the Grantors agrees to save,
indemnify and keep the Collateral Trustee and the Holders harmless from and
against all expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligee
thereunder, arising out of a breach by such Grantor of any of its obligations
hereunder or thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such obligee or its successors
from such Grantor, and all such obligations of such Grantor shall be and remain
enforceable against and only against such Grantor and shall not be enforceable
against the Collateral Trustee or any Holder.
(c) The agreements in this Section 3.13 shall, in all cases, be subject
to Section 3.15 and shall survive the termination of the other provisions of
this Agreement.
3.14. Further Assurances. (a) Each Grantor agrees that from time to
time, at the expense of such Grantor, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, as requested by the Collateral Trustee, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Trustee to exercise and enforce its rights
and remedies hereunder with respect to any Shared Interest Collateral, including
without limitation, the execution of financing or continuation statements, or
amendments thereto.
(b) Each of the Grantors hereby acknowledges that it shall be and
remain primarily and exclusively liable for the preparation, execution and
filing of financing and continuation statements with respect to the Shared
Interest Collateral. Without in any way limiting the foregoing, each of the
Grantors hereby authorizes the Collateral Trustee to file, in its sole
discretion and without any obligation to do so, one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Shared Interest Collateral without the signature of such Grantor where
permitted by law. A carbon, photographic or other reproduction of this Agreement
or any financing statement covering the Shared Interest Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
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3.15. Limitation on Repayment. Notwithstanding anything contained
herein to the contrary, the Collateral Trustee hereby agrees that all amounts
(other than the Collateral Trustee's Fees) owing to it by any of the Grantors
pursuant to this Agreement, including, without limitation, any and all
Collateral Trust Document Fees, shall, to the extent payable on account of the
Trustee, be payable by the Seller but only to the extent of Available Seller
Funds to the extent that at the time of such payment, or immediately thereafter
and giving effect to such payment, the Seller would, in the reasonable
determination of the Seller, continue to be able to pay its debts as they become
due. The Trustee shall have no independent obligation for any such amounts.
3.16. Acceptance of Trust. The Collateral Trustee, for itself and its
successors, hereby accepts the trusts created by this Agreement upon the terms
and conditions hereof, including those contained in this Article 3.
3.17. Exculpatory Provisions. (a) The Collateral Trustee shall not be
responsible in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties contained herein or in the other
Collateral Trust Documents, except for those made by the Collateral Trustee, or
for filing any financing statement or continuation statement or recording or
re-recording any Collateral Trust Document in any public office at any time or
for taking any other action to perfect or maintain the perfection or
effectiveness of any security interest or Lien in any of the Shared Interest
Collateral or in any other property granted to it by the Grantors hereunder or
under any of the other Collateral Trust Documents. The Collateral Trustee makes
no representations as to the value or condition of the Trust Estate or any part
thereof, or as to the title of any of the Grantors thereto or as to the security
afforded by the Collateral Trust Documents or this Agreement or, except as set
forth in Section 3.2 of this Agreement, as to the validity, execution,
enforceability, legality or sufficiency of this Agreement, any other Collateral
Trust Document or of the Interests secured hereby and thereby, and the
Collateral Trustee shall incur no liability or responsibility in respect of any
such matters. The Collateral Trustee shall not be responsible for insuring the
Trust Estate or for the payment of taxes, charges, assessments or liens upon the
Trust Estate or for the maintenance of the Trust Estate, except that (i) in the
event the Collateral Trustee enters into possession of all or any part of the
Trust Estate, the Collateral Trustee shall preserve such portion of the Trust
Estate in its possession and (ii) the Collateral Trustee will promptly, and at
its own expense, take such action as may be necessary to remove and discharge
(by bonding or otherwise) any Collateral Trustee's Lien on any part of the Trust
Estate or any other Lien on any part of the Trust Estate resulting from claims
against it individually.
(b) The Collateral Trustee shall not be required to ascertain or
inquire as to the performance by either of the Grantors of any of the covenants
or agreements contained herein or in any Collateral Trust Document. Whenever it
is necessary, or in the opinion of the Collateral Trustee advisable, for the
Collateral Trustee to ascertain the amount of Interests then held by a Holder,
the Collateral Trustee may rely on a certificate of such Holder (or the Agent or
the Trustee on behalf of such Holder) as to such amount.
(c) PNC Bank, National Association shall, in its individual capacity
and at its own cost and expense, promptly take all action as may be necessary to
discharge any Collateral Trustee's Liens or any other Lien resulting from claims
against it individually.
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(d) The Collateral Trustee shall not be personally liable for any acts,
omissions, errors of judgment or mistakes of fact or law made, taken or omitted
to be made or taken by it in accordance with this Agreement or any other
Collateral Trust Document (including, without limitation, acts, omissions,
errors or mistakes with respect to the Shared Interest Collateral), except for
those arising out of or in connection with the Collateral Trustee's gross
negligence or willful misconduct. Notwithstanding anything set forth herein to
the contrary, the Collateral Trustee shall have a duty of reasonable care with
respect to any notes and instruments which are delivered to the Collateral
Trustee or its designated representatives and are in the Collateral Trustee's or
its designated representatives' possession and control.
3.18. Delegation of Duties. The Collateral Trustee may execute any of
the trusts or powers hereof and perform any duty hereunder either directly or by
or through agents, nominees or attorneys-in-fact, provided that the Collateral
Trustee shall obtain a written acknowledgment from such agents, nominees or
attorneys-in-fact that they shall be liable to the Holders for losses or damages
incurred by any such Holder as a result of such agent's, nominee's or
attorney-in-fact's gross negligence or willful misconduct as and to the extent
the Collateral Trustee would be liable for such losses or damages if the actions
or omissions of such agents, nominees or attorneys-in-fact constituting such
gross negligence or willful misconduct had been actions or omissions of the
Collateral Trustee. The Collateral Trustee shall be entitled to advice of
counsel concerning all matters pertaining to such trusts, powers and duties. The
Collateral Trustee shall not be responsible for the negligence or misconduct of
any agents, nominees or attorneys-in-fact selected by it without gross
negligence or willful misconduct.
3.19. Reliance by Collateral Trustee. (a) Whenever in the
administration of the trusts under this Agreement the Collateral Trustee shall
deem it necessary or desirable that a matter be proved or established with
respect to any of the Grantors in connection with the taking, suffering or
omission of any action hereunder by the Collateral Trustee, such matter (unless
other evidence in respect thereof is specifically prescribed under this
Agreement) may be deemed to be conclusively provided or established by a
certificate of a Responsible Officer of such Grantor(s) or any officer of the
Agent or Trustee, as applicable, in each case, delivered to the Collateral
Trustee, and such certificate shall be full warranty to the Collateral Trustee
for any action taken, suffered or omitted in reliance thereon; subject, however,
to the provisions of Section 3.20 of this Agreement. Without in any way limiting
the foregoing, all certificates, notices or directions required to be delivered
by any of the Grantors, the Agent or the Trustee to the Collateral Trustee
pursuant to the terms hereof shall in all cases be signed by a Responsible
Officer of such Person, if such Person is a Grantor, or, otherwise, by any
officer thereof.
(b) The Collateral Trustee may consult with counsel, accountants and
other experts, and any opinion or advice of any such counsel, any such
accountant, and any such other expert shall be full and complete authorization
and protection in respect of any action taken or suffered by the Collateral
Trustee hereunder in accordance therewith. The Collateral Trustee shall have the
right at any time to seek instructions concerning the administration of the
Trust Estate from any court of competent jurisdiction.
(c) The Collateral Trustee may rely, and shall be fully protected in
acting, upon
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any resolution, statement, certificate, instrument, opinion, report, notice,
request, consent, order, bond or other paper or document which it has no
reasonable reason to believe to be other than genuine and to have been signed
or presented by the proper party or parties or, in the case of cables,
telecopies and telexes, to have been sent by the proper party or parties. In the
absence of its gross negligence or willful misconduct, the Collateral Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Collateral Trustee and conforming to the requirements of this Agreement or
any other Collateral Trust Document.
(d) If the Collateral Trustee has been requested or directed to take
action under this Agreement, including, without limitation, pursuant to Section
3.3, the Collateral Trustee shall not be under any obligation to exercise any of
the rights or powers vested in the Collateral Trustee by this Agreement or any
Collateral Trust Document unless the Collateral Trustee shall have been provided
adequate security and indemnity against the costs, expenses and liabilities
which may be incurred by it in compliance with such request or direction,
including such reasonable advances as may be requested by the Collateral
Trustee.
3.20. Limitations on Duties of Collateral Trustee. (a) The Collateral
Trustee shall be obligated to perform such duties and only such duties as are
specifically set forth in this Agreement or in any other Collateral Trust
Document, and no implied covenants or obligations shall be read into this
Agreement or any other Collateral Trust Document against the Collateral Trustee.
The Collateral Trustee shall exercise the rights and powers vested in it by this
Agreement or by any other Collateral Trust Document, and the Collateral Trustee
shall not be liable with respect to any action taken or omitted to be taken by
it in accordance with the direction of the Agent or the Trustee, as the case may
be, in accordance with the terms of this Agreement.
(b) Except as herein otherwise expressly provided, the
Collateral Trustee shall not be under any obligation to take any action which is
discretionary with the Collateral Trustee under the provisions hereof or under
any Collateral Trust Document.
3.21. Monies to be Held in Trust. All monies received under or
pursuant to any provision of this Agreement or any Collateral Trust Document
shall be held in trust for the purposes for which they were paid or are held.
3.22. Resignation and Removal of the Collateral Trustee. (a)
The Collateral Trustee may at any time (and, if the Collateral Trustee shall at
any time cease to be an Eligible Collateral Trustee, the Collateral Trustee
shall at such time), by giving thirty (30) days' prior written notice to each of
the Grantors, the Master Servicer, the Company, the Seller, the Agent and the
Trustee, resign and be discharged of the responsibilities hereby created, such
resignation to become effective upon the appointment of a successor Collateral
Trustee or Collateral Trustees (each of which Collateral Trustees shall be an
Eligible Collateral Trustee) by the Agent and the Trustee and the acceptance of
such appointment by such successor Collateral Trustee or Collateral Trustees
(which acceptance shall (i) be in writing, (ii) be signed by such successor
Collateral Trustee and delivered to each of the Agent and the Trustee and (iii)
expressly acknowledge such successor Collateral Trustee's agreement to be party
to, and bound by, the terms of this Agreement,
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<PAGE>
including, without limitation, this Section 3.22). The Collateral Trustee may
be removed at any time and a successor Collateral Trustee appointed by the
affirmative vote of the Agent and the Trustee, which successor Collateral
Trustee shall, upon its acceptance of such appointment, deliver a written
acceptance thereof as set forth in the parenthetical in the immediately
preceding sentence; provided, that the Collateral Trustee shall be entitled to
its fees and expenses to the date of removal. If no successor Collateral
Trustee or Collateral Trustees shall be appointed and approved within thirty
(30) days from the date of the giving of the aforesaid notice of resignation
or within thirty (30) days from the date of such removal, the Collateral
Trustee, the Agent or the Trustee may apply to any court of competent
jurisdiction to appoint a successor Collateral Trustee or Collateral Trustees
(any of which shall be an Eligible Collateral Trustee) to act until such time,
if any, as a successor Collateral Trustee or Collateral Trustees shall have
been appointed as above provided. Any successor Collateral Trustee or
Collateral Trustees so appointed by such court shall immediately and without
further act be superseded by any successor Collateral Trustee or Collateral
Trustees appointed by the Agent and the Trustee.
(b) If at any time the Collateral Trustee shall resign, be removed or
otherwise become incapable of action, or if at any time a vacancy shall occur in
the office of the Collateral Trustee for any other cause, a successor Collateral
Trustee or Collateral Trustees (any of which shall be an Eligible Collateral
Trustee) may be appointed by the Agent and the Trustee, and the powers, duties,
authority and title of the predecessor Collateral Trustee or Collateral Trustees
shall be terminated and cancelled with or without procuring the resignation of
such predecessor Collateral Trustee or Collateral Trustees, and without any
other action (except as may be required by applicable law) upon delivery to such
predecessor Collateral Trustee or Collateral Trustees of written notice, duly
executed by the Agent and the Trustee, of such appointment and designation of a
successor Collateral Trustee or Collateral Trustees, which notice shall be filed
for record in each public office, if any, in which this Agreement is required to
be filed.
(c) The appointment and designation referred to in Section 3.22(b) of
this Agreement shall be full evidence of the right and authority to make the
same and of all the facts therein recited, and this Agreement shall vest in such
successor Collateral Trustee or Collateral Trustees, without any further act,
deed or conveyance, all of the estate and title of its predecessor or their
predecessors, and upon such appointment and designation the successor Collateral
Trustee or Collateral Trustees shall become fully vested with all the estates,
properties, rights, powers, trusts, duties, authority and title of its
predecessor or their predecessors; but such predecessor or predecessors shall,
nevertheless, on the written request of the Agent or the Trustee, either of the
Grantors, or the successor Collateral Trustee or Collateral Trustees, execute
and deliver an instrument transferring to such successor or successors all the
estates, properties, rights, powers, trusts, duties, authorities and title of
such predecessor or predecessors hereunder and shall deliver all securities and
monies held by it or them to such successor Collateral Trustee or Collateral
Trustees. Should any deed, conveyance or other instrument in writing from either
of the Grantors be required by any successor Collateral Trustee or Collateral
Trustees for more fully and certainly vesting in such successor Collateral
Trustee or Collateral Trustees the estates, properties, rights, powers, trusts,
duties, authorities and title vested or intended to be vested in the predecessor
Collateral Trustee or Collateral Trustees, any and all such deeds, conveyances
and other instruments in writing shall, on the request of such successor
Collateral Trustee
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<PAGE>
or Collateral Trustees, be so executed, acknowledged and delivered.
(d) Any required filing for record of the instrument appointing a
successor Collateral Trustee or Collateral Trustee as hereinabove provided shall
be at the expense of the Grantors. The resignation of any Collateral Trustee or
Collateral Trustees and the instrument or instruments removing any Collateral
Trustee or Collateral Trustees, together with all other instruments, deeds and
conveyances provided for in this Article 3 shall, if required by law, be
forthwith recorded, registered and filed by and at the expense of the Grantors,
wherever this Agreement is recorded, registered and filed.
(e) Notwithstanding any provision herein to the contrary, the
Collateral Trustee shall at all times be the same Person as the Person acting as
"Trustee" pursuant to the terms (and as defined in) the Pooling and Servicing
Agreement.
3.23. Merger of the Collateral Trustee. Any corporation (i) into which
the Collateral Trustee shall be merged, or with which it shall be consolidated,
(ii) resulting from any merger or consolidation to which the Collateral Trustee
shall be a party, or (iii) succeeding to all or substantially all of the
corporate trust business of the Collateral Trustee shall, to the extent it would
constitute an Eligible Collateral Trustee, be the Collateral Trustee under this
Agreement without the execution or filing of any paper or any further act on the
part of the parties hereto.
ARTICLE 4. MISCELLANEOUS.
4.1. Notices. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
telecommunications and communication by facsimile copy) and mailed, telexed,
transmitted or delivered, as to each party hereto, at its address set forth
under its name on the signature pages hereof or at such other address as shall
be designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective upon receipt, or, in the case
of notice by mail, five (5) days after being deposited in the mails, postage
prepaid, or in the case of notice by telex, when telexed against receipt of the
answerback, or in the case of notice by facsimile copy, when verbal confirmation
of receipt is obtained, in each case addressed as aforesaid.
4.2. Agreement Absolute. The Trustee shall be deemed to have entered
into the Operative Documents in express reliance upon this Agreement and the
Lenders, the Servicing Agent and the Agent shall be deemed to have entered into
the Lender Documents in express reliance upon this Agreement. This Agreement
shall be and remain absolute and unconditional under any and all circumstances,
and no acts or omissions on the part of any party to this Agreement shall affect
or impair the agreement of any party to this Agreement, unless otherwise agreed
to in writing by all of the parties hereto. This Agreement shall be applicable
both before and after the filing of any petition by or against the Company or
the Seller under the Bankruptcy Code and all references herein to the Company or
the Seller shall be deemed to apply to a debtor-in-possession for such party and
all allocations of payments between the Lenders, the Trustee and the Master
Servicer shall, subject to any court order to the contrary, continue to be made
after the
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<PAGE>
filing of such petition on the same basis that the payments were to be applied
prior to the date of the petition.
4.3. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns. The successors and assigns for the Company and the
Seller shall include a debtor-in-possession or trustee of or for such party. The
successors and assigns for the Lenders, the Trustee, the Agent, or the Master
Servicer, as the case may be, shall include any successor Lenders, Trustee, the
Agent, or the Master Servicer, as the case may be, appointed under the terms of
the Lender Documents or the Operative Documents, as applicable. Each of the
Trustee, the Agent or the Master Servicer, as the case may be, agrees not to
transfer any interest it may have in the Lender Documents or the Operative
Documents unless such transferee has been notified of the existence of this
Agreement and has agreed to be bound hereby. In the event that the financing
provided under the Credit Agreement shall be refinanced, replaced or refunded,
the Company, the Seller, the Collateral Trustee, the Trustee and the Master
Servicer hereby agree, at the request of the agent or lenders under the credit
facility that so refinances, replaces or refunds the financing under the Credit
Agreement, to execute and deliver a new intercreditor agreement with such agent
and/or lenders or substantially the same terms as herein provided. In the event
that the financing provided under the Lender Documents shall be refinanced,
replaced or refunded, each of the Lenders and the Agent hereby agree, at the
request of the agent or purchasers under the facility that so refinances,
replaces or refunds the financing under the Lender Documents, to execute and
deliver a new intercreditor agreement with such agent and/or purchaser on
substantially the same terms as herein provided. The Agent, the Servicing Agent,
the Collateral Trustee and each of the Lenders hereby agree that in the event
that any of the Agent, the Servicing Agent or a Lender assigns any or all of
its rights or interests under the Credit Agreement, the assignee thereof shall
execute and deliver to each of the Agent, the Trustee and the Collateral Agent
a Collateral Trust and Intercreditor Agreement Acknowledgment, substantially
in the form of Exhibit A hereto, pursuant to which such assignee shall
expressly acknowledge its obligations hereunder and agree to be bound by all
of the terms hereof.
4.4. Beneficiaries. The terms and provisions of this Agreement shall be
for the sole benefit of the parties hereto and their respective successors and
assigns, and no other Person shall have any right, benefit, or priority by
reason of this Agreement.
4.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE.
4.6. Section Titles. The article and section headings contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
4.7. Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
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<PAGE>
4.8. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same agreement.
4.9. Resolution of Disputes In Respect of Shared Interest Collateral.
In the event that a dispute as to the allocation or disposition of any Shared
Interest Collateral shall arise which cannot be resolved in good faith by mutual
agreement between the Agent and the Trustee, then any of the Agent, the Trustee
or the Collateral Trustee may apply for resolution of such dispute to any court
of competent jurisdiction. Other than as described in the preceding sentence,
and notwithstanding any other provision of this Agreement, the Collateral
Trustee shall have no right to take any action in respect of any Shared Interest
Collateral other than as authorized by the Agent and/or the Trustee pursuant to
the terms of this Agreement.
4.10. Limitations on Liability. None of the members, managers,
officers, employees, agents, stockholders, holders of limited liability company
interests or directors of or in the Seller, the Company or the Master Servicer,
past, present or future, shall be under any liability to the Trust, the Trustee,
the Agent, the Servicing Agent, any Lender, any Certificateholder or any other
Person for any action taken or for refraining from the taking of any action in
such capacities or otherwise pursuant to this Agreement or for any obligation or
covenant under this Agreement, it being understood that, with respect to the
Seller, the Company and the Master Servicer, this Agreement and the obligations
created hereunder shall be, to the fullest extent permitted under applicable
law, solely the limited liability company, limited partnership or corporate
obligations of the Seller, the Company or the Master Servicer, as applicable.
The Seller, the Company, the Master Servicer and any member, manager, officer,
employee, agent, stockholder, or holder of any limited liability company
interest, or director of or in the Seller, the Company 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 Seller or any
Affiliate thereof, in the case of the Seller, or the Company or any Affiliate
thereof, in the case of the Company, or the Master Servicer or any Affiliate
thereof, in the case of the Master Servicer) respecting any matters arising
hereunder.
4.11. Nature of the Obligations and Modification of Lender Documents.
Each of the Seller, the Company, the Trustee and the Master Servicer
acknowledges that the Obligations and other obligations and liabilities owing
under the Lender Documents are, in part, revolving in nature and that the amount
of such revolving indebtedness which may be outstanding at any time or from time
to time may be increased or reduced and subsequently reborrowed. The terms of
the Lender Documents may be modified, extended or amended from time to time, and
the amount thereof may be increased or reduced, all without notice to or consent
by any of the Seller, the Trustee or the Master Servicer and without affecting
the provisions of this Agreement. Without in any way limiting the foregoing,
each of the Seller, the Trustee or Master Servicer hereby agrees that the
maximum amount of Obligations and other obligations and liabilities owing under
the Lender Documents may be increased at any time and from time to time to any
amount.
4.12. Nature of the Trust Claim and Modification of Operative
Documents. Each
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<PAGE>
of the Seller, the Company, the Lenders, and the Agent acknowledges that the
Trust Claim and other obligations and liabilities owing under the Operative
Documents may be, in part, revolving in nature and that the amount of such
revolving indebtedness which may be outstanding at any time or from time to
time may be increased or reduced and subsequently reborrowed. The terms of the
Operative Documents may be modified, extended or amended from time to time,
and the amount thereof may be increased or reduced, all without notice to or
consent by any of the Company, the Lenders or the Agent and without affecting
the provisions of this Agreement. Without in any way limiting the foregoing,
each of the Company, the Lenders and the Agent hereby agrees that the maximum
amount of Trust Claim and other obligations and liabilities owing under the
Operative Documents may be increased at any time and from time to time to any
amount.
4.13. Insolvency Proceeding. To and until the date which is one year
and one day after the Collection Date of the last outstanding Series under the
Pooling and Servicing Agreement, none of the parties hereto shall file or
institute or join any other Person in the filing or institution of any
bankruptcy, dissolution or insolvency proceeding against the Seller.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
ING (U.S.) CAPITAL CORPORATION,
as Agent, as a Lender and as Grantor
By:___________________________________
Name:
Title:
Address: 135 E. 57th Street
New York, New York 10022
Attention: ________________________
Telecopy: (212) 593-3362
PNC BANK, NATIONAL ASSOCIATION,
as Servicing Agent, and as a Lender and as
Grantor
<PAGE>
By: __________________________________
Name:
Title:
Address: PNC Bank Center
1600 Market Street ___ Floor
Philadelphia, PA 19103
Attention: _______________________
Telecopy: (215) 585-____
PNC BANK, NATIONAL ASSOCIATION,
as Trustee, and as Grantor
By: __________________________________
Name:
Title:
Address: c/o PNC Bank, DE
222 Delaware Avenue
17th Floor
Wilmington, DE 19801
Attention: Corporate Trust
Telecopy: (302) 429-7118
PNC BANK, NATIONAL ASSOCIATION,
as Collateral Trustee
By: __________________________________
Name:
Title:
Address: c/o PNC Bank, DE
222 Delaware Avenue
17th Floor
Wilmington, DE 19801
Attention: Corporate Trust
Telecopy: (302) 429-7118
<PAGE>
J.G. WENTWORTH S.S.C. LIMITED
PARTNERSHIP, as Borrower
By: J.G. Wentworth & Company, Inc.,
its general partner
By: __________________________________
Name:
Title:
Address: 222 Delaware Avenue
Suite 1449
Wilmington, DE 19899
Attention: Gary Veloric
Telecopy: (215) 567-7525
<PAGE>
J.G. WENTWORTH RECEIVABLES I LLC,
as Seller
By: J.G. Wentworth S.S.C. Limited Partnership,
its manager
By: J.G. Wentworth & Company, Inc.,
its general partner
By: __________________________________
Name:
Title:
Address: 222 Delaware Avenue
Suite 1449
Wilmington, DE 19899
Attention: Gary Veloric
Telecopy: (215) 567-7525
J.G. WENTWORTH & COMPANY, INC.,
as initial Master Servicer
By: __________________________________
Name:
Title:
Address: 222 Delaware Avenue
Suite 1449
Wilmington, DE 19899
Attention: Gary Veloric
Telecopy: (215) 567-7525
<PAGE>
EXHIBIT A
TO
COLLATERAL TRUST AND INTERCREDITOR AGREEMENT
FORM OF COLLATERAL TRUST AND
INTERCREDITOR AGREEMENT ACKNOWLEDGMENT
[DATE]
PNC BANK, NATIONAL ASSOCIATION,
as Trustee
PNC Bank Center
1600 Market Street
Philadelphia, Pennsylvania 19103
Attention: _________________
PNC BANK, NATIONAL ASSOCIATION,
as Collateral Trustee
PNC Bank Center
1600 Market Street
Philadelphia, Pennsylvania 19103
Attention: _________________
ING (U.S.) CAPITAL CORPORATION,
as Agent
135 E. 57th Street
New York, New York 10022
Attention: __________________
Reference is hereby made to (i) that certain Pooling and Servicing
Agreement (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Pooling and Servicing Agreement"), dated as of
June 13, 1997, among J.G. Wentworth Receivables I LLC, as seller (the "Seller"),
J.G. Wentworth & Company, Inc., as the initial master servicer (the "Master
Servicer"), and PNC Bank, National Association, as trustee (the "Trustee"), (ii)
that certain Series 1997-1 Supplement (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Supplement"), dated
as of June 13, 1997, among the Seller, the Master Servicer and the Trustee and
(iii) that certain Collateral Trust and Intercreditor Agreement, dated as of
June 13, 1997, among ING (U.S.) Capital Corporation, as Agent and as Lender, PNC
Bank, National Association, in its separate capacities as Servicing Agent, as
Lender, as Trustee and as Collateral Trustee, the "Lenders" from time to time
parties thereto, the Seller, the Master Servicer, and J.G. Wentworth S.S.C.,
Limited Partnership, as Borrower (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Intercreditor
Agreement"). Unless otherwise defined herein, capitalized terms used herein
shall have the
<PAGE>
meanings ascribed thereto in the Pooling and Servicing Agreement and/or the
Intercreditor Agreement, as applicable.
In accordance with Section 4.3 of the Intercreditor Agreement,
the undersigned is to become a party to the Intercreditor Agreement as [an
additional Lender] [the "Agent"] [the "Servicing Agent") thereunder. In
connection therewith, as required pursuant to Section 4.3 of the Intercreditor
Agreement, the undersigned hereby (i) acknowledges that it has received and
reviewed a copy of the Intercreditor Agreement and (ii) agrees to bound by the
terms and provisions thereof applicable to the undersigned as [a Lender] [the
Agent] [the Servicing Agent].
IN WITNESS WHEREOF, the undersigned has executed this
Collateral Trust and Intercreditor Agreement Acknowledgment as of the date and
year first above written.
[__________________________]
By:_________________________
Name:
Title:
================================================================================
CERTIFICATE PURCHASE AGREEMENT
among
THE PARTIES SET FORTH ON
THE SIGNATURE PAGES HEREOF
as Purchasers
SSC MASTER TRUST I
as Issuer
J.G. WENTWORTH RECEIVABLES I LLC
as Seller
and
PNC BANK, NATIONAL ASSOCIATION,
as Trustee
$59,518,980 7.80 % CLASS A STRUCTURED SETTLEMENT-BACKED PASS-THROUGH
TRUST CERTIFICATES, SERIES 1997-1
Dated as of June 13, 1997
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS..............................................................................................1
SECTION 1.01 Certain Defined Terms......................................................................1
SECTION 1.02 Other Definitional Provisions..............................................................2
ARTICLE II
PURCHASE AND SALE........................................................................................3
SECTION 2.01 Purchase and Sale of the Class A Certificates..............................................3
ARTICLE III.......................................................................................................3
CONDITIONS PRECEDENT TO
OBLIGATION OF THE PURCHASERS.............................................................................3
SECTION 3.01 Conditions.................................................................................3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER.............................................................5
SECTION 4.01 Reaffirmation..............................................................................6
SECTION 4.02 Authority, etc.............................................................................6
SECTION 4.03 Series 19971 Certificates..................................................................6
SECTION 4.04 Investment Company Act.....................................................................7
SECTION 4.05 Offering of Certificates...................................................................7
SECTION 4.06 Full Disclosure............................................................................7
SECTION 4.07 The Company; Seller Membership.............................................................7
SECTION 4.08 CUSIP No.; Brokerage Fees..................................................................7
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE............................................................7
SECTION 5.01 Pooling and Servicing Agreement............................................................8
SECTION 5.02 Authority, etc.............................................................................8
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER.........................................................8
SECTION 6.01 Representations and Warranties.............................................................8
ARTICLE VII
INDEMNIFICATION.........................................................................................17
SECTION 7.01 Indemnification by the Seller.............................................................17
ARTICLE VIII
MISCELLANEOUS...........................................................................................17
SECTION 8.01 Amendments; etc...........................................................................17
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
SECTION 8.02 Notices...................................................................................17
SECTION 8.03 No Waiver; Remedies.......................................................................18
SECTION 8.04 Governing Law.............................................................................18
SECTION 8.05 No Proceedings............................................................................18
SECTION 8.06 WAIVER OF RIGHT TO JURY TRIAL.............................................................18
SECTION 8.07 Binding Effect............................................................................18
SECTION 8.08 Execution in Counterparts.................................................................18
SECTION 8.09 Survival..................................................................................18
SECTION 8.10 Limitations on Liability..................................................................19
</TABLE>
SCHEDULE I -- ERISA Exceptions
SCHEDULE II -- Form of Benefit Plan Disclosure Letter
EXHIBIT A -- Form of Seller Order
EXHIBIT B -- Trustee Account Information
EXHIBIT C -- List of Closing Documents
- ii -
<PAGE>
CERTIFICATE PURCHASE AGREEMENT (this "Agreement") dated as of
June 13, 1997, among THE PERSONS SET FORTH ON THE SIGNATURE PAGES HERETO AS
PURCHASERS (each a "Purchaser" and collectively the "Purchasers"), SSC MASTER
TRUST I, a trust organized under the laws of the State of Delaware (the
"Issuer"), J.G. WENTWORTH RECEIVABLES I LLC, a Delaware limited liability
company (the "Seller"), and PNC BANK, NATIONAL ASSOCIATION, a national banking
association, not individually but solely in its capacity as trustee under the
Pooling and Servicing Agreement referred to below (in such capacity, the
"Trustee").
W I T N E S S E T H:
--------------------
WHEREAS, the Issuer has authorized and executed, and the Trustee has
authenticated, the Series 1997-1 Certificates in accordance with a Seller Order;
and
WHEREAS, subject to the terms and conditions of this Agreement and the
Series Supplement and pursuant to such Seller Order, the Issuer desires to sell
to the Purchasers, and the Purchasers desire to purchase from the Issuer, Class
A Certificates as hereafter provided;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. Capitalized terms used herein
(including in the preamble and recitals hereof) without definition shall have
the meanings set forth, or incorporated by reference, in the Series Supplement
or the Pooling and Servicing Agreement, as applicable. Additionally, the
following terms shall have the following meanings:
"Class A Certificates" has the meaning specified in Section 2.01(b)
hereof.
"Closing" has the meaning specified in Section 2.01(a) hereof.
"Closing Date" has the meaning specified in Section 2.01(a) hereof.
"Commitment" means, as to any Purchaser, the obligation of such
Purchaser to purchase Class A Certificates in an Aggregate Principal Balance
equal to the amount set forth opposite such Purchaser's name on the signature
pages hereto.
"Company" means J.G. Wentworth S.S.C. Limited Partnership, a Delaware
limited partnership.
1
<PAGE>
"Indemnified Losses" has the meaning specified in Section 7.01 hereof.
"Indemnified Party" has the meaning specified in Section 7.01 hereof.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of June 13, 1997 among J.G. Wentworth Receivables I LLC, as
the Seller, J.G. Wentworth & Company, Inc., as the Initial Master Servicer, and
PNC Bank, National Association, as Trustee, as the same may be amended,
restated, modified or otherwise supplemented from time to time.
"PPM" has the meaning specified in Section 4.06 hereof.
"Preliminary PPM" has the meaning specified in Section 4.06 hereof.
"Purchase Price" has the meaning specified in Section 2.01(b) hereof.
"Purchaser Group" means the group of Purchasers set forth underneath
such heading on the signature pages hereto.
"Series Supplement" means the Series 1997-1 Supplement to the Pooling
and Servicing Agreement dated as of June 13, 1997 among the Seller, the Master
Servicer and the Trustee, as the same may be amended, restated, modified or
otherwise supplemented from time to time.
SECTION 1.02 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.01, and accounting terms partially defined in Section 1.01 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles. To the extent that the definitions of accounting
terms herein are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained herein shall control.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; and Section, subsection,
Schedule, Exhibit and Appendix references contained in this Agreement are
references to Sections, subsections, Schedules, Exhibits and the Appendix in or
to this Agreement unless otherwise specified.
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<PAGE>
ARTICLE II
PURCHASE AND SALE
SECTION 2.01 Purchase and Sale of the Class A Certificates. (a) The
closing (the "Closing") of the purchase and sale of the Class A Certificates
shall take place at 10:00 a.m., New York time at the offices of Sidley & Austin,
One First National Plaza, Chicago, Illinois 60603, on June 13, 1997, or if the
conditions to closing set forth in Article III of this Agreement shall not have
been satisfied or waived by such date, as soon as practicable after such
conditions shall have been satisfied or waived, or at such other time, date and
place as the parties shall agree upon (the date of the Closing being referred to
herein as the "Closing Date").
(b) On the Closing Date, pursuant to a Seller Order (a copy of which is
attached hereto as Exhibit A), the Issuer (acting through the Trustee) shall
issue, sell, transfer and deliver to each Purchaser, and each Purchaser
severally agrees to purchase at the Closing, Series 1997-1 Class A Certificates
(collectively, the "Class A Certificates") for a purchase price ("Purchase
Price") equal with respect to each Purchaser, such Purchaser's Commitment.
Without limiting any other provision of this Agreement, the obligation of each
Purchaser to purchase the Class A Certificates on the Closing Date is subject to
the satisfaction of the conditions precedent set forth in Article III hereof.
(c) The Purchase Price for each Class A Certificate shall be payable in
full at Closing and shall be made in immediately available funds in U.S. Dollars
to the account of the Trustee specified in Exhibit B hereto.
(d) On the Closing Date, the Trustee will deliver to each Purchaser a
Class A Certificate, dated the Closing Date, in the name of each such Purchaser
and in an original Principal Balance equal to the Purchase Price paid by such
Purchaser therefor, duly authenticated in accordance with the provisions of the
Pooling and Servicing Agreement against delivery by such Purchaser, to the
Seller of the Purchase Price for such Purchaser's respective Class A
Certificates in accordance with clause (c) above.
ARTICLE III
CONDITIONS PRECEDENT TO
OBLIGATION OF THE PURCHASERS
SECTION 3.01 Conditions. The obligation of any Purchaser to purchase
and pay for the Class A Certificates on the Closing Date is subject to the
satisfaction at the time of the Closing of the following conditions:
(a) Documents. Each of the documents on Exhibit C attached hereto has
been duly authorized, executed and delivered by the signatories thereto (other
than the Purchasers) and
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copies thereof (in form and substance satisfactory to the Control Party) have
been delivered to the Trustee.
(b) Performance of Obligations. All the terms, covenants, agreements
and conditions of the Pooling and Servicing Agreement, the Series Supplement,
the Seller Purchase Agreement, the Revolving Credit Agreement, the Intercreditor
Agreement and this Agreement to be complied with and performed by the Seller and
the Master Servicer for Series 1997-1 at or before the Closing shall have been
complied with and performed in all respects.
(c) Representations and Warranties. Each of the representations and
warranties of the Seller and the Master Servicer for Series 1997-1 made in the
Pooling and Servicing Agreement, the Series Supplement, the Seller Purchase
Agreement, the Revolving Credit Agreement, the Intercreditor Agreement and this
Agreement shall be true and correct in all material respects as of the time of
the Closing (except to the extent they expressly relate to an earlier or later
time).
(d) No Significant Event. On the Closing Date and after giving effect
to the purchase of Class A Certificates contemplated herein, no Significant
Event, Potential Significant Event or Series Significant Event (or any event or
condition which with the giving of notice or passage of time, or both, would
constitute a Series Significant Event) with respect to any Series shall have
occurred and be continuing at Closing or would result from the transactions
contemplated under the Operative Documents.
(e) Effectiveness of Operative Documents. The Operative Documents with
respect to Series 1997-1, including, without limitation, the Pooling and
Servicing Agreement, the Series Supplement and the Intercreditor Agreement,
shall become effective pursuant to their terms.
(f) Issuance of Class B Certificates. Prior to, or simultaneously with,
the purchase of the Class A Certificates by the Purchasers, the Class B
Certificates shall be issued and shall be executed and delivered by the Issuer
to the Seller.
(g) Documentation for Purchasers. Each Purchaser shall have received an
original signed copy of each certificate required to be delivered to the Trustee
or the Placement Agent in accordance with Section 5.01(a), (b) and (c) of the
Series Supplement.
(h) Opinions. Each Purchaser shall have received an original signed
copy of each opinion of counsel delivered on the Closing Date in connection with
the Pooling and Servicing Agreement and the Series Supplement.
(i) Rating of Certificates. Each Purchaser shall have received written
notice from the Rating Agencies that the Class A Certificates shall have been
rated by Duff & Phelps and Moody's A and A2, respectively.
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(j) No Change in Financial Markets. There shall have not occurred at
any time on or after the date hereof any of the following: (i) a suspension or
material limitation in trading in securities generally on the New York Stock
Exchange; (ii) a general moratorium on commercial banking activities in New York
declared by either Federal or New York State authorities; (iii) the outbreak or
material escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war; or (iv) any
other change in national or international financial, political or economic
conditions or currency exchange rates or exchange controls, but with respect to
any such event specified in clause (iii) or (iv) only if such event makes it
impracticable to proceed with the offering or the delivery of the Class A
Certificates on the terms and in the manner contemplated hereby.
(k) Legal Investment. At the Closing Date, (i) the Class A Certificates
to be purchased by each Purchaser will be a legal investment for such Purchaser
under the laws of each jurisdiction to which such Purchaser may be subject,
without resort to any so-called basket provision of said laws such as Section
1405(a)(8) of the New York Insurance Law, (ii) the purchase of and payment for
said Class A Certificates by each Purchaser will not violate any applicable law
or governmental regulation and shall not subject such Purchaser to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or regulation and (iii) each Purchaser shall have received such
certificates or other evidence as such Purchaser may reasonably request
supporting the foregoing.
(l) Other Purchasers. As to any Purchaser, each other Purchaser shall
have purchased and made payment for the aggregate principal amount of the Class
A Certificates to be purchased by such other Purchaser pursuant hereto.
(m) Other Documents. Each Purchaser shall have received such other
information, documents, certificates and opinions as any Purchaser or special
counsel may reasonably request, all in form and substance reasonably
satisfactory to the Person requesting the same.
If any condition specified in this Article III shall not have been
satisfied when and as required in this Agreement, any Purchaser may, by notice
to the Issuer at any time prior to the Closing Date, terminate such Purchaser's
obligation to purchase the Class A Certificates pursuant to this Agreement.
Notice of such termination shall be given to the Issuer in writing or by
telephone promptly confirmed in writing. Forthwith upon receipt of any such
termination notice, the Issuer shall give each other Purchaser written notice
thereof.
Upon the purchase and payment by the Purchasers of the Class A
Certificates, each of the conditions set forth in this Section 3.01 shall be
irrevocably deemed to have been satisfied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
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As of the Closing Date, the Seller hereby makes the following
representations and warranties to the Purchasers and the Trustee, on which the
Purchasers and the Trustee shall rely in purchasing the Class A Certificates.
SECTION 4.01 Reaffirmation. The Seller hereby remakes and reaffirms to
the Purchasers and the Trustee the representations and warranties of the Seller
set forth in Section 2.03 of the Pooling and Servicing Agreement and, with
respect to the Series 1997-1 Receivables, in Section 3.03 of the Series
Supplement and hereby represents and warrants that such representations and
warranties are true and correct in all material respects as of the date hereof
(unless such representations and warranties specifically refer to an earlier or
later date).
SECTION 4.02 Authority, etc. (a) The execution, delivery and
performance by the Seller of this Agreement, and the consummation of the
transactions herein contemplated will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any Lien, charge or encumbrance upon any of the
property or assets of the Seller or any of its Affiliates pursuant to the terms
of, any indenture, mortgage, deed of trust, loan agreement or other agreement
(excluding this Agreement) or instrument to which it or any of its Affiliates is
bound or to which any of its property or assets is subject, nor will such action
result in any violation of any Requirement of Law applicable to the Seller,
except, in each case, where such conflict, breach, default, creation or
imposition of any Lien or violation does not have, and could not reasonably be
expected to have, a Material Adverse Effect.
(b) All approvals, authorizations or consents of any Person or of any
Governmental Authority required to be obtained by the Seller in connection with
the execution and delivery of this Agreement by the Seller or the consummation
by the Seller of the transactions contemplated hereby have been obtained.
(c) This Agreement has been duly authorized, executed and delivered by
the Seller and this Agreement is the valid and legally binding obligation of the
Seller, enforceable against the Seller in accordance with its terms, subject as
to enforcement of bankruptcy, receivership, conservatorship, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
SECTION 4.03 Series 1997-1 Certificates. The Seller has duly and
validly authorized and instructed the Trustee to execute, authenticate, sell
and/or distribute the Series 1997-1 Certificates in accordance with the terms of
the Pooling and Servicing Agreement and the Series Supplement. The Series 1997-1
Certificates, when executed and authenticated by the Trustee in accordance with
the terms of the Pooling and Servicing Agreement and the Series Supplement and,
in the case of the Class A Certificates delivered to the Purchasers and paid for
by the Purchasers in accordance with this Agreement or in the case of the Class
B Certificates delivered to the Seller in partial consideration for the Transfer
of the Series 1997-1 Trust Property in accordance with the Seller Order, will be
duly and validly issued and outstanding, and will be entitled to the benefits of
the Pooling and Servicing Agreement and the Series Supplement.
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SECTION 4.04 Investment Company Act. As of the Closing Date, neither
the Trust nor the Seller is, nor would the issuance of the Series 1997-1
Certificates pursuant to the terms hereof and of the Pooling and Servicing
Agreement and Series Supplement cause the Trust or the Seller to become, an
"investment company" or controlled by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
SECTION 4.05 Offering of Certificates. Assuming all of the
representations and warranties of each Purchaser in Article VI hereof and in any
other certificate delivered by the Purchaser on the Closing Date are true and
correct in all material respects, the offer and sale of the Series 1997-1
Certificates pursuant to the terms hereof and of the Pooling and Servicing
Agreement and Series Supplement are not required to be registered under Section
5 of the Act pursuant to Section 4(2) of the Act.
SECTION 4.06 Full Disclosure. All written factual information
heretofore furnished by the Seller to the Trustee and the Purchasers (including,
without limitation, the Confidential Private Placement Memorandum dated June 11,
1997 (the "PPM") but specifically excluding any earlier draft of the PPM
including the Preliminary Confidential Placement Memorandum, ("Preliminary PPM")
dated June 5, 1997) for the purposes of or in connection with this Agreement and
the offer and sale of the Series 1997-1 Certificates 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 time of Closing.
SECTION 4.07 The Company; Seller Membership. To the best of Seller's
knowledge after due inquiry, the Company is and will be solvent and able to pay
its debts as they come due, and has and will have adequate capital. On the date
hereof the Seller's sole members are (i) the Company, (ii) Andrew L. Stidd and
(iii) Kevin P. Burns.
SECTION 4.08 CUSIP No.; Brokerage Fees. The Corporate CUSIP Number for
the Class A Certificates is 7846SE. In marketing, distributing and selling the
Series 1997-1 Certificates, the Seller has not used the services of any broker,
dealer, underwriter or placement agent other than ING Baring (U.S.) Securities,
Inc. ("ING Barings") and no sales commissions, underwriting fees or other
similar amounts are payable to any Person other than ING Barings, as Placement
Agent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE
As of the Closing Date, the Trustee makes the following representations
and warranties to the Purchasers, on which the Purchasers shall rely in
purchasing the Class A Certificates.
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SECTION 5.01 Pooling and Servicing Agreement. The Trustee hereby
remakes and reaffirms to the Purchasers the representations and warranties of
the Trustee set forth in Section 11.14 of the Pooling and Servicing Agreement,
and hereby further represents and warrants that such representations and
warranties are true and correct as of the date hereof (unless such
representations and warranties specifically refer to an earlier or later date).
SECTION 5.02 Authority, etc. (a) The Trustee has full power, authority
and right to execute, deliver and perform the Pooling and Servicing Agreement
and the Series Supplement and to execute, authenticate and deliver the Series
1997-1 Certificates.
(b) The Pooling and Servicing Agreement, the Series Supplement and the
Series 1997-1 Certificates have each been duly executed by the Trustee, and each
of the Pooling and Servicing Agreement and the Supplement constitutes the legal,
valid and binding obligation of the Trustee, enforceable against the Trustee in
accordance with its respective terms, except as such enforceability may be
subject to bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally, and except as such enforceability may be limited by
general principles of equity (whether considered in a suit in equity or at law).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
SECTION 6.01 Representations and Warranties. For so long as any
Purchaser shall hold any Class A Certificate, such Purchaser hereby represents
and warrants to each of the Trustee, the Trust, the Placement Agent, the Master
Servicer and the Seller, that:
(a) (i) it has made its own independent evaluation of the risks and
merits of purchasing the Class A Certificates and has had the opportunity to ask
questions and to obtain such information as it has deemed appropriate to make an
informed investment decision regarding the Class A Certificates and (ii) it has
not relied on the Preliminary PPM (or any earlier version) or any of the
information contained therein in making its investment decision regarding the
Class A Certificates.
(b) The Purchaser is an "accredited investor" as defined in Rule 501
(a)(1) or (3) of Regulation D (an "Institutional Accredited Investor")
promulgated by the Securities and Exchange Commission (the "Commission") under
the Act, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment in the Class
A Certificates and is aware that it may be required to, and is able to, bear the
economic risk of such investment for an indefinite period of time.
(c) The Purchaser understands that the Class A Certificates have not
been and will not be registered under the Act, and have not and will not be
registered or qualified under any applicable "Blue Sky" law, and that the
offering and sale of the Class A Certificates has not been reviewed by, passed
on or submitted to any federal or state agency or commission,
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securities exchange or other regulatory body. The Purchaser further understands
that the Class A Certificates may not be offered, sold, transferred, pledged,
hypothecated or otherwise disposed of except as permitted herein and under the
Pooling and Servicing Agreement and the Series Supplement.
(d) The Purchaser is acquiring the Class A Certificates for its own
account, for investment, and without a view to any distribution, resale or other
transfer thereof except as contemplated in the following provisions.
(i) The Purchaser will not resell or otherwise transfer any of the Class A
Certificates unless such resale or transfer is made:
(A) to the Seller;
(B) in the United States of America to Institutional Accredited
Investors (or, in the case of any such sale to an Affiliated Entity
or the Company or an Affiliate thereof, to 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 Seller (or any designated agent of either of the
foregoing) of an Investor Letter and, if requested by the Trustee
and/or the Seller, an opinion confirming the availability of such
exemptions to any such sale or transfer, rendered by a nationally
recognized law firm and in form and substance satisfactory to the
Trustee and/or the Seller, as the case may be;
(C) in the United States of America to a transferee that such Purchaser
reasonably believes is a Qualified Institutional Buyer purchasing
such Class A Certificates 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 or transfer is being made in reliance on
Rule 144A under 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 Seller (or any designated agent of
either of the foregoing) of an Investor Letter and, if requested by
the Trustee and/or the Seller, an opinion confirming the
availability of such exemptions to any such sale or transfer,
rendered by a nationally recognized law firm and in form and
substance satisfactory to the Trustee and/or the Seller, as the
case may be; or
(D) in the United States of America to a transferee to whom such sale
or transfer is being made in reliance on Rule 144 under the Act and
to whom
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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
Seller (or any designated agent of either of the foregoing) of an
Investor Letter and, if requested by the Trustee and/or the Seller,
an opinion confirming the availability of such exemptions to any
such sale or transfer, rendered by a nationally recognized law firm
and in form and substance satisfactory to the Trustee and/or the
Seller, as the case may be, and
(E) in any event, the Certificate Registrar and Transfer Agent shall
have received, prior to the date of any such proposed sale or
transfer, a written instrument of sale executed by the Trustee.
(ii) The Class A Certificates shall bear a legend regarding the
restrictions on transfer as set forth herein which shall be
substantially to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY ACCEPTING
THIS CERTIFICATE, AGREES THAT THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY IN COMPLIANCE WITH THE ACT AND OTHER APPLICABLE LAWS AND ONLY:
(A) TO J.G. WENTWORTH RECEIVABLES I LLC (THE "SELLER");
(B) IN THE UNITED STATES OF AMERICA TO AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1) OR (3) OF REGULATION D PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT ("REGULATION D")
(OR, IN THE CASE OF A SALE TO J. G. WENTWORTH & COMPANY, INC. (THE
"COMPANY") OR ANY OF ITS DIRECT AND INDIRECT SUBSIDIARIES AND
AFFILIATES, OR TO J.G. WENTWORTH S.S.C. LIMITED PARTNERSHIP (THE
"PARTNERSHIP") OR AN AFFILIATE THEREOF, TO AN "ACCREDITED INVESTOR"
AS DEFINED IN RULE 501(a) OF REGULATION D) 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 PNC BANK, NATIONAL ASSOCIATION OR ANY
SUCCESSOR (THE "TRUSTEE") AND THE SELLER (OR ANY DESIGNATED AGENT
OF EITHER OF THE
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FOREGOING) OF AN INVESTOR LETTER AND, IF REQUESTED BY THE TRUSTEE
AND/OR THE SELLER, AN OPINION CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTIONS TO ANY SUCH SALE OR TRANSFER, RENDERED BY A NATIONALLY
RECOGNIZED LAW FIRM AND IN FORM AND SUBSTANCE SATISFACTORY TO THE
TRUSTEE AND/OR THE SELLER, AS THE CASE MAY BE;
(C) IN THE UNITED STATES OF AMERICA TO A TRANSFEREE THAT SUCH PURCHASER
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE
MEANING OF RULE 144A UNDER THE ACT (A "QUALIFIED INSTITUTIONAL
BUYER") PURCHASING SUCH SERIES 1997-1 CERTIFICATES 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 OR TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A UNDER 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 SELLER (OR ANY
DESIGNATED AGENT OF EITHER OF THE FOREGOING) OF AN INVESTOR LETTER
AND, IF REQUESTED BY THE TRUSTEE AND/OR THE SELLER, AN OPINION
CONFIRMING THE AVAILABILITY OF SUCH EXEMPTIONS TO ANY SUCH SALE OR
TRANSFER, RENDERED BY A NATIONALLY RECOGNIZED LAW FIRM AND IN FORM
AND SUBSTANCE SATISFACTORY TO THE TRUSTEE AND/OR THE SELLER, AS THE
CASE MAY BE; OR
(D) IN THE UNITED STATES OF AMERICA TO A TRANSFEREE TO WHOM SUCH SALE
OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144 UNDER 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 SELLER (OR ANY DESIGNATED AGENT OF EITHER OF THE
FOREGOING) OF AN INVESTOR LETTER AND, IF REQUESTED BY THE TRUSTEE
AND/OR THE SELLER, AN OPINION CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTIONS TO ANY SUCH SALE OR TRANSFER, RENDERED BY A NATIONALLY
RECOGNIZED LAW FIRM AND IN FORM AND SUBSTANCE SATISFACTORY TO THE
TRUSTEE AND/OR THE SELLER, AS THE CASE MAY BE.
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EACH CERTIFICATEHOLDER (OTHER THAN THE SELLER OR THE PARTNERSHIP),
BY ACCEPTING A BENEFICIAL INTEREST IN THIS CERTIFICATE, FURTHER REPRESENTS AND
WARRANTS FOR THE BENEFIT OF THE SELLER, THE COMPANY AS THE MASTER SERVICER, SSC
MASTER TRUST I (THE "TRUST"), ING BARING (U.S.) SECURITIES, INC. AS THE
PLACEMENT AGENT AND THE TRUSTEE THAT SUCH CERTIFICATEHOLDER IS NOT AND WILL NOT
BECOME AN ENTITY THAT, FOR FEDERAL INCOME TAX PURPOSES, IS A PARTNERSHIP,
GRANTOR TRUST OR S CORPORATION (ANY OF WHICH (OTHER THAN THE SELLER OR THE
PARTNERSHIP, A "PASS THROUGH ENTITY") FOR SO LONG AS SUCH A CERTIFICATEHOLDER
HOLDS A BENEFICIAL INTEREST IN THIS CERTIFICATE .
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR SOLD, TRADED OR
TRANSFERRED TO (A) ANY PERSON WHO IS NOT A "UNITED STATES PERSON" WITHIN THE
MEANING OF SECTION 7701(a)(3) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), (B) ANY PASS-THROUGH ENTITY, (C) ANY PERSON THAT IS, OR IS
REQUIRED TO BE (REGARDLESS OF WHETHER IT IN FACT IS), REGISTERED AS AN
INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OR IS EXCLUDED FROM THE
DEFINITION OF "INVESTMENT COMPANY" UNDER THE INVESTMENT COMPANY ACT CONTAINED IN
SECTION 3(c)(1) OR SECTION 3(c)(7) THEREOF, IN EACH CASE, TO THE EXTENT THAT
SUCH PERSON WOULD BENEFICIALLY OWN, AT THE TIME OF (AND AFTER GIVING EFFECT TO)
SUCH TRANSFER, 10% OR MORE OF EITHER (1) THE AGGREGATE PRINCIPAL BALANCE OF THE
SERIES 1997-1 CERTIFICATES OUTSTANDING AT SUCH TIME OR (2) THE AGGREGATE
PRINCIPAL BALANCE OF ALL CERTIFICATES OF ALL SERIES OUTSTANDING AT SUCH TIME,
(D) ANY OTHER PERSON WHICH FOR PURPOSES OF THE INVESTMENT COMPANY ACT (X) WAS
FORMED FOR THE PURPOSE OF INVESTING IN THE CERTIFICATES ISSUED BY THE TRUST OR
WOULD OTHERWISE BE TREATED AS MORE THAN ONE PERSON FOR PURPOSES OF DETERMINING
THE NUMBER OF BENEFICIAL OWNERS OF THE CERTIFICATES ISSUED BY THE TRUST, OR (Y)
WOULD CAUSE THE NUMBER OF BENEFICIAL OWNERS OF SECURITIES ISSUED BY THE TRUST
(OTHER THAN SHORT TERM PAPER) TO EXCEED 100, (E) ANY PERSON IN RESPECT OF WHICH
THE PURCHASE OR HOLDING THEREOF WOULD CONSTITUTE A "PROHIBITED TRANSACTION"
UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")
OR SECTION 4975 OF THE CODE OR WOULD CAUSE THE ASSETS OF THE TRUST TO BE DEEMED
TO BE ASSETS OF ANY "EMPLOYEE BENEFIT PLAN" FOR PURPOSES OF ERISA OR TO BE
ASSETS OF A "PLAN" FOR PURPOSES OF SECTION 4975 OF THE CODE OR (F) ANY PERSON IF
SUCH SALE, TRANSFER OR CONVEYANCE WOULD CAUSE THE TRUST TO HAVE MORE THAN 85
BENEFICIAL OWNERS OF THE CERTIFICATES (OTHER THAN THE SELLER, THE PARTNERSHIP OR
ANY AFFILIATE THEREOF) AFTER
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APPLICATION OF APPLICABLE OWNERSHIP AND ANTI-AVOIDANCE RULES UNDER SECTION 7704
OF THE CODE AND THE TREASURY REGULATIONS THEREUNDER OR WOULD CAUSE THE TRUST (OR
ANY PORTION THEREOF) TO BE CLASSIFIED AS A PUBLICLY TRADED PARTNERSHIP FOR
FEDERAL INCOME TAX PURPOSES (AND IN EACH OF THE CASES IN CLAUSES (A), (B), (C),
(D) (OTHER THAN SUBCLAUSE (Y) THEREOF) AND (E) EACH PROSPECTIVE PURCHASER SHALL
BE REQUIRED TO REPRESENT AND WARRANT THAT IT IS NOT SUCH A PERSON PRIOR TO ITS
PURCHASE OF ANY SERIES 1997-1 CERTIFICATES AND TO THE EXTENT ANY SUCH
REPRESENTATION AND WARRANTY IS INCORRECT SUCH SALE SHALL BE RESCINDED AND DEEMED
NOT TO HAVE OCCURRED).
THIS CERTIFICATE MAY NOT BE ACQUIRED, SOLD, TRADED OR TRANSFERRED,
NOR MAY AN INTEREST IN THIS CERTIFICATE BE MARKETED, ON OR THROUGH (1) AN
"ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING OF SECTION 7704(b)(1) OF THE
CODE AND ANY PROPOSED, TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL QUOTATIONS OR (II)
A "SECONDARY MARKET" WITHIN THE MEANING OF SECTION 7704(b)(2) OF THE CODE AND
ANY PROPOSED, TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING A
MARKET WHEREIN INTERESTS IN THE CERTIFICATES ARE REGULARLY QUOTED BY ANY PERSON
MAKING A MARKET IN SUCH INTERESTS AND A MARKET WHEREIN ANY PERSON REGULARLY
MAKES AVAILABLE BID OR OFFER QUOTES WITH RESPECT TO INTERESTS IN THE
CERTIFICATES AND STANDS READY TO EFFECT BUY OR SELL TRANSACTIONS AT THE QUOTED
PRICES FOR ITSELF OR ON BEHALF OF OTHERS.
EACH CERTIFICATEHOLDER (INCLUDING ANY TRANSFEREE OF ANY LEGAL OR
BENEFICIAL INTEREST THEREIN) REPRESENTS AND WARRANTS FOR THE BENEFIT OF THE
SELLER, THE MASTER SERVICER, THE TRUST, THE PLACEMENT AGENT AND THE TRUSTEE
THAT, EITHER (I) THE CERTIFICATEHOLDER IS NOT AN "EMPLOYEE BENEFIT PLAN" AS
DEFINED IN ERISA, WHETHER OR NOT SUBJECT TO ERISA, OR A "PLAN" AS DEFINED IN
SECTION 4975 OF THE CODE OR ANY PERSON WHICH IS DIRECTLY OR INDIRECTLY
PURCHASING OR HOLDING THE CERTIFICATE OR ANY INTEREST THEREIN ON BEHALF OF, OR
WITH ASSETS OF, ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN OR (II) THE
CERTIFICATEHOLDER (OR TRANSFEREE, AS THE CASE MAY BE), AT ITS EXPENSE, HAS
DELIVERED TO THE TRUSTEE AND THE SELLER A CERTIFICATION OF FACTS AND IF
REQUESTED BY THE TRUSTEE, AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE TO
PERMIT THE DETERMINATION BY THE TRUSTEE THAT THE PURCHASE AND HOLDING OF A
CERTIFICATE BY SUCH
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CERTIFICATEHOLDER (OR TRANSFEREE, AS THE CASE MAY BE) WILL NOT RESULT IN ANY OF
(X) THE ASSETS OF THE TRUST BEING DEEMED FOR ANY PURPOSES OF ERISA, OR SECTION
4975 OF THE CODE, TO CONSTITUTE ASSETS OF ANY "EMPLOYEE BENEFIT PLAN" SUBJECT TO
TITLE I OF ERISA OR ANY "PLAN" AS DEFINED IN SECTION 4975 OF THE CODE, (Y) A
NON-EXEMPT "PROHIBITED TRANSACTION" UNDER, AND AS DEFINED IN, SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE OR (Z) THE IMPOSITION ON THE TRUSTEE, THE
TRUST, THE PLACEMENT AGENT, THE MASTER SERVICER OR THE SELLER OF ANY OBLIGATION
IN ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND SERVICING AGREEMENT."
(iii) The Purchaser will not sell, transfer or otherwise convey
Class A Certificates to (A) any Foreign Person, (B) any
Pass-Through Entity, (C) any Person that is, or is required
to be (regardless of whether it in fact is), registered as an
investment company under the Investment Company Act or is
excluded from the definition of "investment company" under
the Investment Company Act contained in Section 3(c)(1) or
Section 3(c)(7) thereof, in each case, to the extent that
such Person would beneficially own, at the time of (and after
giving effect to) such transfer, 10% or more of either (1)
the Aggregate Principal Balance of the Series 1997-1
Certificates outstanding at such time or (2) the Aggregate
Principal Balance of all Certificates of all Series
outstanding at such time, (D) any other Person which for
purposes of the Investment Company Act (x) was formed for the
purpose of investing in the Certificates or would otherwise
be treated as more than one Person for purposes of
determining the number of beneficial owners of the
Certificates issued by the Trust, or (y) would cause the
number of beneficial owners of securities issued by the Trust
(other than short term paper) to exceed 100, (E) 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 or would cause the assets
of the Trust to be deemed to be assets of any "Employee
Benefit Plan" for purposes of ERISA or to be assets of a
"Plan" for purposes of Section 4975 of the Internal Revenue
Code or (F) any Person if such sale, transfer or conveyance
would cause the Trust to have more than 85 beneficial owners
of the Certificates (other than the Seller, the Company or
any Affiliate thereof) after application of applicable
ownership and anti-avoidance rules under Section 7704 of the
Internal Revenue Code and the Treasury Regulations thereunder
or would cause the Trust (or any portion thereof) to be
classified as a publicly traded partnership for Federal
income tax purposes (and in each of the cases in clauses (A),
(B), (C), (D) (other than subclause (y) thereof) and (E) each
prospective purchaser shall be required to represent and
warrant that it is not such a Person prior to its purchase of
any Class A Certificates and to the extent any such
representation and warranty is incorrect such sale shall be
rescinded and deemed not to have occurred).
-14-
<PAGE>
(iv) Each Purchaser will notify any prospective purchaser, pledgee
or other transferee of any Class A Certificates from such
Purchaser of the transfer restrictions referred to in this
Section 6.01(h).
It is hereby understood and agreed that the disposition of the
Class A Certificates shall remain solely within the control of the Class A
Certificateholders.
(e) The Purchaser hereby represents and warrants that either (i)
the Purchaser (or any Person for whose account the Purchaser is purchasing the
Class A Certificates) is not an "employee benefit plan" as defined in ERISA,
whether or not subject to ERISA, or a "plan" as defined in section 4975 of the
Internal Revenue Code or any person which is directly or indirectly purchasing
or holding the Certificate or any interest therein on behalf of, or with assets
of, any such employee benefit plan or plan or (ii) the acquisition, holding
and/or continued ownership of the Class A Certificates by the Purchaser (or
transferee, as the case may be) will not (x) result in the assets of the Trust
being deemed for any purpose of ERISA or Section 4975 of the Internal Revenue
Code to constitute assets of any "employee benefit plan" subject to Title I of
ERISA or any "plan" as defined in Section 4975 of the Internal Revenue Code, (y)
subject the Trustee, the Trust or the Seller to any obligation in addition to
those undertaken in the Pooling and Servicing Agreement or (z) result in a
"prohibited transaction" under, and as defined in, ERISA or Section 4975 of the
Internal Revenue Code by virtue of the applicability with respect thereto, as of
the date of the Purchaser's (or transferee's, as the case may be) purchase of
the Class A Certificates and at all times thereafter while the Purchaser (or
transferee, as the case may be) owns or holds any of the Class A Certificates,
of one of the Prohibited Transaction Class Exemptions or the Exception set forth
on the attached Schedule I, designated on such Schedule by the Purchaser (or
transferee, as the case may be) and upon the request of the Trustee or the
Seller, such Purchaser (or transferee, as the case may be) will at its own
expense, deliver an opinion of counsel to such effect, to the Trustee and the
Seller. In the event that the Purchaser (or any transferee of any legal or
beneficial interest therein) is relying on clause (ii) of the preceding
sentence, the Purchaser (or such transferee, as the case may be) must deliver to
the Trustee the Benefit Plan Disclosure Letter attached hereto as Schedule II.
(f) The Purchaser hereby represents and warrants and covenants that
(i) it is not a Foreign Person;
(ii) it is not a Pass-Through Entity and by accepting a
beneficial interest in the Class A Certificates, the
Purchaser agrees that it will not become a Pass Through
Entity for so long as the Purchaser holds a beneficial
interest in any Class A Certificates;
(iii) it is not registered, nor is it required to be
registered, as an investment company under the
Investment Company Act, and does not rely on the
exclusion from the definition of "investment company"
contained in Section 3(c)(1) or 3(c)(7) of the
Investment Company Act to avoid such registration;
-15-
<PAGE>
(iv) after giving effect to the purchase of Class A
Certificates contemplated hereby, Purchaser will
beneficially own:
(a) that dollar amount set forth next to its name on the
signature pages hereto of the Aggregate Principal
Balance of the Class A Certificates; and
(b) that dollar amount set forth next to its name on the
signature pages hereto of the Aggregate Principal
Balance of all Certificates of all Series.
and
(v) for purposes of the Investment Company Act, it has not
been formed for the purpose of investing in the
Certificates and it would not be otherwise treated as
more than one Person for purposes of determining the
number of beneficial owners of the Certificates issued
by the Trust.
(g) The Purchaser will not acquire, sell, trade or transfer, nor
will it market an interest in the Class A Certificate, on or through (i) an
"Established Securities Market" within the meaning of Section 7704(b)(1) of the
Internal Revenue Code and any proposed, temporary or final Treasury Regulation
thereunder, including, without limitation, an over-the-counter market or an
interdealer quotation system that regularly disseminates firm buy or sell
quotations or (ii) a "Secondary Market" within the meaning of Section 7704(b)(2)
of the Internal Revenue Code and any proposed, temporary or final Treasury
Regulation thereunder, including a market wherein interests in the Class A
Certificates are regularly quoted by any Person making a market in such
interests and a market wherein any Person regularly makes available bid or offer
quotes with respect to interests in the Certificates and stands ready to effect
buy or sell transactions at the quoted prices for itself or on behalf of others.
(h) The Purchaser represents and warrants unless it has otherwise
specified to the Seller, the Trustee and the Placement Agent prior to such
Purchaser's purchase of any of the Class A Certificates, that the Purchaser is
not acting in a fiduciary capacity in purchasing the Class A Certificates.
(i) The Purchaser will not sell, transfer or otherwise convey any
Class A Certificate (or beneficial interest therein) to any Person unless the
Purchaser confirms that, after giving effect to such sale, transfer or
conveyance, the number of current holders of such Class A Certificate (or
beneficial interests therein) including the Purchaser plus the number of the
current holders of all other Class A Certificates (or beneficial interest
therein) that either were originally issued to such Purchaser or any other
member of such Purchaser's Purchaser Group, on June 13, 1997 (the "Original
Certificates") or were issued after June 13, 1997 but which relate to the
Original Certificates, would exceed either the number of permitted holders set
forth opposite such Purchaser's signature on the signature pages hereof or
beneath the "Purchaser Group" heading related to such Purchaser on the signature
pages hereof.
-16-
<PAGE>
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Indemnification by the Seller. Without limiting any other
rights which the Purchaser may have hereunder or under applicable law, but
without duplication, the Seller hereby agrees to indemnify the Purchaser and the
Trustee and each such Person's permitted successors and assigns and all
officers, directors, agents and employees of the foregoing (each of the
foregoing Persons being individually referred to herein as an "Indemnified
Party") 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 a breach of Seller's representations
hereunder or the failure by the Seller to comply with (i) any term, provision or
covenant contained in this Agreement, the Pooling and Servicing Agreement or the
Series Supplement, or (ii) any agreement executed in connection therewith or
with any applicable law, rule or regulation with respect thereto (all of the
foregoing losses being called the "Indemnified Losses").
Any Indemnified Amounts payable by the Seller under this Section 7.01
shall be payable solely from Available Seller Funds and be paid by the Seller to
the Purchaser within five (5) Business Days following the Purchaser's written
demand therefor, setting forth in reasonable detail the basis for such demand.
The agreements of the Seller contained in this Section 7.01 shall survive the
Closing Date. In addition, in no event shall Indemnified Losses include any
consequential, special or punitive damages. Nothing in this Section 7.01 shall
require the Seller to pay Indemnified Amounts if after payment thereof the
Seller would be insolvent or fail to maintain a net worth sufficient to carry on
its business as then being conducted and pay its debts as they generally become
due. The provisions of this Section 7.01 shall survive the termination of this
Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Amendments; etc. No amendment or waiver of any provision
of this Agreement shall in any event be effective unless the same shall be in
writing and signed by the Seller, the Trustee and each affected Purchaser, and
then such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 8.02 Notices. Except as provided below, all communications and
notices provided for hereunder shall be in writing (excluding telecopy or
electronic facsimile transmission or similar writing) and shall be given to the
other party at its address set forth below its name on the signature pages
hereto or at such other address as such party may hereafter specify for the
purposes of notice to such party. Each such notice or other communication shall
-17-
<PAGE>
be effective (i) if given by mail, three (3) Business Days following such
posting, postage prepaid, U.S. certified or registered, (ii) if given by
overnight courier, one (1) Business Day after deposit thereof with a national
overnight courier service, or (iii) if given by any other means, when received
at the address specified on the signature pages hereof.
SECTION 8.03 No Waiver; Remedies. No failure on the part of any party
hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE.
SECTION 8.05 No Proceedings. Each of the Seller, the Trustee and each
Purchaser, by entering into this Agreement, covenant and agree that they will
not at any time institute against, or join any other Person in instituting
against, the Seller or the Trust any bankruptcy, reorganization, arrangement,
insolvency, or liquidation or other similar proceedings under any federal or
state bankruptcy, insolvency or other similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar Person
for the Seller or the Trust or any substantial portion of their respective
assets until, in each case, one year and one day after the Collection Date of
the last outstanding Series.
SECTION 8.06 WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING (WHETHER IN
CONTRACT OR IN TORT) ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH, THE
TRANSACTIONS CONTEMPLATED HEREIN AND/OR IN THE POOLING AND SERVICING AGREEMENT
OR THE SERIES SUPPLEMENT AND FOR ANY COUNTERCLAIM RELATING THERETO.
SECTION 8.07 Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, each of the parties hereto and each of their
respective successors and assigns.
SECTION 8.08 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
SECTION 8.09 Survival. All representations, warranties, covenants,
guaranties and indemnifications contained in this Agreement and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the sale and transfer of the Class A Certificates.
-18-
<PAGE>
SECTION 8.10 Limitations on Liability. (a) Notwithstanding any
provision to the contrary in this Agreement, indemnification payments and other
amounts described herein as payable by the Seller hereunder, whether following
demand, within a specified time period or otherwise shall only be payable from
Available Seller Funds (and, as a result, may be payable from any Trust Asset
only if, to the extent that, and after such Trust Asset shall have been
distributed to the Seller in accordance with the terms of the Pooling and
Servicing Agreement and the Series Supplement). Unless and until Available
Seller Funds become available to pay any such amount, such amount 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 Seller or any such holders, past, present or future,
shall be under any liability to the Trust, the Trustee, the Purchasers or any
other Person for any action taken or for refraining from the taking of any
action in such capacities or otherwise pursuant to this Agreement or for any
obligation or covenant under this Agreement, it being understood that, with
respect to the Seller, this Agreement and the obligations created thereunder and
hereunder shall be, to the fullest extent permitted under applicable law, solely
the limited liability company obligations of the Seller. The Seller and any
member, manager, officer, employee, agent, stockholder, holder of limited
liability company interest, officer or director of or in the Seller, may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person (other than the Seller or any Affiliate thereof)
respecting any matters arising hereunder.
* * * *
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
SELLER: J. G. WENTWORTH RECEIVABLES I LLC
- -------
By: J.G. Wentworth S.S.C. Limited Partnership, a
member
By: J.G. Wentworth Structured Settlement Funding
Corporation, its General Partner
By: _________________________
Name:
Title:
300 Delaware Avenue, Suite 1704
Wilmington, DE 19801
Attention:____________________
ISSUER: SSC MASTER TRUST I
- ------- By: PNC Bank, National Association,
(not individually but solely in its capacity as Trustee)
By: _________________________________
Name:
Title:
c/o PNC Bank DE
222 Delaware Avenue, 17th Floor
Wilmington, DE 19801
Attention: ___________________
TRUSTEE: PNC BANK, NATIONAL ASSOCIATION
- -------- (not individually but solely in its capacity as Trustee)
By: _________________________________
Name:
Title:
c/o PNC Bank, DE
222 Delaware Avenue, 17th Floor
Wilmington, DE 19801
Attention: ___________________
-20-
<PAGE>
PURCHASER GROUP #1
THE JOHN HANCOCK PURCHASER GROUP
Number of Permitted Holders 6
PURCHASER A JOHN HANCOCK MUTUAL LIFE INSURANCE
Aggregate Principal COMPANY
Balance of Class A
Certificates
$33,546,609
By: _________________________________
Name:
Title:
Aggregate Principal
Balance of all Certificates John Hancock Place
of all Series 200 Clarendon Street
$33,546,609 Boston, MA 02117
Attention: Securities Accounting
Division T-10
Number of Permitted
Holders 4
PURCHASER B JOHN HANCOCK LIFE INSURANCE COMPANY
Aggregate Principal OF AMERICA
Balance of Class A
Certificates
$2,000,000
By: _________________________________
Name:
Title:
Aggregate Principal
Balance of all Certificates John Hancock Place
of all Series 200 Clarendon Street
$2,000,000 Boston, MA 02117
Attention: Securities Accounting
Division T-10
Number of Permitted
Holders 1
-21-
<PAGE>
PURCHASER C JOHN HANCOCK VARIABLE LIFE INSURANCE
Aggregate Principal COMPANY
Balance of Class A
Certificates
$4,000,000
By: _________________________________
Name:
Title:
Aggregate Principal
Balance of all Certificates John Hancock Place
of all Series 200 Clarendon Street
$4,000,000 Boston, MA 02117
Attention: Securities Accounting
Division T-10
Number of Permitted
Holders 1
PURCHASER GROUP #2
THE AEGON PURCHASER GROUP
Number of Permitted Holders 3
PURCHASER D LIFE INVESTORS INSURANCE COMPANY OF
Aggregate Principal AMERICA
Balance of Class A
Certificates
$4,500,000
By: _________________________________
Name:
Title:
Aggregate Principal
Balance of all Certificates AEGON USA Investment Management, Inc.
of all Series 4333 Edgewood Road, N.E.
$4,500,000 Cedar Rapids, IA 52499-5112
Attention: Director of Private
Placements
Number of Permitted
Holders 1
-22-
<PAGE>
PURCHASER E BANKERS UNITED LIFE ASSURANCE COMPANY
Aggregate Principal
Balance of Class A
Certificates
$7,500,000
By: _________________________________
Name:
Title:
Aggregate Principal
Balance of all Certificates AEGON USA Investment Management, Inc.
of all Series 4333 Edgewood Road, N.E.
$7,500,000 Cedar Rapids, IA 52499-5112
Attention: Director of Private
Placements
Number of Permitted
Holders 1
PURCHASER F AUSA LIFE INSURANCE COMPANY, INC.
Aggregate Principal
Balance of Class A
Certificates
$3,000,000
By: _________________________________
Name:
Title:
Aggregate Principal
Balance of all Certificates AEGON USA Investment Management, Inc.
of all Series 4333 Edgewood Road, N.E.
$3,000,000 Cedar Rapids, IA 52499-5112
Attention: Director of Private
Placements
Number of Permitted
Holders 1
-23-
<PAGE>
PURCHASER GROUP #3
THE CONNING PURCHASER GROUP
Number of Permitted Holders 1
PURCHASER G COVA FINANCIAL SERVICES LIFE INSURANCE
Aggregate Principal COMPANY
Balance of Class A
Certificates
$5,000,000
By: _________________________________
Name:
Title:
Aggregate Principal
Balance of all Certificates Conning Asset Management
of all Series P.O. Box 418
$5,000,000 St. Louis, MO 63166
Attention: Investment Accounting
Number of Permitted with copies to:
Holders 1 COVA Financial Services Life Insurance Co.
c/o The Northern Trust Company
P.O. Box 92996
Chicago, IL 60675
-24-
<PAGE>
SCHEDULE I
to
THE CERTIFICATE PURCHASE AGREEMENT
ERISA Exemptions
Prohibited Transaction Class Exemptions ("PTCE"):
1. PTCE 96-23, regarding transactions effected by "in-house managers", as
defined therein.
2. PTCE 95-60, regarding investments by insurance company general accounts.
3. PTCE 90-1, regarding investments by insurance company pooled separate
accounts.
4. PTCE 91-38, regarding investments by bank collective investment funds.
5. PTCE 84-14, regarding transactions effected by "qualified professional asset
managers", as defined therein.
Exception:
Purchaser is not an employee benefit plan subject to Title I of ERISA, a plan as
defined in Section 4975 of the Internal Revenue Code or an entity that is deemed
for any purpose of ERISA or Section 4975 of the Internal Revenue Code to hold
assets of any such employee benefit plan or plan and is not acting on behalf of
any such employee benefit plan, plan or entity.
-25-
<PAGE>
SCHEDULE II
to
THE CERTIFICATE PURCHASE AGREEMENT
Benefit Plan Disclosure Letter
[Date]
PNC Bank, National Association,.
as Trustee
The Purchaser (or any transferee of any legal or beneficial interest therein, as
the case may be) hereby represents and warrants that:
(i) if the Purchaser (or transferee, as the case may be) is an
insurance company using assets from its general account, the percentage
of the assets of such general account used to purchase the Series
1997-1 Certificates that represents plan assets does not exceed the
percentage set forth below and the Aggregate Principal Balance of Class
A Certificates owned by the Purchaser (or the transferee, as the case
may be) equals the amount set forth below:
----------% $--------------
(ii) if the Purchaser (or transferee, as the case may be) is an entity,
other than an insurance company using assets from its general account,
the underlying assets of which are considered for any purpose of ERISA
or section 4975 of the Internal Revenue Code to be assets of any
"employee benefit plan" or any "plan" (as defined in Section 4975 of
the Internal Revenue Code), the percentage of the assets of such entity
that represents plan assets does not exceed the percentage set forth
below and the Aggregate Principal Balance of Class A Certificates owned
by the Purchaser (or the transferee, as the case may be) equals the
amount set forth below:
----------% $--------------
(iii) if the Purchaser (or transferee, as the case may be) is an
"employee benefit plan" as defined in ERISA, whether or not subject to
ERISA, or a "plan" as defined in section 4975 of the Internal Revenue
Code, the Aggregate Principal Balance of Series 1997-1 Certificates
owned by such Purchaser (or transferee, as the case may be) equals the
following amount:
$----------------------
-26-
<PAGE>
The Purchaser (and each transferee thereof, as the case may be) hereby further
represents and warrants that it will not transfer the Series 1997-1 Certificates
owned by it to an "employee benefit plan" as defined in ERISA, whether or not
subject to ERISA, or a "plan" as defined in section 4975 of the Internal Revenue
Code or any person which is directly or indirectly purchasing or holding the
Series 1997-1 Certificates or any interest therein on behalf of, or with assets
of, any such employee benefit plan or plan (each such employee benefit plan,
plan or person, a "benefit plan investor") unless (a) the transferee delivers
this Benefit Plan Disclosure letter to the Trustee and the Trustee consents to
such transfer and (b) the transferee agrees that it will not transfer the Series
1997-1 Certificates unless its transferees comply with the requirements of the
preceding clause (a) and this clause (b). The Purchaser (and each transferee
thereof, as the case may be) understands that the Trustee shall not consent to
any transfer to a benefit plan investor unless the Trustee has determined that
the aggregate ownership by benefit plan investors is less than 25% of the
Aggregate Principal Balance of each Class of Certificates of the Issuer
(determined by not including the investments of persons with discretionary
authority or control over the assets of the Issuer, any person who renders
investment advice for a fee with respect to such assets and their respective
affiliates).
[PURCHASER]
By:_________________________
Name:
Title:
-27-
<PAGE>
EXHIBIT A
[FORM OF SELLER ORDER]
-28-
<PAGE>
EXHIBIT B
TRUSTEE ACCOUNT INFORMATION
PNC Bank, Wilmington Delaware
ABA # 031100089
Credit A/C Name Trust Funds
Credit A/C #5678702981
Further Credit 47-47-002-3011565
RE: Wentworth Certificate Proceeds
-29-
<PAGE>
EXHIBIT C
[LIST OF CLOSING DOCUMENTS]
-30-
PURCHASE AGREEMENT
Dated as of June 13, 1997
between
J. G. WENTWORTH S.S.C. LIMITED PARTNERSHIP
as the Seller
and
J. G. WENTWORTH RECEIVABLES I LLC
as the Purchaser
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C>
1.01. Certain Definitions...............................................................................2
1.02. Accounting Terms..................................................................................5
1.03. Other Terms.......................................................................................5
1.04. Computation of Time Periods.......................................................................5
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
2.01. Purchases of Receivables; Agreement to Purchase...................................................6
2.02. Payment for the Purchases.........................................................................7
2.03. Payments and Computations, Etc....................................................................9
2.04. Transfer of Records to the Purchaser..............................................................9
ARTICLE III
CONDITIONS PRECEDENT
3.01. Conditions Precedent to Agreement................................................................10
3.02. Conditions Precedent to Ongoing Purchases........................................................11
3.03. Effect of Payment of Purchase Price and/or Contribution..........................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Seller.....................................................12
4.02. Representations and Warranties of the Seller Relating to the Receivables.........................15
4.03. Representations and Warranties of the Purchaser..................................................15
ARTICLE V
GENERAL COVENANTS OF THE SELLER
5.01. Affirmative Covenants of the Seller..............................................................16
5.02. Negative Covenants of the Seller.................................................................19
</TABLE>
-i-
<PAGE>
<TABLE>
ARTICLE VI
ADMINISTRATION AND COLLECTION
<S> <C>
6.01. Collection of Receivables........................................................................22
6.02. Servicing of Receivables.........................................................................23
6.03. Responsibilities of the Seller...................................................................23
6.04. Further Action Evidencing Purchases..............................................................24
ARTICLE VII
INDEMNIFICATION
7.01. Indemnities by the Seller........................................................................24
ARTICLE VIII
MISCELLANEOUS
8.01. Waivers; Amendments..............................................................................26
8.02. Notices..........................................................................................26
8.03. Effectiveness; Binding Effect; Assignability.....................................................27
8.04. GOVERNING LAW; WAIVER OF JURY TRIAL..............................................................27
8.05. Costs and Expenses...............................................................................28
8.06. Execution in Counterparts; Severability..........................................................28
8.07. Purchase Termination.............................................................................28
8.08. No Proceedings...................................................................................28
8.09. Entire Agreement.................................................................................29
8.10. Limitations on Liability.........................................................................29
</TABLE>
-ii-
<PAGE>
EXHIBITS AND SCHEDULES
----------------------
Exhibit A - Form of Subordinated Intercompany Revolving Loan Note
Exhibit B - Form of Seller Transfer Report
Exhibit C - List of Closing Documents
Schedule I - Addresses and Locations of Books and Records of the Seller
Schedule II - ERISA Matters
Schedule III - Lock-Box Banks; Lock-Box Accounts; Lock-Box Numbers;
Deposit Account Banks; Deposit Account Numbers
-iii-
<PAGE>
PURCHASE AGREEMENT
Dated as of June 13, 1997
This PURCHASE AGREEMENT (the "Agreement"), dated as of June 13, 1997,
is made by and between J.G. WENTWORTH S.S.C. LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Seller"), and J.G. WENTWORTH RECEIVABLES I LLC, a
Delaware limited liability company (the "Purchaser").
WITNESSETH:
WHEREAS, the Seller has purchased, and from time to time hereafter may
purchase, Settlements (or portions thereof) from various "Claimants" (as defined
in the Pooling and Servicing Agreement) pursuant to various "Settlement
Agreements" (as defined in the Pooling and Servicing Agreement) between the
Seller and each such Claimant;
WHEREAS, the Seller may from time to time desire to sell, transfer or
otherwise convey to the Purchaser, and the Purchaser may from time to time
desire to purchase or otherwise acquire or accept from the Seller, all of the
Seller's right, title and interest in the Receivables relating to certain such
"Settlements" (as defined in the Pooling and Servicing Agreement (or portions
thereof) now owned or hereafter acquired by the Seller, in each case, on the
terms and conditions provided herein; and
WHEREAS, in order to finance purchases of Receivables and the Related
Assets relating thereto, the Purchaser has entered into that certain Pooling and
Servicing Agreement, dated as of June 13, 1997 (as amended, restated,
supplemented (including by way of any "Supplement" (as defined in the Pooling
and Servicing Agreement) thereto) or otherwise modified from time to time, the
"Pooling and Servicing Agreement") among the Purchaser, J.G. Wentworth &
Company, Inc. ("Wentworth"), as the initial "Master Servicer" thereunder, and
PNC Bank, National Association, as trustee (in such capacity, the "Trustee"),
pursuant to which the Purchaser has established a trust, SSC Master Trust I (the
"Trust"), to which the Purchaser may from time to time transfer or otherwise
convey specified Receivables in exchange for, among other things, cash generated
by the sale of trust certificates by the Trust and trust certificates payable to
the Purchaser;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Definitions. For all purposes of this Agreement,
as used in this Agreement (including in the recitals hereto), the following
terms shall have the following meanings:
"Aggregate Discounted Receivables Balance" means, for purposes
of this Agreement with respect to any designated group of Receivables, at any
time, the sum of the Discounted Receivables Balances of such Receivables at such
time.
"Applicable Discount Rate" shall mean, with respect to any
Receivable, the "Discount Rate" specified in the Designated Supplement to which
such Receivable shall be allocated as described in the applicable Seller
Transfer Report.
"Business Day" shall mean any day other than a Saturday or
Sunday or any other day on which national banking associations or state banking
institutions in New York, New York or Philadelphia, Pennsylvania are authorized
or obligated by law, executive order or governmental decree to be closed;
provided, however, that as it relates to any specific Series, the term "Business
Day" may have such other meaning, if any, as may be specified in the related
Supplement.
"Closing Date" shall mean June 13, 1997.
"Collateral Trustee" means the Person acting in such capacity under the
Intercreditor Agreement.
"Collections" shall mean all cash payments by or on behalf of the
Obligors (including, without limitation, pursuant to any "Annuity Contract" (as
defined in the Pooling and Servicing Agreement)) in respect of the Receivables
or the Related Property relating thereto, whether in the form of cash, checks,
wire transfers, electronic transfers or any other form of cash payment
(including, without limitation, from the Seller in connection with any
repurchase of any such Receivables from the Purchaser pursuant hereto).
"Collection Date" means that date following the Purchase Termination
Date upon which the Aggregate Discounted Receivables Balance of the Receivables
transferred to the Purchaser hereunder has been reduced to zero.
"Discounted Receivables Balance" means, at any time with respect to any
Receivable, the sum of (i) the discounted present values of the remaining
"Scheduled Payments" (as defined in the Pooling and Servicing Agreement) due
under such Receivable at such time discounted at the Purchase Discount Rate and
(ii) the principal amount of any past due Scheduled Payments outstanding on such
Receivable at such time.
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"Designated Supplement" has the meaning, with respect to any
Receivable, as is specified in the definition of "Eligible Receivable" below.
"Eligible Receivable" means, with respect to this Agreement, a
Receivable which, as of the date of its sale or conveyance to the Purchaser by
the Seller hereunder, would constitute an "Eligible Receivable" under and
pursuant to the Supplement for the "Series" (as defined in the Pooling and
Servicing Agreement) to which such Receivable is to be allocated and for which
such Receivable will be a "Series Receivable" (as defined in the Pooling and
Servicing Agreement); it being agreed that each Seller Transfer Report shall
designate the Supplement to which such Receivable shall be so allocated (such
Supplement so designated with respect to any such Receivable being the
"Designated Supplement" for such Receivable).
"Governmental Authority" shall mean any country or nation, any
political subdivision of such country or nation, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government of any country or nation or political subdivision
thereof.
"Intercreditor Agreement" shall mean that certain Collateral Trust and
Intercreditor Agreement, dated as of June 13, 1997, among ING (U.S.) Capital
Corporation, as contractual representative (the "Agent") for the benefit of the
financial institutions from time to time parties to the Revolving Credit
Facility (the "Lenders") and as a Lender, PNC Bank, National Association, as
servicing agent (the "Servicing Agent") and as a Lender, the Trustee, PNC Bank,
National Association, as Collateral Trustee, the Seller, the Purchaser and the
Master Servicer (as the same may be amended, restated, supplemented or otherwise
modified from time to time).
"Material Adverse Effect" shall mean, with respect to any Person, the
occurrence or existence of any event or condition which has a material adverse
effect (v) on such Person's ability to perform under the Operative Documents,
(w) on the businesses, properties or condition (financial or otherwise) of such
Person, (x) on the ability of the Purchaser or any of its designees and/or
assigns to enforce this Agreement or any of the other Operative Documents, (y)
on the rights of the Purchaser or any of its designees and/or assigns in the
Purchased Assets.
"Noncomplying Receivable" means any Receivable which, as of the date of
origination thereof, did not meet the criteria for an Eligible Receivable as of
such date.
"Permitted Liens" shall mean with respect to any Receivable or the
Related Asset relating thereto which are sold, transferred, or otherwise
conveyed to the Purchaser hereunder, "Liens" (as defined in the Pooling and
Servicing Agreement) created under the "Operative Documents" (as defined in the
Pooling and Servicing Agreement) (x) in favor of the Purchaser (and assigned to
the Trustee) or the Trustee, in either case, as against the Seller and (y) in
favor of the Trustee as against the Purchaser.
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"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Authority or any other entity of similar nature.
"Purchase" means, on any Purchase Date, the sale, assignment,
contribution, transfer and/or other conveyance of any Receivable from the Seller
to the Purchaser for which the Purchase Price has not been previously paid
(including by increasing the outstanding balance of the Subordinated
Intercompany Revolving Loan Note) and which have not previously been sold,
assigned, contributed, transferred or otherwise conveyed to the Purchaser by the
Seller, in either case, in accordance with the terms of Sections 2.01 and 2.02
hereof; and "Purchased" means the past tense of Purchase.
"Purchase Date" means, with respect to any Receivable, the date such
Receivable is Purchased by the Purchaser.
"Purchase Discount Rate" means, with respect to any Receivable, a per
annum rate equal to the Applicable Discount Rate for such Receivable plus one
percent (1%), which rate shall be specified in the Seller Transfer Report; it
being understood and agreed that such rate may be determined as a weighted
average which may apply to all Receivables being Purchased on any given Purchase
Date.
"Purchase Price" has the meaning specified in Section 2.02(b) hereof.
"Purchase Termination Date" means the earliest to occur of (i) the date
upon which the Seller shall cease to sell Receivables to the Purchaser in
accordance with the provisions of Section 8.07 of this Agreement, (ii) the date
upon which the ability of the Seller to permit Purchases hereunder has been
terminated (and cannot be reinstated) pursuant to Section 2.01(c) of this
Agreement, and (iii) or the date upon which the Seller breaches its repurchase
or substitution obligation as set forth in Section 5.02(b).
"Purchase Yield" means, with respect to any Receivable, the per annum,
discount rate, as calculated by the Seller on the date the Settlement underlying
such Receivable was originally purchased by the Seller from the Claimant, at
which the present value of all "Scheduled Payments" (as defined in the Pooling
and Servicing Agreement) (or portions thereof) to be received by the Seller
equals the sum of the purchase price paid by the Seller to the Claimant therefor
plus the estimated closing costs and commissions incurred by the Seller and
directly allocated to such Receivable in accordance with the Seller's customary
past business practices.
"Purchased Assets" shall mean all Receivables and Related Assets
purchased hereunder pursuant to Section 2.01.
"Receivable" shall mean those Scheduled Payments (or portions thereof)
due to a Claimant under a Settlement Agreement and the rights to which Scheduled
Payments (or such
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portion thereof) have heretofore been or which are hereafter transferred by such
Claimant to the Seller pursuant to a Settlement Purchase Agreement and by the
Seller to the Purchaser pursuant to this Agreement, whether such Scheduled
Payments (or such portions thereof) constitute accounts, general intangibles,
investment property, chattel paper, instruments, documents, securities, cash, or
any other kind of property.
"Related Assets" has the meaning specified in Section 2.01(a) hereof.
"Related Property" means with respect to any Receivable: all of the
Seller's rights, remedies, powers and privileges (a) under the Settlement
Purchase Agreement pursuant to which such Receivable was purchased by the Seller
and under the related "Power of Attorney" (as defined in the Pooling and
Servicing Agreement), (b) all security interests or liens and property subject
thereto from time to time purporting to secure payment of such Receivable, if
any, whether pursuant to the Settlement Purchase Agreement related to such
Receivable or otherwise, (c) under the "Back-up Servicing Agreement" (as defined
in the Pooling and Servicing Agreement), (d) all "Lock-Box Accounts" (as defined
in the Pooling and Servicing Agreement), lock-boxes and other bank accounts, in
each case, into which (but only to the extent of) any "Collections" (as defined
in the Pooling and Servicing Agreement) are deposited or concentrated; all
monies and other items of payment therein (but only to the extent relating to
the Receivables); and "Eligible Investments" (as defined in the Pooling and
Servicing Agreement) purchased with any of the foregoing funds and any
investment income thereon, (e) all "Life Insurance Contracts" (as defined in the
Pooling and Servicing Agreement) relating to any "Non-Guaranteed Settlements"
(as defined in the Pooling and Servicing Agreement) or "Commutable Settlements"
(as defined in the Pooling and Servicing Agreement) included as a Receivable,
(f) any interest rate hedging instruments or agreements entered into by the
Seller in respect of any such Receivable, (g) any other agreements or
arrangements of whatever character (including guaranties, letters of credit,
annuity contracts (including, "Qualified Annuity Contracts" (as defined in the
Pooling and Servicing Agreement)) or other credit support) from time to time
supporting or securing payment of such Receivable whether pursuant to any
related Settlement Agreement, "Qualified Assignment" (as defined in the Pooling
and Servicing Agreement), Qualified Annuity Contract, Settlement Purchase
Agreement or any other agreement related to such Receivable or otherwise, (h)
all "UCC" (as defined in the Pooling and Servicing Agreement) financing
statements filed by the Seller against the Claimants under such Receivable; and
(j) all "Records" (as defined in the Pooling and Servicing Agreement) and all
other instruments and rights relating to such Receivable.
"Revolving Credit Facility" means that certain Amended and Restated
Credit Agreement, dated as of February 11, 1997 (as the same may be amended
restated, supplemented or otherwise modified from time to time) and all
documents, instruments and agreements executed and/or delivered in connection
therewith.
"Seller Loans" has the meaning specified in Section 2.02(c) hereof.
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"Seller Transfer Report" means a report to be delivered by the Seller
to the Purchaser and accepted by the Purchaser on each Purchase Date setting
forth for each such Receivable so Purchased, the name of the Claimant, the
present and future values of the assigned Scheduled Payments, the "Annuity
Provider" (as defined in the Pooling and Servicing Agreement), if any, the
Purchase Price thereof, the Purchase Yield, the Applicable Discount Rate and
Purchase Discount Rate thereof, and the Designated Supplement under which such
Receivable is intended to be an Eligible Receivable.
"Series Specific Lock-Box Account" has the meaning specified in Section
6.01(a) hereof.
"Subordinated Intercompany Revolving Loan Note" has the meaning
specified in Section 2.02(d) hereof.
"Subsequent Issuances" means any issuance of new "Certificates" (as
defined in the Pooling and Servicing Agreement) on any date after the Closing
Date.
"U.S. Dollars" or "Dollars" means dollars of the United States of
America.
SECTION 1.02. Accounting Terms. Under this Agreement, all accounting
terms not specifically defined herein shall be interpreted, all accounting
determinations made, and all financial statements prepared, in accordance with
GAAP.
SECTION 1.03. Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein. The
words "herein," "hereof," and "hereunder" and other words of similar import
refer to this Agreement as a whole, including the exhibits and schedules hereto,
as the same may from time to time be amended or supplemented and not to any
particular section, subsection, or clause contained in this Agreement, and all
references to Sections, Exhibits and Schedules shall mean, unless the context
clearly indicates otherwise, the Sections hereof and the Exhibits and Schedules
attached hereto, the terms of which Exhibits and Schedules are hereby
incorporated into this Agreement. Whenever appropriate, in the context, terms
used herein in the singular also include the plural, and vice versa.
SECTION 1.04. Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding", and the word "within" means "from and excluding a
specified date and to and including a later specified date."
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ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Purchases of Receivables; Agreement to Purchase. (a)
Subject to the terms and conditions hereinafter set forth (including the
conditions set forth in Article III), at any time prior to the Purchase
Termination Date (provided such Purchases are permitted pursuant to Section
2.01(d) hereof) upon at least one Business Days' prior notice by the Seller to
the Purchaser, the Purchaser shall purchase from the Seller, and the Seller
shall sell, transfer, assign and otherwise convey to the Purchaser all of the
Seller's right, title and interest in the Receivables described on the Seller
Transfer Reports from time to time delivered by the Seller to the Purchaser on
or prior to the proposed respective Purchase Dates therefor (as such dates shall
be specified in such notices), in each case together with all of the Related
Property relating to such Receivables and all Collections with respect to and
other proceeds of such Receivables and "Related Security" (as defined in the
Pooling and Servicing Agreement) (such Related Property, Collections and
Proceeds, collectively, the "Related Assets"); it being agreed that the first
such Purchase Date shall be on the Closing Date (and the execution and delivery
of this Agreement shall suffice as notice thereof by the Seller for purposes of
this Agreement). On any Purchase Date on which the Seller and Purchaser agree to
effect a sale or transfer of Receivables preceding the Purchase Termination
Date, the Purchaser shall pay for the Purchases described in the preceding
sentence no later than 5:00 p.m. (New York time) on such Purchase Date by making
available to the Seller the payment of the Purchase Price in the manner required
under Section 2.02. Prior to paying the Purchase Price hereunder, the Purchaser
may request of the Seller, and the Seller shall deliver, such approvals,
opinions, information, reports or documents as the Purchaser may reasonably
request.
(b) It is the intention of the parties hereto that each Purchase of
Receivables and the associated Related Assets made hereunder shall constitute a
"sale" from the Seller to the Purchaser under applicable state law and Federal
bankruptcy law, which sales are, in each case, absolute and irrevocable and
provide the Purchaser with all indicia and rights of ownership of the
Receivables and such Related Assets. Neither the Seller nor the Purchaser
intends the transactions contemplated hereunder to be, or for any purpose to be
characterized as, loans from the Purchaser to the Seller secured by such
property. Except for certain indemnities pursuant to Section 7.01, each sale of
Receivables and the associated Related Assets by the Seller to the Purchaser is
made without recourse to the Seller; provided, however, that (i) the Seller
shall be liable to the Purchaser for all representations, warranties and
covenants made by the Seller pursuant to the terms of this Agreement, and (ii)
such sale does not constitute and is not intended to result in an assumption by
the Purchaser or any assignee thereof of any obligation of the Seller or any
other person to any Claimant, Obligor, "Liable Party" (as defined in the Pooling
and Servicing Agreement) or any other Person in connection with the Receivables,
the Related Assets and/or the related Settlement Purchase Agreements, or any
other obligations of the Seller thereunder or in connection therewith, other
than to return (or provide for the return of) any Scheduled Payments (or any
portion thereof) not covered under the Settlement Purchase
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Agreement and not sold to the Purchaser hereunder back to such Claimant (it
being understood and agreed that the Master Servicer and/or the Collateral
Trustee shall remit or cause to be remitted all amounts in respect of "Split
Payments" (as defined in the Pooling and Servicing Agreement) in accordance with
Section 5.01(f)). In view of the intention of the parties hereto that the
Purchases of Receivables and the associated Related Assets made hereunder shall
constitute sales of such Receivables and such Related Assets rather than a loan
secured by such Receivables and such Related Assets, the Seller agrees to note
on its financial statements and in its books an records that such Receivables
and the associated Related Assets have been sold to the Purchaser and to respond
to any inquiries made by third parties as to the ownership of such Receivables
and such Related Assets so sold that such Receivables and such Related Assets
have been sold to the Purchaser.
(c) Notwithstanding any other provision of this Agreement to the
contrary, the Purchaser shall not Purchase from the Seller nor shall the Seller
sell to the Purchaser any Receivable from and after the time of any bankruptcy
filing by or against the Seller or the Purchaser, provided, however, that should
any such bankruptcy or insolvency proceeding instituted against the Seller (as
distinguished from by the Seller) be withdrawn or dismissed prior to the
occurrence of a "Significant Event" under the Pooling and Servicing Agreement,
then the Purchaser shall be entitled to resume Purchasing Receivables from the
Seller after the withdrawal or dismissal of such filing or proceeding.
(d) If, notwithstanding the provisions of the immediately preceding
clause (b), a court of competent jurisdiction were to hold that any Purchase of
Receivables hereunder does not constitute a valid sale of the affected
Receivables and the Related Assets as set forth above but instead constitutes a
loan in the amount of the Purchase Price of such Receivables, then this
Agreement shall be deemed a present grant of a security interest (within the
meaning of Articles 8 and 9 of the UCC as in effect in all applicable
jurisdictions) in favor of the Purchaser in all of the Seller's rights, title
and interest in, to and under the Purchased Assets to secure such loan in the
amount of the Purchase Price effective upon each such Purchase, and the Seller
hereby grants such a security interest to the Purchaser in the Purchased Assets
which are the subject of such Purchase, and this Agreement shall constitute a
security agreement within the meaning of Article 8 and Article 9 of the UCC of
all applicable jurisdictions.
SECTION 2.02. Payment for the Purchases. (a) Except as otherwise
provided below in this Section 2.02, the Purchase Price for the Receivables sold
by the Seller under this Agreement shall be payable in full in cash by the
Purchaser to the Seller, in each case on the Purchase Date relating to such
Purchase; provided, however, that with respect to the Purchase made on the
Closing Date, [$________] of the Purchase Price due on the Closing Date shall be
paid by the issuance of equity in the Purchaser to the Seller pursuant to the
terms of the organizational documents of the Purchaser.
(b) On each Purchase Date with respect to any Receivables being sold on
such date, the Seller shall deliver to the Purchaser a Seller Transfer Report in
the form of that attached
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hereto as Exhibit B. The Purchaser, if it agrees to purchase all such
Receivables set forth on such report, shall signify its acceptance thereof by
signing such report and returning a copy, as accepted, to the Seller on such
date, together with payment of the aggregate Purchase Price for such
Receivables, by no later than 5:00 p.m. (New York time) on such date. To the
extent that the Purchaser disputes any of the information in such report with
respect to any Receivable described therein, the Seller and the Purchaser shall
reconcile such report as promptly as possible and if unable to reconcile and
agree on the content of such report prior to 4:30 p.m. (New York time) on the
proposed Purchase Date therefor, the Seller and the Purchaser shall exclude any
Receivables therefrom until such report is acceptable to both parties (and such
excluded Receivables shall be deemed not sold on such date). The aggregate
Purchase Price (as hereinafter defined) payable on any Purchase Date shall be
calculated to equal the sum of the respective Purchase Prices of the new
Receivables noted on such Seller Transfer Report. The "Purchase Price" for any
Receivable shall be equal to the Discounted Receivables Balance of such
Receivable on such date as calculated without giving effect to any past due
Scheduled Payments thereon which are outstanding on such date.
(c) On each Business Day, to the extent that the Purchaser receives
proceeds from any "Subsequent Issuances" (as defined in the Pooling and
Servicing Agreement) or otherwise has any other "Available Seller Funds" (as
defined in the Pooling and Servicing Agreement), then the Purchaser shall remit
such funds to the Seller in the following order of priority and application:
first to pay the Purchase Price for any Receivables Purchased from the Seller on
such Business Day to the extent it is a Purchase Date; and second to pay amounts
owed by the Purchaser to the Seller under the Subordinated Intercompany
Revolving Loan Notes described in Section 2.02(d) below. If, on any Purchase
Date, the amount of cash available to pay for all Purchases of Receivables to be
made on such date is less than the Purchase Price owing therefor, then the
Purchaser shall, with notice to the Seller, pay such remaining part of the
Purchase Price by borrowing a revolving loan (each a "Seller Loan") under its
Subordinated Intercompany Revolving Loan Note issued in favor of the Seller, and
the Seller shall have irrevocably agreed to advance, and shall be deemed to have
advanced, a Seller Loan in the amount so specified by the Purchaser; provided,
however, that such Seller Loan shall be made to the Purchaser only to the extent
that such Seller Loan shall be payable out of "Available Seller Funds" (as
defined in the Pooling and Servicing Agreement), and, at the time of such Seller
Loan, or immediately thereafter and after giving effect to such Seller Loan, the
Purchaser would, in the reasonable determination of the Purchaser, continue to
be able to pay its debts as they become due.
(d) The Seller Loans shall be subordinated to the prior right and
payment in full of all Certificates and other amounts required to be paid by the
Purchaser under the Operative Documents and any other "Indebtedness" (as defined
in the Pooling and Servicing Agreement) of the Purchaser which is specified in
any document relating thereto as having priority over the Seller Loans. The
Seller Loans advanced by the Seller shall be evidenced by, and payable in
accordance with the terms and provisions of, a promissory note (a "Subordinated
Intercompany Revolving Loan Note") payable to the Seller in the form of Exhibit
A attached hereto.
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SECTION 2.03. Payments and Computations, Etc. All amounts to be paid by
the Seller to the Purchaser hereunder shall be paid in accordance with the terms
hereof no later than 1:00 P.M. (New York time) on the day when due in Dollars in
immediately available funds to the "Master Collection Account" (as defined in
the Pooling and Servicing Agreement). All amounts to be paid by the Purchaser to
the Seller hereunder shall be paid in accordance with the terms hereof no later
than 5:00 P.M. (New York time) to such account as may be specified therefor by
the Seller from time to time by notice to the Purchaser. Payments received by
the Purchaser or the Seller after such times shall be deemed to have been
received on the next Business Day. In the event that any payment becomes due on
a day which is not a Business Day, then such payment shall be made on the next
succeeding Business Day. The Seller and the Master Servicer (if an "Affiliated
Entity" (as defined in the Pooling and Servicing Agreement)) shall, to the
extent permitted by law, pay to the Purchaser, on demand, interest on all
amounts not paid when due hereunder (whether owing by the Seller individually or
as Master Servicer) at 2% per annum above the per annum rate designated by PNC
Bank, National Association as its "prime rate" for commercial borrowers (such
rate not necessarily being the lowest rate offered by such bank) as in effect on
the date such payment was due; provided, however, that such interest rate shall
not at any time exceed the maximum rate permitted by applicable law. All
computations of interest payable hereunder shall be made on the basis of a year
of 360 days for the actual number of days (including the first but excluding the
last day) elapsed.
SECTION 2.04. Transfer of Records to the Purchaser. (a) In connection
with the Purchases of Receivables hereunder, the Seller hereby sells, transfers,
assigns and otherwise conveys to the Purchaser all of the Seller's right and
title to and interest in the Records relating to all Receivables included in the
Purchased Assets, without the need for any further documentation in connection
with any Purchase. In connection with such transfer, the Seller hereby
represents and warrants that the Seller and/or Wentworth either itself owns, or
has taken such action as may be necessary (including, without limitation,
obtaining any necessary consents from licensors or other Persons) to provide the
Master Servicers, the "Back-up Servicer" (as defined in the Pooling and
Servicing Agreement), the Trustee and any "Successor Servicer" (as defined in
the Pooling and Servicing Agreement) with such licenses, sublicenses and/or
assignments of contracts as the Master Servicers, the Trustee or any Successor
Servicer shall from time to time require for its use of all services and
computer hardware or software that relate to the servicing of the Receivables or
the other Purchased Assets. The Seller and Wentworth each hereby grants the
Master Servicers, the Back-up Servicer, the Trustee and each Successor Servicer
an irrevocable license (with respect to the services, and computer hardware and
software that it owns) or sublicense (with respect to all other such services,
hardware and software) to use such services, hardware or software in connection
with the servicing, collection and monitoring of the Receivables (subject to
reasonable confidentiality restrictions and restrictions limiting such use to
the collection, servicing and monitoring of the Receivables, which restrictions
have already been established with respect to the Back-up Servicer and, with
respect to any other Person other than the Back-up Servicer, shall be determined
at such time as such Person is charged with the servicing of the Receivables).
As of the Closing Date, all such computer software and hardware is currently
owned by Seller and/or Wentworth and is licensed to the Back-up Servicer
irrevocably until the
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termination of the Back-up Servicing Agreement. From and after the Closing Date,
the Seller or Wentworth, as applicable, shall deliver to the Trustee a copy of
each consent (or evidence that such consent is not required) from all necessary
parties with respect to any such services, hardware or software prior to the
date the Seller or Wentworth enters into any license to use such service or
software to service, monitor and collect any Receivables. The license granted
hereby shall be irrevocable, and shall terminate on the Business Day following
the Collection Date.
(b) The Seller shall take such action requested by the Purchaser (or
its assignees) or any Master Servicer (including any successor Master Servicer
appointed in accordance with the Pooling and Servicing Agreement), from time to
time hereafter, that may be reasonably necessary or appropriate to ensure that
the Purchaser (and its assignees, including, without limitation, the Trustee,
the Collateral Trustee and the Certificateholders) has an enforceable ownership
or security interest, as applicable, in the Records relating to the Receivables
purchased from the Seller hereunder.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Agreement. This Agreement is
subject to the conditions precedent that (i) each of the conditions precedent to
the execution, delivery and effectiveness of each other Operative Document
(other than a condition precedent in any such other Operative Document relating
to the effectiveness of this Agreement) shall have been fulfilled, and (ii) the
Purchaser shall have received each of the following, on or before the Closing
Date, each (unless otherwise indicated) dated as of the Closing Date or such
other recent date acceptable to the Purchaser and each in form and substance
satisfactory to the Purchaser:
1. Resolutions. A copy of the resolutions of the Board of Directors of
the general partner of the Seller, certified by its Secretary or Assistant
Secretary, approving for and on behalf of the Seller this Agreement and the
other Operative Documents to be delivered by it hereunder and the
transactions contemplated hereby and thereby and addressing such other
matters as may be reasonably required by the Purchaser;
2. Good Standing Certificates of the Seller; Certificates as to Foreign
Qualification of the Seller. Good standing or qualification certificates
for the Seller issued by the Secretaries of State of Delaware and
Pennsylvania and of any other state in which the Seller transacts business
and is required to be in good standing;
3. Incumbency Certificate. A certificate of the Secretary or Assistant
Secretary of the general partner of the Seller certifying the names and
true signatures of the officers authorized on the general partner's behalf
to sign this Purchase Agreement for and on behalf of the Seller and the
other Operative Documents to be delivered by the
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Seller hereunder (on which certificate the Purchaser, the Trustee, the
Agent and the Master Servicers may conclusively rely until such time as the
Purchaser shall receive from the Seller (with a copy to the Trustee, each
Master Servicer and the Agent), a revised certificate meeting the
requirements of this subsection (3);
4. Other Operative Documents. Original copies, executed by each of the
parties thereto in such reasonable number as shall be specified by the
Purchaser, of each of the other Operative Documents to be executed and
delivered in connection herewith;
5. Release of Liens under the Revolving Credit Facility. With respect
to the Receivables to be Purchased on or after the Closing Date, the
Intercreditor Agreement shall provide for the release upon the Purchase
thereof pursuant hereto of all Liens previously granted by the Seller or
the Purchaser under the Revolving Credit Facility or otherwise with respect
to such Receivables and Related Assets;
6. Opinions of Counsel. The following opinions of counsel, each in form
and substance satisfactory to the Purchaser as to (i) general corporate and
UCC matters, (ii) true sale and non-consolidation, (iii) federal and
Delaware income tax matters, (iv) assignability and priority of the
Receivables, (v) federal securities law issues, and (vi) enforceability of
Powers of Attorney; and
7. Other Documents. Such other documents as are set forth on the List
of Closing Documents attached hereto as Exhibit C.
SECTION 3.02. Conditions Precedent to Ongoing Purchases. The obligation
of the Purchaser on any Purchase Date to accept and pay the Purchase Price for
the transfers of Receivables under this Agreement is subject to the conditions
precedent that the representations and warranties contained in Article IV are
true and correct in all material respects as of such Business Day. The Seller,
by accepting the Purchase Price paid for each Purchase of Receivables and
Related Assets hereunder (including by way of increase in the principal balance
of the Subordinated Intercompany Revolving Loan Note or the equity interest of
the Seller in the Purchaser), shall be deemed to have certified, with respect to
the Receivables and the Related Assets paid for on such day, that its
representations and warranties contained in Article IV are true and correct on
and as of such day, with the same effect as though made on and as of such day.
SECTION 3.03. Effect of Payment of Purchase Price and/or Contribution.
Upon the payment of the Purchase Price for any Purchase, (whether in cash by an
equity issuance to the Seller or by an increase in the Seller's Subordinated
Intercompany Revolving Loan Note pursuant to Section 2.02(c)), or in the case of
a Purchase made on the Closing Date, the contribution of any Receivables and
Related Assets by the Seller to the capital of the Purchaser pursuant to Section
2.02(a), title to the Receivables and the Related Assets included in such
Purchase shall vest in the Purchaser. Upon the purchase and payment by the
Purchaser of the Purchase Price for
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any Purchase, each of the conditions set forth in Section 3.02 shall be
irrevocably deemed to have been satisfied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller. The Seller
hereby represents and warrants that as of the Closing Date and (except for
representations and warranties which relate to a specific date only) and on each
"Transfer Date" (as defined in the Pooling and Servicing Agreement) thereafter
until the Purchase Termination Date:
(a) Organization and Good Standing. The Seller is a limited
partnership, duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full power and authority to own its
properties and conduct its business as presently owned or conducted, and to
execute, deliver and perform its obligations under this Agreement, the
Settlement Purchase Agreements, and each of the other Operative Documents to
which it is a party.
(b) Due Qualification. The Seller is duly qualified to do business and
is in good standing as a foreign limited partnership, and has obtained all
necessary licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have, or could reasonably
be expected to have a Material Adverse Effect.
(c) Due Authorization; Conflicts. The execution, delivery and
performance by the Seller of this Agreement, the Settlement Purchase Agreements
and each of the other Operative Documents to which it is a party are within the
Seller's powers, have been duly authorized by all necessary partnership action,
and do not contravene (i) the Seller's Agreement of Limited Partnership, (ii)
any law, rule, regulation, order, decree or contractual restriction binding on,
or affecting, the Seller and the violation of which would have, or could
reasonably be expected to have, a Material Adverse Effect, or (iii) any
agreement, contract, indenture, mortgage, or other instrument, document or
agreement to which the Seller or any of its assets are subject or may be
effected and the violation of which would have, or could reasonably be expected
to have, a Material Adverse Effect.
(d) Consents. No authorization or approval or other action by, and no
notice to or registration of or filing with, any Governmental Authority or other
regulatory body is required to be made by the Seller for the due execution,
delivery and performance by the Seller, or to insure the legality, validity,
binding effect or enforceability of, this Agreement, the Settlement Purchase
Agreements or any of the other Operative Documents to which it is a party,
except for the filing of UCC financing statements against the Seller in respect
of the transactions contemplated herein, all of which that need to be filed to
perfect the interest of the Purchaser in the Purchased
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Assets (as comprised as of the date of the making or remaking of this
representation and warranty) have been so made.
(e) Enforceability. This Agreement, the Settlement Purchase Agreements
or any of the other Operative Documents to which it is a party is and will be
the legal, valid and binding obligation of the Seller enforceable against the
Seller in accordance with its respective terms, 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 principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(f) Proceedings. There are no judgments or other judicial or
administrative orders outstanding against the Seller nor is there any pending
or, to the best of the Seller's knowledge, threatened action or proceeding
affecting the Seller before any court, governmental agency or arbitrator, which
would have, or could reasonably be expected to have, a Material Adverse Effect.
(g) Compliance with Laws, Etc. The Seller is not in violation of any
law, rule, regulation, order, writ, judgment, decree, determination or award
applicable to it or any of its properties or any indenture, lease, loan or other
agreement to which it is a party or by which it or its assets may be bound or
affected, the violation of which, in any of the foregoing cases, would have, or
could reasonably be expected to have, a Material Adverse Effect.
(h) Locations. The principal place of business and chief executive
office of the Seller are located at the address of the Seller set forth on the
signature page hereof, and the offices where the Seller keeps all of its records
relating to the Receivables are located at the addresses set forth on Schedule I
hereto, or, in each case, at such other locations notified to the Purchaser, the
Trustee and each Master Servicer, and the Agent, in jurisdictions with respect
to which all applicable actions required by Section 5.02(f) hereof have been
taken and completed.
(i) Lock-Box Banks. The names and addresses of all the "Lock-Box Banks"
(as defined in the Pooling and Servicing Agreement), and the account numbers of
all "Lock-Box Accounts" (as defined in the Pooling and Servicing Agreement) and
related lock-boxes such Lock-Box Banks, are in each case specified in Schedule
III hereto or have been notified to the Purchaser, the Trustee and the
Collateral Trustee and with respect to which all action required to be taken
pursuant to Section 5.02(h) has been taken. The Lock-Box Banks are the only
institutions holding any Lock-Box Accounts or lock-boxes for the receipt of
Scheduled Payments in respect of the Receivables. All Annuity Providers have
been directed to make payments on the Annuity Contracts relating to the
Receivables to a Lock-Box Account (or a related lock-box) covered by a "Lock-Box
Notice" (as defined in the Pooling and Servicing Agreement), and such
instructions are in full force and effect.
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(j) Financial Statements. The annual audited financial statements of
the Seller for the fiscal year ended December 31, 1996, and the unaudited
quarterly financial statements of the Seller for the fiscal quarter ended March
31, 1997, copies of which have been provided to the Purchaser, the Trustee and
the Agent, present fairly the financial condition of the Seller as of such date.
(k) Accuracy of Information. Each certificate, information, exhibit,
financial statement, document, book, record, report or disclosure furnished by
the Seller to the Purchaser, the Trustee, any Master Servicer or the Agent is
accurate in all material respects and contains no untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading.
(l) Investment Company Act Matters. The Seller is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act.
(m) Title to Property. The Seller, with respect to any Receivables
immediately prior to the Purchase thereof by the Purchaser hereunder, had good,
indefeasible, and merchantable title to and ownership of such Receivables, free
and clear of all Liens.
(n) Tradenames. The Seller has no tradenames, fictitious names, assumed
names or "doing business as" names and since its incorporation, the Seller (i)
has not been the subject of any merger or other corporate reorganization that
resulted in a change of name, identity or corporate structure or (ii) had any
other name.
(o) Solvency. After giving effect to each Purchase of Purchased Assets
hereunder, the Seller is and will be solvent and able to pay its debts as they
come due, and has and will have adequate capital.
(p) Valid Transfer. This Agreement constitutes a valid sale, transfer
and assignment to the Purchaser of all right, title and interest of the Seller
in and to the Receivables now or hereafter Purchased hereunder and in and to all
other Purchased Assets and the proceeds thereof free and clear of any Lien,
other than any Permitted Lien or, if a court of competent jurisdiction were to
hold that any Purchase of Receivables hereunder does not constitute a valid sale
of the affected Receivables and the Related Assets as set forth herein but
instead constitutes a loan in the amount of the Purchase Price of such
Receivables, constitutes a valid grant to the Purchaser of a "security interest"
(as defined in the UCC of the jurisdiction the law of which governs the
perfection of the interest in the Receivables and other Purchased Assets created
hereunder), which is and shall be a first priority perfected security interest
to secure such loan in the amount of the Purchase Price, free and clear of any
Lien (other than any Permitted Lien) in all right, title and interest of the
Seller in and to the Receivables now or hereafter Purchased by the Purchaser
pursuant hereto and in and to all other Purchased Assets and the proceeds
thereof
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which will be enforceable by the Purchaser (and its assignees or pledgees) upon
such creation of such security interest.
(q) Originator Receivables. The Purchaser has given reasonably
equivalent value to the Seller (which may include an equity issuance on the
Closing Date and additional indebtedness of the Purchaser under the Subordinated
Intercompany Revolving Loan Note) in consideration for the Purchase by the
Purchaser from the Seller of the Receivables and Related Property pursuant
hereto, and no such transfer has been made for or on account of an antecedent
debt owed by the Seller to the Purchaser.
SECTION 4.02. Representations and Warranties of the Seller Relating to
the Receivables. The Seller hereby represents and warrants to the Purchaser,
with respect to each Receivable Purchased by the Purchaser pursuant hereto,
that:
(a) On the Purchase Date therefor the representations and warranties
set forth in the Designated Supplement relating to such Receivable (as set forth
in the applicable Seller Transfer Report delivered by the Seller on such
Purchase Date) under the heading of "Representations and Warranties of the
Seller Relating to the Series Trust Assets" or other similar heading or
otherwise relating specifically to the Receivables with respect to (and
allocated to or serving as collateral under) such Designated Supplement, shall
be true and correct in all material respects (and such representations and
warranties shall be deemed incorporated herein by this reference hereto).
(b) From and after the Closing Date, the Credit Policy Manual shall
provide that, upon the receipt of payment of less than the full amount of any
Scheduled Payments in respect of any Receivable in respect of which there is a
concurrent obligation of the Seller to remit a Split Payment to the Claimant
thereon, such Scheduled Payment shall be remitted to the Seller and the
applicable Claimant pro rata based on the relative percentages of the full
amount of such Scheduled Payment which each would be entitled to received (had
the full payment been received) in accordance with the terms of the applicable
Settlement Purchase Agreement.
The representations and warranties made pursuant to this Section 4.02
on the date of any Purchase of Receivables by the Purchaser shall survive such
Purchase.
SECTION 4.03. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants that as of the Closing Date and (except for
representations and warranties which relate to a specific date only) as of each
Purchase Date:
(a) Corporate Existence and Power. The Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted. The
Purchaser is duly qualified to do business in, and is in good standing in,
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every other jurisdiction in which the nature of its business requires it to be
so qualified, except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by the Purchaser of this Agreement and the
other Operative Documents to which it is a party (i) are within the Purchaser's
limited liability company powers, (ii) have been duly authorized by all
necessary limited liability company action, (iii) require no action by or in
respect of, or filing with, any Governmental Authority or official thereof, or
(iv) do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the Purchaser's Organizational
Documents or of any agreement, judgment, injunction, order, writ, decree or
other instrument binding upon the Purchaser the contravention of which, in any
of the foregoing cases would have, or could reasonably be expected to have, a
material adverse effect on the Purchaser's ability to perform hereunder or on
the enforceability hereof.
(c) Binding Effect. Each of this Agreement and the Subordinated
Intercompany Revolving Loan Notes constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditor generally or general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller. At all times from
the date hereof to the Collection Date, Seller will, unless the Purchaser shall
otherwise consent in writing:
(a) Compliance with Law. The Seller will comply in all material
respects with all Requirements of Law applicable to the Purchased Assets.
(b) Preservation of Existence. The Seller will preserve and maintain
its existence, rights, franchises and privileges as a limited partnership (or
other legal entity, provided the Seller shall have complied with the
requirements of Section 5.02(f)) in the jurisdiction of its organization, and
qualify and remain qualified in good standing as a foreign business entity in
each jurisdiction where the failure to maintain such qualification would have,
or could reasonably be expected to have, a Material Adverse Effect.
(c) Inspection of Books and Records. The Purchaser, the Agent, their
respective assigns (or designated representative thereof) and independent
accountants appointed by, or other agents of, any of the foregoing, shall have
the right, upon reasonable prior written notice to the Seller, to visit the
Seller, to discuss the affairs, finances and accounts of the Seller with, and to
be
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advised as to the same by, its officers, and to examine the books of account and
records of the Seller, and to make or be provided with copies and extracts
therefrom, all at such reasonable times and intervals (but not more than once in
any six month period) and to such reasonable extent during regular business
hours as the Purchaser, the Agent, their respective assigns (or designated
representative thereof) or such accountants or agents appointed by any of the
foregoing, as applicable, may desire.
(d) Keeping of Records and Books of Account. (i) The Seller itself or
through its agents will keep proper books of record and account, which shall be
maintained or caused to be maintained by the Seller and shall be separate and
apart from those of any Affiliate of the Seller, in which full and correct
entries shall be made of all financial transactions and the assets and business
of the Seller in accordance with generally accepted accounting principles
consistently applied, and (ii) maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables in the event of the destruction of the
originals thereof) and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of all Collections of and adjustments to each existing
Receivable).
(e) Location of Records. The Seller will keep its principal place of
business and chief executive office at the address of the Seller referred to in
Section 4.01(h) and shall keep the other offices where it keeps the books,
records and documents regarding the Purchased Assets at the addresses of the
Seller referred to on Schedule I, or in either case, upon 30 days' prior written
notice to the Purchaser, the Trustee and each Master Servicer and the Agent, at
any other location within the United States with respect to which all applicable
action required by Section 5.02(f) hereof shall have been taken and completed.
(f) Settlement Purchase Agreement. The Seller will at its expense
timely perform and comply in all material respects with all provisions,
covenants and other promises required to be observed by it under each Settlement
Purchase Agreement, maintain each Settlement Purchase Agreement in full force
and effect, enforce each Settlement Purchase Agreement in accordance with its
respective terms, and, at the request of the Purchaser, the Trustee, or any
applicable Master Servicer, make to the Claimant such reasonable demands and
requests for information and reports or for action as, the Trustee, or any
applicable Master Servicer may request to the extent that the Seller is entitled
to do the same thereunder; it being agreed however that with respect to the
obligations of the Seller to remit Split Payments to the Claimant pursuant to
the Settlement Purchase Agreements relating to the Purchased Assets, such
obligation shall hereafter be performed by the Master Servicer and/or the
Collateral Trustee, in each case, under and pursuant to the Pooling and
Servicing Agreements.
(g) Payment of Taxes, Etc. The Seller will pay promptly when due all
material taxes, assessments and governmental charges or levies imposed upon it
in respect of the Purchased Assets, or in respect of its income or profits
therefrom, and any and all material claims
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of any kind (including, without limitation, claims for labor, materials and
supplies) in respect of the Purchased Assets, except where such tax, assessment,
charge or levy is being contested in good faith and by proper proceedings and
adequate reserve have been set up and are being maintained in respect thereof on
the Seller's books and records.
(h) Collections. In the event that the Seller or any other Affiliated
Entity receives any Collections, the Seller agrees to hold, or cause such
Affiliated Entity to hold, all such Collections in trust and to deposit such
Collections to a Lock-Box Account or the Master Collection Account, in each
case, as soon as practicable, but in no event later than two Business Days after
its receipt thereof.
(i) Fidelity Insurance. The Seller shall maintain, at its own expense,
a fidelity insurance policy, with broad coverage with responsible companies on
all officers, employees or other persons acting on behalf of the Seller in any
capacity with regard to the Receivables to handle documents and papers related
thereto. Any such fidelity insurance shall protect and insure the Seller against
losses, including forgery, theft, embezzlement, and fraud, and shall be
maintained in an amount of at least $10,000,000 or such lower amount as the
Purchaser or any of its assigns may in their commercially reasonable credit
judgment designate to the Seller from time to time. No provision of this Section
5.01(i) requiring such fidelity insurance shall diminish or relieve the Seller
from its duties and obligations as set forth in this Agreement or any of the
other Operative Documents. The Seller shall be deemed to have complied with this
provision if one of its respective Affiliates has such fidelity policy coverage
and, by the terms of such fidelity policy, the coverage afforded thereunder
extends to the Seller. Upon the request of the Purchaser or any of its assigns,
the Seller shall cause to be delivered to the Purchaser or such assigns, as
applicable, a certification evidencing coverage under such fidelity policy. Any
such insurance policy shall contain a provision or endorsement providing that
such policy may not be canceled or modified in a materially adverse manner
without ten (10) days' prior written notice to the Purchaser and such assigns.
(j) Protection of Right, Title and Interest to Purchaser and Assignees.
(i) The Seller shall cause all financing statements and continuation
statements and any other necessary documents covering the Purchaser's and
its assignees' right, title and interest in and to the Purchased Assets to
be promptly recorded, registered and filed, and at all times to be kept
recorded, registered and filed, all in such manner and in such places as
may be required by law to preserve and protect fully the right, title and
interest of the Purchaser and its assignees in and to all such Purchased
Assets. The Seller shall cooperate fully with the Master Servicers and
Agent and take such actions as any such Person shall reasonably request, in
order to carry out the objectives of this Agreement and the other Operative
Documents.
(ii) Within 30 days after the Seller makes any change in its name,
identity or corporate structure which would make any financing statement or
continuation statement
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filed in accordance with the terms of this Agreement seriously misleading
within the meaning of Section 9-402(7) (or any comparable provision) of the
UCC as in effect in the jurisdiction the law of which governs the
perfection of the interest in the Purchased Assets created hereunder, the
Seller shall give the Purchaser, the Agent and the Trustee notice of such
change and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Purchaser's and its Assignees'
interest in the Purchased Assets and the proceeds thereof.
(iii) Notwithstanding anything contained herein to the contrary, the
Seller shall not be required to file assignments in favor of the Purchaser
or the Trustee, respectively, with respect to the UCC financing statements
filed by the Seller against each of the Claimants in connection with the
respective Settlement Purchase Agreements, but the Seller hereby covenants
to file continuation statements thereof as and when necessary to maintain
the effectiveness of such statements; it being understood and agreed that
the Seller shall not have any duty to monitor the continued effectiveness
of the financing statements originally filed against such Claimants (other
than with respect to the lapse thereof due to time).
(k) Corporate Separateness. The Seller shall at all times deal with the
Purchaser in a manner consistent with Section 2.06(m) of the Pooling and
Servicing Agreement.
(l) Accounting For Purchases. The Seller shall treat all Purchases
hereunder by the Purchaser as sales and absolute transfers thereof for all tax,
accounting and other purposes.
SECTION 5.02. Negative Covenants of the Seller. From the date hereof
until the Collection Date, the Seller shall not, without the written consent of
the Purchaser:
(a) No Liens. The Seller will not sell, pledge, assign or transfer to
any Person, or grant, create, incur, assume or suffer to exist any Lien (other
than a Permitted Lien) on, any Purchased Asset, whether now existing or
hereafter created, or any interest therein, and the Seller shall defend the
right, title and interest of the Purchaser in and to the Purchased Assets,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Seller.
(b) Extension or Amendment of Receivables. The Seller will not extend,
amend or otherwise modify (or consent to any such extension, amendment or
modification of) the terms of any Receivable or rescind or cancel, or permit the
rescission or cancellation of, any Receivable except to the extent that any
representation or warranty of the Seller with respect to any Receivable
constituting a Purchased Asset under Section 4.02 was incorrect when made or
remade or deemed made or remade (it being agreed that the incorrectness of any
such representation or warranty, and the substitution or repurchase obligation
of the Seller pursuant to this clause (b) 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
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of the Seller contained in any such representation or warranty), the Seller
shall, within five Business Days after learning thereof, either (X) convey to
the Purchaser in exchange for the affected Receivable, one or more additional
Receivables to be described on a Seller Transfer Report delivered to the
Purchaser and having Discounted Receivables Balance (as calculated without
giving effect to any past due Scheduled Payments thereon which are outstanding
on such date) approximately equal to, but not less than, the Discounted
Receivables Balance of the Receivable being so replaced (as calculated by
treating any past-due Scheduled Payments then due as if such Scheduled Payments
were due on the date of such calculation) or (Y) in the event the Seller lacks
sufficient Receivables to substitute or replace the affected Receivables,
repurchase in cash delivered to the Purchaser as aforesaid, in an amount equal
to the Discounted Receivables Balance (as calculated by treating any past-due
Scheduled Payments then due as if such Scheduled Payments were due on the date
of such calculation) of such affected Receivable at such time, whereupon the
Receivable being replaced or repurchased shall cease to be a "Receivable"
hereunder.
(c) Change in Credit Policy Manual. The Seller will not make, or
consent or fail to object to, any change in the "Credit Policy Manual" (as
defined in the Pooling and Servicing Agreement) which change could be reasonably
likely to materially impair or delay the collectibility of any Receivable or
result in a deterioration in the creditworthiness of the Obligors generally.
(d) Deposits to Lock-Box Accounts or the Master Collection Account. The
Seller will not deposit or otherwise credit, or cause to be so deposited or
credited, or consent or fail to object to any such deposit or credit, to any
Lock-Box Account or the Master Collection Account of cash proceeds other than
Collections of Receivables and other Purchased Assets; provided that to the
extent any such other amounts are so deposited on any date, it shall not
constitute a breach hereunder if such other funds are identified and are removed
from such account within two Business Days after such amounts were so deposited
in such account.
(e) Receivables Not To Be Evidenced by Promissory Notes. The Seller
will take no action to cause any Receivable to be evidenced by any "instrument"
(as defined in the UCC of the jurisdiction the law of which governs the
perfection of the interest in such Receivable created hereunder), except in
connection with its enforcement, in which event the Seller shall deliver such
instrument to the Collateral Trustee, for the benefit of the Person entitled
thereto or secured thereby in accordance with the Intercreditor Agreement.
(f) Change in Name. The Seller will not (i) make any change to its
name, principal place of business, partnership structure or location of books
and records or use any tradenames, fictitious names, assumed names or "doing
business as" names unless, at least 30 days prior to the effective date of any
such name change, change in principal place of business, change in partnership
structure, change in location of its books and records, or change in trade or
fictitious names, the Seller notifies the Purchaser, the Trustee and each Master
Servicer thereof and delivers to the Trustee and the Purchaser such financing
statements (Forms UCC-1 and
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UCC-3) executed by the Seller which the Purchaser or the Trustee may reasonably
request to reflect such name change, location change, change in partnership
structure or fictitious name change or use, together with such other documents
and instruments that the Purchaser or the Trustee may reasonably request in
connection therewith and has taken all other steps to ensure that the Purchaser,
and the Trustee continue to have a first priority, perfected security or
ownership interest in the Purchased Assets, or (ii) change its jurisdiction of
organization unless the Purchaser and the Trustee shall have received from the
Seller (A) written notice of such change at least 10 days prior to the effective
date thereof, and (B) prior to the effective date thereof if the Purchaser shall
so request, an Opinion of Counsel, in form and substance reasonably satisfactory
to the Purchaser and the Trustee, as to such organization and the Seller's valid
existence and good standing and as to the matters referred to in the first
sentence of Section 4.01(a).
(g) Merger. The Seller shall not consolidate with or merge into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any Person unless:
(i) (X) the Person formed by such consolidation or into which the
Seller is merged or the Person which acquires by conveyance or transfer the
properties and assets of the Seller substantially as an entirety shall be,
if the Seller is not the surviving entity, a corporation, limited
partnership or limited liability company organized and existing under the
laws of the United States of America or any State or the District of
Columbia, and such entity shall have expressly assumed, by an agreement
supplemental hereto, executed and delivered to the Trustee, in form
reasonably satisfactory to the Purchaser and the Trustee the performance of
every covenant and obligation of the Seller hereunder and (Y) the Seller
shall have delivered to the Purchaser and the Trustee an Officer's
Certificate and an Opinion of Counsel each in form reasonably satisfactory
to the Purchaser and the Trustee and stating that such consolidation,
merger, conveyance or transfer complies with this Section 5.02(g) and that
all conditions precedent herein provided for relating to such transaction
have been complied with;
(ii) each "Rating Agency" (as defined in the Pooling and
Servicing Agreement) rating any Series shall have notified the Purchaser
and the Trustee, in writing, that such merger or consolidation or
conveyance or transfer, as the case may be, will not result in a reduction
or withdrawal of the rating of any such outstanding Series or "Class" (as
defined in the Pooling and Servicing Agreement) of such Series; and
(iii) the corporation, limited partnership or limited liability
company formed by such consolidation or into which the Seller is merged or
which acquires by conveyance or transfer the properties and assets of the
Seller substantially as an entirety shall have all licenses and approvals
to perform its obligations hereunder and under the other Operative
Documents to which the Seller is a party, except to the extent the failure
to have any such license would not have, and could not reasonably be
expected to have, a
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<PAGE>
material adverse effect on its ability to perform the obligations of the
Seller hereunder and/or any such other Operative Document.
(h) Change in Lock-Box Accounts and Instructions to Obligors. The
Seller will not add or terminate any institution as a Lock-Box Bank or terminate
or substitute any Lock-Box Account or any related lock-box from those listed in
Schedule III hereto, except as otherwise permitted hereunder or unless the
Purchaser, the Trustee and the Collateral Trustee shall have received notice of
such addition, termination or change and executed copies of Lock-Box Notices
covering any such new Lock-Box Bank, Lock-Box Account or any new lock-box
relating thereto. The Seller will not instruct any Obligor to remit Collections
to any Person, address or account other than a Lock-Box Account or the related
lock-box to which the underlying Receivables or Purchased Assets relates.
(i) If, and for so long as, the Seller or the Purchaser shall be the
sole beneficial owner of all of the 5.00% Class B Structured Settlement-Backed
Pass Through Trust Certificates, Series 1997-1, the Seller or the Purchaser, as
the case may be, shall not for federal income tax purposes be a corporation,
shall not elect to be taxed for federal income tax purposes as an association
taxable as a corporation and shall not incorporate.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Collection of Receivables. (a) The Seller and the
Purchaser each hereby acknowledges and agrees that (i) the Collateral Trustee
has the exclusive ownership, dominion and control of any and all Lock-Boxes and
Lock-Box Accounts, other than any Lock-Box and/or Lock-Box Account into which
only Collections with respect to one particular Series are deposited (any such
Series-specific Lock-Box and Lock-Box Account being a "Series Specific Lock-Box"
and "Series Specific Lock-Box Account", respectively) and (ii) the Trustee has
the exclusive ownership and control of each Series Specific Lock-Box and Series
Specific Lock-Box Account and in either case, the Seller hereby agrees to take
any further action necessary or that the Trustee, the Collateral Trustee, the
Agent or the Purchaser may reasonably request to evidence and/or effect such
ownership and control. Unless instructed otherwise by the Collateral Trustee or
the Trustee, as applicable, pursuant to either such Person's authority under the
Intercreditor Agreement and the Pooling and Servicing Agreement, each Lock-Box
Bank shall be instructed to remit, on a daily basis, via overnight or same day
transfer, all amounts deposited in its Lock-Box Accounts to the Master
Collection Account in accordance with the terms of a Lock-Box Notice
substantially in the form of Exhibit B to the Pooling and Servicing Agreement.
The Master Servicer (or any successor Master Servicer (including the Back-Up
Servicer) appointed for any such Master Servicer) and the Seller, pursuant to
each Daily Report shall advise the Purchaser daily of the amount of Collections
received into the Master Collection
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Account on such day with respect to the Receivables and the allocations thereof
as among the Series, the Split Payments, and the Revolving Credit Facility. If
the Seller or its agents or representatives shall at any time receive any cash,
checks or other instruments constituting Collections, such recipient shall
segregate such payment and hold such payment in trust for and in a manner
acceptable to the Purchaser and shall, promptly upon receipt (and in any event
within one Business Day following receipt), remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to a
Lock-Box Account or Series Specific Lock-Box Account, as the case may be, or the
Master Collection Account. The Seller hereby authorizes the Purchaser (and its
designees and assigns), and gives each of the Purchaser, such designees and/or
such assigns its irrevocable power of attorney, with full power of substitution,
which authorization shall be coupled with an interest, to take any and all steps
in the Seller's name and on behalf of the Seller, which steps are necessary or
desirable, in the reasonable determination of the Purchaser, such designees
and/or such assigns, to collect all amounts due under the Purchased Assets,
including, without limitation, endorsing the Seller's name on checks and other
instruments representing Collections and enforcing such Receivables and the
related Settlement Purchase Agreements.
(b) The Purchaser shall, following notification that collections of any
receivable or other intangible owed to the Seller thereof, which is not a
Purchased Asset, have been deposited into the Lock-Box Accounts or Series
Specific Lock-Box Accounts, as the case may be, segregate all such collections
and, after such misapplied collections have been reasonably identified to the
Purchaser, the Purchaser shall turn over to the Seller, as applicable, all such
collections less all reasonable and appropriate out-of-pocket costs and
expenses, if any, incurred by the Purchaser in collecting such receivables.
SECTION 6.02. Servicing of Receivables. (a) From and after the Purchase
of any Receivable by the Purchaser from the Seller, the Purchaser (or its
designees or assignees) shall have the sole right to service, administer and
monitor the Receivables and the Seller shall cease to have any rights whatsoever
in connection with such Receivables constituting Purchased Assets. In connection
therewith, the Seller shall deliver all books and records relating to the
Receivables to the Purchaser (or its agent or assign as so designated by the
Purchaser) promptly after the Purchase thereof by the Purchaser, and shall take
such other action as shall be reasonably requested by the Purchaser (or its
agents or assigns) to further evidence such assignment or to assist in the
servicing, monitoring, collecting and administering the Receivables sold
hereunder.
(b) Grant of Power of Attorney. The Seller hereby authorizes the
Purchaser (and its designees and assigns), and gives each of the Purchaser and
such designees and/or assigns its irrevocable power of attorney, with full power
of substitution, which authorization shall be coupled with an interest, to take
any and all steps in the Seller's name and on behalf of the Seller, which steps
are necessary or desirable in the reasonable determination of the Purchaser,
such designees and/or assigns to endorse, negotiate, deposit or otherwise
realize on any Receivable or any writing of any kind in connection with any
Receivable or Purchased Asset.
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SECTION 6.03. Responsibilities of the Seller. Anything herein to the
contrary notwithstanding:
(a) Subject to the allocation of the obligations in respect of Split
Payments pursuant to Section 5.01(f), the Seller shall perform all of its
obligations under the Settlement Purchase Agreements related to the Receivables
sold by it hereunder to the same extent as if such Receivables had not been sold
hereunder and the exercise by the Purchaser (or any of its assignees) of its
respective rights hereunder shall not relieve the Seller from such obligations.
(b) The Purchaser and its assignees shall have no obligation or
liability with respect to any Receivable or related Settlement Purchase
Agreement, nor shall the Purchaser or any such assignee be obligated to perform
any of the obligations of the Seller thereunder.
(c) The Seller shall, upon the request of the Purchaser (or its agents
or assigns) deliver to the Purchaser, such agents and/or assigns, as directed,
all Records that evidence or relate to the Receivables and other Purchased
Assets conveyed to the Purchaser under this Agreement.
SECTION 6.04. Further Action Evidencing Purchases. (a) The Seller
agrees that at any time and from time to time, at its expense, it will promptly
execute and deliver all further instruments and documents, and take all further
action that may be reasonably necessary to perfect, protect or more fully
evidence the Purchaser's and its assignees' respective interests in the
Purchased Assets, or to enable the Purchaser and/or such assignees (or any agent
or designee of any of the foregoing) to exercise or enforce any of their
respective rights hereunder. Without limiting the generality of the foregoing,
the Seller will (i) execute and file such financing or continuation statements,
or amendments thereto or assignments thereof, and such other instruments and
notices, as may be necessary or appropriate or as the Purchaser or its assignees
may reasonably request, and (ii) mark its master data processing records
evidencing such Receivables and related Settlement Purchase Agreements with a
legend indicating that such assets have been sold to the Purchaser, and (iii)
indicate on its financial statements that its Receivables have been sold to the
Purchaser pursuant to this Agreement.
(b) If the Seller fails to perform any of its agreements or
obligations under this Agreement, following expiration of any applicable cure
period, the Purchaser (or any assignee thereof) may (but shall not be required
to) perform, or cause performance of, such agreement or obligation, and the
reasonable expenses of the Purchaser (or any such assignee) incurred in
connection therewith shall be payable by the Seller upon the Purchaser's (or any
such assignee's) written demand therefor (which demand shall itemize such
expenses in reasonable detail).
ARTICLE VII
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INDEMNIFICATION
SECTION 7.01. Indemnities by the Seller. Without limiting any other
rights which the Purchaser may have hereunder or under applicable law, but
without duplication, the Seller hereby agrees to indemnify the Purchaser and its
permitted successors and assigns and all officers, directors, agents and
employees of the foregoing (each of the foregoing Persons being individually
referred to herein as an "Indemnified Party") 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 (collectively, the "Indemnified Losses", and each an
"Indemnified Loss"), other than any such Indemnified Loss (x) 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 of any Non-Complying Receivable to the Purchaser pursuant
hereto;
(ii) reliance on any representation or warranty made in writing by the
Seller (or any of its officers) under or in connection with this Agreement,
any Seller Transfer Report or any "Monthly Report" (as defined in the
Pooling and Servicing Agreement), or reliance on any other information or
report delivered by the Seller or by the Master Servicer with respect to
the Seller (to the extent based on information provided by the Seller)
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, and the substitution or repurchase
obligation of the Seller 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 Seller contained in any such representation or warranty);
(iii) the failure by the Seller to comply with any term, provision or
covenant contained in this Agreement, or any agreement executed in
connection with this Agreement or with any applicable law, rule or
regulation with respect to any Receivable, the related Settlement Purchase
Agreement or the "Related Security" (as defined in the Pooling and
Servicing Agreement), or the nonconformity of any Receivable, the related
Settlement Purchase Agreement or the Related Security with any such
applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Purchaser or to
transfer to the Purchaser, legal and equitable title to, and first priority
perfected ownership of, the Receivables and other Purchased Assets which
are, or are purported to be, sold or otherwise transferred by the Seller
hereunder, free and clear of any Lien (other than Liens created in favor of
the Purchaser hereunder and Liens created under the other Operative
Documents);
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(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 Receivables and
other Purchased Assets which are, or are purported to be, sold or otherwise
transferred by the Seller hereunder, whether at the time of any Purchase or
at any subsequent time;
(vi) the failure by the Seller 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;
(vii) the failure of the Seller to pay when due any sales taxes or
other governmental fees or charges imposed in connection with the transfer
of the Purchased Assets hereunder;
(viii) the failure of the Seller or any of its agents, employees or
representatives to remit to the Purchaser, Collections of Purchased Assets
remitted to the Seller or any such agent, employees or representatives in
accordance with the terms hereof; and
(ix) the assignment by a Claimant under a Settlement Agreement of the
rights to Scheduled Payments (or any portion thereof) that have been or
which are hereafter transferred by such Claimant to the Seller pursuant to
a Settlement Purchase Agreement in contravention of an anti-assignment
provision in such Settlement Agreement that prohibits the Claimant's
transfer of the rights to such Scheduled Payments (or any such thereof).
Any Indemnified Amounts payable under this Section 7.01 shall, be paid by the
Seller to the Purchaser within five (5) Business Days following the Purchaser's
written demand therefor, setting forth in reasonable detail the basis for such
demand. The agreements of the Seller contained in this Section 7.01 shall
survive the Collection Date. In addition, in no event shall Indemnified Losses
include any consequential, special or punitive damages. The provisions of this
Section 7.01 shall survive the termination of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Waivers; Amendments. No failure or delay on the part of
the Purchaser or the Seller (or any assignee thereof) in exercising any power,
right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy preclude
any other further exercise thereof or the exercise of any
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<PAGE>
other power, right or remedy. The rights and remedies herein provided shall be
cumulative and nonexclusive of any rights or remedies provided by law. Any
provision of this Agreement may be amended if, but only if, (a) such amendment
is in writing and is consented to by the Seller, the Purchaser and the Trustee
and (b) the Trustee shall have received from each Rating Agency confirmation
that such amendment will not result in the downgrading or withdrawal of the then
current ratings of any Series
SECTION 8.02. Notices. Except as provided below, all communications and
notices provided for hereunder shall be in writing and shall be given to the
other party at its address set forth below its name on the signature pages
hereto or at such other address as such party may hereafter specify for the
purposes of notice to such party. Each such notice or other communication shall
be effective (i) if given by mail, three (3) Business Days following such
posting, postage prepaid, U.S. certified or registered, (ii) if given by
overnight courier, one (1) Business Day after deposit thereof with a national
overnight courier service, or (iii) if given by any other means, when received
at the address specified on the signature pages hereof.
SECTION 8.03. Effectiveness; Binding Effect; Assignability. (a) This
Agreement shall become effective on the Closing Date and shall, from and after
such date, be binding upon and inure to the benefit of the Seller and the
Purchaser and their respective successors and permitted assigns. The Seller may
not assign any of its rights or delegate any of its duties hereunder without the
prior written consent of the Purchaser and the Trustee. No provision of this
Agreement shall in any manner restrict the ability of the Purchaser (or the
Trustee or any Certificateholder as assignees of the Purchaser) to assign,
participate, grant security interests in, or otherwise transfer any of their
rights or remedies hereunder.
(b) Without limiting the foregoing, the Seller hereby acknowledges
that, contemporaneously herewith, the Purchaser is selling, assigning,
transferring and conveying to the Trustee, for its benefit and for the benefit
of the "Certificateholders" (as defined in the Pooling and Servicing Agreement),
and the foregoing's assignees, under the Pooling and Servicing Agreement, all of
the Purchaser's right and title to and interest in, among other things, the
Purchased Assets and this Agreement to the extent relating to any "Trust Assets"
(as defined in the Pooling and Servicing Agreement), including all of the
Purchaser's rights, remedies, powers and privileges, and all claims of the
Purchaser against the Seller, under or with respect to this Agreement (whether
arising pursuant to the terms of this Agreement or otherwise available at law or
in equity), including (i) the right of the Purchaser and the obligations of the
Seller hereunder and (ii) the right, at any time, to give or withhold consents,
requests, notices, directions, approvals, demands, extensions or waivers under
or with respect to this Agreement or the obligations in respect of the Seller
hereunder to the same extent as the Purchaser may do. The Seller hereby consents
to such sale, transfer, assignment and conveyance to the Trustee and
acknowledges and agrees that the Trustee, as the assignee of the Purchaser for
the benefit of the Certificateholders and each of its assignees, shall be a
third party beneficiary of the rights of the Purchaser arising hereunder.
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(c) The Seller hereby agrees to execute all agreements, instruments and
documents, and to take all other action, that the Purchaser or the Trustee
reasonably determines is necessary or appropriate to evidence the assignments
described in clause (b) immediately above. To the extent that the Purchaser has
granted or grants powers of attorney to the Trustee under the Pooling and
Servicing Agreement, the Seller hereby grants a corresponding power of attorney
on the same terms to the Purchaser. The Seller hereby acknowledges and agrees
that the Purchaser, in all of its capacities, shall assign to the Trustee for
the benefit of the Certificateholders, and each of its assignees, such powers of
attorney and other rights and interests granted by the Seller to the Purchaser
hereunder and agrees to cooperate fully with the Trustee in the exercise of such
rights.
(d) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the Collection Date; provided, however, that (i)
the indemnification and payment provisions of Article VII and Section 8.05 and
(ii) the provisions of Sections 8.08 and 8.10, shall, in each case, be
continuing and shall survive any termination of this Agreement.
SECTION 8.04. GOVERNING LAW; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE.
(b) EACH OF THE SELLER AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE BETWEEN EITHER THEM ARISING OUT OF, CONNECTED WITH, RELATING
TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS.
SECTION 8.05. Costs and Expenses. In addition to the rights of
indemnification under Article VII hereof, the Seller agrees to pay the Purchaser
(and its agents' and assignees') within 30 days after demand all reasonable
out-of-pocket costs and expenses (including without limitation, reasonable
counsel fees and expenses) in connection with the enforcement of the covenants,
agreements, liabilities and obligations of the Seller under this Agreement.
SECTION 8.06. Execution in Counterparts; Severability. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
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SECTION 8.07. Purchase Termination. (a) The agreements of the Seller to
sell Receivables hereunder may be terminated at any time by the Seller by giving
written notice thereof to the Purchaser and the Trustee of the Seller' election
to terminate this Agreement, in which event the Purchase Termination Date shall
thereafter occur on the date specified therefor by the Seller in such notice,
but in any event not less than 60 days after the Trustee's receipt of such
notice.
(b) Notwithstanding any such termination described under paragraph (a)
above, all other provisions of this Agreement shall remain in full force and
effect as provided in Section 8.03.
SECTION 8.08. No Proceedings. The Seller hereby agrees that it will not
institute against the Purchaser, or join any other Person in instituting against
the Purchaser, any proceeding of the type referred to in the definition of
"Insolvency Event" in the Pooling and Servicing Agreement, so long as there
shall not have elapsed one year plus one day since the last day on which any
amounts owing under the Certificates of the last outstanding Series shall have
been indefeasibly paid in full in cash. The foregoing shall limit the rights of
the Seller under any and all agreements it may have with the Purchaser but shall
not limit the right of the Seller to file any claim in or otherwise take any
action with respect to any insolvency proceeding that was instituted against the
Purchaser by any Person other than the Seller or any Affiliate thereof. The
provisions of this Section 8.08 shall survive the termination of this Agreement.
SECTION 8.09. Entire Agreement. This Agreement, together with the other
Operative Documents, including the exhibits and schedules hereto and thereto,
contains a final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof and shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, superseding all previous oral statements and other writings with respect
thereto.
SECTION 8.10. Limitations on Liability. None of the members, managers,
partners, officers, employees, agents, shareholders, directors or holders of
limited liability company interests of or in (x) the Purchaser or the Seller or
(y) the general or limited partners of the Seller, past, present or future,
shall be under any liability to the Seller or the Purchaser, respectively, any
of their successors or assigns, or any other Person for any action taken or for
refraining from the taking of any action in such capacities or otherwise
pursuant to this Agreement or for any obligation or covenant under this
Agreement, it being understood that this Agreement and the obligations created
hereunder shall be, to the fullest extent permitted under applicable law, with
respect to the Seller, solely the limited partnership obligation of the Seller
and with respect to the Purchaser, solely the limited liability company
obligation of the Purchaser. The Seller, the Purchaser and any member, manager,
partner, officer, employee, agent, shareholder, director or holder of a limited
liability company interest of or in (x) the Seller or the Purchaser and (y) any
general or limited partner of the Seller, may rely in good faith on any
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document of any kind prima facie properly executed and submitted by any Person
(other than the Seller or any Affiliate thereof) respecting any matters arising
hereunder.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
J. G. WENTWORTH S.S.C. LIMITED
PARTNERSHIP
By: J.G. Wentworth Structured Settlement
Funding Corporation, its General Partner
By: _________________________
Name:
Title:
The Graham Building
15th and Ranstead Streets
Philadelphia, PA 19102
Attention:____________________
Telecopy No.: (215) 567-7525
J. G. WENTWORTH RECEIVABLES I LLC
By: J.G. Wentworth S.S.C. Limited Partnership,
a member
By: J.G. Wentworth Structured Settlement
Funding Corporation, its General Partner
By: _________________________
Name:
Title:
300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Attention:____________________
Telecopy No.: (215) 567-7525
================================================================================
J.G. WENTWORTH RECEIVABLES I LLC,
as the Seller,
J.G. WENTWORTH & COMPANY, INC.,
as the Master Servicer,
and
PNC BANK, NATIONAL ASSOCIATION,
as the Trustee,
----------------------
SERIES 1997-1 SUPPLEMENT
Dated as of June 13, 1997
to
POOLING AND SERVICING AGREEMENT
Dated as of June 13, 1997
----------------------
$59,546,609 7.80% CLASS A STRUCTURED SETTLEMENT-BACKED PASS-THROUGH TRUST
CERTIFICATES, SERIES 1997-1
$11,342,211 5.00% CLASS B STRUCTURED SETTLEMENT-BACKED PASS-THROUGH TRUST
CERTIFICATES, SERIES 1997-1
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions........................................................1
ARTICLE II
CREATION OF THE SERIES 1997-1 CERTIFICATES
SECTION 2.01 Designation.......................................................15
SECTION 2.02 Limitations on the Initial Issuance and Sales
or Transfers of Series 1997-1 Certificates................16
ARTICLE III
TRANSFER OF RECEIVABLES
SECTION 3.01. Transfer of Series Trust Assets..................................21
SECTION 3.02. Acceptance by Trustee............................................21
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.............................24
SECTION 4.02. Successor Master Servicer........................................24
ARTICLE V
CONDITIONS TO ISSUANCE OF CERTIFICATES
SECTION 5.01 Conditions to Issuance............................................25
ARTICLE VI
RIGHTS AND OBLIGATIONS OF SERIES 1997-1 CERTIFICATEHOLDERS;
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 6.01. Creation of the Series Accounts for Series
1997-1.......................................................26
SECTION 6.02. Determination of Payment Amounts; Deposits to
and Withdrawals from the Series 1997-1 Reserve Account ......27
SECTION 6.03. Distributions....................................................29
SECTION 6.04. Allocations......................................................31
ARTICLE VII
STATEMENTS TO CERTIFICATEHOLDERS
SECTION 7.01. Statements to Certificateholders.................................35
</TABLE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE VIII
SERIES SIGNIFICANT EVENTS
SECTION 8.01. Series Significant Events........................................36
ARTICLE IX
ADDITIONAL AGREEMENTS AND RIGHTS
OF THE SELLER AND MASTER SERVICER
SECTION 9.01. Reporting Requirements...........................................40
SECTION 9.02. Indemnification by the Master Servicer...........................40
SECTION 9.03. Optional Repurchase..............................................41
SECTION 9.04. Net Worth of the Seller..........................................41
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<PAGE>
SECTION 9.05. Indemnities by the Seller........................................41
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Ratification of Agreement; Integration..........................43
SECTION 10.02. Counterparts....................................................43
SECTION 10.03. GOVERNING LAW...................................................44
SECTION 10.04. Amendments and Waivers..........................................44
SECTION 10.05. Limitations on Liability........................................45
SECTION 10.06. Confidentiality.................................................46
SECTION 10.07. Tax and Usury Treatment.........................................46
SECTION 10.08. Section Headings................................................47
SECTION 10.09. Notices.........................................................47
</TABLE>
-ii-
<PAGE>
SCHEDULES
- ---------
Schedule I -- List of Receivables
Schedule II -- List of Closing Documents
EXHIBITS
- --------
Exhibit A -- Form of Class A Certificates
Exhibit B -- Form of Class B Certificates
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
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<PAGE>
SERIES 1997-1 SUPPLEMENT, dated as of June 13, 1997, among J.G.
Wentworth Receivables I LLC, a Delaware limited liability company (the
"Seller"), J.G. Wentworth & 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
Seller 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 Certificates. 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 1997-1.
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. (a) Whenever used in this Supplement and
when used in the Agreement with respect to the Series 1997-1 Certificates, 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 Significant Event described under Section 9.01(a) or 9.01(b)
of the Agreement or any Series Significant Event hereunder, upon which the
principal and interest of the Series 1997-1 Certificates 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.
"Adjusted Capital Account" shall mean the Capital Account of any Series
1997-1 Certificateholder after crediting to such Capital Account any amounts
which such Certificateholder is deemed to be obligated to restore pursuant to
Section 1.704- 1(b)(2)(ii)(c), 1.704-1(b)(2)(ii)(h), 1.704-2(g) or 1.704-2(i)(5)
of the Regulations.
"Adjusted Capital Account Deficit" shall mean the deficit balance, if
any, in any Series 1997-1 Certificateholders' Adjusted Capital Account as of the
end of the relevant Fiscal Year after giving effect to the following
adjustments: (a) credit to such Adjusted Capital Account any amounts which such
Certificateholder is obligated to restore to the Trust upon liquidation of the
Trust pursuant to this Supplement and (b) debit to such Adjusted Capital Account
the items described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
Regulations. The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704- 1(b)(2)(ii)(d) of the
Regulations (captioned "Alternate Test for Economic Effect") and shall be
interpreted consistently therewith.
"Agreement" shall mean, for purposes of this Supplement, the Pooling
and Servicing Agreement dated as of June 13, 1997 among the Seller, 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.
"Amortization Date" shall mean with reference to Series 1997-1, the
Series Closing Date in respect of Series 1997-1.
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"Available Seller Funds" shall mean, at any time, all cash of the
Seller to the extent fully distributable by the Seller at the Seller's
discretion.
"Back-up Servicing Fee" shall mean, for any Distribution Date with
respect to Series 1997-1, the sum of (i) the product of (x) 1/12 (or, in the
case of the initial Distribution Date, a fraction, the numerator of which is the
number of days from (and including) the Series Issuance Date to (but excluding)
such Distribution 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 Distribution 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 1997-1 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
payable as fees for special services during the Collection Period preceding such
Distribution Date pursuant to the Back-up Servicing Agreement, and (iv) any
accrued but unpaid Back-up Servicing Fees with respect to any Distribution Dates
preceding the Distribution Date for which such determination is being made.
"Business Day" shall mean any day that is a Business Day under the
Agreement.
"Capital Account" shall mean the account maintained by the Seller on
behalf of the Trust for certain Series 1997-1 Certificateholder as and to the
extent provided in Section 6.04.
"Capital Contribution" shall mean with respect to any Series 1997-1
Certificateholder, the amount of cash and the fair market value of any property
(other than cash, as determined by Wentworth in its commercially reasonable
judgment) contributed to the Trust in respect of Series 1997-1 by such
Certificateholder in exchange for an Interest.
"Certificateholder Nonrecourse Debt" shall mean "partner nonrecourse
debt" within the meaning set forth in Section 1.704-2(b)(4) of the Regulations.
"Certificateholder Nonrecourse Debt Minimum Gain" shall mean
"partner nonrecourse debt minimum gain" within the meaning set forth in Section
1.704-2(i)(3) of the Regulations.
"Certificateholder Nonrecourse Deductions" shall mean "partner
nonrecourse deductions" within the meaning set forth in Sections 1.704-2(i)(1)
and (2) of the Regulations.
"Certificate Purchase Agreement" shall mean the Certificate Purchase
Agreement dated as of June 13, 1997, among the Trust, the Seller and those
Person parties thereto as "Purchasers" thereunder.
"Certificate Rate" shall mean (a) with respect to the Class A
Certificates, a per annum rate equal to 7.80%, and (b) with respect to the Class
B Certificates, a per annum rate equal to 5.00%.
"Class A Certificate" shall mean any of the 7.80% Class A Structured
Settlement-Backed Pass-Through Trust Certificates, Series 1997-1, and "Class A
Certificates" shall mean all such Certificates, each of which
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Certificates shall be in substantially the form of that attached hereto as
Exhibit A.
"Class A Interest Distribution Amount" shall mean, with respect to any
Distribution Date, the Interest Distribution Amount for Class A on such date.
"Class B Certificate" shall mean any of the 5.00% Class B Structured
Settlement-Backed Pass-Through Trust Certificates, Series 1997-1, and "Class B
Certificates" shall mean all such Certificates, each of which Certificates shall
be in substantially the form of that attached hereto as Exhibit B.
"Class B Interest Distribution Amount" shall mean, with respect to any
Distribution Date, the Interest Distribution Amount for Class B on such date.
"Collection Date" shall mean, with reference to Series 1997-1, the
earlier of (a) the date following the Series Closing Date on which the principal
amount of the Series 1997-1 Certificates, all interest thereon and all fees and
other amounts payable in connection therewith have been paid in full and (b) the
date of termination of the Trust in accordance with Section 12.01 of the
Agreement.
"Control Party" shall mean for purposes of Series 1997- 1, the Majority
Certificateholders or any representative thereof which has been appointed or
designated by the Majority Certificateholders.
"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 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 9.05%.
"Distribution Date" shall mean the 15th day of each calendar month
(commencing on July 15, 1997) or, if such day is not a Business Day, the
immediately succeeding Business Day.
"Eligible Receivable" shall mean a Series Receivable in respect of
which, on the Series Closing Date:
(a) (x) all Scheduled Payments required to be made thereon to
the Company and the Seller 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 30 days) and (y) no such Scheduled Payments have been diverted
from the Company or the Seller, 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 Structured Settlement (x) does not arise
from a court judgment that is subject to court approval or appeal and
(y) is the subject of a Qualified Assignment;
(c) the underlying Settlement is denominated and payable only
in U.S. Dollars;
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(d) the underlying Settlement Agreement releases all liable
parties (other than the Qualified Assignee) under the applicable
Settlement Agreement from all liability pertaining thereto;
(e) the underlying Settlement Agreement is not governed by the
law of a state which expressly prohibits the assignability of proceeds
of Settlements;
(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 marital
property to which any such spouse has any rights;
(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 of the Seller and (y)
perfect a first priority ownership or security interest therein in
favor of the Trust, 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;
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(l) the Claimant thereon has represented in writing or in a
freely taped telephone conversation that (a) either (x) such Claimants
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 months had elapsed from the date the Claimant
thereon originally entered into the related Settlement Agreement or at
least one Scheduled Payment thereunder had been made to such Claimant
thereunder;
(n) the Company and the Seller shall have obtained a first
priority, indefeasible ownership interest therein;
(o) the Collections thereon have been directed to be made
directly from the Annuity Provider 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 the Qualified
Assignment relating thereto releases the Qualified Assignee from
liability thereunder as a result of the existence of the Qualified
Annuity Contract issued to fund the Settlement relating thereto; and
(s) neither the Settlement Agreement nor the Qualified
Assignment relating thereto contains any provision requiring the
Claimant thereon to maintain the confidentiality of the terms of such
agreement.
"Fiscal Year" shall mean the taxable year of the Trust 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.
"Intended Characterization" shall have the meaning, with respect to the
Class A Certificates and the Class B Certificates, as is set forth in Section
10.07.
"Interest" shall mean the ownership interest of a Certificateholder in
the Trust at any particular time, including the right of such Certificateholder
to any and all benefits to which such Certificateholder may be entitled as
provided in the Supplement.
"Interest Distribution Amount" shall mean, with respect to any
Distribution Date for any Class, an amount equal to the sum of (a) the product
of (i) a fraction, the numerator of which is the number of days from and
including the Distribution Date (or, in the case of the first Distribution Date,
the Series Issuance Date) immediately preceding the Distribution Date in
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respect of which such determination is being made to (but excluding) the date
immediately preceding such Distribution Date in respect of which such
determination is being made and the denominator of which is 360, (ii) the
Certificate Rate applicable to such Class and (iii) the Aggregate Principal
Balance of such Class on the immediately preceding Distribution Date (or, in the
case of the initial Distribution Date, on the Series Issuance Date) after giving
effect to any distributions made on such preceding Distribution Date to the
Certificateholders 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 Distribution Date preceding the
Distribution Date for which such determination is being made, together (unless
prohibited by applicable law) with interest thereon at the Certificate 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 47-47-002-3011557 established
and maintained with PNC Bank, National Association at PNC Bank, DE, 222 Delaware
Avenue, 17th Floor, Wilmington, DE 19801.
"Investor Collections" shall mean, with reference to Series 1997-1,
Collections.
"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
1997-1 Certificate (other than a Certificateholder that is a party as a
purchaser to the Certificate Purchase Agreement).
"Institutional Accredited Investor" shall mean an Accredit Investor
under (and as defined in) Rule 501(a)(1) and (3) under the Act.
"Litigation Loss" shall mean, with respect to any Receivable, the
aggregate dollar amount of any past and/or future Scheduled Payments thereon
which are required to be refunded, surrendered or otherwise returned by the
Trust or the Series 1997-1 Certificateholders or rendered uncollectible by the
Trust (calculated on a present value basis discounted at the Discount Rate) as a
result of the entry by a court of competent jurisdiction in a proceeding
involving such Receivable of a final, non-appealable judgment holding that, on
the sole basis that such assignment was prohibited by the terms of the
Settlement Agreement (and on no other basis), the Company (and hence its direct
and indirect assignees, including the Trust) did not receive a security interest
or ownership interest in such Receivable enforceable against the Claimant or its
creditors.
"Litigation Loss Trigger Date" shall mean the date declared as such by
the Control Parties by written notice to the Trustee and the Seller after the
incurrence of Litigation Losses equaling or exceeding, in the aggregate,
$1,000,000 in any twelve month period or $5,000,000 since the Series Issuance
Date.
"Majority Certificateholders" shall mean, at any time with reference to
the Series 1997-1 Certificates, the holders of Class A Certificates evidencing
more than 50% of the Aggregate Principal Balance of the Class A Certificates (in
each case, as calculated without giving effect to any Series 1997-1 Certificates
owned of record by any Affiliated Entities).
"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.
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"Master Servicing Fee" shall mean, with respect to any Distribution
Date in respect of Series 1997-1, the sum of (a) the product of (x) 1/12 (or, in
the case of the initial Distribution Date, a fraction, the numerator of which is
the number of days from (and including) the Series Issuance Date to (but
excluding) such Distribution 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 Distribution Date and
(z) the Master Servicing Fee Rate, plus (b) any unpaid Master Servicing Fees in
respect of Series 1997-1 for any Distribution Date preceding the Distribution
Date for which such determination is being made; provided, however, that no
Master Servicing Fee with respect to Series 1997-1 shall be payable with respect
to any portion of any Collection Period for which the Back-up Servicer is acting
as the Successor Servicer with respect to Series 1997-1.
"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 Trust Assets and (y) in respect of which
each Rating Agency then rating the Series 1997-1 Certificates shall have
confirmed that as a result of such fee increase, the ratings of such
Certificates 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 time) on each Series Determination Date relating to
the immediately preceding Collection Period.
"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 calculated as of the Series Cut-Off Date discounted at the
Discount Rate.
"Original Class A Certificate Principal Balance" shall mean
$59,546,609.
"Original Class B Certificate Principal Balance" shall mean
$11,342,211.
"Overcollateralization Default" shall mean, at any time, that the
Aggregate Discounted Receivables Balance of all Series 1997-1 Trust 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 Class A Certificates at such time.
"Placement Agent" shall mean ING Baring (U.S.) Securities, Inc.
"Prohibited State" shall mean any of Connecticut, Louisiana, Tennessee
and Vermont.
"Projected Class A Payment Date" means the earlier of (i) April 15,
2006 and (ii) the Acceleration Date.
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"Qualified Institutional Buyer" shall have the meaning specified in
Rule 144A under the Act.
"Record Date" shall mean, with respect to any Distribution 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 Distribution Date occurs.
"Regulations" shall mean the Treasury Regulations promulgated under the
Internal Revenue Code, including proposed regulations.
"Regulatory Allocations" shall mean the allocations set forth in
Sections 6.04(c), 6.04(d), 6.04(e) and 6.04(f).
"Related Property" shall have the meaning with reference to Series
1997-1 as is specified in the Agreement and shall also include all rights to,
and monies from time to time on deposit in, the Series 1997-1 Reserve Account,
and all Eligible Investments acquired with such amounts and all Investment
Proceeds thereof and to which the Series 1997-1 Certificateholders 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 1997-1
specified in Section 6.01.
"Series Closing Date" shall mean, with reference to Series 1997-1, June
13, 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 47-47-002-3011549
established and maintained with PNC Bank, National Association at PNC Bank, DE,
222 Delaware Avenue, 17th Floor, Wilmington, DE 19801.
"Series Cut-Off Date" shall mean, with reference to Series 1997-1, the
Series Closing Date.
"Series Determination Date" shall mean, with reference to Series
1997-1, the 10th day of each calendar month or, if such day is not a Business
Day, the immediately preceding Business Day.
"Series Issuance Date" shall mean, with reference to Series 1997-1, the
Series Closing Date for Series 1997-1.
"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 47-47-002-3011565 established
and maintained with PNC Bank, National Association at PNC Bank, DE, 222 Delaware
Avenue, 17th Floor, Wilmington, DE 19801.
"Series Receivables" shall mean, with reference to Series 1997-1, 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 as a Series Receivable in accordance with Section 2.06(f) of the
Agreement.
"Series Significant Event" shall have the meaning specified in Section
8.01.
"Series Trust Assets" shall mean, with respect to Series 1997-1, all of
the Series Receivables, all Related Property relating thereto, all Collections
thereof and all products and proceeds thereof (excluding only Class A
Certificates or Class B Certificates), accessions thereto and
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substitutions therefor. Without limiting the foregoing in any way, the Series
Trust Assets for Series 1997-1 shall include all of the Seller'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
1997-1 Reserve 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,
Qualified 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;
(g) the rights of the Trustee for the benefit of the
Certificateholders under the Pooling and Servicing Agreement and the
Back-up Servicing Agreement to the extent relating to the Series Trust
Assets;
(h) as against the Company under the Seller Purchase
Agreement to the extent relating to the Series Trust 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 Seller to the Trustee for purposes of the UCC of all applicable
jurisdictions) and by the Seller against the Company; 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 1997-1" shall mean the Series of Investor Certificates, the
terms of which are specified in this Supplement.
"Series 1997-1 Certificateholder" shall mean the Person in whose name a
Series 1997-1 Certificate is registered in the Certificate Register.
"Series 1997-1 Certificate" shall mean any one of the Investor
Certificates executed, authenticated and delivered by the Trustee pursuant to
this Supplement, substantially in the form of Exhibit A or Exhibit B hereto.
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"Series 1997-1 Reserve Account" shall mean the segregated bank account
established and designated as such pursuant to Section 6.01(a). The Series
1997-1 Reserve Account shall initially be account number 47-47-002-3011573
established and maintained with PNC Bank, National Association at PNC Bank, DE,
222 Delaware Avenue, 17th Floor, Wilmington, DE 19801.
"Servicer Default" shall mean, with reference to Series 1997-1, 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 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 1997-1 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) (x) continues unremedied for thirty days
after the earlier of (1) 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 1997-1 Certificateholder, the Collateral Trustee
or the Control Party and (2) to the extent such Master Servicer is an
Affiliated Entity, the date upon which a Responsible Officer of such
Affiliated Entity obtained actual knowledge of such failure, and (y)
has, or could reasonably be expected to have, a material adverse effect
on the Series 1997-1 Certificateholders (other than the Affiliated
Entities), any of the Series Receivables or the Trust;
(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 days after the earlier of (1) 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 1997-1 Certificateholder or the
Control Party and (2) to the extent such Master Servicer is an
Affiliated Entity, the date upon which a Responsible Officer of such
Affiliated Entity obtained actual knowledge of such incorrectness and
(y) has, or could reasonably be expected to have, a material adverse
effect on the Series 1997-1 Certificateholders (other than the
Affiliated Entities), any of the Series Receivables or the Trust; or
(e) the Master Servicer shall become the subject of an
Insolvency Event; or
(f) an Overcollateralization Default.
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"Specified Series 1997-1 Reserve Balance" shall mean, with respect to
the Series 1997-1 Reserve Account, a balance on deposit therein equal on each
Distribution Date (after giving effect to all withdrawals to be made therefrom
in respect of such Distribution 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 Class A Certificates on such date (after
giving effect to all distributions to be made on such date in reduction of the
Aggregate Principal Balance of such Certificates).
"Supplement" shall mean this Series 1997-1 Supplement.
"Trustee Fee" shall mean, with respect to any Distribution Date in
respect of Series 1997-1, the sum of (a) the product of (x) 1/12 (or, in the
case of the initial Distribution Date, a fraction, the numerator of which is the
number of days from (and including) the Series Issuance Date to (but excluding)
such Distribution 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 Distribution Date, (z) .018%
per annum, plus (b) any unpaid Trustee Fees in respect of Series 1997-1 for any
Distribution Date preceding the Distribution Date for which such determination
is being made.
"Trust Minimum Gain" shall mean "partnership minimum gain" within the
meaning set forth in Sections 1.704-2(b)(2) and (d) of the Regulations.
"Trust Nonrecourse Debt" shall mean "nonrecourse debt" within the
meaning set forth in Section 1.704-2(b)(3) of the Regulations.
"Trust Nonrecourse Deductions" shall mean "nonrecourse deductions"
within the meaning set forth in Section 1.704-2(b)(1) of the Regulations.
(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".
ARTICLE II
CREATION OF THE SERIES 1997-1 CERTIFICATES
SECTION 2.01 Designation. There is hereby created a series of
Certificates to be issued pursuant to the Agreement and this Supplement to be
known as "Series 1997-1 Certificates," which shall consist of a senior Class to
be known as the "7.80% Class A Structured Settlement-Backed Pass-Through Trust
Certificates, Series 1997-1" and a subordinated Class to be known as the "5.00%
Class B Structured Settlement-Backed Pass-Through Trust Certificates, Series
1997-1." The Series 1997-1 Certificates 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 IV, the Trustee shall
execute, authenticate and deliver the Series 1997-1 Certificates, in accordance
with the Seller's direction to be set forth in a Seller Order delivered to the
Trustee on or before the Series Closing Date, (i) in the case of the Class A
Certificates, in an aggregate principal amount equal to the Original Class A
Certificate Principal Balance and (ii) in the case of the Class B Certificates,
in an aggregate principal amount equal to the Original Class B Certificate
Principal Balance. Each of the Series 1997-1 Certificates shall be executed,
authenticated and delivered in the manner and at the times for authentication
and delivery of Certificates as are specified in Article VI
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of the Agreement and the aforementioned Seller Order. There shall be no Seller
Certificate issued in connection with Series 1997-1.
SECTION 2.02 Limitations on the Initial Issuance and Sales or Transfers
of Series 1997-1 Certificates. (a) Without limiting the provisions of the
Agreement in any way, each Certificateholder by its purchase of a Series 1997-1
Certificate will be deemed to acknowledge that the Series 1997-1 Certificates
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 1997-1 Certificates
on the Series Issuance Date may only be made by the Trustee to investors that
are Institutional Accredited Investors (or, in the case of the Class B
Certificates being issued to any Affiliated Entities, Accredited Investors), and
which have delivered to the Trustee on or before the Series Issuance Date an
Investor Letter (or, to the extent such purchaser is a party to the Certificate
Purchase Agreement, the Certificate 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 1997-1 Certificates 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 such Sale is made:
(w) to the Seller;
(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 Seller (or any designated agent of either of the foregoing) of an
Investor Letter and, if requested by the Trustee and/or the Seller, an
opinion confirming the availability of such exemptions to any such Sale
rendered by a nationally recognized law firm and in form and substance
satisfactory to the Trustee and/or the Seller, as the case may be;
(y) in the United States of America to a transferee that such
Holder reasonably believes is a Qualified Institutional Buyer
purchasing such Series 1997-1 Certificates 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 Seller (or any
designated agent of either of the foregoing) of an Investor Letter and,
if requested by the Trustee and/or the Seller, an opinion confirming
the availability of such exemptions to any such Sale rendered by a
nationally recognized law firm and in form and substance satisfactory
to the Trustee and/or the Seller, 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
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to an available exemption from the registration requirements of all
applicable state securities laws, upon delivery to the Trustee and
the Seller (or any designated agent of either of the foregoing) of an
Investor letter and, if requested by the Trustee and/or the Seller,
an opinion confirming the availability of such exemptions to any such
Sale rendered by a nationally recognized law firm and in form and
substance satisfactory to the Trustee and/or the Seller, as the case
may be, and in any event, the Certificate 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
Certificateholder 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 1997-1 Certificates (whether such Sale is the initial
issuance on the Series Issuance Date or a subsequent sale on any other date):
(i) The Series 1997-1 Certificates shall bear a legend
regarding the restrictions on transfer as set forth herein which shall
be in substantially the forms set forth in the forms of the Series
1997-1 Certificates attached hereto as Exhibit A and B.
(ii) Each Series 1997-1 Certificateholder (other than the
Seller, the Company or Stone International LLC (if such Persons are
Series 1997-1 Certificatehold- ers)), by accepting a beneficial
interest in the Series 1997-1 Certificates shall be required to
represent and warrant for the benefit of the Trust, the Trustee, the
Seller and the other Certificateholders that such Person is not and
will not become a Pass-Through Entity for so long as it holds any
Certificates.
(iii) No Series 1997-1 Certificate may be acquired, sold,
traded or transferred, nor may any interest in a Series 1997-1
Certificate be marketed, on or through (A) an "Established Securities
Market" within the meaning of Section 7704(b)(1) of the Internal
Revenue Code and any proposed, temporary or final United States
Treasury Department regulations thereunder, including, without
limitation, an over-the-counter market or an interdealer quotation
system that regularly disseminates firm buy or sell quotations or (B) a
"Secondary Market" within the meaning of Section 7704(b)(2) of the
Internal Revenue Code and any proposed, temporary or final United
States Treasury Department regulations thereunder, including a market
wherein any Person making a market in such interest and a market
wherein any Person regularly makes available bid or offer quotes with
respect to interests in the Series 1997-1 Certificates and stands ready
to effect buy or sell transactions at the quoted prices for itself or
on behalf of others.
(iv) No Series 1997-1 Certificates shall be Sold to (u) any
Foreign Person, (v) any Pass-Through Entity, (w) any Person that is, or
is required to be (regardless of whether it in fact is), a registered
"investment company" under the Investment Company Act or is excluded
from the definition of "investment company" under the Investment
Company Act pursuant to Section 3(c)(1) or Section 3(c)(7) thereof, in
each case, to the extent that such Person would beneficially own, at
the time of (and after giving effect to) such transfer, 10% or more of
either (1) the Aggregate Principal Balance of the Series 1997-1
Certificates outstanding at such time or (2) the Aggregate Principal
Balance of all Certificates of all Series outstanding at such time, (x)
any other
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Person which for purposes of the Investment Company Act (A) was
formed for the purpose of investing in the Series 1997-1 Certificates
or would otherwise be treated as more than one Person for purposes of
determining the number of owners of the Certificates issued by the
Trust or (B) would cause the number of beneficial owners of the
securities issued by the Trust (other than short term paper) to exceed
100, (y) 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 or would cause the assets of the Trust to
be deemed to be assets of any "Employee Benefit Plan" for purposed of
ERISA or to be assets of "Plan" for purposes of Section 4975 of the
Code, or (z) any Person if such Sale to such Person would cause the
Trust to have more than 85 beneficial owners (other than the Seller,
the Company or any Affiliate of either of the foregoing) of the
Certificates issued by the Trust (after application of applicable
ownership and anti-avoidance rules under Section 7704 of the Internal
Revenue Code and the United States Treasury Department regulations
thereunder or would cause the Trust (or any portion thereof) to be
classified as a publicly traded partnership for federal income tax
purposes (and, in each of the cases in clauses (u), (v), (w), (x)
(other than subclause (B) thereof) and (y), each prospective purchaser
shall be required to represent and warrant that it is not such a Person
prior to its purchase of any Series 1997-1 Certificate and to the
extent any such representation and warranty is incorrect such sale
shall be rescinded and deemed not to have occurred).
(iii) Each Holder of any Series 1997-1 Certificates will
notify any prospective purchaser, pledgee or other transferee of any
Series 1997-1 Certificates from such Holder of the transfer
restrictions referred to in this Section 2.02(a) and in Section 6.10 of
the Agreement.
(d) The Seller shall make available to any selling Holder of Series
1997-1 Certificates and any prospective transferee of such Series 1997-1
Certificates such information as is required under Rule 144A(d)(4) under the Act
in connection with the resale of any such Series 1997-1 Certificates, promptly
after the same is requested.
(e) Upon (x) the affirmative vote of all of the Holders of the Class B
Certificates and (y) the confirmation by each of the Rating Agencies rating the
Class A Certificates that such ratings would not be reduced or withdrawn as a
result of the following, the Class B Certificateholders may cause the Seller to
issue a Seller Order instructing the Trustee to subdivide the Class B
Certificates into additional Classes (none of which shall have any rights or
remedies greater than those of the Class B Certificates hereunder and under the
Agreement) upon the delivery to the Trustee and the Seller of a supplement
hereto setting forth the relative designations and rights and remedies of such
Classes, the Intended Tax Characterization of such Classes, a Tax Opinion, an
opinion of counsel, in form and substance reasonably satisfactory to the
Trustee, the Control Party and the Seller, confirming that such issuance would
not impair or adversely effect the Class A Certificateholders, and such other
opinions of counsel as the Trustee and/or the Seller shall request, in each
case, in form and substance reasonably satisfactory to the Trustee and the
Seller. Each such new Class issued pursuant to such Seller Order 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 Class B 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. The Series 1997-1 Certificates issued in
substitution for the Class B Certificates being so subdivided shall be issued
only to the existing
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Class B Certificateholders 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
Seller shall not transfer any interest in the Class B Certificates except (x)
for fair consideration (as determined in the reasonable judgment of the
Designated Manager of the Seller), (y) upon not less than 5 Business Days' prior
written notice to each of the Rating Agencies then rating any of the Series
1997-1 Certificates and (z) in respect of which transfer, the Seller 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 Company to the Seller as being
absolute transfers. It is expressly understood that, if the Seller satisfies the
foregoing conditions, the Seller shall be allowed to sell its interest in the
Class B Certificates notwithstanding anything contained herein or in the Pooling
and Servicing Agreement to the contrary.
ARTICLE III
TRANSFER OF RECEIVABLES
SECTION 3.01. Transfer of Series Trust Assets. (a) The Seller hereby
Transfers all of its rights, title and interest in the Series Trust Assets to
the Trust, for the benefit of the Holders of the Series 1997-1 Certificates.
(b) Such Transfer shall not be deemed to constitute, nor is it intended
to result in, an assumption by the Trust, the Trustee or any Holder of any
Series 1997-1 Certificate of any obligation of the Claimant, the Company, the
Seller 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 under any agreement or instrument relating to any of the foregoing,
including, without limitation, any obligation to any Claimant.
(c) The parties hereto intend that the Transfers hereunder constitute
sales and absolute transfers of the Series Trust Assets conveyed by the Seller
to the Trust for value. To the extent, however, that such Transfers are deemed
not to constitute sales and/or absolute transfers thereof, this Supplement shall
be deemed to constitute a security agreement under the UCC (as defined in the
UCC as in effect in the State of Delaware). In connection therewith, the Seller
hereby grants to the Trustee on the terms and conditions of this Supplement a
security interest, which except as otherwise expressly permitted hereunder in
the case of instruments pending delivery thereof to the Trustee, shall be a
first priority perfected security interest, in and against all of the Seller's
right, title and interest in and to the Series Receivables and the other Series
Trust Assets from time to time Transferred to the Trust for the purpose of
securing the rights of the Trustee for the benefit of the Holders of the Series
1997-1 Certificates.
SECTION 3.02. Acceptance by Trustee. (a) The Trustee hereby
acknowledges its acceptance on behalf of the Trust for the benefit of the
Holders of the Series 1997-1 Certificates of all of the Seller's rights, title
and interests in and to the Series Trust Assets, now existing and hereafter
created and declares that it shall maintain such right, title and interest, upon
the trust herein set forth, for the benefit of such Certificateholders.
SECTION 3.03. Representations and Warranties of the Seller Relating to
the Series Trust Assets. The Seller hereby represents and warrants to the Trust
as of each Transfer Date in respect of Series 1997-1,
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that with respect to each such Series Receivable Transferred to the Trust on
such Transfer Date:
(a) Such Series Receivable is an Eligible Receivable.
(b) To the best of the Seller'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.
(d) To the best of the Seller's knowledge, such Series Receivable has
not, nor has the Qualified Annuity Contract relating thereto or 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 Transfer Date therefor is, or Claimant which at the time of the sale of
such Series Receivable by the Claimant to the Company pursuant to the Settlement
Purchase Agreement was, the subject of an Insolvency Event (as determined
without giving effect to the 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
Trust.
(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 Seller's knowledge:
(x) the Qualified 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
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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); or
(z) neither such Qualified Annuity Contract nor the Settlement
Agreement contravenes in any material respect any Requirement of Law
applicable thereto.
(j) The Transfer of such Series Receivable to the Trust would not cause
a Significant Event or a Potential Significant Event to occur.
(k) The Seller has taken and completed all actions reasonably required
to protect and perfect the Trust's 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, and
the Seller.
(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
Trust 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 may be filed by the Seller against the Company
(and which shall be assigned to the Trust) pursuant to the Seller Purchase
Agreement, (iii) such as may be filed in favor of the Trustee, for the benefit
of the Certificateholders, in accordance with this Agreement, (iv) such as may
be filed in favor of the Agent against the Company 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 Trust
Assets shall have been delivered to the Trustee.
The representations and warranties made pursuant to this Section 3.03
on the date of any Transfer of any Series Receivable to the Trust shall survive
such Transfer. Upon discovery by the Seller, 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.
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 1997-1, shall be payable to the
Master Servicer, the Back-up Servicer and the Trustee, respectively, in arrears,
on each Distribution Date in respect of any Collection Period (or portion
thereof during which the Series 1997-1 Certificates are outstanding). Such fees
shall be payable to the Master
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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
Distribution 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 Distribution 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 1997-1 to which the Master Servicer is a
party or is subject.
ARTICLE V
CONDITIONS TO ISSUANCE OF CERTIFICATES
SECTION 5.01 Conditions to Issuance. The Trustee will not execute,
authenticate or deliver any Series 1997-1 Certificates to be issued hereunder on
the Series Issuance Date for Series 1997-1 unless:
(a) the Trustee and the Placement Agent shall have received
written certification from the Seller that the Agreement, this
Supplement, the Seller Purchase Agreement, the Certificate 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 Issuance Date for Series 1997-1;
(b) the Trustee and the Placement Agent shall have received
written certification from the Seller that all conditions to the
issuance of the Series 1997-1 Certificates 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 Issuance Date for the Series 1997-1
Certificates, the Trustee and the Placement Agent shall have received
written confirmation from Duff & Phelps and Moody's that the Class A
Certificates shall be rated at least "A" by Duff & Phelps and at least
"A2" by Moody's;
(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 1997-1
Certificates; 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).
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ARTICLE VI
RIGHTS AND OBLIGATIONS OF SERIES 1997-1 CERTIFICATEHOLDERS;
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 6.01. Creation of the Series Accounts for Series 1997-1. (a) On
or prior to the Series Issuance Date, the Master Servicer, for the benefit of
the Series 1997-1 Certificateholders, shall establish and maintain with an
Eligible Institution, in the name of the Trustee, on behalf of the Trust, the
following segregated bank accounts: (i) an interest bearing account (the "Series
Collection Account") to be identified as the "Series 1997-1 Collection Account
for the SSC Master Trust I," (ii) an interest bearing account (the "Series
1997-1 Reserve Account") to be identified as the "Series 1997-1 Reserve Account
for the SSC Master Trust I," (iii) an interest bearing account (the "Series
Payment Account") to be identified as the "Series 1997-1 Payment Account for the
SSC Master Trust I" and (iv) an interest bearing account (the "Investment
Proceeds Account") (the Series Collection Account, the Series 1997-1 Reserve
Account, the Series Payment Account and the Investment Proceeds Account being
referred to hereinafter with respect to Series 1997-1, collectively, as the
"Series Accounts").
(b) Out of the proceeds of the issuance and sale of the Class A
Certificates, the Trustee, prior to making any payments thereof to the Seller,
shall deposit to the Series 1997- 1 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 Issuance Date.
(c) At the written direction of Wentworth (which may be a standing
order), funds on deposit in the Series Collection Account, the Series 1997-1
Reserve 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 1997-1. All
interest and other investment earnings and interest (net of losses and
investment expenses, the "Investment Proceeds") on funds on deposit in the
Series Account 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
Distribution 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
Distribution 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 Trust 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 1997-1
Reserve Account on the Business Day preceding each Distribution Date and to
transfer such amounts to the Series Payment Account, which directions shall be
set forth in the Monthly Report, (y) on each
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Distribution 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 Distribution 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 1997-1 (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.
SECTION 6.02. Determination of Payment Amounts; Deposits to and
Withdrawals from the Series 1997-1 Reserve 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 1997-1 Reserve Account, as
applicable, and, to the extent applicable, the amounts to be withdrawn from the
Series 1997-1 Reserve Account and the Investment Proceeds Account in respect of
the following Distribution 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
1997-1 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 6.03 by the close of business on the Business
Day immediately preceding the Distribution 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 1997-1 Reserve Balance in the Series 1997-1 Reserve Account out
of the initial proceeds received by it from the initial sale of the Class A
Certificates. In addition, pursuant to Section 6.03, funds (to the extent
available pursuant to and in accordance with such Section) shall be deposited to
such account on each Distribution Date occurring prior to the Projected Class A
Payment Date to the extent that the balance thereof is less than the Specified
Series 1997-1 Reserve Balance to increase the balance thereof to the Specified
Series 1997-1 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 Distribution Date and deposited into the
Series Payment Account for distribution on the succeeding Distribution Date as
set forth in Section 6.03: (i) to the extent Collections and other amounts
received by the Trust or the Seller (and remitted to the Trust as required
hereunder and under the Agreement), in each case, with respect to Series 1997-1
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 Class A Interest Distribution Amount payable in respect of such
Collection Period and (y) with respect to any Distribution Date occurring after
the Projected Class A Payment Date, the Aggregate Principal Balance of the Class
A Certificates, the amount of such deficiency; and (ii) to the extent that the
balance of the Series 1997-1 Reserve Account would exceed the Specified Series
1997-1 Reserve Balance (as such amounts are calculated after giving effect to
all withdrawals, deposits and payments required to be made on such Distribution
Date), the amount of such excess. On the first Distribution Date to occur after
the Collection Date with respect to the Class A Certificates, all amounts in the
Series 1997-1 Reserve Account shall be remitted to the Seller.
(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 Distribution Date, the amount of such Investment Proceeds
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received during the immediately preceding Collection Period shall be distributed
to the Persons set forth in clause (i)-(iv) of Section 6.03 to the extent
insufficient funds in the Series Payment Account exist to pay the amounts owing
to such Persons on such Distribution Date, and otherwise all such excess
Investment Proceeds with respect to such Collection Period shall be distributed
to the Seller on such date.
SECTION 6.03. Distributions. (a) On each Distribution Date, 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 Class A Certificateholders, the Class A Interest
Distribution Amount in respect of such Distribution Date;
(iii) prior to the first Distribution Date occurring on or
after the Projected Class A Payment Date, to the Series 1997-1 Reserve
Account to the extent such funds are required to increase the balance
thereof to the Specified Series 1997-1 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 the Acceleration Date or the Litigation Loss
Trigger Date shall have occurred, to the Class B Certificateholders,
the Class B Interest Distribution Amount in respect of such
Distribution Date;
(vi) to the Class A Certificateholders an amount equal to the
lesser of (x) any remaining amounts available for distribution on such
date after payment of items (i)-(v) above and (y) the Aggregate
Principal Balance of the Class A Certificates at such time;
(vii) ratably to the Master Servicer (if other than an
Affiliated Entity), the Back-up Servicer, the Trustee and the Class A
Certificateholders, any and all other amounts then owing to such
Persons hereunder (including, without limitation, any indemnities); and
(viii) to the Class B Certificateholders, all remaining
amounts available for distribution on such date after payment in full
of items (i)-(vii) above (other than amounts in the Series 1997-1
Reserve Account or the Investment Proceeds Account) (to be applied by
such Certificateholders first to the payment of any accrued but unpaid
Class B Interest Distribution Amount, then to the reduction of the
Aggregate Principal Balance of the Class B Certificates outstanding at
such time, then to the payment of any and all other amounts then owing
to such Certificateholders hereunder (including, without limitation,
any
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indemnities) and then as a final distribution of the residual
interest in the Series 1997-1 to such Certificateholders.
(b) Notwithstanding any provision to the contrary herein, if at any
time after any payment to any Series 1997-1 Certificateholder, 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 1997-1
Certificateholder, the Trustee, such Master Servicer or the Back-up Servicer, as
the case may be, and the Seller and the Master Servicer (if an Affiliated
Entity), never to have occurred, and the Seller 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 1997-1 Certificateholders hereunder shall
be made by wire transfer to each Series 1997-1 Certificateholder to such account
as may be designated in writing, received by the Paying Agent at least fifteen
Business Days prior to the applicable distribution date, by each Series 1997-1
Certificateholder without presentation or surrender of any Series 1997-1
Certificate or the making of any notation thereon. Any designation by a Series
1997-1 Certificateholder of an account for receipt of wire transfers pursuant to
the preceding sentence may be a standing instruction, effective with respect to
the applicable distribution date and each distribution 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 1997-1
Certificateholder. 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.
SECTION 6.04. Allocations. (a) Subject to Section 6.04(l), a separate
Capital Account shall be maintained by the Seller on behalf of the Trust for
each Series 1997-1 Certificateholder in accordance with federal income tax
accounting principles and Sections 1.704-1(b) and 1.704-2 of the Regulations,
which account shall, as of any given date, reflect the Capital Contributions
made to the Trust by each Certificateholder in respect of Series 1997-1, net of
any liabilities that the Trust is considered to assume or "take subject to"
pursuant to Section 752 of the Internal Revenue Code in respect of Series
1997-1, (i) increased to reflect its distributive share of Trust income
(including income exempt from tax) and gain (or any item thereof) and (ii)
decreased to reflect (x) its distributive share of Trust loss and deduction (or
any item thereof), (y) its distributive share of expenditures of the Trust
described in Section 705(a)(2)(B) of the Internal Revenue Code (which share
shall be determined in accordance with this Supplement) for each Fiscal Year or
fraction thereof and (z) the amount of cash or the fair market value of property
distributed by the Trust to it, net of any liabilities assumed by such
Certificateholder or to which the property is subject under Section 752 of the
Internal Revenue Code, in each case, in respect of Series 1997-1. It is the
intention of the Series 1997-1 Certificateholders that the above-described
Capital Accounts be maintained in accordance with Section 704(b) of the Internal
Revenue Code and with the Regulations thereunder so that such allocations of
income, gain, loss and deduction (or items thereof) provided in this Supplement
shall have substantial economic effect thereunder. If, in the opinion of the
Seller, the manner in which the Capital Accounts are to be maintained pursuant
to the preceding provisions of this Section 6.04 should be modified in order to
comply with the requirements of Section 704(b) of the Internal Revenue Code and
the Regulations thereunder, then, notwithstanding anything to the contrary
contained in the preceding provisions of this Section 6.04, the Seller may amend
this Supplement to alter the method in which such Capital Accounts are
maintained in order to comply with Section 704(b) of the Internal Revenue Code,
without notice to or consent from any Series 1997-1 Certificateholders;
provided, however, that no such amendment shall affect the
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timing or amount of cash or other property payable by the Trust to any Series
1997-1 Certificateholder (other than the Seller or its Affiliates), affect the
timing, amount or character of any items of income, gain, loss, deduction,
credit, profits or losses allocable to any Certificateholder (other than the
Seller or any of its Affiliates) or otherwise affect the economic arrangement
among the Certificateholders.
(b) Except as expressly provided otherwise in this Section 6.04 and
subject to Section 6.04(l), Trust income, gain, loss, deduction and credit in
respect of Series 1997-1 shall be allocated to the Series 1997-1
Certificateholders for each taxable year of the Trust as follows:
(i) First, items of gross income of the Trust in respect of
Series 1997-1 (and items of gain of the Trust in respect of Series
1997-1, if such gross income of the Trust is insufficient to satisfy
the allocation set forth in this Section 6.04(b)(i)) shall be allocated
to the Class A Certificateholders until each Class A Certificateholder
shall have been allocated an aggregate amount of gross income (or gain)
equal to (i) the sum of (A) the aggregate of the Class A Interest
Distribution Amounts received by such Class A Certificateholder for all
periods, plus (B) the Class A Interest Distribution Amount that would
have been distributed to such Class A Certificateholder had there been
a Distribution Date on the last day of the current taxable year, less
(ii) the cumulative amounts previously allocated to such Class A
Certificateholder under this Section 6.04(b)(i) for all prior years.
Allocations to each Class A Certificateholder pursuant to this Section
6.04(b)(i) shall be made in the proportion that the Certificate
Principal Balance of such Class A Certificateholder's Class A
Certificate bears to the Aggregate Principal Balance of all Class A
Certificates outstanding at such time.
(ii) All other items of income, gain, loss and deduction in
respect of Series 1997-1 shall be allocated to each Class B
Certificateholder in the proportion that the Certificate Principal
Balance of such Class B Certificateholder's Class B Certificate bears
to the Aggregate Principal Balance of all Class B Certificates
outstanding at such time.
(c) If any Series 1997-1 Certificateholder unexpectedly receives any
adjustments, allocations or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations in respect of Series
1997-1, items of Trust income and gain shall be specially allocated to each such
Series 1997-1 Certificateholder in an amount and manner sufficient to as quickly
as possible eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Series 1997-1 Certificateholder created by such
adjustments, allocations and distributions. An allocation pursuant to this
Section 6.04(c) shall be made for an accounting period if and to the extent that
such Series 1997-1 Certificateholder would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Section 6.04 have been
tentatively made.
(d) Except as otherwise provided in Section 1.704-2(f) of the
Regulations, notwithstanding any other provision of this Section 6.04, if there
is a net decrease in Trust Minimum Gain during any Fiscal Year, each Series
1997-1 Certificateholder shall, to the extent required by Section 1.704-2(f) of
the Regulations, be specially allocated items of Trust income and gain for such
year (and, if necessary, subsequent years) in an amount equal to the portion of
such Series 1997-1 Certificateholder's share of such net decrease in Trust
Minimum Gain, determined in accordance with Section 1.704-2(g)(2) of the
Regulations and this Supplement (it being the parties' intent that no Class A
Certificateholder shall share in such Trust Minimum Gain or any decrease
therein; provided, however, that allocations, if any, of Trust income and gain
pursuant to Section 6.04(b) shall be reduced to the extent of any allocation of
such Trust income and gain pursuant to this
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Section 6.04(d); and provided, further, that, if the allocations of Trust
income and gain pursuant to this Section 6.04(d) exceeds the amount of such
Trust income and gain, if any, that would be allocated to such Series 1997-1
Certificateholders pursuant to Section 6.04(b), such Series 1997-1
Certificateholders shall be allocated Trust loss or deduction equal to such
excess. The items to be so allocated shall be determined in accordance with
Section 1.704- 2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section
6.04(d) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(e) Subject to Section 6.04(d), but notwithstanding any other provision
of this Section 6.04, if there is a net decrease in Certificateholder
Nonrecourse Debt Minimum Gain during any Fiscal Year, each Series 1997-1
Certificateholder that has a share of such Certificateholder Nonrecourse Debt
Minimum Gain shall, to the extent required by Section 1.704-2(i)(5) of the
Regulations, be specifically allocated items of Trust income and gain for such
year (and, if necessary, subsequent years), in an amount equal to the portion of
such Series 1997-1 Certificateholder's share of the net decrease in
Certificateholder Nonrecourse Debt Minimum Gain, determined in accordance with
Section 1.704-2(i)(4) of the Regulations (it being the parties' intent that no
Class A Certificateholder shall share in Certificateholder Nonrecourse Debt
Minimum Gain or any decrease therein). The items to be so allocated shall be
determined in accordance with Section 1.704-2(i)(4) of the Regulations. This
Section 6.04(c) is intended to comply with partner nonrecourse debt minimum gain
chargeback requirement in Section 1.704-2(i) of the Regulations and shall be
interpreted consistently therewith.
(f) Any Certificateholder Nonrecourse Deductions in respect of Series
1997-1 shall be allocated to the Series 1997-1 Certificateholder that bears the
economic risk of loss with respect to the Certificateholder Nonrecourse Debt to
which such Certificateholder Nonrecourse Deductions are attributable in
accordance with Section 1.704-2(i)(1) of the Regulations. Consistent with the
allocation of items of income, gain, loss and deduction in respect of Series
1997-1 to the Class B Certificateholders pursuant to Section 6.04(b), all Trust
Nonrecourse Deductions in respect of Series 1997-1 shall be allocated to the
Class B Certificateholders; provided, however, that if it is determined that any
such Trust Nonrecourse Deductions should or must be allocated to Series 1997-1
Certificateholders other than the Class B Certificateholders, such Series 1997-1
Certificateholders shall be allocated additional gross income and gain of the
Trust in an amount equal to such Trust Nonrecourse Deductions in the year of the
allocation of such Trust Nonrecourse Deductions or as soon as thereafter as
possible.
(g) To the extent an adjustment to the adjusted tax basis of any Series
Trust Asset pursuant to Section 734(b) of the Internal Revenue Code or Section
743(b) of the Internal Revenue Code is required to be taken into account in
determining Capital Accounts in respect of Series 1997-1 pursuant to Section
1.704- 1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations,
the amount of such adjustment to such Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Series 1997-1 Certificateholders in a manner consistent with
the manner in which their Capital Accounts in respect of Series 1997-1 are
required to be adjusted pursuant to such Sections of the Regulations.
(h) Income, gain, loss and deduction with respect to any property
(other than money) contributed to the capital of the Trust in respect of Series
1997-1 shall, solely for tax purposes, be allocated among the Series 1997-1
Certificateholders so as to take account of any variation between the adjusted
basis of such property to the Trust for federal income tax purposes and its
fair market value at the time of contribution in accordance with Section
704(c) of the Internal Revenue Code and the applicable Regulations
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promulgated thereunder as determined by the Seller. Allocations pursuant to
this Section 6.04(h) are solely for purposes of federal, state and local taxes
and shall not affect, or in any way be taken into account in computing, any
Certificateholder's Capital Account or share of profits, losses, other items
or distributions pursuant to any provision of this Supplement.
(i) Income, gain, loss, deduction and credits allocable to an Interest
assigned or reissued in respect of Series 1997-1 during a Fiscal Year shall be
allocated to each Person who was the holder of such Interest during such Fiscal
Year, in proportion to the number of days that each such holder was recognized
as the owner of such Interest during such Fiscal Year by an interim closing of
the books or in any other proportion permitted by the Internal Revenue Code and
selected by the Seller, without regard to the results of Trust operations or the
date, amount or recipient of any distributions which may have been made with
respect to such Interest. The effective date of the assignment shall be (i) in
the case of a voluntary assignment, the actual date the assignment is recorded
on the books of the Trust or (ii) in the case of involuntary assignment, the
date of the operative event.
(j) The Regulatory Allocations are intended to comply with certain
requirements of Sections 1.704-1(b) and 1.704-2 of the Regulations.
Notwithstanding any other provision of this Section 6.04 (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into account
in allocating other Trust items of income, gain, loss and deduction as among the
Series 1997-1 Certificateholders so that, to the extent possible, the net amount
of such allocations of other Trust items and the Regulatory Allocations shall be
equal to the net amount that would have been allocated to the Series 1997-1
Certificateholders if the Regulatory Allocations had not occurred.
(k) The Seller's calculation with respect to the Capital Accounts for
Series 1997-1 shall be conclusive and binding as to all Series 1997-1
Certificateholders absent manifest error.
(l) Notwithstanding Sections 6.04(a) through 6.04(k), a Capital Account
shall not be maintained and no allocations of Trust income, gain, loss or
deduction (or items thereof) shall be made with respect to the Class A
Certificateholders except to the extent it is determined that the Class A
Certificates represent an interest in the Trust rather than indebtedness of the
Trust for federal income tax purposes.
(m) Notwithstanding anything contained herein to the contrary, it is
expressly acknowledged and agreed that the Trustee shall have no duty or
responsibility for the establishment, maintenance, allocation, adjustment and/or
calculation of the accounts or the account balances, or otherwise in connection
with the matters, described in this Section 6.04.
ARTICLE VII
STATEMENTS TO CERTIFICATEHOLDERS
SECTION 7.01. Statements to Certificateholders. (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 1997-1, in
substantially the form attached hereto as Exhibit C, for the second preceding
Business Day.
(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 1997-1 for
each Distribution Date, such Monthly Report to be in substantially the form
attached hereto as Exhibit D, the Paying Agent, on
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behalf of the Trustee, shall forward a copy thereof to each Series 1997-1
Certificateholder.
(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
Seller, on behalf of the Trust, 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 Class A
Certificateholder during the preceding fiscal year of the Trust, a Schedule K-1
for each Person that was a Class B Certificateholder during the preceding fiscal
year of the Trust, or such other applicable information statement for each
Person that was a Series 1997-1 Certificateholder during the preceding fiscal
year of the Trust, in each case, setting forth (to the extent applicable) each
Holder's allocable share of items of income and deduction with respect to Series
1997-1, together with such other customary information as is necessary to enable
the Series 1997-1 Certificateholders 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 Certificateholder.
(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
1997-1 Certificateholder and to each Rating Agency then rating the Series 1997-1
Certificates.
ARTICLE VIII
SERIES SIGNIFICANT EVENTS
SECTION 8.01. Series Significant Events. If any one of the following
(each, a "Series Significant Event") shall occur:
(a) (i) there shall be a failure to pay in full the Class A
Interest Distribution Amount for any three consecutive Distribution
Dates, or (ii) the Aggregate Principal Balance of the Class A
Certificates shall not have been repaid in full on or prior to June 15,
2011; or
(b) any failure by 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
Business Days after the Seller or the Master Servicer, as applicable,
was required to make such payment, deposit or remittance or give such
instruction; or
(c) any failure by the Seller or the Company duly to observe
or perform in any material respect any other covenant or agreement of
the Seller or the Company set forth in any of the Agreement, this
Supplement, the Seller Purchase Agreement, the Certificate Purchase
Agreement, any other Operative Document relating to Series 1997-1, any
other instrument, agreement or document related to any Series 1997-1
Certificate or to any of the foregoing, which failure (x) continues
unremedied for thirty days after the earlier of (1) the date upon which
written notice of such failure shall have been given to such breaching
party by the Trustee, any Certificateholder, the Master Servicer, any
Control Party or any other Person and (2) the date upon which a
Responsible Officer of such breaching party obtained actual knowledge
of such failure and (y) has, or could reasonably be expected in the
determination of the Majority Certificateholders
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to have, a Material Adverse Effect with respect to Series 1997-1; or
(d) any representation, warranty or certification made or
deemed to have been made by the Seller or the Company under or in
connection with the Agreement, the Supplement, the Seller Purchaser
Agreement, the Certificate Purchase Agreement, any other Operative
Document relating to Series 1997-1, any other instrument, agreement or
document related to any Series 1997-1 Certificate 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 J.G. Wentworth
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) in connection with any of the opinions of
counsel delivered on the 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
days after the earlier of (1) the date upon which written notice of
such failure shall have been given to such breaching party by the
Trustee, any Certificateholder, the Master Servicer, any Control Party
or any other Person and (2) the date upon which a Responsible Officer
of such breaching party obtained actual knowledge of such failure and
(y) has, or could reasonably be expected in the determination of the
Majority Certificateholders to have, a Material Adverse Effect with
respect to Series 1997-1; provided, however, that to the extent that
any such untrue representation relates to a Series Receivable, it shall
not constitute a Series Significant Event hereunder to the extent the
Seller repurchases or substitutes such Series Receivable as required
pursuant to Section 2.06(f) of the Agreement; or
(e) (i) (x) any Transfer of any Series Trust Assets for Series
1997-1 on any date shall cease to create a valid sale, transfer and
assignment to the Trust of all right, title and interest of the Seller
in and to such Series Trust Assets, or (y) if such Transfer does not
constitute such a sale, transfer and assignment, such Transfer shall
cease to create, or the Trust shall otherwise 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 Trust Assets created hereunder) in the
Series Trust Assets for Series 1997-1; provided, that in either clause
(x) or (y), if the Series Trust Assets affected by any such event
described therein constitute 10% or less of the Aggregate Discounted
Receivables Balance of all of the Series Trust Assets, then such
circumstance shall not constitute a Series Significant Event if, within
15 days after learning of any such circumstance, the Seller repurchases
such affected Trust Assets from the Trust for a price equal to the
Aggregate Discounted Receivables Balance thereof (to be paid in cash to
the Trustee's Account) or contributes (in exchange for such affected
Receivables) to the Series Trust Assets 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 (ii) the Series 1997-1 Certificates hereunder shall for
any reason cease to evidence the transfer to the Series 1997-1
Certificateholders of, or the Series 1997-1 Certificateholders shall
otherwise cease to have, a beneficial interest in a trust owning or
having a perfected first priority security interest in the Series
Receivables and the other Series Trust Assets now existing and
hereafter arising and the proceeds
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thereof to the extent of their respective fractional undivided
interest therein; or
(f) an Overcollateralization Default shall occur; or
(g) 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) the Trust shall become an association taxable as a
corporation 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 of Receivables
and Related Property (whether constituting Series Receivables for
Series 1997-1 or otherwise) thereunder on any date shall cease to
create a valid sale, transfer and assignment to the Seller of all
right, title and interest of the Company in, to and under all such
Receivables and Related Property; or
(j) 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
(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 1997-1 Certificateholders under
the Agreement, this Supplement, the Seller Purchase Agreement, the
Certificate 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 90
days after notice thereof has been given to the Back-up 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 1997-1
Certificates have reduced or withdrawn their rating of such rated
Certificates as a result thereof and shall not have increased or
reinstated such rating to a level at least equal to the rating which
existed at the time of the occurrence of such event within 90 days
after so reducing or withdrawing such rating; or
then, (i) the Majority Certificateholders or (ii) the Trustee (at the direction
of the Majority Certificateholders), in either case, by notice given in writing
to the Seller and the Master Servicer (and to the Trustee to the extent that
such notice is given by the Majority Certificateholders) may declare that a
Significant Event has occurred with respect to Series 1997-1 as of the date of
such notice.
Notwithstanding any provision to the contrary in the Agreement, the
Seller or the Master Servicer on its behalf shall promptly notify the Trustee of
the occurrence of any Series Significant Event or any event or circumstance that
with the lapse of time or the giving of notice or both would constitute such a
Series Significant Event, which notice shall contain a statement from such
Person's chief financial officer describing what action
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the Seller or the Master Servicer intends to take with respect to such
occurrence.
ARTICLE IX
ADDITIONAL AGREEMENTS AND RIGHTS
OF THE SELLER AND MASTER SERVICER
SECTION 9.01. Reporting Requirements.
(a) Promptly following receipt by the Trustee from the Seller 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 1997-1 Certificateholder and to
each Rating Agency rating any of the Series 1997-1 Certificates.
(b) Promptly following any request therefor by the Trustee or the
Control Party, each of the Seller or the Master Servicer, as applicable, will
furnish to the Trustee or the Series 1997-1 Certificateholders, as applicable,
such other information, documents, records or reports respecting the Series
Receivables, the other Series Trust Assets or the condition or operations,
financial or otherwise, of the Seller or the Master Servicer as the Trustee, the
Control Party or any Rating Agency then rating the Series 1997-1 Certificates
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, the Trust, any Series 1997-1 Certificateholder, 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 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 Trust Assets or
in respect of any Receivable or any Contract or the Seller Purchase Agreement.
In addition, in no event shall "Indemnified Losses" include any consequential,
special or punitive damages. Indemnification pursuant to this Section shall not
be payable from the Trust 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 Repurchase. On any Distribution Date occurring
on or after the date on which the Aggregate Principal Balance of the Class A
Certificates held by non-Affiliated Entities is reduced to an amount equal to or
less than 10% of the Original Aggregate Principal Balance of the Class A
Certificates, the Seller shall have the option to purchase the outstanding Class
A Certificates at a purchase price equal to the Aggregate Principal Balance
thereof, plus all accrued and unpaid interest thereon. The Seller shall give the
Master Servicer and the Trustee at least 30 days prior
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written notice of the date on which the Seller intends to exercise such option
to purchase. Not later than 1:00 p.m. (New York City time) on the Business Day
preceding such Distribution Date, the Seller 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
Distribution Date, the Paying Agent shall pay to the Class A Certificateholders
in accordance with their respective interests therein, the remainder of such
purchase price.
SECTION 9.04. Net Worth of the Seller. From the Series Closing Date
until the Collection Date for the Class A Certificates, the Seller 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 Seller. Without limiting any other
rights which any of the Indemnified Parties may have hereunder or under
applicable law, but without duplication, the Seller 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 "Seller Indemnified Losses"),
other than any such Seller Indemnified Loss (x) 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 Trust 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 Seller (or any of its officers) under or in connection
with this Agreement, any Seller Transfer Report or any Monthly Report,
or reliance on any other information or report delivered by the Seller
or by the Master Servicer with respect to the Seller (to the extent
based on information provided by the Seller) 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 Seller 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 Seller contained in
any such representation or warranty;
(iii) the failure by the Seller 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);
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(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 Trust or otherwise;
(vi) the failure by the Seller 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;
(vii) the failure of the Seller 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 Seller or any of its agents,
employees or representatives to remit any Collections received by it in
accordance with the terms hereof; and
(ix) the assignment by a Claimant, the Company or the Seller
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).
Subject to Section 10.05, any Seller Indemnified Amounts payable under this
Section 9.05 shall, be paid by the Seller 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 Seller contained in this Section 9.05 shall survive the
Collection Date of the Series 1997-1 Certificates 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 Certificate Purchase Agreement,
the Series 1997-1 Certificates, the Back-up Servicing Agreement, the
Intercreditor Agreement and the other Operative Documents and other instruments,
documents and agreements relating to Series 1997-1 or any of the foregoing set
forth the complete agreement of the parties hereto, thereto and the Holders of
the Series 1997-1 Certificates, and shall be deemed to have incorporated and
superseded all prior written or oral agreements with respect thereto. Each of
the Holders of the Series 1997-1 Certificates, by its acceptance thereof, hereby
acknowledges and agrees that prior to its purchase or other acquisition of such
Certificates, 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 1997-1.
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.
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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 1997-1
Certificateholders (other than those held by Affiliated Entities), no
amendment or waiver of any term or condition of the Agreement, this
Supplement, the Seller Purchase Agreement or any other Operative
Document relating to Series 1997-1 shall be made which has the effect
of (i) releasing all or any material portion of the Series Trust
Assets, (ii) waiving any Significant Event or Series Significant Event
with respect to Series 1997-1 resulting from (A) the occurrence of an
Insolvency Event with respect 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 Certificateholders," (iv) modifying
any provision of (x) Section 6.02, 6.03 or 6.04 of this Supplement
which amendment, waiver or modification would materially adversely
affect any such Certificateholders or (y) this Section 10.04;
(b) without the prior consent of the Majority
Certificateholders, no amendment or waiver of any term or condition of
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);
(c) without the consent of all of the Class A
Certificateholders, no amendment or waiver of any term or condition
hereof shall be made which has the effect of reducing the Specified
Series 1997-1 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 1997-1 Certificates; and (ii)
the Seller or the Master Servicer shall promptly notify each Rating
Agency of any waiver of any term or condition of any Operative
Documents.
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
Seller hereunder (including, without limitation, amounts payable pursuant to
Section 9.05) shall be payable only from Available Seller Funds (and, as a
result, may be payable from any allocable Trust Asset only if, to the extent
that, and after such Trust Asset shall have been distributed to the Seller in
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accordance with the terms of the Agreement and the Supplements thereto). Unless
and until sufficient Available Seller 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 Seller or the Master Servicer, past, present or future,
shall be under any liability to the Trust, the Trustee, the Series 1997-1
Certificateholders 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
Seller, 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 Seller or
the Master Servicer, as applicable. The Seller, the Master Servicer and any
member, manager, officer, employee, agent, stockholder, holder of limited
liability company interest, officer or director of or in the Seller 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
Seller or any Affiliate thereof, in the case of the Seller, or the Master
Servicer or any Affiliate thereof, in the case of the Master Servicer)
respecting any matters arising hereunder.
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 1997-1 Certificateholder (other
than the initial Series 1997-1 Certificateholders), by its acceptance of the
Series 1997- 1 Certificates held by it, agrees to (a) maintain the confidenti
ality of the financial terms of the Operative Documents (unless the Seller 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 Seller, the Master Servicer, or
the Company that such Series 1997-1 Certificateholder 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 1997-1
Certificateholder 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 1997-1
Certificates 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 or Governmental
Authority, and (C) subject to a written confidentiality agreement for the
benefit of the Seller having terms substantially similar to this Section 10.06,
to any assignee or potential assignee of the Series 1997-1 Certificates held by
such Series 1997-1 Certificateholder; provided, further, however, that such
Series 1997-1 Certificateholder 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 1997-1
Certificateholder.
SECTION 10.07. Tax and Usury Treatment. The Seller, the Master
Servicer and the Trustee have entered into this Supplement, and the Series
1997-1 Certificates will be issued and acquired by the Series 1997-1
Certificateholders, with the intention that, for federal, state and local income
and franchise tax and usury law purposes, (i) the Class A Certificates shall be
treated as debt, or (ii) the Trust will not be treated as an association (or
publicly traded partnership) taxable as a corporation (the "Intended
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Characterization"). The Seller, the Master Servicer and the Trustee, by entering
into this Supplement, and each Series 1997-1 Certificateholder, by the
acceptance of such Certificate, each hereby agrees to treat and report the
Certificates and the Trust for federal, state and local income and franchise tax
purposes consistent with the Intended Characterization unless and until required
to do otherwise by a relevant taxing or judicial authority. Neither the Trustee
nor the Seller 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 1997-1, whether pursuant to this Supplement, the Agreement or otherwise,
shall be sent to the following addresses, (x) if to Duff & Phelps, to Duff &
Phelps Credit Rating Co. at 55 East Monroe Street, Suite 3500, Chicago, Illinois
60603, Attn.: Asset-Backed Monitoring, and (y) if to Moody's, to Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, Attn.: Alex
Dill.
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IN WITNESS WHEREOF, the Seller, 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.
J.G. WENTWORTH RECEIVABLES I LLC
By: J.G. Wentworth S.S.C. Limited
Partnership, as a member and as the
Designated Manager
By: J.G. Structured Settlement Funding
Corporation, as its General Partner
By:
-------------------------------------
Name:
Title:
J.G. WENTWORTH & 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:
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J.G. WENTWORTH RECEIVABLES I LLC
as the Seller
J.G. WENTWORTH & COMPANY, INC.
as the Initial Master Servicer
and
PNC BANK, NATIONAL ASSOCIATION
as the Trustee
SSC MASTER TRUST I
POOLING AND SERVICING AGREEMENT
Dated as of June 13, 1997
================================================================================
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Table of Contents
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ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions...............................................................................1
SECTION 1.02. Other Definitional Provisions............................................................25
ARTICLE II
TRANSFER OF RECEIVABLES;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Creation of Trust; Transfer of
Receivables .................................................................25
SECTION 2.02. Acceptance by Trustee....................................................................27
SECTION 2.03. Representations and Warranties of
the Seller ..................................................................28
(a) Organization and Good Standing..........................................28
(b) Due Qualification.......................................................28
(c) Due Authorization; Conflicts............................................28
(d) Consents................................................................28
(e) Enforceability..........................................................29
(f) Proceedings.............................................................29
(g) Compliance with Laws, Etc...............................................29
(h) Margin Regulations......................................................29
(i) Locations...............................................................29
(j) Lock-Box Banks..........................................................29
(k) ERISA Matters...........................................................30
(l) Pro-Forma Balance Sheet.................................................30
(m) Taxes...................................................................30
(n) Other Agreements........................................................30
(o) Accuracy of Information.................................................30
(p) Investment Company Act Matters..........................................31
(q) Title to Property.......................................................31
(r) Tradenames..............................................................31
(s) Subsidiaries............................................................31
(t) Solvency................................................................31
(u) Valid Transfer..........................................................31
(v) No Claim or Interest....................................................32
(w) Offering of Certificates................................................32
(x) Originator Receivables..................................................32
SECTION 2.04. [Reserved]...............................................................................32
SECTION 2.05. Affirmative Covenants of the Seller......................................................32
(a) Compliance with Law.....................................................32
(b) Preservation of Existence...............................................32
(c) Inspection of Books and Records.........................................32
(d) Keeping of Records and Books of
Account.................................................................33
(e) Location of Records.....................................................33
(f) Maintenance of Separate Member..........................................33
(g) Seller Purchase Agreement...............................................34
(h) Payment of Taxes, Etc...................................................34
(i) Reporting Requirements..................................................34
(j) Acquisition of Receivables from the
Company.................................................................35
(k) Collections.............................................................36
(l) Computer Services.......................................................36
(m) ERISA...................................................................36
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(n) Accounting for Transfers................................................37
SECTION 2.06. Negative Covenants of the Seller.............................................37
(a) No Liens................................................................37
(b) Activities of the Seller................................................38
(c) Indebtedness............................................................38
(d) Guarantees..............................................................38
(e) Investments.............................................................38
(f) Extension or Amendment of Receivables...................................38
(g) Change in Credit Policy Manual..........................................40
(h) Deposits to Lock-Box Accounts or
the Master Collection Account; Deposits
to Series Collection Accounts...........................................40
(i) Receivables Not To Be Evidenced by
Promissory Notes........................................................41
(j) Change in Name or Jurisdiction of
Organization ...........................................................41
(k) Seller Purchase Agreements..............................................41
(l) Organizational Documents................................................41
(m) Maintenance of Separate Existence.......................................42
(n) Merger and Other Transactions...........................................44
(o) Transactions with Affiliates............................................44
(p) Change in Lock-Box Accounts and
Instructions to Obligors................................................45
(q) Ownership of the Seller.................................................45
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.01. Acceptance of Appointment and Other Matters
Relating to the Master Servicer......................................................45
SECTION 3.02. Servicing Compensation...................................................................47
SECTION 3.03. Representations and Warranties of Each Master
Servicer.....................................................................47
(a) Organization and Good Standing..........................................48
(b) Due Qualification.......................................................48
(c) Due Authorization.......................................................48
(d) Binding Obligation......................................................48
(e) No Conflict.............................................................48
(f) No Proceedings..........................................................49
(g) No Consents.............................................................49
(h) Information.............................................................49
SECTION 3.04. Covenants of the Master Servicer.........................................................49
(a) Change in Accounts......................................................50
(b) Collections.............................................................50
(c) Preservation of Existence; Compliance
with Requirements of Law................................................50
(d) Extension or Amendment of Receivables...................................51
(e) Protection of Certificateholders'
Rights..................................................................51
(f) Deposits to Lock-Box Accounts or
Collection Account......................................................51
(g) Receivables Not To Be Evidenced by
Promissory Notes........................................................51
(h) Reporting Requirements..................................................51
(i) Inspection of Books and Records.........................................52
SECTION 3.05. Reports and Records for the Trustee......................................................53
(a) Daily Report............................................................53
(b) Monthly Report..........................................................54
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(c) Monthly Reconciliations..............................................54
SECTION 3.06. Servicing Report of Independent Public
Accountants..........................................................................54
SECTION 3.07. Notices to Wentworth and the Seller......................................................55
SECTION 3.08. Adjustments..............................................................................55
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.01. Rights of Certificateholders.............................................................55
SECTION 4.02. Establishment of the Master Collection
Account and the Lock-Box Accounts....................................................56
SECTION 4.03. Establishment of the Trustee's Account...................................................58
SECTION 4.04. Other Payments...........................................................................59
ARTICLE V
DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS
ARTICLE VI
THE CERTIFICATES .......................................................................................59
SECTION 6.01. The Certificates.........................................................................59
SECTION 6.02. Authentication of Certificates...........................................................60
SECTION 6.03. Registration of Transfer and Exchange
Certificates.........................................................................60
SECTION 6.04. Mutilated, Destroyed, Lost or Stolen
Certificates.........................................................................62
SECTION 6.05. Persons Deemed Owners....................................................................62
SECTION 6.06. Appointment of Paying Agent..............................................................63
SECTION 6.07. Access to List of Certificateholders' Names
and Addresses........................................................................64
SECTION 6.08. Authenticating Agent.....................................................................64
SECTION 6.09. New Issuances............................................................................65
SECTION 6.10. Transfer of Certificates.................................................................68
ARTICLE VII
OTHER MATTERS RELATING TO THE SELLER
SECTION 7.01. Obligations Not Assignable...............................................................70
SECTION 7.02. Limitations on Liability.................................................................70
SECTION 7.03. Indemnification by the Seller............................................................70
ARTICLE VIII
OTHER MATTERS RELATING TO THE APPLICABLE MASTER SERVICERS
SECTION 8.01. Liability of Each Applicable Master
Servicer ............................................................................70
SECTION 8.02. Merger or Consolidation of, or Assumption
of the Obligations of, any Applicable
Master Servicer......................................................................70
SECTION 8.03. Limitations on Liability.................................................................71
SECTION 8.04. Indemnification by Master Servicers......................................................72
SECTION 8.05. Master Servicer Not to Resign............................................................72
SECTION 8.06. Examination of Records...................................................................73
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ARTICLE IX
SIGNIFICANT EVENTS
SECTION 9.01. Significant Events.......................................................................73
SECTION 9.02. Additional Rights Upon the Occurrence
of any Significant Event.............................................................73
SECTION 9.03. Certain Specific Rights Upon the Occurrence
of an Insolvency Event...............................................................74
ARTICLE X
SERVICER DEFAULTS
SECTION 10.01. Servicer Defaults.......................................................................74
SECTION 10.02. Trustee to Act; Appointment of
Successor ...........................................................................76
SECTION 10.03. Notification to Certificateholders......................................................78
ARTICLE XI
THE TRUSTEE
SECTION 11.01. Duties of Trustee.......................................................................78
SECTION 11.02. Certain Matters Affecting the Trustee...................................................80
SECTION 11.03. Trustee Not Liable for Recitals in
Certificates........................................................................82
SECTION 11.04. Compensation; Trustee's Expenses........................................................82
SECTION 11.05. Eligibility Requirements for Trustee....................................................83
SECTION 11.06. Resignation or Removal of Trustee.......................................................83
SECTION 11.07. Successor Trustee.......................................................................84
SECTION 11.08. Merger or Consolidation of Trustee......................................................84
SECTION 11.09. Appointment of Co-Trustee or Separate
Trustee.............................................................................84
SECTION 11.10. Tax Returns.............................................................................86
SECTION 11.11. Trustee May Enforce Claims Without
Possession of Certificates..........................................................86
SECTION 11.12. Suits for Enforcement...................................................................86
SECTION 11.13. Rights of Certificateholders to Direct
Trustee.............................................................................87
SECTION 11.14. Representations and Warranties of
Trustee ............................................................................87
SECTION 11.15. Maintenance of Office or Agency.........................................................88
SECTION 11.16. Trustee May Own Certificates............................................................88
ARTICLE XII
TERMINATION
SECTION 12.01. Termination of Trust....................................................................88
SECTION 12.02. Final Distribution......................................................................89
SECTION 12.03. Seller's Termination Rights.............................................................89
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Amendment; Waiver of Default Events.....................................................90
SECTION 13.02. Protection of Right, Title and Interest to
Trust...............................................................................91
SECTION 13.03. Limitation on Rights of
Certificateholders..................................................................93
</TABLE>
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SECTION 13.04. Governing Law; Jurisdiction; Consent to
Service of Process..................................................................93
(a) Governing Law.................................................................93
(b) Jurisdiction.................................................................94
(c) Consent to Service of Process................................................94
SECTION 13.05. Notices; Payments.......................................................................94
SECTION 13.06. Assignment of the Seller Purchase
Agreement ........................................................................95
SECTION 13.07. Severability of Provisions..............................................................95
SECTION 13.08. Assignment..............................................................................96
SECTION 13.09. Certificates Nonassessable and
Fully Paid .......................................................................96
SECTION 13.10. Further Assurances......................................................................96
SECTION 13.11. Nonpetition Covenant....................................................................96
SECTION 13.12. No Waiver; Cumulative Remedies..........................................................96
SECTION 13.13. Counterparts............................................................................97
SECTION 13.14. Third-Party Beneficiaries...............................................................97
SECTION 13.15. Actions by Certificateholders...........................................................97
SECTION 13.16. Merger and Integration..................................................................97
SECTION 13.17. Headings................................................................................97
SECTION 13.18. Construction of Agreement...............................................................97
SECTION 13.19. Tax and Usury Treatment.................................................................98
SECTION 13.20. Liability of the Seller.................................................................98
</TABLE>
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<PAGE>
SCHEDULES
Schedule I Credit Policy Manual
Schedule II Seller's Chief Executive Office and Location of Records
Schedule III Lock-Box Banks and Lock-Box Accounts
Schedule IV Required Contents of a Receivables Package
Schedule V Eligible Receivables Purchase Procedures
Schedule VI ERISA Matters
EXHIBITS
Exhibit A Form of Settlement Purchase Agreements
Exhibit B Form of Lock-Box Notice
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<PAGE>
POOLING AND SERVICING AGREEMENT, dated as of June 13, 1997, among J. G.
WENTWORTH RECEIVABLES I LLC, a Delaware limited liability company as the Seller,
J.G. WENTWORTH & COMPANY, INC., a Pennsylvania corporation, as the Initial
Master Servicer, and PNC BANK, NATIONAL ASSOCIATION, as the Trustee.
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties, the Certificateholders
and each Series Enhancer (as defined below) to the extent provided herein and in
any Supplement:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Whenever used in this Agreement, 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.
"Act" shall mean the Securities Act of 1933, as amended from time to time.
"Affiliate" shall mean, with reference to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person; provided, that for purposes of this Agreement when used with respect to
Wentworth or any of its direct or indirect subsidiaries or Affiliates, any
limited partners of such Persons (other than ING Capital or any of its
Affiliates) shall also be deemed "Affiliates" of any such Person. For the
purposes of this definition, "control" when used with reference to any specified
Person shall mean the power to direct the management and policies of such
specified Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Affiliated Entity" means any of Wentworth, any of its direct or indirect
subsidiaries or any Affiliate of any of the foregoing.
"Aggregate Discounted Receivables Balance" shall mean, with respect to any
designated group of Receivables at any time, the sum at such time of the
respective Discounted Receivables Balances of such Receivables.
"Aggregate Principal Balance" shall mean, with respect to any designated
group of Certificates, the sum at such time of the respective Principal Balances
of such Certificates.
"Agreement" shall mean this Pooling and Servicing Agreement, as the same
may from time to time be amended, modified or otherwise supplemented, including,
with respect to any Series or Class, the related Supplement.
"Agreement of Limited Partnership" shall mean the Agreement of Limited
Partnership of J.G. Wentworth S.S.C. Limited Partnership dated as of August 25,
1995 among James Delaney, Gary Veloric, Michael Goodman, ING Capital (as
successor by assignment to ING Baring (U.S.) Capital Markets, Inc., formerly
known as Internationale Nederlanden (U.S.) Capital Markets, Inc.), Stone
International, LLC, and the General Partner, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Amortization Date" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"Amortization Period" shall mean, with reference to any Series, unless
otherwise specified in the related Supplement, the period beginning on the
Amortization Date with respect to such Series, and ending upon the Collection
Date with respect to such Series; provided, however, that if, at any time after
the payment that would have otherwise resulted in the end of
<PAGE>
the Amortization Period for any Series, such payment is rescinded or must
otherwise be returned for any reason, then effective upon such rescission or
return the Amortization Period shall automatically be deemed not to have
occurred until all such rescinded or returned amounts are subsequently paid in
full.
"Annuity Contract" shall mean an annuity contract issued by an Annuity
Provider to fund the obligations of an Obligor under a Settlement Agreement,
including, without limitation, a Qualified Annuity Contract.
"Annuity Provider" shall mean the issuer of any Annuity Contract, including
any Qualified Annuity Contract.
"Assignee" shall mean the Person to which the obligations to make payments
under a Settlement Agreement have been assigned pursuant to an Assignment and
shall include, without limitation, a Qualified Assignee.
"Assignment" shall mean an assignment of the obligations to make payments
under a Settlement to an Assignee, including, without limitation, a Qualified
Assignment.
"Applicable Master Servicer" shall mean, with reference to any Series, the
Person then acting in the capacity as Master Servicer with respect thereto at
such time. Unless otherwise designated in or pursuant to any Supplement, the
Initial Master Servicer for each Series shall be Wentworth.
"Applicable Series Collection Account" shall mean, with reference to any
Series, the Series Collection Account for such Series.
"Available Seller Funds" shall mean at any time all cash of the Seller to
the extent (i) freely distributable by the Seller at the Seller's discretion and
(ii) that the payment or distribution thereof (in the commercially reasonable
judgment of the Seller) would not render the Seller unable to pay its debts as
they generally become due.
"Back-up Servicer" shall mean Electronic Data Systems Corporation or any
successor thereto as Back-up Servicer under the Back-up Servicing Agreement.
"Back-up Servicing Agreement" shall mean that certain Back-up Servicing
Agreement dated as of June 6, 1997 among the Trustee, the Initial Master
Servicer and the Back-up Servicer, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
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<PAGE>
"Business Day" shall mean any day other than a Saturday or Sunday or any
other day on which national banking associations or state banking institutions
in New York, New York or Philadelphia, Pennsylvania are authorized or obligated
by law, executive order or governmental decree to be closed; provided, however,
that as it relates to any specific Series, the term "Business Day" may have such
other meaning, if any, as may be specified in the related Supplement.
"Certificate" shall mean any one of the Investor Certificates or the Seller
Certificates and "Certificates" means all such Investor Certificates or Seller
Certificates.
"Certificate Rate" shall mean, with respect to any Series or Class, the
certificate rate specified therefor in the related Supplement.
"Certificate Registrar and Transfer Agent" shall have the meaning specified
in Section 6.03.
"Certificate Register" shall have the meaning specified in Section 6.03(a).
"Certificateholder" shall mean an Investor Certificateholder or, with
respect to any Seller Certificate, the Seller.
"Certificateholders' Interest" shall have the meaning specified in Section
4.01.
"Class" shall mean, with respect to any Series, any class of Investor
Certificates designated pursuant to the Supplement relating to that Series.
"Claimant" shall mean the Person (or such Person's heir) entitled to
receive the Settlement under the terms of the Settlement Agreement.
"Closing Date" shall mean June 13, 1997.
"Collateral Trustee" shall mean the Person serving in such capacity under
the Intercreditor Agreement; provided, that in any event, the Trustee and the
Collateral Trustee shall at all times be the same Person. The initial Collateral
Trustee shall be PNC Bank, National Association (not individually but solely in
its capacity as Collateral Trustee).
"Collection Date" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"Collection Period" shall mean, with respect to any Distribution Date, the
calendar month immediately preceding the calendar month in which such
Distribution Date occurs.
"Collections" shall mean (a) all cash payments by or on behalf of the
Obligors (including, without limitation, pursuant to any Annuity Contract)
deposited to any Lock-Box Account, the Master Collection Account or any
applicable Series Collection Account, or received by the Applicable Master
Servicer or the Seller, in respect of Receivables or Related Property in the
form of cash, checks, wire transfers, electronic transfers or any other form of
cash payment (including, without limitation, from the Seller in connection with
any repurchase of such Receivable pursuant to Sections 2.06(f)(iii) or (iv))and
(b) all interest and other investment earnings (net of losses and investment
expenses) on Collections as a result of the investment thereof pursuant to
Section 4.02; provided, however, that the Certificateholders of each Series
shall be entitled to receive payments only out of those Collections relating to
the Receivables allocated to such Series and the Holders of such Series shall
have no rights to, or recourse against, the Collections in respect of any other
Receivables. Any amounts paid by any
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<PAGE>
Series Enhancer in reduction of the principal amount of any Investor Certificate
of such Series, any interest thereon or any other amount in connection therewith
shall not constitute Collections.
"Commutable Settlement" shall have the meaning specified in Section
2.06(f).
"Company" shall mean J.G. Wentworth S.S.C. Limited Partnership, a Delaware
limited partnership.
"Control Party" shall mean, with reference to any Series, the Person or
Persons designated as such in the related Supplement.
"Corporate Trust Office" shall have the meaning specified in Section 11.15.
"Credit Policy Manual" shall mean the credit and collection policies and
practices of the Company, including, without limitation, those described in
Schedule I hereto, in effect on the date hereof, relating to Receivables, as
modified from time to time in compliance with Section 2.06(g).
"Daily Report" shall mean, with respect to any Business Day and any Series,
a report prepared by a Servicing Officer of the Applicable Master Servicer for
such Business Day as of the end of the immediately preceding Business Day in
substantially the form set forth in the related Supplement.
"Defaulted Receivable" shall mean, unless otherwise specified in the
Supplement exclusively with respect to the related Series designated thereunder,
a Receivable with respect to which:
(a) any Scheduled Payment (or any portion thereof) due thereunder has
been or should have been deemed to be uncollectible by the Applicable
Master Servicer or the Trustee in accordance with the Credit Policy Manual;
provided, however, that only such portion of such Receivable that has been
or should have been so deemed uncollectible shall constitute a Defaulted
Receivable pursuant to this clause (a);
(b) the Trustee does not have a first priority perfected ownership or
security interest, free and clear of any Liens;
(c) the related Annuity Provider has become or has been deemed
insolvent, and either (x) its liquidation or rehabilitation plan has caused
the stated amount of the Scheduled Payments due in respect of the related
Annuity Contract to be reduced, delayed or otherwise modified, (y) a
liquidation or rehabilitation plan providing for the full payment of the
related Annuity Contract has been adopted and approved by the applicable
court but such order remains subject to appeal, or (z) no rehabilitation or
reorganization plan dealing with payment of the related Annuity Contracts
has yet been adopted and approved by the applicable court; provided, that
in the case of (y) and (z) above, to the extent that such court has entered
an order authorizing or requiring the continued payment in full of the
Scheduled Payments owing by such Annuity Provider under the related Annuity
Contract in accordance with the terms thereof pending the entry and
approval of such a plan or such a plan becoming final, then such
Receivables shall not be deemed to be Defaulted Receivables pursuant to
this clause (c); and provided, further, that only such portion of such
Receivable which is so reduced, delayed or otherwise modified shall be
deemed to be a Defaulted Receivable pursuant to this clause (c);
(d) any Scheduled Payment (or any portion thereof) is more than 90
days past due;
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<PAGE>
(e) any Scheduled Payment (or any portion thereof) has been diverted
by the Claimant or any other Person and such diverted payment has not been
returned to the Company, the Seller or the Trust (as applicable) within 15
days after such diversion; or
(f) any Person other than the Trustee obtains an interest in all or
any portion of the Scheduled Payments to be made thereunder; provided, that
only such portion of such Scheduled Payment which is so encumbered (and
only for so long as so encumbered) shall be deemed to be a Defaulted
Receivable pursuant to this clause (f); and provided, further, that this
clause (f) shall not be deemed to include any interest of any such other
Person in any Scheduled Payment (or portion thereof) to the extent
constituting (i) any Split Payment obligation owing to any Claimant with
respect thereto, (ii) any security interest under the Revolving Credit
Facility covering such Scheduled Payments to the extent that the
Intercreditor Agreement remains in full force and effect with respect
thereto, or (iii) any Lien granted by, or imposed against, any of the
Certificateholders, the Trustee or the Collateral Trustee covering such
Settlement Payment;
it being understood and agreed, that a Receivable that was a Defaulted
Receivable may thereafter cease to be deemed a Defaulted Receivable upon the
cure of the circumstances that rendered such Receivable to be a Defaulted
Receivable (such Receivable shall be deemed to have been "Rehabilitated");
provided, that in the case of a Receivable deemed to be a Defaulted Receivable
pursuant to clause (e) above, such Receivable shall only be deemed Rehabilitated
if either (a) an order of garnishment requiring such Annuity Provider to make
payment on the related Annuity Contract directly to a Lock-Box Account (or a
related lock-box) for the account of the Trust or the Company (which shall
receive such money in trust for the Trust) shall have been obtained and served
upon the applicable Annuity Provider and thereafter either (x) a Scheduled
Payment thereunder shall have been received from such Annuity Provider in such
Lock-Box Account (or the related lock-box) or (y) if no Scheduled Payment was
required to be made prior to such time, the related Annuity Provider has filed
no appeal or action to vacate such garnishment order and the time for doing so
shall have expired or (b) following any such diversion of payments, the Trust
shall have received three consecutive Scheduled Payments in respect of such
Receivable (in each case, on or not later than 90 days after the scheduled date
therefor); and provided, further, that any Defaulted Receivable (other than
pursuant to clause (e) of this definition) which has been compromised, extended
or otherwise modified as permitted hereunder shall be deemed to be Rehabilitated
hereunder as so compromised, extended or otherwise modified to the extent that
the Trust shall have received at least two consecutive Scheduled Payments (as so
modified) in respect of such Receivable (in each case, on or before the 90th day
after the scheduled date therefor); and it being further agreed that in any
event no Receivable may be Rehabilitated more than one time.
"Deposit Date" shall mean each Business Day on which any Collections are
initially deposited in any Lock-Box Account, the Master Collection Account or
any applicable Series Collection Account, whichever occurs first.
"Discount Rate" shall mean, with reference to any Series, the per annum
rate specified as such in the related Supplement.
"Discounted Receivables Balance" shall mean, with respect to any Receivable
at any time, the present value at such time of the Scheduled Payments (net of
the Split Payment obligations associated therewith) included as a Receivable
discounted at the applicable Discount Rate.
"Distribution Date" shall have the meaning, with reference to any Series,
specified in the related Supplement.
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<PAGE>
"Duff & Phelps" shall mean Duff & Phelps Credit Rating Co. or its
successor.
"Eligible Institution" shall mean a commercial bank organized under the
laws of the United States of America or any one of the states thereof, including
the District of Columbia (or any domestic branch of a foreign bank), which at
all times (i) is a member of the FDIC, has a combined capital and surplus of at
least $500,000,000 and (ii) has a certificate of deposit rating or long-term
unsecured senior debt rating of at least "A" (or the equivalent thereof) by at
least two of S&P, Moody's, Duff & Phelps and Fitch; provided, however, that a
commercial bank which does not satisfy the requirements set forth in clause (ii)
shall nonetheless be deemed to be an Eligible Institution for purposes of
holding any Trust Account or any other account so long as such commercial bank
is a federally or state chartered depository institution subject to regulations
regarding fiduciary funds on deposit substantially similar to 12 C.F.R.
(section)9.10(b) and such account is maintained as a segregated trust account
with the corporate trust department of such bank.
"Eligible Investments" shall mean book-entry securities entered on the
books of the registrar of such security and held in the name or on behalf of the
Trustee or negotiable instruments or securities represented by instruments in
bearer or registered form which evidence:
(a) direct obligations of and obligations fully guaranteed as to
timely payment by, the full faith and credit of the United States of
America or any agency or instrumentality thereof;
(b) demand and time deposits in, certificates of deposit of, and
federal funds sold by, depository institutions or trust companies
incorporated under the laws of the United States of America or any state
thereof (or domestic branches of foreign banks), subject to supervision and
examination by Federal or state banking or depository institution
authorities, and having, at the time of the Trust's investment or
contractual commitment to invest therein, a short-term unsecured debt
rating of "P-1" or better by Moody's and, if rated by Duff & Phelps, "D-1"
or better by Duff & Phelps;
(c) commercial paper having, at the time of the Trust's investment or
contractual commitment to invest therein, a rating of "P-1" or better by
Moody's and, if rated by Duff & Phelps, "D-1" or better by Duff & Phelps;
or
(d) readily marketable investments in money market funds (which may be
12b-1 funds, as contemplated under the rules promulgated by the Securities
Exchange Commission under the Investment Company Act) or in mutual funds
having as their sole investments any of the investments described in the
foregoing clauses (a), (b) and (c), are rated "Aaa" or better by Moody's
and, if rated by Duff & Phelps, "AAA" or better by Duff & Phelps, and which
seek to maintain a constant net asset value (including funds for which the
Trustee or any of its affiliates acts as an investment advisor or manager).
"Eligible Master Servicer" shall mean Wentworth, the Back-up Servicer, the
Trustee, or any other operating entity which, at the time of its appointment as
Master Servicer, (a) is servicing a portfolio of receivables having similar
attributes as the Receivables, (b) is legally qualified and has the capacity to
service the Receivables, and (c) is approved by the Control Party for each
Series for which it shall be acting as Master Servicer, as having demonstrated
the ability to professionally and competently service a portfolio of receivables
of a nature similar to the Receivables in accordance with high standards of
skill and care.
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<PAGE>
"Eligible Receivable" shall mean, with reference to any Series, those
Series Receivables meeting the criteria therefor set forth in the related
Supplement.
"Eligible Receivable Purchase Procedures" shall mean those procedures set
forth on Schedule V.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.
"ERISA Affiliate" shall mean with respect to any Person, at any time, such
trade or business (whether or not incorporated) that would, at the time, be
treated together with such Person as a single employer under Section 4001 of
ERISA or any of Sections 414(b), (c), (m) or (o) of the Internal Revenue Code.
"FDIC" shall mean the Federal Deposit Insurance corporation or any
successor.
"Foreign Person" shall mean any Person that is not a "United States person"
within the meaning of Section 7701(a)(30) of the Internal Revenue Code.
"GAAP" shall mean generally accepted accounting principles as are in effect
from time to time in the United States of America and applied on a consistent
basis.
"General Partner" shall mean the Person or Persons then acting as General
Partner of the Company. As of the date hereof, the "General Partner" is J.G.
Wentworth Structured Settlement Funding Corporation.
"Governmental Authority" shall mean any country or nation, any political
subdivision of such country or nation, and any entity exercising executive,
legislative, judicial, regula tory or administrative functions of or pertaining
to government of any country or nation or political subdivision thereof.
"Grantors" shall mean the "Grantors" under (and as such term is defined in)
the Intercreditor Agreement.
"Holder" shall mean a Certificateholder.
"Indebtedness" shall mean, with respect to any Person, (i) the principal
amount of all obligations of such Person for borrowed money, (ii) the principal
amount of all obligations of such Person evidenced by bonds, debentures, notes,
trust certificates or other similar instruments (in each case, other than the
Certificates), (iii) all obligations of such Person to pay the deferred purchase
price of property or services recorded on the books of such Person, except for
(a) trade and other similar accounts payable and accrued expenses arising in the
ordinary course of business and (b) employee compensation and pension
obligations and other obligations arising from employee benefit programs and
agreements or other similar employment arrangements, (iv) all obligations of
such Person as lessee which are capitalized on the books of such Person in
accordance with GAAP; (v) all indebtedness or obligations (other than under this
Agreement) which would constitute Indebtedness under the other provisions of
this definition which are secured by a Lien on the assets of such Person,
whether such Person has assumed the obligation to pay such indebtedness or
obligation, and (vi) all obligations of such Person under any direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the types which would constitute
Indebtedness under the other provisions of this definition.
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<PAGE>
"Initial Master Servicer" shall mean Wentworth in its capacity as the
initial Master Servicer hereunder.
"ING Capital" shall mean ING (U.S.) Capital Corporation, and its successors
and assigns.
"Insolvency Event" shall mean with respect to a specified Person, that:
(a) such Person shall fail to, or admit in writing its inability to,
pay its debts generally as they become due, or shall commence a voluntary
case or other proceeding under any applicable bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or other similar law now or
hereafter in effect, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) for, such Person or for any
substantial part of its property, or shall make any general assignment for
the benefit of creditors, or shall take any corporate or partnership action
authorizing the taking of any of foregoing actions; or
(b) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up, or
composition or readjustment of debts of such Person, the appointment of a
trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or any substantial part of its assets, or any similar
action with respect to such Person under any law (foreign or domestic)
relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 30 days;
or any of the actions sought in such petition or proceeding, including the
entering of an order for relief in respect of such Person or the
appointment of any trustee, receiver, custodian, liquidator, assignee,
sequestrator or the like for such Person or any substantial portion of such
Person's property shall be granted or otherwise occur.
"Intended Characterization" shall mean, with respect to any Series or Class
of any Series, the intended tax and usury characterization of the Certificates
of such Series or Class as shall be set forth in the related Supplement.
"Intercreditor Agreement" shall mean that certain Collateral Trust and
Intercreditor Agreement dated as of the Closing Date among the Revolving Credit
Facility Lenders, ING Capital, as agent for the Revolving Credit Facility
Lenders, PNC Bank, National Association, as servicing agent for the Revolving
Credit Facility Lenders, the Trustee, the Seller, the Company, the Master
Servicer and the Collateral Trustee, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
together with the rules and regulations promulgated thereunder, as amended from
time to time.
"Investment Company Act" shall mean the Investment Company Act of 1940,
together with the rules and regulations promulgated thereunder, as amended from
time to time.
"Investor Certificate" shall mean any one of the Structured Settlement
Pass-Through Trust Certificates of any Series or Class executed, authenticated
and delivered by or on behalf of the Trustee pursuant hereto and the related
Supplement, in substantially the form attached to such Supplement, other than
the Seller Certificates.
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<PAGE>
"Investor Certificateholder" shall mean the Person in whose name an
Investor Certificate is registered in the Certificate Register.
"Investor Collections" shall have the meaning, with reference to any
Series, specified in the related Supplement.
"Investor Letter" shall mean, with respect to any Series, an Investor
Letter under (and as such term is defined in) the related Supplement.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), preference, participation
interest, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the UCC or comparable law of any jurisdiction to
evidence any of the foregoing.
"Life Insurance Carrier" shall mean any life insurance carrier issuing a
Life Insurance Contract.
"Life Insurance Contract" shall mean a life insurance contract covering the
life of a Claimant for a term covering at least through the final Scheduled
Payment to be made under any Non-Guaranteed Settlement or Commutable Settlement,
if any, included as a Receivable.
"List of Receivables" shall mean, with reference to any Series, a list of
the Receivables transferred to the Trust on any Transfer Date specifying for
each such Receivable the name of the Claimant, the Discounted Receivables
Balance thereof, the name of the Annuity Provider making payments thereon, the
Series that such Receivables support, and the Lock-Box Account to which
Scheduled Payments thereunder are to be sent.
"Lock-Box Account" shall have the meaning specified in Section 4.02(b).
"Lock-Box Bank" shall have the meaning specified in Section 4.02(b).
"Lock-Box Notice" shall have the meaning specified in Section 4.02(c).
"Majority Control Parties" shall mean, the Control Parties for those
outstanding Series, the Aggregate Principal Balance of the Investor Certificates
of which represent, in the aggregate, 66 2/3% or more of the Aggregate Principal
Balance of all Investor Certificates (exclusive of any Investor Certificates
owned by any Affiliated Entity) of all Series outstanding at such time; provided
that pursuant to any Supplement, the definition of Majority Control Party may be
modified to require the inclusion therein of the respective Control Party of
such Series.
"Majority Certificateholders" shall have the meaning with reference to any
Series as shall be specified in the related Supplement.
"Master Collection Account" shall mean the segregated account established
and maintained pursuant to Section 4.02(a), which account shall initially be
account number 5600814035 established in the name of the Collateral Trustee, for
the benefit of the Grantors under the Intercreditor Agreement, with PNC Bank,
National Association at c/o PNC Bank, DE, 222 Delaware Avenue, 17th Floor,
Wilmington, DE 19801.
"Master Collection Account Bank" shall have the meaning specified in
Section 4.02(a) and shall initially be PNC Bank, National Association.
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"Master Servicer" initially shall mean Wentworth in its capacity as Master
Servicer pursuant to this Agreement, and after any Service Transfer with respect
to any Series, shall mean the Successor Master Servicer with respect to such
Series.
"Master Servicing Fees" shall mean, with reference to any Series, the fee
payable to the Master Servicer for such Series pursuant to the related
Supplement.
"Material Adverse Effect" shall mean, with respect to any Person, the
occurrence or existence of any event or condition which has a material adverse
effect (v) on such Person's ability to perform under the Operative Documents,
(w) on the businesses, properties or condition (financial or otherwise) of such
Person, (x) on the ability of the Trustee or the requisite Certificateholders to
enforce the Operative Documents, (y) on the rights of the Trustee, for the
benefit of the Certificateholders, in the Trust Assets, or (z) with respect to
any Series, on any material portion of the Series Receivables of such Series.
"Monthly Report" shall mean, with respect to any Distribution Date and any
Series, a report prepared by a Servicing Officer for such Distribution Date as
of the end of the immediately preceding Collection Period in substantially the
form set forth in the related Supplement.
"Moody's" shall mean Moody's Investors Service, Inc. or its successor.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which contributions are or have been made during
the preceding six years by any Person or any ERISA Affiliate of such Person.
"Non-Guaranteed Settlement" shall mean that portion of any Settlement in
respect of which the Obligor's and/or the Annuity Provider's obligation to make
any of the Scheduled Payments thereunder may be terminated by the death of the
Claimant.
"Notices" shall have the meaning specified in Section 13.05(a).
"Obligor" shall mean, with respect to any Receivable, the Person or Persons
obligated to make the Scheduled Payments with respect to the Settlement
Agreement relating to such Receivable, including, without limitation, any
Settlement Counterparty, any Assignee and/or any Life Insurance Carrier, but
such term shall not include the applicable Annuity Provider with respect to such
Settlement.
"Officer's Certificate" shall mean, unless otherwise specified in this
Agreement, a certificate signed by the president, any vice president, the chief
financial officer, the treasurer or controller of the Seller, the Master
Servicer, or the Back-up Servicer, as the case may be, and delivered to the
Trustee.
"Operative Documents" shall mean this Agreement, each Supplement, the
Certificates, the Seller Purchase Agreement, the Settlement Purchase Agreements,
the Back-up Servicing Agreement, the Intercreditor Agreement, each certificate
purchase agreement described in any Supplement, each agreement or instrument
related to any Series Enhancement and the other agreements and instruments
related to any of the foregoing or any other instruments, documents and/or
agreements, if any, designated as such in any Supplement, but shall not include
the Revolving Credit Agreement or any of the instruments, documents and
agreements executed and/or delivered in connection therewith (other than the
Intercreditor Agreement).
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"Opinion of Counsel" shall mean a written opinion of counsel, who, except
as otherwise provided herein, may be counsel for, or an employee of, the Person
providing the opinion and who shall be reasonably acceptable to the Trustee.
"Organizational Documents" shall mean the Seller's Certificate of Formation
and Limited Liability Company Agreement.
"Pass-Through Entity" shall mean any entity that, for federal income tax
purposes, is a partnership, grantor trust or S corporation (other than the
Seller or the Company).
"Paying Agent" shall mean any paying agent appointed pursuant to Section
6.06.
"PBGC" shall mean the Pension Benefit Guaranty Corporation (or any
successor).
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Authority or any other entity of similar nature.
"Plan" shall mean, with respect to any Person, any defined benefit plan (as
defined in Section 3(35) of ERISA) that (a) is or was at any time during the
past six years maintained by such Person or any ERISA Affiliate of such Person,
or to which contributions by any such Person are or were at any time during the
past six years required to be made or under which such Person has or could have
any liability, (b) is subject to the provisions of Title IV of ERISA and (c) is
not a Multiemployer Plan.
"Plan Event" shall mean, with respect to any Person, (a) the imposition of
an obligation of such Person or any of its ERISA Affiliates under Section 4041
of ERISA to provide any affected parties written notice of an intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA, (b) the receipt of any notice by any Plan to the effect that the PBGC
intends to apply for the appointment of a trustee to administer any Plan, (c)
the termination of any Plan which results in any liability of such Person and/or
any of its ERISA Affiliates in excess of the Plan Liability Threshold, (d) the
withdrawal of such Person or any ERISA Affiliate of such Person from any Plan
described in Section 4063 of ERISA which may reasonably be expected to result in
any liability of such Person and/or any of its ERISA Affiliates in excess of the
Plan Liability Threshold, (e) the complete or partial withdrawal of such Person
or any ERISA Affiliate of such person from any Multiemployer Plan which may
reasonably be expected to result in any liability of such Person and/or any of
its ERISA Affiliates in excess of the Plan Liability Threshold, (f) a Reportable
Event or an event described in Section 4068(f) of ERISA which may reasonably be
expected to result in any liability of such Person and/or any of its ERISA
Affiliates in excess of the Plan Liability Threshold, and (g) any other event or
condition which under ERISA or the Internal Revenue Code may reasonably be
expected to constitute grounds for the imposition of a lien on the property of
such Person in respect of any Plan or Multiemployer Plan.
"Plan Liability Threshold" shall mean, with respect to any Person and its
ERISA Affiliates, any liability of such Person and such ERISA Affiliates with
respect to any Plan Event which when aggregated with all other liabilities of
such Person and its ERISA Affiliates incurred as a result of any other Plan
Events during the immediately preceding twelve month period, plus any unpaid
liabilities of such Person and its ERISA Affiliates arising as a result of any
Plan Events occurring at any other time, exceeds $1,000,000.
"Potential Significant Event" means any event or condition which with the
giving of notice or passage of time, or both, would constitute a Significant
Event or Series Significant Event.
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"Power of Attorney" shall mean an irrevocable power of attorney executed by
a Claimant in favor of the Company (with full power of substitution at the
election of the Company) pursuant to a Settlement Purchase Agreement,
authorizing the Company (or any such substitute therefor) to act for and on
behalf of the Claimant in connection with the enforcement of such Claimant's
Settlement.
"Principal Balance" shall mean, with respect to any Certificate at any
time, the outstanding principal balance of such Certificate at such time;
provided, that the Principal Balance of any Certificate shall only be reduced
upon distribution of any amounts on account of the Principal thereof to or for
the benefit of the Certificateholder thereof on a Distribution Date, and the
Principal Balance of any Certificate shall be reinstated to the extent any such
distribution (or any portion thereof) is rescinded or returned or such
Certificateholder is required to return or disgorge or returns or disgorges any
such distribution (or any portion thereof) previously made to it.
"Principal Terms" shall mean, with respect to any Series: (a) the name or
designation; (b) the Series Receivables and other Series Trust Assets for such
Series; (c) the initial principal amount (or method for calculating such
amount); (d) the Certificate Rate (or method for the determination thereof); (e)
the payment date or dates and the date or dates from which interest shall
accrue; (f) the method for allocating Collections to Certificateholders; (g) the
designation of any Series Accounts and the terms governing the operation of any
such Series Accounts; (h) the terms on which the Certificates of such Series may
be exchanged for Certificates of another Series, repurchased by the Seller or
remarketed to other investors; (i) the number of Classes of Certificates of such
Series and, if more than one Class, the rights and priorities of each such
Class; and (j) the Master Servicing Fees and Back-up Servicing Fees for such
Series.
"Prohibited State" shall mean any state defined in any Supplement as being
a Prohibited State.
"Purchase Price Note" shall mean any of the "Seller Notes" under (and as
such term is defined in) the Seller Purchase Agreement.
"Qualified Annuity Contract" shall mean an Annuity Contract which qualifies
as a "qualified funding asset" under Section 130(d) of the Internal Revenue
Code.
"Qualified Assignee" shall mean the Person to which the obligations to make
payments under a Settlement have been assigned pursuant to a Qualified
Assignment.
"Qualified Assignment" shall mean an assignment of the obligations to make
payments under a Settlement which satisfies Section 130(c) of the Internal
Revenue Code.
"Rating Agency" shall mean each nationally recognized statistical rating
organization selected by the Seller to rate the Investor Certificates of any
Series or Class.
"Receivable" shall mean those Scheduled Payments (or portions thereof) due
to a Claimant under a Settlement Agreement and the rights to which Scheduled
Payments (or such portion thereof) have been transferred by such Claimant to the
Company pursuant to a Settlement Purchase Agreement, by the Company to the
Seller pursuant to the Seller Purchase Agreement and have been further
transferred by the Seller to the Trust for the benefit of the Holders of a
specific Series of Certificates, whether such Scheduled Payments (or such
portions thereof) constitute accounts, general intangibles, investment property,
chattel paper, instruments, documents, securities, cash, or any other kind of
property, and "Receivables" shall mean all such Receivables. Without limiting
the foregoing in any way, it is understood and
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agreed that the Holders of Certificates of any Series shall only have rights to,
and recourse against, the Series Receivables relating to such Series and shall
have no rights in, or recourse against, the Series Receivables relating to any
other Series. Notwithstanding the foregoing, the term "Receivable" shall not
include any Scheduled Payments received by the Claimant, the Company or the
Seller prior to the applicable Series Cut-Off Date for the Series to which such
Receivable is to be allocated.
"Receivables Package" shall mean, with respect to any Receivable, the
documents set forth on Schedule IV.
"Record Date" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"Records" means all Settlement Purchase Agreements and other documents,
books, records and other information (including without limitation, computer
programs, tapes, discs, punch cards, data processing software and related
property and rights) maintained with respect to the Receivables and the related
Claimants.
"Rehabilitated" shall have the meaning, with respect to any Receivable,
specified in the definition of "Defaulted Receivable."
"Rehabilitated Receivable" shall mean any Receivable that was a Defaulted
Receivable but which has been Rehabilitated (and has not ever again become a
Defaulted Receivable).
"Related Property" means with respect to any Receivables of any Series:
all of the Seller's rights, title, interests, remedies, powers and privileges
(a) under the Settlement Purchase Agreement pursuant to which such Receivable
was purchased by the Company and under the related Power of Attorney, (b) all
security interests or liens and property subject thereto from time to time
purporting to secure payment of such Receivable, if any, whether pursuant to the
Settlement Purchase Agreement related to such Receivable or otherwise, (c) under
or pursuant to the Seller Purchase Agreement to the extent relating to such
Series, (d) the rights of the Trustee under the Pooling and Servicing Agreement
and the Back-up Servicing Agreement, to the extent relating to such Series, (e)
all Lock- Box Accounts, Lock-Boxes, Series Payment Accounts, and Series
Collection Accounts relating to such Series or into which any Collections
relating to such Series are deposited or concentrated; all monies and other
items of payment therein relating to such Series; all monies and other items of
payment relating to such Series on deposit from time to time in the Master
Collection Account to the extent constituting Collections of Trust Assets; and
all Eligible Investments purchased with any such amounts and any investment
income with respect thereto, (f) all Life Insurance Contracts relating to any
Non-Guaranteed Settlements or Commutable Settlements, if any, included as a
Series Receivable for such Series, (g) any interest rate hedging instruments or
agreements entered into by the Seller in connection with such Series, (h) 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 such Receivables
whether pursuant to the Settlement Agreement, the Assignment, the Annuity
Contract, the Settlement Purchase Agreement or any other agreement related to
such Receivable or otherwise, (i) all UCC financing statements filed by the
Company against the Claimants under such Receivables; (j) all Records and all
other instruments and rights relating to such Receivables, (k) any other
property designated as such for a specific Series pursuant to the related
Supplement, and (l) all products and proceeds of any of the foregoing.
"Reportable Event" shall mean any of the events set forth in Section 4043
of ERISA.
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"Requirements of Law" shall mean any law, treaty, rule or regulation, or
final determination of an arbitrator or Governmental Authority, and, when used
with respect to any Person, the certificate of incorporation and by-laws or
other organizational or governing documents of such Person.
"Responsible Officer" shall mean, (i) when used with respect to the
Trustee, any officer within the corporate trust department (or any successor
department or group) of the Trustee including any vice president, assistant vice
president, secretary, assistant secretary, treasurer, assistant treasurer,
trust officer or any other officer of the Trustee customarily performing
functions similar to those performed by the persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such officer's knowledge of and familiarity with the particular
subject and (ii) when used with respect to any other Person, any president, vice
president, treasurer or any other officer of such Person customarily performing
functions similar to those performed by the Persons who at the time shall be
such officers.
"Revolving Credit Agreement" shall have the meaning specified in the
definition of "Revolving Credit Facility."
"Revolving Credit Facility" shall mean the revolving credit facility
provided to the Seller pursuant to that certain Amended and Restated Credit
Agreement dated as of February 11, 1997 (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Revolving Credit
Agreement") among the Company, the Revolving Credit Facility Lenders, ING
Capital, as agent, and PNC Bank, National Association, as Servicing Agent, or
any replacement or substitution facility therefor.
"Revolving Credit Facility Lenders" shall mean those financial institutions
from time to time providing credit or other financial accommodations to the
Company pursuant to the Revolving Credit Facility.
"Revolving Period" shall have the meaning, if any, with reference to any
Series, specified in the related Supplement.
"S&P" shall mean Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies or its successor.
"Scheduled Payments" shall mean, (i) when used with respect to any
Settlement, those payments from time to time due to be paid by the Obligor or by
an Annuity Provider, on behalf of the Obligor, to the Claimant pursuant to the
terms of the related Settlement Agreement, and (ii) when used with respect to a
Receivable, those payments described in the foregoing clause (i) (or portions
thereof), the rights to receive which have been transferred to the Trust.
"Seller" shall mean J.G. Wentworth Receivables I LLC, a Delaware limited
liability company.
"Seller Certificate" shall mean any of the Structured Settlement
Pass-Through Trust Certificates authenticated, executed and delivered by or on
behalf of the Trustee pursuant hereto and the related Supplement to evidence the
Seller Interest, if any, in any of the Series, in each case, substantially in
the form attached to such Supplement.
"Seller Interest" shall mean, with respect to any Series, any interest of
the Seller in the Trust Assets for such Series, if any, which is not evidenced
by Investor Certificates.
"Seller Order" shall mean a written direction or order executed by the
Seller and delivered to the Trustee.
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"Seller Purchase Agreement" shall mean that certain Purchase Agreement
dated as of the Closing Date between the Company and the Seller, as the same may
be amended, restated, supplemented or otherwise modified from time to time.
"Seller's Account" shall mean the account maintained by the Seller for
deposits by the Master Servicers, the Collateral Trustee, the Back-up Servicer
or the Trustee in accordance with the Master Servicers' or the Back-up
Servicer's instructions, as applicable pursuant hereto or to any applicable
Supplement. The initial Seller's Account shall be account no.: 5600813999,
maintained at the office of PNC Bank, National Association at PNC Bank, DE, 222
Delaware Avenue, 17th Floor, Wilmington, DE 19801, or such other account as the
Seller may designate for such purpose from time to time, maintained at such bank
as the Seller may designate from time to time.
"Seller Split Payment Account" shall mean an account of the Collateral
Trustee to be maintained with an Eligible Institution pursuant to Section 4.02
and into which Split Payments are to be deposited in accordance with the Daily
Reports and Section 4.02(a). The Seller Split Payment Account shall initially be
account number 5600814027 established and maintained with PNC Bank, National
Association at PNC Bank, DE, 222 Delaware Avenue, 17th Floor, Wilmington, DE
19801.
"Series" shall mean any series of Certificates established pursuant to a
Supplement.
"Series Accounts" shall mean, with reference to any Series, any bank
accounts established for such Series and designated in the Supplement relating
thereto as being "Series Accounts" for such Series, including, for and with
respect to each Series (whether or not so specified in such Supplement), the
Master Collection Account to the extent of any Collections of the Series
Receivables of such Series or the Related Security relating thereto.
"Series Allocable Collections" shall mean, with respect to any Series, the
Collection of the Series Receivables for such Series and the Related Property
relating thereto.
"Series Closing Date" shall mean, with reference to any Series, the date
specified as such in the related Supplement.
"Series Collection Account" shall mean, with reference to any Series, the
account designated as such in the related Supplement.
"Series Collection Account Bank" shall mean, with reference to any Series,
the bank at which the Series Collection account for such Series is maintained.
"Series Cut-Off Date" shall mean, with reference to any Series, the date
specified as such in the related Supplement.
"Series Determination Date" shall have the meaning, with reference to any
Series, specified in the related Supplement.
"Series Enhancement" shall mean the rights and benefits provided to the
Trust for the benefit of the Investor Certificateholders of any Series or Class
pursuant to any letter of credit, surety bond, cash collateral account, spread
account, guaranteed rate agreement, maturity liquidity facility, tax protection
agreement, interest rate swap agreement, interest rate cap agreement or other
similar arrangement. The subordination of any Series or Class to another Series
or Class shall be deemed to be a Series Enhancement. Without limiting the
foregoing in any manner, only the Holders of Certificates of the Series or Class
of Series for which such Series Enhancement shall have been provided to the
Trust shall be entitled to the
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benefits thereof, and no Holders of any other Series or Class shall have any
rights in or recourse to any such Series Enhancement.
"Series Enhancer" shall mean the Person or Persons providing any Series
Enhancement, other than the Investor Certificateholders of any Series or Class
which is subordinated to another Series or Class.
"Series Issuance Date" shall mean, with reference to any Series, the date
on which the Investor Certificates of such Series are to be originally issued in
accordance with Section 6.02 and the related Supplement.
"Series Payment Account" shall mean, with reference to any Series, the
account designated as such in the related Supplement.
"Series Receivables" shall mean those Receivables specified on a List of
Receivables that have been transferred to the Trust pursuant to any Supplement
for the benefit of the Holders of Certificates of the Series designated therein.
"Series Significant Event" shall have the meaning, with reference to any
Series, specified in the related Supplement.
"Series Trust Assets" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"Service Transfer" shall have the meaning specified in Section 10.01.
"Servicer Default" shall have the meaning, with reference to any Series,
specified in the related Supplement.
"Servicing Officer" shall mean, with respect to any Master Servicer, any
officer or other employee of such Master Servicer or other agent of such Master
Servicer who in any case is involved in, or responsible for, the administration
and servicing of the Series Receivables for the Series for which such Person
acts as Master Servicer and whose name appears on a list of Servicing Officers
furnished to the Trustee by such Master Servicer, as such list may from time to
time be amended.
"Settlement" shall mean the Scheduled Payments due or to become due under
and in connection with, and all of the Claimant's other rights (but no
obligations or liabilities) under, a Settlement Agreement, including payments
under any Annuity Contract purchased by any Obligor to fund its obligations
under such Settlement Agreement.
"Settlement Agreement" shall mean a Settlement Agreement entered into
between a Claimant and a Settlement Counterparty evidencing, among other things,
the obligation of the Settlement Counterparty to make the Scheduled Payments to
the Claimant thereunder as compensation by the Settlement Counterparty for a
tort, injury or other claim.
"Settlement Counterparty" shall mean the Person or Persons (including, any
Insurer) that entered into, and was originally obligated to make Scheduled
Payments under, a Settlement Agreement with a Claimant.
"Settlement Purchase Agreement" shall mean an agreement between the Company
and a Claimant pursuant to which the Company agrees to purchase and the Claimant
agrees to sell all or any portion of the Claimant's Settlement under a
Settlement Agreement.
"Significant Event" shall mean, with respect to any Series, (a) any event
described in clause (a) or (b) of Section 9.01, and (b) any Series Significant
Event with respect to such Series, but only to the extent giving
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rise to a Significant Event with respect to such Series pursuant to the terms of
the applicable Supplement.
"Split Payment" shall mean, with respect to any Settlement Purchase
Agreement pursuant to which the Claimant has reserved an interest (which
interest shall solely be in the form of an independent claim against the Company
for payment to the Claimant of certain amounts upon, and to the extent of,
receipt by the Company of the Scheduled Payments sold by the Claimant to the
Company pursuant to such Settlement Purchase Agreement), the amount of such
payment obligation (or portion thereof) payable by the Company to such Claimant
from time to time pursuant to (and in accordance with) such Settlement Purchase
Agreement and the Credit Policy Manual.
"Successor Servicer" shall have the meaning specified in Section 10.02(a).
"Supplement" shall mean, with respect to any Series, a Supplement to this
Agreement, executed and delivered in connection with the original issuance of
the Certificates of such Series pursuant to Section 6.09, and all amendments
thereof and supplements thereto.
"Tax Opinion" shall mean, with respect to any action, an Opinion of Counsel
who is not an employee of any Affiliated Entity to the effect that, for federal
income tax purposes and Pennsylvania and Delaware state income and franchise tax
purposes (a) such action will not adversely affect the Tax Opinion
Characterization of the Investor Certificates, (b) such action will not cause a
taxable event to any Investor Certificateholder (other than the parties to such
action), (c) following such action, neither the Trust nor any portion thereof
will be treated as an association (or publicly traded partnership) taxable as a
corporation, (d) without limiting the applicability of clauses (a), (b) and (c)
of this definition, in the case of the original issuance of Certificates
hereunder, the Investor Certificates of each Series and Class thereof should
properly be characterized in accordance with the Tax Opinion Characterization
and the Trust will not be treated as an association (or publicly traded
partnership) taxable as a corporation, and (e) without limiting the
applicability of clauses (a), (b) and (c) of this definition, in the case of a
subsequent issuance pursuant to Section 6.09(b), the Investor Certificates of
each Series and Class issued in connection therewith should properly be
characterized in accordance with the Tax Opinion Characterization and neither
the Trust nor any portion thereof will be treated as an association (or publicly
traded partnership) taxable as a corporation; provided, however, that for
purposes of this definition, the term "Investor Certificate" shall be deemed not
to include any Investor Certificate of any Series of Class the sole beneficial
holders of which are the Seller, the Company as any Affiliate of any of the
foregoing.
"Tax Opinion Characterization" shall mean (other than for state tax
purposes), with respect to the Investor Certificates of any Series or Class: (i)
in the case of each Series or Class for which the Intended Characterization is
debt, characterization as debt, or if not debt, as an interest in a partnership
and not in an association (or publicly traded partnership) taxable as a
corporation, and (ii) in the case of a Series or Class not described in clause
(i), either as an interest in an entity, which entity is disregarded for federal
income tax purposes or as an interest in a partnership and not in an association
(or a publicly traded partnership) taxable as a corporation; provided, however,
that for purposes of this definition, the term "Investor Certificate" shall be
deemed not to include any Investor Certificate of any Series of Class the sole
beneficial holders of which are the Seller, the Company as any Affiliate of any
of the foregoing..
"Termination Notice" shall have the meaning specified in Section 10.01.
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"Transfer" and "Transferred" shall have the meanings specified in Section
2.01.
"Transfer Date" shall have the meaning specified in Section 6.10.
"Trust" shall mean the SSC Master Trust I created by this Agreement.
"Trust Account" shall mean any of the Master Collection Account, any Series
Collection Account, any Lock-Box Account, any Series Payment Account, and any
other bank accounts established and maintained for the benefit of the Trust or
any Series, and "Trust Accounts" shall mean all such accounts, collectively.
"Trust Assets" shall have the meaning specified in Section 2.01.
"Trustee" shall mean PNC Bank, National Association, in its capacity as
trustee on behalf of the Trust, or its successor in interest, or any successor
trustee appointed as herein provided.
"Trustee Fee" shall mean, with reference to any Series, the fee payable to
the Trustee solely for its own account in respect of such Series pursuant to the
related Supplement.
"Trustee's Account" shall have the meaning specified in Section 4.03.
"UCC" shall mean the Uniform Commercial Code, as amended from time to time,
as in effect in any specified jurisdiction.
"U.S. Dollars" or "Dollars" means dollars of the United States of America.
"Wentworth" shall mean J.G. Wentworth & Company, Inc., a Pennsylvania
corporation.
SECTION 1.02. Other Definitional Provisions. (a) All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement, and accounting terms partly defined in this Agreement to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles or regulatory accounting principles, as
applicable, as in effect in the United States. To the extent that the
definitions of accounting terms herein are inconsistent with the meanings of
such terms under generally accepted accounting principles or regulatory
accounting principles as in effect in the applicable jurisdiction, the
definitions contained herein shall control.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; and Section, Schedule and
Exhibit references contained in this Agreement are references to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified; and
the term "including" means "including without limitation".
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ARTICLE II
TRANSFER OF RECEIVABLES;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Creation of Trust; Transfer of Receivables. (a) Upon the
execution of this Agreement by the parties hereto, there is hereby created the
SSC Master Trust I.
(b) Pursuant to each Supplement, the Seller shall from time to time sell,
transfer, assign, set-over and otherwise convey to the Trust without recourse
except to the extent otherwise expressly provided for herein or in any
applicable Supplement (such action with respect to any Trust Asset being
referred to herein as a "Transfer" and so to act being to "Transfer" and
"Transferred" shall be deemed to mean any Trust Asset which was the subject of
any Transfer), for the benefit of the Holders of the specific Series of
Certificates issued pursuant to such Supplement, all of the Seller's right,
title and interest in, to and under:
(i) all of the those certain Receivables set forth on the Lists of
Receivables delivered by the Seller to the Trustee on or before each
Transfer Date in connection with any Transfers to the Trust for the benefit
of such Series;
(ii) all Related Property relating to such Receivables;
(iii) all monies due or to become due and all Collections and other
amounts received from time to time with respect to such Receivables after
the applicable Series Cut-Off Date for the Series to which such Receivables
are allocated; and
(iv) all proceeds (including, without limitation, "proceeds" as
defined in the UCC of the jurisdiction the law of which governs the
perfection of the interest in such Receivables so Transferred) of any of
the foregoing.
Such property described in the preceding sentence, together with all monies
allocable to such Series from time to time on deposit in, and all Eligible
Investments and other securities, instruments and other investments purchased
from funds allocable to such Series on deposit in, any Lock-Box Account, the
Master Collection Account, the applicable Series Collection Account, the
applicable Series Payment Account, any other applicable Series Account for such
Series and the Trustee's Account, shall constitute the assets of the Trust for
the benefit of the Holders of the Certificates of such Series (collectively the
"Series Trust Assets," and the Series Trust Assets for all Series shall be
referred to collectively as the "Trust Assets").
Other than the obligation of the Master Servicer and/or the Trustee to
remit Split Payments to the Claimants pursuant hereto, no Transfer shall be
deemed to constitute, nor is it intended to result in, an assumption by the
Trust, the Trustee or any Investor Certificateholder of any obligation of the
Claimant, the Company, the Seller or any other Person in connection with the
Receivables or under any Settlement Agreement, Settlement Purchase Agreement or
Seller Purchase Agreement or under any agreement or instrument relating to any
of the foregoing, including, without limitation, any obligation to any Claimant.
Each such Transfer to the Trust shall be made to the Trustee, on behalf of the
Series for which it is made, and each reference in this Agreement to such
Transfers shall be construed accordingly.
Without limiting the foregoing in any way, it is hereby expressly agreed by
each Certificateholder of each Series, by its acceptance of such Certificate,
that it shall not have any interest in, or any rights to, any Series Trust
Assets for any other Series.
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The Seller agrees to record and file from time to time, at its own expense,
financing statements and other documents (and amendments thereto, assignments
thereof and continuation statements, when applicable) with respect to the
Receivables and the other Trust Assets now existing and hereafter created
meeting the requirements of applicable law in such manner and in such
jurisdictions as are necessary to perfect, and maintain perfection of, the
Transfers of the Receivables and the other Trust Assets to the Trust, and to
deliver a file-stamped copy of each such financing statement or other document
or other evidence of such filing to the Trustee on or prior to each Series
Closing Date or, with respect to any Transfer made on a date other than a Series
Closing Date, such Transfer Date or, in the case of any financing statement,
continuation statement or other document filed by the Seller after the Closing
Date, promptly after the filing thereof. The Trustee shall be under no
obligation whatsoever to file such financing statements, documents, amendments,
assignments or continuation statements, or to make any other filing under the
UCC in connection with any Transfer.
The Seller further agrees, at its own expense, on or prior to any Transfer
Date to indicate in its files that the Receivables which are the subject of any
such Transfer have been conveyed to the Trust in accordance with this Agreement
for the benefit of the Certificateholders of a particular Series.
The parties hereto intend that the Transfers of Trust Assets contemplated
hereby shall constitute sales and/or absolute transfers of such Trust Assets by
the Seller to the Trust for value. To the extent, however, that such Transfers
are deemed not to constitute sales or absolute transfers of such Trust Assets,
the Seller intends that this Agreement shall constitute a security agreement
under the UCC (as defined in the UCC as in effect in the State of Delaware). In
connection therewith, the Seller hereby grants to the Trustee on the terms and
conditions of this Agreement a security interest, which except as otherwise
expressly permitted hereunder in the case of instruments pending delivery
thereof to the Trustee, shall be a first priority perfected security interest,
in and against all of the Seller's right, title and interest in and to the
Receivables and the other Trust Assets from time to time Transferred to the
Trust for the purpose of securing the rights of the Trustee for the benefit of
the Certificateholders and each Series Enhancer, in each case, for the Series in
respect of which such Trust Assets were so conveyed to the Trust under this
Agreement and the applicable Supplement.
SECTION 2.02. Acceptance by Trustee. (a) The Trustee hereby acknowledges
its acceptance on behalf of the Trust of all right, title and interest in and to
the Trust Assets, now existing and hereafter created, so Transferred to the
Trust pursuant to Section 2.01 and any applicable Supplement and declares that
it shall maintain such right, title and interest, upon the trust herein set
forth, for the benefit of the Certificateholders of the Series in respect of
which such Trust Assets were so Transferred to the Trust.
(b) The Trustee shall have no power to create, assume or incur indebtedness
or other liabilities in the name of the Trust other than as contemplated in this
Agreement.
SECTION 2.03. Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Trust as of the date hereof and on each
date hereafter until the termination of the Trust pursuant to Section 12.01,
that:
(a) Organization and Good Standing. The Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has full power and authority to own its properties and
conduct its business as presently owned or conducted, and to execute, deliver
and perform its obligations under the Operative Documents.
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(b) Due Qualification. The Seller is duly qualified to do business and is
in good standing as a foreign limited liability company, and has obtained all
necessary licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals has, or could reasonably be
expected to have, a Material Adverse Effect.
(c) Due Authorization; Conflicts. The execution, delivery and performance
by the Seller of the Operative Documents are within the Seller's powers, have
been duly authorized by all necessary company and member action, and do not
contravene (i) the Seller's Organizational Documents, (ii) any law, rule,
regulation, order, or decree binding on, or affecting, the Seller and the
violation of which has, or could reasonably be expected to have, a Material
Adverse Effect, or (iii) any agreement, contract, indenture, mortgage, or other
instrument, document or agreement to which the Seller or any of its assets are
subject or may be effected.
(d) Consents. No authorization or approval or other action by, and no
notice to or registration of or filing with, any Governmental Authority or other
regulatory body is required to be made or obtained by the Seller or the Company
for the due execution, delivery and performance by the Seller, or to insure the
legality, validity, binding effect or enforceability of, the Operative
Documents, except for the filing of UCC financing statements against the Seller
in respect of the transactions contemplated herein all of which that need to be
filed to perfect the interest of the Trust in the Trust Assets (as comprised as
of the date of the making or remaking of this representation and warranty) have
been so made.
(e) Enforceability. Each of the Operative Documents is and will be the
legal, valid and binding obligation of the Seller enforceable against the Seller
in accordance with its respective terms, 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 principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(f) Proceedings. There are no judgments or other judicial or administrative
orders outstanding against the Seller nor is there any pending or, to the best
of the Seller's knowledge, threatened action or proceeding affecting the Seller
before any court, governmental agency or arbitrator, which has, or could
reasonably be expected to have, a Material Adverse Effect.
(g) Compliance with Laws, Etc. The Seller is not in violation of any law,
rule, regulation, order, writ, judgment, decree, determination or award
applicable to it or any of its properties or any indenture, lease, loan or other
agreement to which it is a party or by which it or its assets may be bound or
affected, the violation of which, in any of the foregoing cases, would have, or
could reasonably be expected to have, a Material Adverse Effect.
(h) Margin Regulations. The Seller will not use any of the proceeds that it
receives pursuant hereto or any Supplement for any purpose which will conflict
with or contravene any of Regulations G, T, U or X promulgated by the Federal
Reserve Board from time to time.
(i) Locations. The principal place of business and chief executive office
of the Seller are located at the address of the Seller set forth in Section
13.05, and the offices where the Seller keeps all of its records relating to the
Receivables are located at the addresses set forth on Schedule II hereto, or, in
each case, at such other locations notified to the Trustee and each Series
Enhancer (other than an Affiliated Entity) in accordance with Section 2.05(e),
in jurisdictions with respect to which all applicable actions required by the
last three paragraphs of Section 2.01 have been taken and completed.
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(j) Lock-Box Banks. The names and addresses of all the Lock-Box Banks, and
the account numbers of all Lock-Box Accounts and the related lock-boxes at such
Lock-Box Banks, are in each case specified in Schedule III hereto or have been
notified to the Trustee and with respect to which all action required to be
taken pursuant to Section 3.04 has been taken. The Lock-Box Banks are the only
institutions holding any lock-box accounts or lock-boxes for the receipt of
Scheduled Payments in respect of the Receivables. All Annuity Providers have
been directed to make payments on the Annuity Contracts relating to the
Receivables to a Lock-Box Account (or a related lock-box) covered by a Lock-Box
Notice, and such instructions are in full force and effect.
(k) ERISA Matters. Except as set forth on Schedule VI, neither the Seller
nor any of its ERISA Affiliates has maintained or participated in any Plan or
Multiemployer Plan during the past six (6) years. With respect to any such Plan
and/or Multiemployer Plan, (i) such Plan and/or Multiemployer Plan complied and
complies in all material respects with all applicable Requirements of Law, (ii)
no Reportable Event has occurred with respect to any such Plan and/or
Multiemployer Plan, (iii) no such Plan or Multiemployer Plan has been
terminated, and (iv) no funding deficiency has occurred in respect of any such
Plan or Multiemployer Plan, except, in each case, where the occurrence of any of
the foregoing could not be reasonably expected to result in liability to the
Seller in excess of the Plan Liability Threshold or result in a Lien against the
Trust Assets (or any portion thereof) which would require the payment of an
amount in excess of the Plan Liability Threshold to satisfy. With respect to any
such Plan or Multiemployer Plan that is intended to qualify for special tax
treatment under Sections 401(a) or 403(a) of the Internal Revenue Code, such
Plan or Multiemployer Plan is in compliance with the applicable requirements of
the Internal Revenue Code for such qualifications.
(l) Pro-Forma Balance Sheet. The pro-forma balance sheets of the Seller as
at the Closing Date certified by the Chief Financial Officer of the Seller,
copies of which have been provided to the Trustee, present fairly the financial
condition of the Seller on a pro-forma basis as of such date after giving effect
to the transactions contemplated under the Operative Documents to take place on
such date.
(m) Taxes. The Seller has filed all federal, state and material local tax
returns which it is required by law to file and has paid all material taxes,
assessments and other governmental charges due in respect of its respective
returns, except to the extent that any such taxes, assessments or other
governmental charges are being contested in good faith and as to which the
Seller has set aside on its books adequate reserves.
(n) Other Agreements. Other than the Operative Documents, the Seller is not
a party to any material lease, contract, agreement, understanding or commitment
of any kind which, if breached, has, or could reasonably be expected to directly
or indirectly have, a Material Adverse Effect.
(o) Accuracy of Information. Each certificate, information, exhibit,
financial statement, document, book, record, report or disclosure furnished by
the Seller to the Trustee, any Master Servicer, the Back-Up Servicer, any Series
Enhancer or any Investor Certificateholder (other than an Affiliated Entity) is
accurate in all material respects and contains no untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading.
(p) Investment Company Act Matters. The Seller is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act.
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(q) Title to Property. The Seller, immediately prior to the Transfer to the
Trust of any Receivables, had good, indefeasible, and merchantable title to and
ownership of such Receivables, free and clear of all Liens.
(r) Tradenames. The Seller has no tradenames, fictitious names, assumed
names or "doing business as" names and since its incorporation, the Seller (i)
has not been the subject of any merger or other corporate reorganization that
resulted in a change of name, identity or corporate structure or (ii) had any
other name.
(s) Subsidiaries. The Seller has no subsidiaries.
(t) Solvency. After giving effect to each Transfer of Trust Assets
hereunder, the Seller is and will be solvent and able to pay its debts as they
come due, and has and will have adequate capital.
(u) Valid Transfer. The Seller Purchase Agreement creates a valid sale,
transfer and assignment to the Seller of all right, title and interest of the
Company in and to all Receivables and Related Property conveyed to the Seller
thereunder. This Agreement constitutes a valid sale, transfer and assignment to
the Trust of all right, title and interest of the Seller in and to the
Receivables now or hereafter Transferred to the Trust during the period from the
date hereof until the termination of the Trust and in and to all other Trust
Assets and the proceeds thereof free and clear of any Lien, except as created
hereby or otherwise permitted hereunder, or, if this Agreement does not
constitute such a sale, transfer and assignment, constitutes a valid grant to
the Trust of a "security interest" (as defined in the UCC of the jurisdiction
the law of which governs the perfection of the interest in the Receivables and
other Trust Assets created hereunder), which is and shall be a first priority
perfected security interest, in all right, title and interest of the Seller in
and to the Receivables now or hereafter Transferred to the Trust pursuant hereto
during the period from the date hereof until the termination of the Trust and in
and to all other Trust Assets and the proceeds thereof which will be enforceable
by the Trustee upon such creation of such security interest.
(v) No Claim or Interest. Except as otherwise provided in this Agreement or
any Supplement, neither the Seller nor any Person claiming through or under the
Seller has any claim to or interest in the Trust Accounts.
(w) Offering of Certificates. The Seller has not taken or caused to be
taken, and has no knowledge that any other Person has taken, any action which
would subject the issuance or sale of any Certificate to the provisions of
Section 5 of the Act or to the qualification provisions of any securities or
Blue Sky law of any applicable jurisdiction.
(x) Originator Receivables. The Seller has given reasonably equivalent
value to the Company (which may include additional equity interests in the
Seller) in consideration for the transfer to the Seller by the Company of the
Receivables and Related Property pursuant to the Seller Purchase Agreement, and
no such transfer has been made for or on account of an antecedent debt owed by
the Company to the Seller.
The representations and warranties made pursuant to this Section 2.03 shall
survive the making thereof. Upon discovery by the Seller, 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 and to each Series Enhancer. The
Trustee's obligations in respect of any such breach are limited as provided in
Section 11.02(g).
SECTION 2.04. [Reserved].
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SECTION 2.05. Affirmative Covenants of the Seller. The Seller hereby
covenants that, without the prior written consent of the Majority Control
Parties, until the termination of the Trust:
(a) Compliance with Law. The Seller will comply in all material respects
with all Requirements of Law applicable to the Seller, its business and
properties and the Trust Assets.
(b) Preservation of Existence. The Seller will preserve and maintain its
existence, rights, franchises and privileges as a limited liability company in
the jurisdiction of its organization, and qualify and remain qualified in good
standing as a foreign limited liability company in each jurisdiction where the
failure to maintain such qualification has, or could reasonably be expected to
have, a Material Adverse Effect.
(c) Inspection of Books and Records. The Trustee, each Series Enhancer, the
Control Party for each Series (or, if such Control Party is a designated
percentage of the Investor Certificateholders for any Series, a representative
of such Control Party) and independent accountants appointed by, or other agents
of, any of the foregoing, shall have the right, upon reasonable prior written
notice to the Seller, to visit the Seller, to discuss the affairs, finances and
accounts of the Seller with, and to be advised as to the same by, its officers,
and to examine the books of account and records of the Seller, and to make or be
provided with copies and extracts therefrom, all at such reasonable times and
intervals (but, so long as no Significant Event has occurred and is continuing,
not more than once in any six month period) and to such reasonable extent during
regular business hours as the Trustee, such Series Enhancer, such Control Party
(or designated representative thereof) or such accountants or agents appointed
by any of the foregoing, as applicable, may desire.
(d) Keeping of Records and Books of Account. (i) The Seller itself or
through its agents will keep proper books of record and account, which shall be
maintained or caused to be maintained by the Seller and shall be separate and
apart from those of any Affiliate of the Seller, in which full and correct
entries shall be made of all financial transactions and the assets and business
of the Seller in accordance with generally accepted accounting principles
consistently applied, and (ii) maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables in the event of the destruction of the
originals thereof) and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of all Collections of and adjustments to each existing
Receivable).
(e) Location of Records. The Seller will keep its principal place of
business and chief executive office at the address of the Seller referred to in
Section 2.03(j) and shall keep the other offices where it keeps the books,
records and documents regarding the Trust Assets at the addresses of the Seller
referred to on Schedule II, or, in either case, upon 30 days' prior written
notice to the Trustee and each Series Enhancer, at any other location within the
United States with respect to which all applicable action required by the last
three paragraphs of Section 2.01 shall have been taken and completed.
(f) Maintenance of Separate Member. The Seller will maintain at least two
independent members, neither of which otherwise is (or at any time during the
last five years has been) a direct, indirect or beneficial officer, general
partner, member, director, employee, affiliate, associate, creditor, customer or
supplier of any of the Affiliated Entities (unless acting as such in an
independent capacity), nor a direct, indirect or beneficial owner of the
outstanding equity interest (including, limited partnership interests or limited
liability company interest) of any of the Affiliated Entities (any
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such Person also being a "Affiliated Entity"), nor a relative of any of the
foregoing, nor a trustee in bankruptcy for any of the foregoing.
(g) Seller Purchase Agreement. The Seller will at its expense timely
perform and comply in all material respects with all provisions, covenants and
other promises required to be observed by it under the Seller Purchase
Agreement, maintain the Seller Purchase Agreement in full force and effect,
enforce the Seller Purchase Agreement in accordance with its respective terms,
and, at the request of the Trustee, make to the Company such reasonable demands
and requests for information and reports or for action as the Trustee may
request to the extent that the Seller is entitled to do the same thereunder.
(h) Payment of Taxes, Etc. The Seller will pay promptly when due all
material taxes, assessments and governmental charges or levies imposed upon it
or any Trust Asset (other than for any income or gain realized thereon after the
Transfer thereof to the Trust, which income and/or gain shall be allocable among
the affected Certificateholders in accordance with the related Supplements), or
in respect of its income or profits therefrom, and any and all material claims
of any kind (including, without limitation, claims for labor, materials and
supplies), except where such tax, assessment, charge or levy is being contested
in good faith and by proper proceedings and adequate reserve have been set up
and are being maintained in respect thereof on the Seller's books and records.
(i) Reporting Requirements. The Seller will furnish to the Trustee and the
Series Enhancer for each affected Series whereupon the Trustee shall promptly
thereafter send a copy thereof to each Certificateholder of each affected Series
and each Rating Agency rating any of the Certificates of such affected Series:
(1) within 60 days after the end of each of the first three quarters
of each fiscal year of the Seller, unaudited balance sheets of the Seller
as of the end of such quarter, and unaudited statements of income of the
Seller each for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, prepared in accordance with
GAAP (subject to year-end adjustments) and certified by the chief financial
officer or chief accounting officer of the Seller as fairly presenting the
financial condition of the Seller as at the dates covered thereby;
(2) within 90 days after the end of each fiscal year of the Seller, a
copy of the audited balance sheets of the Seller as of the end of such year
and the related statements of income and retained earnings of the Seller
for such year, together with a letter from the Seller's independent
certified public accounting firm certifying that after reviewing such
financial statements such accounting firm believes that such financial
statements have been prepared in accordance with GAAP and fairly present
the financial condition of the Seller with respect to the periods to which
they speak;
(3) (A) promptly after becoming aware of the occurrence of each
Significant Event, Potential Significant Event, Series Significant Event,
and Servicer Default, the statement of the chief financial officer or chief
accounting officer of the Seller setting forth details of such occurrence
or event and the action which the Seller has taken and proposes to take
with respect thereto, and (B) as soon as possible and in any event within
two Business Days after obtaining knowledge thereof, notice of any other
event, development or information which has, or is reasonably likely to
have, a Material Adverse Effect with respect to any Series;
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(4) promptly, and in any event within five Business Days, after the
Seller's receipt thereof, copies of all notices, requests, and other
documents (excluding regular periodic reports) delivered or received by the
Seller under or in connection with the Seller Purchase Agreement; and
(5) promptly, and in any event within five Business Days, after the
Seller acquires knowledge of the occurrence of any event described in the
definition of "Plan Event" (as determined without giving effect to any
limitations as to materiality or dollar thresholds contained in such
definition).
(j) Acquisition of Receivables from the Company. With respect to each
Receivable acquired by the Seller from the Company, the Seller shall (i) acquire
such Receivable pursuant to and in accordance with the terms of the Seller
Purchase Agree ment, (ii) take all action necessary to perfect, protect and more
fully evidence the Seller's ownership of such Receivable, including, without
limitation, (A) filing and maintaining effec tive financing statements and
continuations thereof (Forms UCC-1 and UCC-3) against the Company in all
necessary or appropriate filing offices, and filing continuation statements,
amendments or assignments with respect thereto in such filing offices and (B)
executing or causing to be executed such other instruments or notices (other
than to the Claimant, the Assignee or the Annuity Provider) as may be necessary
or appropriate and (iii) take all additional action that the Trustee or the
Majority Control Parties may reasonably request to perfect, protect and more
fully evidence the respective interests of the parties to this Agreement, the
Investor Certificateholders of the affected Series and the Series Enhancers of
the affected Series in the applicable Receivables.
(k) Collections. In the event that the Seller or any other Affiliated
Entity receives any Collections, the Seller agrees to hold, or cause such
Affiliated Entity to hold, all such Collections in trust and to deposit, or
cause such Affiliated Entity to deposit, such Collections to a Lock-Box Account,
the Master Collection Account or the applicable Series Collection Account
relating to the applicable Series to which such Collection relates, in each
case, as soon as practicable, but in no event later than two Business Days after
its receipt thereof.
(l) Computer Services. The Seller and/or Wentworth either itself owns, or
has taken such action as may be necessary (including, without limitation,
obtaining any necessary consents from licensors or other Persons) to provide the
Master Servicers, the Back-up Servicer, the Trustee and any Successor Servicer
with such licenses, sublicenses and/or assignments of contracts as the Master
Servicers, the Trustee, or any Successor Servicer shall from time to time
require for its use of all services and computer hardware or software that
relate to the servicing of the Receivables or the other Trust Assets for each
Series. The Seller and Wentworth each hereby grants the Master Servicers, the
Back-up Servicer, the Trustee and each Successor Servicer an irrevocable license
(with respect to the services, and computer hardware and software that it owns)
or sublicense (with respect to all other such services, hardware and software)
to use such services, hardware or software in connection with the servicing,
collection and monitoring of the Receivables (subject to reasonable
confidentiality restrictions and restrictions limiting such use to the
collection, servicing and monitoring of the Receivables, which restrictions have
already been established with respect to the Back-up Servicer and, with respect
to any other Person other than the Back-up Servicer, shall be determined at such
time as such Person is charged with the servicing of the Receivables). As of the
Closing Date, all such computer software and hardware is currently owned by
Seller and/or Wentworth and is licensed to the Back-up Servicer irrevocably
until the termination of the Back-up Servicing Agreement. From and after the
Closing Date, the Seller or Wentworth, as applicable, shall deliver to the
Trustee a copy of each consent (or evidence that such consent is not required)
from all necessary
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parties with respect to any such services, hardware or software prior to the
date the Seller or Wentworth enters into any license to use such service or
software to service, monitor and collect any Receivables of any Series.
(m) ERISA. The Seller shall not allow any Plan maintained by the Seller or
any of its ERISA Affiliates to incur any "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of the Internal
Revenue Code), whether or not waived. Each of the Seller and each ERISA
Affiliate of the Seller shall timely make all contributions required by it to be
made by it to any Plans and/or Multiemployer Plans to which contributions are or
shall be required to be made by the Seller or such ERISA Affiliate, and no event
requiring notice to the PBGC under Section 302(f) of ERISA shall occur with
respect to any such Plan, in any case, that could reasonably be expected to
result, directly or indirectly, in any Lien being imposed on the property of the
Seller or the payment of any amount in excess of the Plan Liability Threshold to
avoid such Lien. No Plan Event with respect to the Seller or any of its ERISA
Affiliates shall occur that could reasonably be expected to result, directly or
indirectly, in any Lien being imposed on the property of the Seller or the
payment of any amount in excess of the Plan Liability Threshold to avoid such
Lien.
(n) Accounting for Transfers. The Seller shall treat the transfers and
conveyances of the Receivables by the Company to it pursuant to the Seller
Purchase Agreement as sales and absolute transfers thereof for all tax and
accounting purposes.
(o) Fidelity Insurance. The Seller shall maintain, at its own expense, a
fidelity insurance policy, with broad coverage with responsible companies on all
officers, employees or other persons acting on behalf of the Seller in any
capacity with regard to the Receivables to handle documents and papers related
thereto. Any such fidelity insurance shall protect and insure the Seller against
losses, including forgery, theft, embezzlement, and fraud, and shall be
maintained in an amount of at least $10,000,000 or such lower amount as the
Majority Control Parties may in their commercially reasonable credit judgment
designate to the Seller from time to time, and in a form acceptable to the
Majority Control Parties in its commercially reasonable judgement. No provision
of this Section 2.05(o) requiring such fidelity insurance shall diminish or
relieve the Seller from its duties and obligations as set forth in this
Agreement or any of the other Operative Documents. The Seller shall be deemed to
have complied with this provision if one of its respective Affiliates has such
fidelity policy coverage and, by the terms of such fidelity policy, the coverage
afforded thereunder extends to the Seller. Upon the request of the Trustee or
any Control Party, the Seller shall cause to be delivered to the Trustee or such
Control Party, as applicable, a certification evidencing coverage under such
fidelity policy. Any such insurance policy shall contain a provision or
endorsement providing that such policy may not be canceled or modified in a
materially adverse manner without ten (10) days' prior written notice to the
Trustee.
SECTION 2.06. Negative Covenants of the Seller. The Seller hereby further
covenants that, without the prior written consent of the Majority Control
Parties, until the termination of the Trust:
(a) No Liens. Other than pursuant to a Transfer hereunder or as otherwise
contemplated herein, the Seller will not sell, pledge, assign or transfer to any
Person, or grant, create, incur, assume or suffer to exist any Lien on, any
Trust Asset, whether now existing or hereafter created, or any interest therein,
and the Seller shall defend the right, title and interest of the Trust in and to
the Trust Assets, whether now existing or hereafter created, against all claims
of third parties claiming through or under the Seller.
(b) Activities of the Seller. The Seller will not engage in, enter into or
be a party to any business, activity or transaction of any kind
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other than the businesses, activities and transactions authorized in its
Organizational Documents as in effect as of Closing Date, or as otherwise
amended with the prior written consent of the Trustee and the Majority Control
Parties and, with respect of which amendment, the Rating Agencies then rating
the Certificates of any outstanding Series or Class shall have confirmed that
such amendment would not cause the reduction or withdrawal of such rating of any
such Series or Class.
(c) Indebtedness. Except as contemplated herein (including any Supplement
hereto) with respect to any other subsequent issuances of Certificates of other
Series hereunder, the Seller will not create, incur or assume any Indebtedness
or enter into any other securitization transaction or any other off- balance
sheet financing arrangement, other than (i) Indebtedness arising under the
Seller Purchase Agreement to the extent evidenced by a Purchase Price Note and
(ii) any additional Indebtedness (not secured by Settlements) arising in the
ordinary course of business in an aggregate amount outstanding at any time not
to exceed $500,000.
(d) Guarantees. The Seller will not become or remain liable, directly or
contingently, in connection with any Indebtedness or other liability of any
other Person, whether by guarantee, endorsement (other than endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business), agreement to purchase or repurchase, agreement to supply or advance
funds, or otherwise.
(e) Investments. The Seller will not make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Affiliate or any other Person except for (i) purchases of
assets permitted pursuant to the Seller's Organizational Documents and (ii)
loans, advances, extensions, investments and contributions in connection with
any financing arrangements permitted pursuant to Section 2.06(c)(D).
(f) Extension or Amendment of Receivables. The Seller will not extend,
amend or otherwise modify (or consent to, or fail to object to, any such
extension, amendment or modification by the Company or any of the Master
Servicers of) the terms of any Receivable or rescind or cancel, or permit the
rescission or cancellation of, any Receivable except:
(i) as permitted under any Supplement with respect to the Series
Receivables thereunder;
(ii) as ordered by a court of competent jurisdiction or other
Governmental Authority;
(iii) to the extent that any representation or warranty of the Seller
with respect to any Series Receivable under Section 2.04, the Supplement
relating to such Series, or, in the case of the initial issuance hereunder,
in any certificates delivered by any officer of J.G. Wentworth 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)
in connection with any of the opinions of counsel delivered on the Closing
Date was incorrect when made or deemed made, the Seller shall, within five
Business Days after learning thereof, either (x) convey to the Trust, for
the benefit of the Series to which such affected Receivable was allocated,
in exchange for the affected Series Receivable, one or more different
Receivables to be described on a List of Receivables delivered to the
Trustee and having a Discounted Receivables Balance approximately equal to
(but not less than) than that of the Receivable being so replaced (provided
that for purposes of this clause, the Discounted Receivables Balance of
such Series Receivable being so replaced shall be calculated by treating
any
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past due Scheduled Payments thereon as if such payments were due on the
date of such calculation and the Discounted Receivables Balance of the
replacement Series Receivable shall be calculated without giving effect to
any past due Scheduled Payments owing thereon), or (y) repurchase, in cash
delivered to the Series Collection Account for such Series, such affected
Series Receivable from the Trust for an amount equal to the Discounted
Receivables Balance (as calculated by treating any past due Scheduled
Payments thereon as if such payments were due on the date of such
calculation) of such Series Receivable, whereupon, in either case, the
Series Receivable being replaced or repurchased shall cease to be a "Series
Receivable" and, in the case of clause (x), any such new Settlement shall
become a "Series Receivable" for such Series (it being agreed that the
incorrectness of any such representation or warranty, and the substitution
or repurchase obligation of the Seller pursuant to this clause (iii)
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 Seller contained in any such
representation or warranty; and
(iv) the Seller may (but shall not be obligated) from time to time to,
(x) add to the Series Receivables of any Series additional Scheduled
Payments due under the Settlement Agreement (but not previously included in
the Trust Assets) relating to any Receivable of such Series which became a
Defaulted Receivable pursuant to clause (e) of the definition thereof
(whether or not such Defaulted Receivable has since been Rehabilitated), in
substitution for (and in consideration of) any diverted Scheduled Payment
originally included as part of such Series Receivable, which additional
Scheduled Payments shall be described on a List of Receivables delivered to
the Trustee, or (y) repurchase any such Series Receivable, in cash
delivered to the Series Collection Account for such Series, for a purchase
price equal to the Discounted Receivables Balance of such Receivable (as
calculated by treating any past due Scheduled Payments thereon as if such
payments were due on the date of such calculation), whereupon, in the case
of clause (x), such new Scheduled Payments shall become part of the "Series
Receivables" for such Series and, in the case of clause (y), the Series
Receivable being repurchased shall cease to be a "Series Receivable";
provided that, for all purposes hereunder, any such Receivable which was a
Defaulted Receivable prior to such extension, adjustment or modification
shall remain a Defaulted Receivable until the same shall have been
otherwise Rehabilitated; and
it is further understood, agreed and acknowledged that certain of the
Settlements provide that they may be prepaid upon the death of the Claimant and
that such prepayment may be discounted into a present value in accordance with a
formula set forth in the related Settlement Agreement or the related Annuity
Contract (any such Settlement being a "Commutable Settlement").
(g) Change in Credit Policy Manual. The Seller will not make, or consent or
fail to object to, any change in the Credit Policy Manual which change could be
reasonably likely to materially impair or delay the collectibility of any
Receivable or result in a deterioration in the creditworthiness of the Obligors
generally.
(h) Deposits to Lock-Box Accounts or the Master Collection Account;
Deposits to Series Collection Accounts. The Seller will not deposit or otherwise
credit, or cause to be so deposited or credited, or consent or fail to object to
any such deposit or credit, to any Lock-Box Account or the Master Collection
Account of cash proceeds other than Collections of Receivables and other Trust
Assets; provided, that to the extent any amounts other than Collections of
Receivables and the Related Property relating thereto are so deposited on any
date, it shall not constitute a breach hereunder if such other funds are
identified and are removed from such account within two Business Days after such
amounts were so deposited in such account.
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The Seller will not deposit or otherwise credit, or cause to be so deposited or
credited, or consent or fail to object to any such deposit or credit, to any
Series Collection Account cash proceeds other than Collections of the Series
Receivables and other Series Trust Assets of the Series to which such account
relates; provided that to the extent any such other amounts are so deposited on
any date, it shall not constitute a breach hereunder if such other funds are
identified and are removed from such account within two Business Days after such
amounts were so deposited in such account.
(i) Receivables Not To Be Evidenced by Promissory Notes. The Seller will
take no action to cause any Receivable to be evidenced by any "instrument" (as
defined in the UCC of the jurisdiction the law of which governs the perfection
of the interest in such Receivable created hereunder), except in connection with
its enforcement, in which event the Seller shall deliver such instrument to the
Trustee, for the benefit of the Certificateholders of the Series to which such
Receivables relates, as required pursuant to Section 2.01.
(j) Change in Name or Jurisdiction of Organization. The Seller will not (i)
make any change to its name or principal place of business or use any
tradenames, fictitious names, assumed names or "doing business as" names unless,
at least 30 days prior to the effective date of any such name change, change in
principal place of business, or use, the Seller delivers to the Trustee such
financing statements (Forms UCC-1 and UCC-3) and such other documents or
instruments executed by the Seller as shall be necessary to maintain the
perfection of the Trustee's ownership or security interest in the Trust Assets
free and clear of all other Liens or which the Trustee or any of the Control
Parties may reasonably request to reflect such change or (ii) change its
jurisdiction of organization unless the Trustee shall have received from the
Seller (A) written notice of such change at least 10 days prior to the effective
date thereof, and (B) prior to the effective date thereof, an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, as to
such organization and the Seller's valid existence and good standing and as to
the matters referred to in Section 2.03(e).
(k) Seller Purchase Agreements. The Seller will not (i) cancel or terminate
the Seller Purchase Agreement or consent to or accept any cancellation or
termination thereof, (ii) amend or otherwise modify any term or condition of the
Seller Purchase Agreement or give any consent, waiver or approval thereunder,
(iii) waive any default under or breach of the Seller Purchase Agreement or (iv)
take any other action under the Seller Purchase Agreement not required by the
terms thereof to the extent that it would materially impair the value of any
Trust Asset or the rights or interests of the Seller thereunder or of the
Trustee or any Investor Certificateholders hereunder or thereunder.
(l) Organizational Documents. Except as permitted by Section 2.06(j), the
Seller will not amend any of its Organizational Documents in any manner which
would adversely affect the Certificateholders or the Trust Assets, as confirmed
by an Opinion of Counsel of the Seller to the Trustee and the confirmation by
each of the Rating Agencies then rating the Certificates of any outstanding
Series or Class that such amendment would not cause the reduction or withdrawal
of such rating of any such Series or Class.
(m) Maintenance of Separate Existence. The Seller shall take all reasonable
steps to continue its identity as a separate legal entity and to make it
apparent to third Persons that it is an entity with assets and liabilities
distinct from those of Wentworth, the Company, the other Affiliated Entities or
any other Person, and that it is not a division of any of the Affiliated
Entities or any other Person. In that regard, and without limiting the foregoing
in any manner, the Seller shall:
(1) maintain its limited liability company existence and make
independent decisions with respect to its daily operations and business
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affairs and not be controlled in making such decisions by any other
Affiliated Entity or any other Person;
(2) maintain at least two members neither of which otherwise is (or at
any time during the last five years has been) a direct, indirect or
beneficial officer, general partner, member, director, employee, affiliate,
associate, creditor, customer or supplier of any of the Affiliated Entities
(unless acting as such in an independent capacity), nor a direct, indirect
or beneficial owner of the outstanding equity interest (including, limited
partnership interests or limited liability company interest) of any of the
Affiliated Entities, nor a relative of any of the foregoing, nor a trustee
in bankruptcy for any of the foregoing;
(3) maintain separate and clearly delineated office space owned by it
or evidenced by a written lease or sub lease (even if located in an office
owned or leased by, or shared with, another Affiliated Entity);
(4) maintain its assets in a manner which facilitates their
identification and segregation from those of any of the other Affiliated
Entities;
(5) maintain a separate telephone number which will be answered only
in its own name and separate stationery and other business forms;
(6) conduct all intercompany transactions with the other Affiliated
Entities on terms which the Seller reasonably believes to be on an
arm's-length basis;
(7) not guarantee any obligation of any of the other Affiliated
Entities, nor have any of its obligations guaranteed by any other
Affiliated Entity or hold itself out as responsible for the debts of any
other Affiliated Entity or for the decisions or actions with respect to the
business and affairs of any other Affiliated Entity, nor seek or obtain
credit or incur any obligation to any third-party based upon the
creditworthiness or assets of any other Affiliated Entity or any other
Person;
(8) except as expressly otherwise permitted hereunder or under any of
the other Transaction Documents, not permit the commingling or pooling of
its funds or other assets with the assets of any other Affiliated Entity;
(9) maintain separate deposit and other bank accounts to which no
other Affiliated Entity (other than as a Master Servicer) has any access;
(10) maintain financial records which are separate from those of the
other Affiliated Entities;
(11) compensate (either directly or through reimbursement of its
allocable share of any shared expenses) all employees, consultants and
agents, and Affiliated Entities, to the extent applicable, for services
provided to the Seller by such employees, consultants and agents or
Affiliated Entities, in each case, from the Seller's own funds;
(12) have agreed with each of the other relevant Affiliated Entities
to allocate among themselves shared overhead and corporate operating
services and expenses which are not reflected in the Master Servicing Fee
(including without limitation the services of shared employees, consultants
and agents and reasonable legal and auditing expenses) on the basis of
actual use or the value of services rendered,
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and otherwise on a basis reasonably related to actual use or the value of
services rendered;
(13) pay for its own account for accounting and payroll services,
rent, lease and other expenses (or its allocable share of any such amounts
provided by one or more other Affiliated Entity) and not have such
operating expenses (or the Seller's allocable share thereof) paid by any of
the Affiliated Entities, provided, that Wentworth and/or the Company shall
be permitted to pay the initial organizational expenses of the Seller;
(14) maintain adequate capitalization in light of its business and
purpose;
(15) conduct all of its business (whether in writing or orally) solely
in its own name through its duly authorized officers, employees and agents;
(16) not make or declare any dividends or other distributions of cash
or property to the holders of its equity securities or make redemptions or
repurchases of its equity securities, in either case, on a periodic basis
any more frequently than monthly or otherwise, in certain other irregular
cases, in accordance with appropriate corporate formalities and consistent
with sound business judgment; and all such distributions, redemptions or
repurchases shall only be permitted to be made hereunder out of Available
Seller Funds and only to the extent that it is not violative of any
applicable law and no Significant Event or Potential Significant Event then
exists or would result therefrom;
(17) maintain at least one employee (which employee may be shared with
an Affiliate pursuant to a written agreement allocating the compensation
and other remuneration and benefits for such employee as among such
parties) in charge of day-to-day operations of the Seller;
(18) otherwise practice and adhere to corporate formalities such as
complying with its Organizational Documents and member and manager
resolutions, the holding of regularly scheduled meetings of members and
managers, and maintaining complete and correct books and records and
minutes of meetings and other proceedings of its members and managers; and
(19) not fail to maintain all policies and procedures or take or
continue to take all actions necessary or appropriate to ensure that all
factual assumptions set forth in those certain Opinions of Counsel of the
Seller delivered on the Closing Date concluding that sales of Receivables
by the Company to the Seller made pursuant to the Seller Purchase Agreement
would constitute true sales and that the Seller would not be substantively
consolidated with the Company or Wentworth following the occurrence of an
Insolvency Event with respect to either such Person.
(n) Merger and Other Transactions. The Seller will not (i) enter into any
transaction of merger or consolidation, or convey or otherwise dispose of any
material portion of its assets (except as contemplated herein) to any Person or
Person(s), (ii) terminate, liquidate or dissolve itself (or suffer any
termination, liquidation or dissolution), (iii) acquire any Person other than as
permitted hereunder and under its Organizational Documents, or (iv) appoint any
Person other than the Company or an Affiliate of the Company to be the manager
or controlling co-manager of the Seller.
(o) Transactions with Affiliates. The Seller will not enter into, or be a
party to, any transaction with any of its Affiliates, except (i) the
transactions contemplated by the Seller Purchase Agreement and (ii) any other
transactions (including, without limitation, the lease of
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office space or computer equipment or software by the Seller from an Affiliate
and the sharing of employees and employee resources and benefits) (A) in the
ordinary course of business or as otherwise permitted hereunder, (B) pursuant to
the reasonable requirements and purposes of the Seller's business, (C) upon fair
and reasonable terms (and, to the extent material, pursuant to written
agreements) that are consistent with market terms for any such transaction
(including, any financing arrangements entered into pursuant to Section
2.06(c)(D)), and (D) not inconsistent with the factual assumptions set forth in
the opinion letters referred to in clause (19) of Section 2.06(m).
(p) Change in Lock-Box Accounts and Instructions to Obligors. The Seller
will not add or terminate any institution as a Lock-Box Bank or terminate or
substitute any Lock-Box Account or any related lock-box from those listed in
Schedule III hereto, except as otherwise permitted pursuant to Section 4.02 or
unless the Trustee shall have received notice of such addition, termination or
change and executed copies of Lock-Box Notices covering any such new Lock-Box
Bank, Lock-Box Account or any new lock-box relating thereto. The Seller will not
instruct any Obligor to remit Collections to any Person, address or account
other than a Lock-Box Account or the related lock-box or the Series Collection
Account for the Series to which the underlying Receivables or Trust Assets
relates.
(q) Ownership of the Seller. The number of individuals and entities (other
than Flow-Through Entities (as such term is defined below)) that are beneficial
owners of a direct interest in the Seller, plus the number of individuals and
entities (other than Flow-Through Entities) that are beneficial owners of an
indirect interest in the Seller through one or more Flow-Through Entities other
than the Company or any successor thereto, will never exceed two. As used
herein, "Flow-Through Entity" shall mean an entity that, for federal income tax
purposes, is a partnership, a grantor trust or an S corporation.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.01. Acceptance of Appointment and Other Matters Relating to the
Master Servicers. (a) Wentworth agrees to act as the Initial Master Servicer
under this Agreement (subject to Article X) and, unless otherwise specified in
any Supplement with respect to the Series covered thereby shall act and be
appointed as such for each Series without any further action hereunder or
thereunder (subject to Article X). Unless otherwise specified in any Supplement
with respect to the Series covered thereby and subject to Article X, the
Certificateholders of each Series, by their acceptance of the Certificates of
such Series, consent to Wentworth so acting as Master Servicer.
(b) The Trustee hereby appoints as its agent, for the benefit of the
Certificateholders of each Series, separately, the Person designated or, in
accordance with Section 3.01(a), deemed designated, by the Certificateholders of
such Series to act as Master Servicer with respect to such Series (subject to
Article X) to enforce the Trustee's respective rights and interests in, to and
under the Receivables and the other Series Trust Assets relating to such Series;
it being understood and agreed that the Master Servicer for one Series need not
be the same Person as the Master Servicer for any other Series. Each Master
Servicer shall service, administer and collect the Receivables relating to such
Series and, in connection therewith, such Master Servicer shall take or cause to
be taken all such actions as may be necessary or advisable to collect each
Receivable relating to such Series from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit Policy Manual. Each Master Servicer shall exercise
the same care and apply the same policies with respect to the collection,
administration and servicing of the Receivables and other Trust Assets relating
to such Series that it would
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exercise and apply if it owned such Receivables and other Trust Assets, all in
substantial compliance with applicable law and in accordance with the Credit
Policy Manual.
(c) Each Master Servicer shall have full power and authority, acting alone
or through any party properly designated by it hereunder, to do any and all
things in connection with such servicing and administration which it may deem
necessary or desirable, subject to the limitations set forth herein, in any
applicable Supplement or in the Intercreditor Agreement. Without limiting the
generality of the foregoing and subject to Section 10.01, each Master Servicer
or its designee is hereby authorized and empowered to (i) subject to the terms
of the Intercreditor Agreement and the last sentence of Section 3.05(a),
instruct the Collateral Trustee, in writing, to make transfers of Collections
relating to Series for which it is Master Servicer from the Master Collection
Account to either the applicable Series Collection Account or, with respect to
any portion of any such Collections received and owing as Split Payments to the
Claimant thereof, to the Split Payment Account, as applicable, such instructions
to be set forth in the Daily Reports to be delivered to the Trustee and the
Collateral Trustee in accordance with Section 3.05(a), (ii) subject to the last
sentence of Section 3.05(a) and the terms of any applicable Supplement, to
withdraw, or instruct the Collateral Trustee in writing to withdraw, the amounts
owing to the applicable Claimants in respect of Split Payments from the
Collections received in the Master Collection Account on the Series Receivables
for the Series for which it acts as Master Servicer, and, in accordance with
Section 4.02(a), to remit or cause the Trustee to remit such amounts to such
Claimants, such instructions to also be set forth in the Daily Reports to be
delivered to the Trustee and the Collateral Trustee in accordance with Section
3.05(a), (iii) subject to, and in accordance with, the terms of any applicable
Supplement, administer the Series Accounts with respect to each Series for which
it acts as Master Servicer, (iv) to make any filings, reports, notices,
applications and registrations with, and to seek any consents or authorizations
from, the Securities and Exchange Commission and any state securities authority
on behalf of the Trust with respect to the Series for which it acts as Master
Servicer as may be necessary or advisable to comply with any Federal or state
securities laws or reporting requirements, and (v) to subcontract with any other
Person with the prior consent of the applicable Control Party for the applicable
Series for which such Person would be so appointed to act (in any case, at such
Master Servicer's expense), for servicing, administering or collecting, in whole
or in part, the Receivables of such Series whereupon such other Person with
which such Master Servicer so subcontracts shall be entitled such rights and
powers of such Master Servicer hereunder as may be delegated to it; provided,
however, that such Master Servicer shall remain fully liable for the performance
of the duties and obligations of the Master Servicer pursuant to the terms
hereof. The Trustee shall execute any documents furnished by any Master Servicer
which are necessary or appropriate to enable such Master Servicer to carry out
its servicing and administrative duties hereunder and which are acceptable in
form and substance to the Trustee.
(d) No Master Servicer shall extend the maturity, adjust the Discounted
Receivables Balance, or otherwise modify the terms of any Receivable, except (i)
as permitted pursuant to Section 2.06(f), (ii) with respect to any specific
Series, as permitted pursuant to the Supplement relating to such Series, and
(iii) unless otherwise provided in any Supplement with respect to the Series
Receivables allocated to such Series, to the extent no Servicer Default,
Significant Event or Series Significant Event with respect to any affected
Series has occurred and is outstanding, the Master Servicer for a Series shall
be permitted to adjust the Discounted Receivables Balance of, or extend the time
of payment for, any Defaulted Receivable allocated to such Series, all as it may
deem appropriate to maximize the Collections thereon and all in accordance with
its ordinary business practices; provided, that except as otherwise provided
herein, such Receivable shall remain a Defaulted Receivable hereunder
notwithstanding such adjustments or modifications unless and until the same
shall be Rehabilitated.
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SECTION 3.02. Servicing Compensation. As full compensation for its
servicing activities hereunder in respect of any Series, and as reimbursement
for any expense incurred by it in connection therewith, each Master Servicer
shall be entitled to receive the Master Servicing Fees specified in the
Supplement for such Series.
SECTION 3.03. Representations and Warranties of Each Master Servicer.
Except as may otherwise be expressly provided in any Supplement for the related
Series covered thereby, each Master Servicer hereby makes, and each successor
servicer by acceptance of its appointment hereunder shall make, the following
representations and warranties as of the date hereof or, if later, the date of
its appointment as a Master Servicer (and shall be deemed to remake on each day
hereafter or thereafter during which such Person is acting as such):
(a) Organization and Good Standing. Such Master Servicer is a corporation
duly organized, validly existing and in good standing under the applicable laws
of its jurisdiction of incorporation and has, in all material respects, full
power and authority to own its properties and conduct its business as such
properties are presently owned and as such business is presently conducted, and
to execute, deliver and perform its obligations under the Operative Documents to
which it is a party or by which it is bound.
(b) Due Qualification. Such Master Servicer is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt from
such requirements), and has obtained all necessary licenses and approvals, in
each jurisdiction in which failure to so qualify or to obtain such licenses or
approvals has, or could reasonably be expected to have, a material adverse
effect on its ability to perform its obligations as a Master Servicer under the
Operative Documents to which it is a party or by which it is bound.
(c) Due Authorization. Such Master Servicer's execution, delivery and
performance of the Operative Documents to which it is a party or by which it is
bound have been duly authorized by all necessary corporate and shareholder
action on the part of such Master Servicer.
(d) Binding Obligation. Each of the Operative Documents to which it is a
party or by which it is bound constitutes a legal, valid and binding obligation
of such Master Servicer enforceable against it in accordance with its terms
except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors' rights
generally, and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
(e) No Conflict. Such Master Servicer's execution and delivery of the
Operative Documents by such Master Servicer, and the performance of the
transactions contemplated by the Operative Documents to which it is a party or
by which it is bound, and fulfillment of the terms hereof and thereof applicable
to such Master Servicer, do not conflict with or violate any Requirements of Law
applicable to such Master Servicer, or conflict with, result in any breach of
any of the enforceable terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which such Master
Servicer is a party or by which it or its properties are bound.
(f) No Proceedings. There are no proceedings or investigations pending or,
to the best of the Master Servicer's knowledge, threatened against such Master
Servicer before any Governmental Authority (i) asserting the illegality,
invalidity or unenforceability, or seeking any determination or ruling that
would affect the legality, binding effect, validity or enforceability, of any of
the Operative Documents to which it is a party or by
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which it is bound, (ii) seeking to prevent the consummation of any of the
transactions contemplated by any of the Operative Documents to which it is a
party or by which it is bound, or (iii) seeking any determination or ruling that
is reasonably likely to materially and adversely affect the financial condition
or operations of such Master Servicer or the performance by such Master Servicer
of its obligations under any of the Operative Documents to which it is a party
or by which it is bound.
(g) No Consents. No authorization, consent, license, order or approval of
or registration or declaration with any Governmental Authority is required to be
obtained, effected or given by such Master Servicer in connection with the
execution and delivery by it of any of the Operative Documents or the
performance by it of its obligations under the Operative Documents to which it
is a party or by which it is bound.
(h) Information. Each certificate, information, exhibit, financial
statement, document, book or record or report furnished by such Master Servicer
to the Trustee, the Seller, any Series Enhancer or any Investor
Certificateholder in connection with this Agreement is accurate in all material
respects as of its date, and no such document contains any material misstatement
of fact or omits to state a material fact or any fact necessary to make the
statements contained therein not materially misleading as of its date.
The representations and warranties made pursuant to this Section 3.03 shall
survive the date of the making thereof. Upon a discovery by the Seller, such
Master 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. The Trustee's obligations in respect
of any such breach are limited as provided in Section 11.02(h).
SECTION 3.04. Covenants of the Master Servicer. Except as may be expressly
otherwise provided in any Supplement with respect to the related Series covered
thereby, each Master Servicer hereby covenants that, without the prior written
consent of the Control Party for the applicable Series for which such Person is
acting as Master Servicer until the termination of the Trust or, if earlier, the
Collection Date of the last outstanding Series for which such Person acts as
Master Servicer:
(a) Change in Accounts. Such Master Servicer will not (i) terminate or
substitute any Series Collection Account except as required pursuant to Section
4.02 or (ii) add or terminate any institution as a Lock-Box Bank or terminate or
substitute any Lock-Box Account or any related lock-boxes from those listed in
Schedule III hereto, except as otherwise permitted pursuant to Section 4.02 or
unless the Trustee and each Series Enhancer shall have received notice of such
addition, termination or change and executed copies of Lock-Box Notices from
each new Lock-Box Bank or relating to each new Lock-Box Account and/or each new
lock-box. No Master Servicer shall instruct any Annuity Provider or other
Obligor to remit, or consent to any applicable Claimant's, Annuity Provider's or
other Obligor's instructions to remit or remittance of, Collections to any
Person, address or account other than a Lock-Box Account, the related lock-box,
or the Series Collection Account for the Series to which such Collections
relate.
(b) Collections. In the event that such Master Servicer or any Affiliate
thereof receives any Collections relating to any Receivables, such Master
Servicer agrees to hold, or cause such Affiliate to hold, all such Collections
in trust and to deposit, or cause such Affiliate to deposit, such Collections to
the Master Collection Account or the Series Collection Account for the
applicable Series, in either case, as soon as practicable, but in no event later
than two Business Days after its receipt thereof.
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(c) Preservation of Existence; Compliance with Requirements of Law.
(i) Except as permitted pursuant to Section 8.02, each Master Servicer
will preserve and maintain its corporate or other existence, rights,
franchises and privileges in the jurisdiction of its organization, and
qualify and remain qualified in good standing as a foreign corporation in
each jurisdiction where the failure to maintain such qualification could
reasonably be expected to materially and adversely affect (i) the interests
of the Trustee or the applicable Investor Certificateholders hereunder or
in the Series Trust Assets for the Series for which such Master Servicer
acts in such capacity, (ii) the collectibility of any Series Receivable for
the Series for which such Master Servicer acts in such capacity or (iii)
the ability of such Master Servicer to perform its obligations hereunder,
under any applicable Supplement or any other Operative Documents to which
such Person is a party or by which it is bound.
(ii) Such Master Servicer will duly satisfy in all material respects
all obligations on its part to be fulfilled under or in connection with
each Series Receivable for the Series for which such Master Servicer acts
in such capacity, will maintain in effect all qualifications required under
Requirements of Law in order properly to service each such Series
Receivable and will comply in all material respects with all other
Requirements of Law in connection with servicing each such Series
Receivable.
(d) Extension or Amendment of Receivables. Except as permitted pursuant to
Sections 2.06(f) and 3.01(d), no Master Servicer will extend, amend or otherwise
modify (or consent or fail to object to any such extension, amendment or
modification by any Originator or the Seller) the terms of any then existing
Receivable.
(e) Protection of Certificateholders' Rights. Except as expressly permitted
hereunder or under any applicable Supplement, no Master Servicer will take any
action which could reasonably be expected to impair the rights of any of the
Certificateholders in any Receivable or Trust Asset for the Series for which it
acts as Master Servicer.
(f) Deposits to Lock-Box Accounts or Collection Account. No Master Servicer
will deposit or otherwise credit, or cause to be so deposited or credited, or
consent or fail to object to any such deposit or credit, to any Lock-Box Account
(or any related lock-box) or the Master Collection Account cash or cash proceeds
other than Collections of Receivables; provided that to the extent that any such
other funds are so deposited, it shall not constitute a breach of this Section
3.04(f) if such funds are removed from such account within two Business Days
after so deposited in such account. No Master Servicer will deposit or otherwise
credit, or cause to be so deposited or credited, or consent or fail to object to
any such deposit or credit, to the Series Collection Account for any Series cash
or cash proceeds other than Collections of the Series Receivables and other
Series Trust Assets, in each case, for the Series to which such account relates;
provided that to the extent that any such other funds are so deposited, it shall
not constitute a breach of this Section 3.04(f) if such funds are removed from
such account within two Business Days after so deposited in such account.
(g) Receivables Not To Be Evidenced by Promissory Notes. No Master Servicer
will take any action to cause any Receivable to be evidenced by any "instrument"
(as defined in the UCC of the State the law of which governs the perfection of
the interest in such Receivable created hereunder), except in connection with
its enforcement, in which event such Master Servicer shall deliver such
instrument to the Trustee as required pursuant to Section 2.01.
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(h) Reporting Requirements. Each Master Servicer will furnish to the
Trustee and the Series Enhancer, if any, for any Series for which it so acts:
(i) promptly after becoming aware thereof, notice of the occurrence of
any Significant Event, Potential Significant Event, Servicer Default or
event that, with the giving of notice or lapse of time or both, would
constitute a Servicer Default, in each case, with respect to such Series,
and, in the case of such a Servicer Default or incipient Servicer Default,
the statement of the chief financial officer or chief accounting officer of
such Master Servicer setting forth details of such occurrence, commencement
or event and the action which such Master Servicer has taken and proposes
to take with respect thereto; and
(ii) as soon as possible and in any event within two Business Days
after acquiring knowledge thereof, notice of the occurrence of any Material
Adverse Effect.
(i) Inspection of Books and Records. The Trustee and the Series Enhancer
and/or the Control Party for the applicable Series (or if such Control Party is
a designated percentage of the Investor Certificateholders for such Series, a
representative of such Control Party), independent accountants appointed by, or
other agents of, any of the foregoing, and the Seller shall have the right, upon
reasonable prior written notice to the Master Servicer for a Series, to visit
such Master Servicer and to discuss the affairs, finances and accounts of such
Master Servicer (as they relate to such Master Servicer's obligations under this
Agreement and the other Operative Documents relating to such Series) with, and
to be advised as to the same by, its officers, and to examine the books of
account and records of such Master Servicer as they relate to the Trust Assets
of such Series, to make or be provided with copies and extracts there from, and,
upon reasonable notice, to discuss the affairs, finances and accounts of such
Master Servicer with, and to be advised as to the same by, the independent
accountants of such Master Servicer (and by this provision such Master Servicer
authorizes such accountants to discuss such affairs, finances and accounts,
whether or not a representative of such Master Servicer is present, it being
understood that nothing contained in this Section 3.04(i) is intended to confer
any right to exclude any such representative from such discussions), all at such
reasonable times and intervals and to such reasonable extent during regular
business hours of such Master Servicer as the Trustee, such Series Enhancer,
such Control Party (or designated representative thereof) or such accountants or
agents appointed by any of the foregoing, as applicable, may desire (but, so
long as no Servicer Default is then outstanding or continuing, no more often
than once in any six month period).
(j) Fidelity Insurance. The Master Servicer for each Series shall maintain,
at its own expense, a fidelity insurance policy, with broad coverage with
responsible companies on all officers, employees or other persons acting on
behalf of the Master Servicer in any capacity with regard to the Receivables to
handle documents and papers related thereto. Any such fidelity insurance shall
protect and insure such Master Servicer against losses, including forgery,
theft, embezzlement, and fraud, and shall be maintained in an amount of at least
$10,000,000 or such lower amount as the applicable Control Parties may in their
commercially reasonable credit judgment designate to such Master Servicer from
time to time, and in a form acceptable to such applicable Control Parties in its
commercially reasonable judgement. No provision of this Section 3.04(j)
requiring such fidelity insurance shall diminish or relieve any such Master
Servicer from its duties and obligations as set forth in this Agreement or any
of the other Operative Documents. Any Master Servicer shall be deemed to have
complied with this provision if one of its respective Affiliates has such
fidelity policy coverage and, by the terms of such fidelity policy, the coverage
afforded thereunder extends to such Master Servicer. Upon the request of the
Trustee
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or any applicable Control Party, the Seller shall cause to be delivered to the
Trustee or such Control Party, as applicable, a certification evidencing
coverage under such fidelity policy. Any such insurance policy shall contain a
provision or endorsement providing that such policy may not be canceled or
modified in a materially adverse manner without ten (10) days' prior written
notice to the Trustee.
(k) Transactions With the Seller. The Master Servicer shall at all times
deal with the Seller in a manner consistent with Section 2.06(m).
SECTION 3.05. Reports and Records for the Trustee.
(a) Daily Report. On each Business Day, to the extent that any Collections
relating to two or more Series are directed to be made to one or more common
Lock-Box Accounts (or related lock-boxes) or, with respect to any Series, any
Split Payments are outstanding with respect to the Series Receivables
thereunder, the Master Servicers of each such Series shall deliver to the
Trustee by no later than 1:00 p.m. (New York time) on each Business Day a Daily
Report (whether or not otherwise required to deliver such a report pursuant to
the Supplement relating to such Series) specifying the amount of any Collections
relating to the Trust Assets of such Series received on the second preceding
Business Day, the Series Receivables to which they relate, the Lock-Box Account
to which they were deposited and the amounts and allocation of other funds
deposited into such Lock-Box Accounts on such date. In the event that the
Trustee is unable to reconcile the Daily Reports (together with any reports
delivered to it pursuant to the Intercreditor Agreement) received by it on any
Business Day with the amount of deposits received in the applicable Lock-Box
Accounts on such second preceding Business Day, the Trustee shall be entitled to
request a reconciliation from the Back-up Servicer prior to making allocations
thereof to the Series Collection Accounts of the affected Series.
(b) Monthly Report. On or before 3:00 p.m. (New York time) on the Series
Determination Date preceding the applicable Distribution Date for each Series,
each Master Servicer, with respect to each outstanding Series for which such
Person acts in such capacity, shall deliver to the Trustee a Monthly Report for
the preceding Calculation Period substantially in the form set forth in the
related Supplement for such Series.
(c) Monthly Reconciliations. On or prior to the 20th day of each month (or,
if such day is not a Business Day, on the immediately succeeding Business Day),
the Master Servicers shall deliver to the Trustee a report from the Back-up
Servicer reconciling the Collections received during the immediately preceding
month and the allocations thereof by the Master Servicers to the Monthly Reports
delivered by the Master Servicers with respect to such period.
SECTION 3.06. Servicing Report of Independent Public Accountants. (a) On or
before March 31 of each calendar year, beginning with March 31, 1998, each
Master Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to such Master Servicer or the
Seller) to furnish a report (addressed to the Trustee) to the Trustee, such
Master Servicer and each applicable Rating Agency and each applicable Series
Enhancer to the effect that they have examined certain documents and records
relating to the servicing of Receivables of such Series under this Agreement and
the related Supplement, compared the information contained in such Master
Servicer's certificates delivered pursuant to Section 3.05(b) during the period
covered by such report with such documents and records and that, on the basis of
such examination, such accountants are of the opinion that the servicing has
been conducted in compliance with the terms and conditions as set forth in
Articles III and IV and Section 8.06 of this Agreement and the applicable
provisions of the related Supplement, except for such exceptions as they believe
to be immaterial and such other exceptions as shall be set forth in such
statement.
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(b) On or before September 30, 1997, December 31, 1997, and March 31, 1998,
and on or before March 31st of each calendar year thereafter, each Master
Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to such Master Servicer or the
Seller) to furnish a report (addressed to the Trustee) to the Trustee, each
applicable Rating Agency and each applicable Series Enhancer to the effect that
they have compared the mathematical calculations of each amount set forth in
such Master Servicer's certificates delivered pursuant to Section 3.05(b) during
the prior calendar year with such Master Servicer's computer reports which were
the source of such amounts and that on the basis of such comparison, such
accountants are of the opinion that such amounts are in agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such statement.
SECTION 3.07. Notices to Wentworth and the Seller. In the event that
Wentworth or an Affiliate thereof is no longer acting as a Master Servicer with
respect to any Series, any Successor Servicer shall deliver or make available to
Wentworth and the Seller, each certificate and report required to be delivered
thereafter with respect to such Series pursuant to Section 3.05.
SECTION 3.08. Adjustments. If any Master Servicer makes a mistake with
respect to the amount of any Collection or payment and deposits, pays or causes
to be deposited or paid, an amount that is less than or more than the actual
amount thereof, such Master Servicer and each other Master Servicer that acts
for any other Series which benefitted or harmed by such mistake shall
appropriately adjust the amounts subsequently deposited into the applicable
Series Collection Accounts or Series Payment Accounts or paid out to reflect
such mistake and account for such adjustment in the Daily Reports for the date
of such adjustment. Any Receivable in respect of which a dishonored check is
received shall be deemed not to have been paid.
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.01. Rights of Certificateholders. The Investor Certificates of
each Series shall represent either debt of the Trust supported by the Series
Trust Assets of such Series or fractional undivided interests in the Series
Trust Assets for such Series, which, in either case, with respect to each
Series, shall entitle the holder thereof to receive, to the extent necessary to
make the required payments with respect to the Investor Certificates of such
Series at the times and in the amounts specified in the related Supplement, the
portion of Collections of the Series Receivables allocable to the Investor
Certificateholders of such Series pursuant to this Agreement and the related
Supplement from funds on deposit in the Series Collection Account for such
Series and funds on deposit in any related Series Account (collectively with
respect to each Series, the "Certificateholder Interest"); it being understood
that the Investor Certificates of any Series or Class shall not represent or
entitle the holder thereof to any interest in any Series Trust Assets for any
other Series or Class. The Seller Certificate of each Series for which it shall
be issued, if any, shall represent the ownership interest in the remainder, if
any, of the Trust Assets of such Series not allocated pursuant to this Agreement
or any Supplement to the Certificateholders' Interest of such Series, (the
"Seller Interest"); provided, however, that the Seller Certificate of any Series
shall not represent any interest in the Master Collection Account, the Series
Collection Account, the Series Payment Account or any other Series Account for
such Series, except as specifically provided in this Agreement or any Supplement
relating to such Series.
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SECTION 4.02. Establishment of the Master Collection Account and the
Lock-Box Accounts; Establishment of the Seller Split Payment Account. (a) On or
prior to the Closing Date, the Master Servicer, (x) for the benefit of the
Certificateholders, shall establish and maintain or cause to be established and
maintained in the name of the Collateral Trustee, on behalf of the Grantors
under the Intercreditor Agreement, with an Eligible Institution a segregated
account accessible by the Collateral Trustee (such account being the "Master
Collection Account" and such institution holding such account being the "Master
Collection Account Bank"), such account bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Grantors under
the Intercreditor Agreement, and (y) for the benefit of Company, shall establish
and maintain or cause to be established and maintained in the name of the
Collateral Trustee, with an Eligible Institution a segregated account accessible
by the Trustee (such account being the "Seller Split Payment Account" and such
institution holding such account being the "Split Payment Account Bank"), such
account bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Company. Except as otherwise
contemplated in Section 4.02(c), all Collections of Receivables of each Series
shall be remitted from the Lock-Box Accounts to the Master Collection Account on
a daily basis. Subject to the Intercreditor Agreement, the Collateral Trustee
shall possess all right, title and interest in and to all funds from time to
time on deposit in the Master Collection Account and in all proceeds thereof.
The Master Collection Account shall be under the sole dominion and control of
the Collateral Trustee, for the benefit of the Grantors under the Intercreditor
Agreement; provided, however, that, pursuant to the authority granted to each
Master Servicer in Section 3.01, but subject to the terms thereof and of any
applicable Supplement, the Master Servicers shall have the power with respect to
the amounts from time to time on deposit in the Seller Split Payment Account,
(i) so long as no Servicer Default shall have occurred and be continuing, to
withdraw money from the Seller Split Payment Account, or (ii) if a Servicer
Default shall have occurred and is continuing, to instruct the Trustee in
writing to withdraw money from the Seller Split Payment Account, and, in each
case, to remit or cause the Trustee to remit such amounts so withdrawn to the
applicable Claimants entitled thereto in accordance with the terms of the
relevant Settlement Purchase Agreements (but, in no event, later than two
Business Days after the withdrawal of such funds from the Seller Split Payment
Account). Except as expressly provided in this Agreement, no Master Servicer
shall have any or claim any right of setoff or banker's lien against, or any
right to otherwise deduct from, any funds held in the Master Collection Account
or the Seller Split Payment Account for any amount owed to it by the Trustee,
the Collateral Trustee, the Trust, any Certificate- holder, any Claimant or any
other Grantor under the Intercreditor Agreement.
If, at any time, the institution holding the Master Collection Account
ceases to be an Eligible Institution, the Master Servicer (or, if there is more
than one Master Servicer at such time, Wentworth), for the benefit of the
Certificateholders, shall within 30 Business Days establish a new Master
Collection Account meeting the conditions specified above with an Eligible
Institution, transfer any cash and/or any investments held therein or with
respect thereto to such new Collection Account and deliver to all relevant
Lock-Box Banks new Lock-Box Notices (with copies thereof to the Trustee)
referring to such new Master Collection Account. From the date such new Master
Collection Account is established, it shall be the "Master Collection Account."
If, at any time, the institution holding the Seller Split Payment Account
ceases to be an Eligible Institution, the Master Servicer (or, if there is more
than one Master Servicer at such time, Wentworth), shall within 30 Business Days
establish a new Seller Split Payment Account meeting the conditions specified
above with an Eligible Institution, transfer any cash held therein to such new
Seller Split Payment Account. From the date such new Seller Split Payment
Account is established, it shall be the "Seller Split Payment Account."
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Funds on deposit in the Master Collection Account, at the direction of the
Initial Master Servicer hereunder, shall be invested in overnight Eligible
Investments and all investment income earned therein shall be deemed to be the
property of the Seller, distributable therefrom on each Business Day
concurrently with the transfer of funds from the Master Collection Account in
accordance with the following sentence. Funds on deposit in the Master
Collection Account shall, at the directions of the Master Servicers and the
Company (or the Back-Up Servicer, if applicable) in accordance with the
information set forth on the respective Daily Reports, be transferred to the
Series Collection Account(s) for the Series to which they relate and to the
Split Payment Account, and all other funds on deposit therein and not relating
to the Trust Assets shall be removed therefrom and remitted to the Seller (or,
if otherwise provided in the Intercreditor Agreement, then as so directed under
the Intercreditor Agreement)), in each case, within two Business Days after
receipt of any Collections in the Master Collection Account. The Master
Servicers shall, or shall cause, the funds on deposit in the Seller Split
Payment Account to be remitted to the applicable Claimant in accordance with the
terms of the applicable Settlement Purchase Agreement. Funds on deposit in the
Series Accounts for each Series may be invested by the Trustee in Eligible
Investments in accordance with the provisions set forth in the respective
Supplements relating to such Series. Funds on deposit in the Master Collection
Account and the Seller Split Payment Account shall not be invested.
(b) The Company has, prior to the execution and delivery of this Agreement,
established, and from time to time hereafter shall establish deposit accounts
with one or more depository institutions in the sole name of the Company (each
such account, being a "Lock-Box Account" and each such institution holding such
an account being a "Lock-Box Bank") into which all Collections are to be
deposited by such Lock-Box Bank (as holder of the related lock-box or the
recipient of payments by electronic funds transfers) by the close of business on
each Business Day received, or on the next Business Day if not received on a
Business Day, or by the Master Servicer, the Seller or the Company, as
applicable, within two Business Days after such Person's receipt thereof. The
name, location and account number of each Lock-Box Account existing on the
Closing Date is attached to this Agreement on Schedule III attached hereto.
(c) The Company, the Seller, and the applicable Lock-Box Bank shall execute
and deliver to the Trustee (or, if such Lock-Box Account is commingled with the
Collections of other Series or the Revolving Credit Facility, the Collateral
Trustee) on or prior to (x) the date upon which Collections of the Series
Receivables of any Series have been directed to be made to such Lock-Box Account
(or the related lock-box) or (y) if later, the Series Issuance Date of any such
Series, a letter substantially in the form of Exhibit C hereto with respect to
each Lock-Box Account and or related lock-box (the "Lock-Box Notice"). Pursuant
to the applicable Lock-Box Notice, each Lock-Box Account and the lock-boxes
relating thereto have been assigned by the Company to the Seller and by the
Seller to the Trustee (or the Collateral Trustee, as applicable) and is
maintained in the name of the Trustee (or the Collateral Trustee, as applicable)
for the benefit of the Trust (and, to the extent applicable, the other Grantors
under the Intercreditor Agreement). Pursuant to each Lock-Box Notice, the
Seller, the Trustee (or the Collateral Trustee, as applicable) and the
applicable Lock-Box Bank have agreed that all funds deposited into the affected
Lock-Box Account, upon becoming available, be remitted to the Master Collection
Account on a daily basis; provided, that if the Lock- Box Account and the
related lock-box have been established so as to receive only Collections of the
Series Trust Assets for a particular Series (and no other Series or other
non-Trust Assets), then the applicable Lock-Box Notice related to such account
and lock-box may direct that funds deposited therein be remitted directly to the
Series Collection Account for such Series.
SECTION 4.03. Establishment of the Trustee's Account. On or prior to the
Closing Date, the Trustee shall establish and maintain or cause
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to be established and maintained in the name of the Trustee, on behalf of the
Trust, with an Eligible Institution, a special account (the "Trustee's Account")
for deposits by the Seller or any of the Master Servicers pursuant to the terms
of each Supplement. The Trustee's Account initially shall be established at PNC
Bank, National Association, 1600 Market Street, 30th Floor, Philadelphia,
Pennsylvania 19103.
If, at any time, the institution holding the Trustee's Account ceases to be
an Eligible Institution, the Trustee shall within 30 Business Days establish a
new Trustee's Account with an Eligible Institution, transfer any cash and/or any
investments held therein or with respect thereto to such new Trustee's Account.
From the date such new Trustee's Account is established, it shall be the
"Trustee's Account."
SECTION 4.04. Other Payments. Indemnification payments and other amounts
not constituting Collections received by the Trustee from time to time, if any,
shall be paid by the Trustee to the intended beneficiary of such payment or
amount in accordance with the written instructions of the Person remitting the
relevant payment or amount to the Trustee, and in the event that such Person
shall fail to identify the intended beneficiary or to provide the Trustee with
written payment instructions, the Trustee shall hold such payment or amount in
the Master Collection Account until such Person or any Applicable Master
Servicer shall have provided the Trustee with the necessary information to make
a distribution thereof.
ARTICLE V
DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS
Distributions shall be made to, and reports shall be provided to,
Certificateholders of each Series as set forth in the applicable Supplement.
ARTICLE VI
THE CERTIFICATES
SECTION 6.01. The Certificates. The Certificates of any Series or Class
shall be issued in fully registered definitive form and shall be in
substantially the form of the exhibits with respect thereto attached to the
applicable Supplement and shall, upon receipt of a Seller Order to such effect
executed by the Seller, be executed, authenticated and delivered by the Trustee
to the Persons designated in such Seller Order as provided in Section 6.02. The
Investor Certificates for any Series shall be issued upon initial issuance as
one or more Investor Certificates, and shall represent the portion of the
Certificateholders' Interest allocable to such Series. The Seller Certificate,
if any, for any Series shall be a single certificate and shall represent the
Seller Interest allocable to such Series, if any. Each Certificate shall be
executed by manual or facsimile signature on behalf of the Trust by a
Responsible Officer of the Trustee. Certificates bearing the manual or facsimile
signature of the individual who was, at the time when such signature was
affixed, a Responsible Officer authorized to sign on behalf of the Trust shall
not be rendered invalid, notwithstanding that such individual thereafter ceased
to be a Responsible Officer so authorized. Except as otherwise specified in the
applicable Supplement, Investor Certificates of any Series shall be issued in
minimum denomination of $100,000 and integral multiples of $100,000 in excess of
that amount. No Certificates shall be entitled to any benefit under this Agree
ment or the applicable Supplement or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication in substantially the
form provided for herein exe cuted by or on behalf of the Trustee by a
Responsible Officer of the Trustee, and such certificate upon any Certificate
shall be conclusive evidence, and the only evidence, that such Certificate has
been duly
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authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
SECTION 6.02. Authentication of Certificates. In accordance with any Seller
Order directing the Trustee to do so, the Trustee shall execute, authenticate
and deliver the Investor Certificates of each Series to the Persons specified in
such Seller Order against payment to the Trustee of the purchase price therefor.
To the extent provided in any applicable Supplement relating to any Series and
any Seller Order instructing the Trustee to do so, the Trustee shall execute,
authenticate and deliver the Seller Certificate of any Series, if any, to the
Seller simultaneously with its initial delivery of Investor Certificates of such
Series to be issued pursuant to such Supplement.
SECTION 6.03. Registration of Transfer and Exchange Certificates. (a) The
Trustee shall cause to be kept at the office or agency to be maintained in
accordance with the provisions of Section 11.15 a register (the "Certificate
Register") in which, subject to such reasonable regulations as it may prescribe,
a transfer agent and registrar (which may be the Trustee) (the "Certificate
Registrar and Transfer Agent") shall provide for the registration of the
Certificates and of transfers and exchanges of the Certificates as herein
provided. The Certificate Registrar and Transfer Agent shall initially be the
Trustee.
The Trustee (or, if the Trustee is then acting as Certificate Registrar and
Transfer Agent, the Majority Control Parties) may revoke the appointment of and
remove any Person serving as Certificate Registrar and Transfer Agent if the
Trustee (or the Majority Control Parties, as applicable) determines in its or
their sole discretion that such Person failed to perform its obligations under
this Agreement in any material respect. Any Person serving as Certificate
Registrar and Transfer Agent shall be permitted to resign as Certificate
Registrar and Transfer Agent upon 30 days' written notice to the Seller, the
Trustee and the Master Servicer; provided, however, that such resignation shall
not be effective and such Person shall continue to perform its duties as
Certificate Registrar and Transfer Agent until the Trustee (or the Majority
Control Parties, as applicable) has appointed a successor Certificate Registrar
and Transfer Agent reasonably acceptable to the Seller.
Subject to the restrictions herein and in the applicable Investor
Certificate, upon surrender for registration of transfer of any Investor
Certificate at any office or agency of the Certificate Registrar and Transfer
Agent maintained for such purpose, the Trustee shall execute, authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Investor Certificates (of the same Series and Class) in authorized
denominations of like aggregate fractional undivided interests in the
Certificateholders' Interest in such Series.
At the option of an Investor Certificateholder, Investor Certificates may
be exchanged for other Investor Certificates (of the same Series and Class) of
authorized denominations of like aggregate fractional undivided interests in the
Certificateholders' Interest in such Series, upon surrender of the Investor
Certificates to be exchanged at any such office or agency. Whenever any Investor
Certificates are so surrendered for exchange, the Trustee shall execute,
authenticate and deliver, the Investor Certificates which the Certificateholder
making the exchange is entitled to receive.
In addition to the other restrictions on transfer set forth herein, in any
applicable Supplement or in any applicable Certificate, every Investor
Certificate presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in a form satisfactory
to the Trustee and the Certificate Registrar and Transfer Agent duly executed by
the Certificateholder thereof or his attorney-in-fact duly authorized in writing
and the Seller.
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Each Investor Certificate shall be registered at all times as herein
provided, and any transfer or exchange of such Investor Certificate will be
valid for purposes hereunder only upon registration of such transfer or exchange
by the Certificate Registrar and Transfer Agent as provided herein.
No service charge shall be made for any registration of transfer or
exchange of any Investor Certificate, but the Certificate Registrar and Transfer
Agent may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any such transfer or exchange.
All Investor Certificates surrendered for registration of transfer or
exchange, or for payment, shall be canceled and disposed of in a manner
satisfactory to the Trustee.
The Seller Certificates of any applicable Series shall be held at all times
by the Seller (or any successor thereto).
(b) The Certificate Registrar and Transfer Agent will maintain at its
expense an office or offices or agency or agencies where Investor Certificates
may be surrendered for registration of transfer or exchange.
SECTION 6.04. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any
mutilated Certificate is surrendered to the Certificate Registrar and Transfer
Agent, or the Certificate Registrar and Transfer Agent receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate; provided that
a written statement of such destruction, loss or theft from any institutional
Certificateholder shall constitute satisfactory evidence thereof, and (b) there
is delivered to the Certificate Registrar and Transfer Agent, the Trustee and
the Seller such indemnity as may be required by them to save each of them
harmless, provided that an unsecured agreement of indemnity from any
institutional Certificateholder shall be sufficient indemnity, then, in the
absence of notice to the Trustee that such Certificate has been acquired by a
bona fide purchaser, the Trustee shall execute, authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Series tenor and (in the case of any new
Investor Certificate of any Series) fractional undivided interest in such
Series. In connection with the issuance of any new Certificate under this
Section 6.04, the Trustee or the Certificate Registrar and Transfer Agent may
require the payment by the Certificateholder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto. Any
duplicate Certificate issued pursuant to this Section 6.04 shall constitute
complete and indefeasible evidence of ownership in the Series of the Trust to
which it relates, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
SECTION 6.05. Persons Deemed Owners. At all times prior to due presentation
of a Certificate for registration of transfer, the Trustee, the Paying Agent,
the Certificate Registrar and Transfer Agent and any agent of any of them shall
treat the Person in whose name any Certificate is registered as the owner of
such Certificate for all purposes whatsoever (such determination of ownership to
be made for purposes of distributions pursuant to the terms hereof and of the
applicable Supplement as of the applicable Record Date for the Certificates of
the applicable Series), and neither the Trustee, the Certificate Registrar and
Transfer Agent nor any agent of any of them shall be affected by any notice to
the contrary. Notwithstanding the foregoing, in determining whether the
requisite Certificateholders of the requisite fractional undivided interests
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Certificates owned by any Affiliated Entity shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction,
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notice, consent or waiver, only Certificates which the Trustee knows to be so
owned shall be so disregarded. Certificates so owned which have been pledged in
good faith shall not be disregarded and may be regarded as outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right to so
act with respect to such Certificates and that the pledgee is not an Affiliated
Entity.
SECTION 6.06. Appointment of Paying Agent. The Paying Agent shall make
distributions to Investor Certificateholders of each Series, the Applicable
Master Servicer for each Series, the Back-up Servicer, the Trustee and to the
extent applicable, Series Enhancers, from the Series Payment Account for each
Series pursuant to the terms of each Supplement and shall report the amounts of
such distributions to the Trustee. Any Paying Agent shall have the power,
revocable by the Trustee, to withdraw funds from each of the Series Collection
Accounts, and the Series Payment Accounts for each Series, in each case, for the
purpose of making the distributions referred to above. The Trustee may revoke
such power and remove the Paying Agent if the Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Agreement in any material respect. The Paying Agent shall initially
be PNC Bank, National Association. In the event that PNC Bank, National
Association shall no longer be the Paying Agent, the Trustee shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company). The
Trustee shall act as Paying Agent until a successor is appointed. The Trustee
shall cause each successor Paying Agent or additional Paying Agent to execute
and deliver to the Trustee an instrument in which such successor or additional
Paying Agent shall agree with the Trustee that, as Paying Agent, such successor
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Investor Certificateholders, the Applicable Master Servicer, the Back-up
Servicer, the Trustee and to the extent applicable, the Series Enhancers in
trust for the benefit of the Persons entitled to payment thereof, until such
sums shall be paid to such Persons. The Paying Agent shall return all funds
remaining unclaimed for three months or more to the Trustee. The Trustee shall
retain such unclaimed amounts solely for the account of the affected
Certificateholder in the applicable Series Collection Account until the
Collection Date for such Series would otherwise have occurred but for such
unclaimed payments by the Certificateholders of such Series at which time such
unclaimed funds will be distributed to the Seller and the affected
Certificateholder shall look solely to the Seller for reimbursement thereof.
Upon removal of a Paying Agent, such Paying Agent shall also return all funds in
its possession to the Trustee.
The Trustee agrees to pay any Paying Agent which the Trustee from time to
time may appoint reasonable compensation for such Paying Agent's services under
this Section 6.06, which fee shall be payable by the Trustee out of the Trustee
Fee payable to it in accordance with the applicable Supplement relating to the
Series for which such Paying Agent shall have been appointed to act in such
capacity.
The provisions of Sections 11.01, 11.02, 11.03 and 11.04 shall apply to the
Trustee also in its role as Paying Agent, for so long as the Trustee shall act
as Paying Agent.
SECTION 6.07. Access to List of Certificateholders' Names and Addresses.
The Trustee will furnish or cause to be furnished by the Certificate Registrar
and Transfer Agent to the Applicable Master Servicer, any Investor
Certificateholder of any Series, any Series Enhancer for any Series, the Seller
or the Paying Agent, within five Business Days after receipt by the Trustee of a
written request therefor from such Applicable Master Servicer, the Seller, such
Investor Certificateholder, such Series Enhancer, or the Paying Agent,
respectively, a list of the names and addresses of the Certificateholders.
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Every Certificateholder, by receiving and holding a Certificate, agrees
that none of the Trustee, the Certificate Registrar and Transfer Agent, the
Seller, any Applicable Master Servicer, the Back-up Servicer, the Company, any
Series Enhancer or any of their respective agents, shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Certificateholders hereunder, regardless of the sources from which such
information was derived.
SECTION 6.08. Authenticating Agent. (a) The Trustee may appoint one or more
authenticating agents with respect to the Certificates (or any Series
Certificates) which shall be authorized to act on behalf of the Trustee in
authenticating such Certificates in connection with the issuance, execution,
delivery, registration of transfer, exchange or repayment of such Certificates.
Whenever reference is made in this Agreement to the authentication of any
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an authenticating agent and a certificate of authentication executed on behalf
of the Trustee by an authenticating agent. Each authenticating agent must be
acceptable to the Seller.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any power or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written notice
of resignation to the Trustee and to the Seller. The Trustee may at any time
terminate the agency of an authenticating agent by giving notice of termination
to such authenticating agent and to the Seller. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time an authenticating
agent shall cease to be acceptable to the Trustee or the Seller, the Trustee may
promptly appoint a successor authenticating agent. Any successor authenticating
agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an authen ticating agent. No successor authenticating
agent shall be appointed unless acceptable to the Trustee and the Seller.
(d) The Trustee agrees to pay to each authenticating agent from time to
time reasonable compensation for its services under this Section 6.08 out of the
Trustee Fees payable to it pursuant to any applicable Supplement relating to any
Certificates of any Series for which such authenticating agent shall have been
appointed to act in such capacity.
(e) The provisions of Sections 11.01, 11.02 and 11.03 shall be applicable
to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.08, the
Certificates may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternate cer tificate of authentication in substantially
the following form:
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This is one of the Certificates described in the Pooling and Servicing
Agreement.
------------------------------
------------------------------
as Authenticating Agent
for the Trustee
By:
---------------------------
Authorized Officer
SECTION 6.09. New Issuances.
(a) The Seller may from time to time direct the Trustee, on behalf of the
Trust, to issue one or more new Series of Certificates pursuant to a Supplement.
The Investor Certificates of all outstanding Series shall be equally and ratably
entitled as provided herein to the benefits of this Agreement without
preference, priority or distinction, all in accordance with the terms and
provisions of this Agreement and the applicable Supplement except, with respect
to any Series or Class, as provided in the related Supplement.
(b) On or before the Series Issuance Date relating to any new Series, the
parties hereto will execute and deliver a Supplement which will specify the
Principal Terms of such new Series. The terms of such Supplement may modify or
amend the terms of this Agreement solely as applied to such new Series. The
obligation of the Trustee to issue the Certificates of such new Series and to
execute and deliver the related Supplement is subject to the satisfaction of the
following conditions:
(i) on or before the 30th Business Day immediately preceding the
Series Issuance Date, the Seller shall have given the Trustee, each Master
Servicer and each Rating Agency rating any Series of Certificates written
notice of such proposed issuance and the Series Issuance Date;
(ii) the Seller shall have delivered to the Trustee the related
Supplement, in form and substance satisfactory to the Trustee, executed by
each party hereto other than the Trustee;
(iii) each Rating Agency rating any Series of Certificates shall have
notified the Seller and the Trustee in writing that such issuance will not
result in a reduction or withdrawal of the rating of any outstanding Series
or Class with respect to which it acts as a Rating Agency;
(iv) such issuance will not result in the occurrence of a Significant
Event, a Potential Significant Event, a Series Significant Event with
respect to any Series, or any event that, with the giving of notice or
lapse of time or both, would constitute such a Series Significant Event,
and the Seller shall have delivered to the Trustee an Officer's
Certificate, dated the Series Issuance Date (upon which the Trustee may
conclusively rely), to the effect that such issuance will not result in the
occurrence of any such Significant Event, Potential Significant Event,
Series Significant Event or other event and will not result in the
occurrence of any such Significant Event, Potential Significant Event,
Series Significant Event or other event at any time in the future;
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(v) the Seller shall have delivered to the Trustee an Opinion of
Counsel to the effect that the issuance of the Certificates of such Series
(A) has been, or need not be, registered under the Act and will not result
in the requirement that any other Series of Investor Certificates not
registered under the Act be so registered (unless the Seller has elected,
in its sole discretion and at its sole expense, to register such
Certificates), and (B) will not result in the Trust becoming subject to
registration as an investment company under the Investment Company Act and
(C) will not require this Agreement or the related Supplement to be
qualified under the Trust Indenture Act of 1939, as amended;
(vi) the Seller shall have delivered to the Trustee a Tax Opinion,
dated the Series Issuance Date, with respect to such issuance;
(vii) the Seller shall have satisfied such other conditions to the
issuance of any new Series as may be specified in any Supplement; and
(viii) the Seller shall have delivered to the Trustee copies of the
Investor Letters (or any applicable certificate purchase agreement
containing similar representations, warranties and undertakings as those
set forth in the Investor Letters), in each case, executed by each
Certificateholder.
Upon satisfaction of the above conditions, the Trustee shall execute the
Supplement and, upon receipt of, and in accordance with the terms of, a Seller
Order to do so, shall execute, authenticate and deliver the Certificates to the
Persons specified in such Order against receipt of payment by the Trustee, for
the benefit of the Trust, of the purchase price (or in the case of the Seller,
the Series Receivables for such Series) for such Certificates. Notwithstanding
the provisions of this Section 6.09(b), prior to the execution of any
Supplement, the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such Supplement is authorized or permitted
by this Agreement and any Supplement related to any outstanding Series. The
Trustee may, but shall not be obligated to, enter into any such Supplement which
affects the Trustee's own rights, duties or immunities under this Agreement.
Notwithstanding anything contained herein or in any Supplement to the contrary,
no Investor Certificates may be issued to (u) any Foreign Person, (v) any
Pass-Through Entity, (w) any Person that is, or is required to be (regardless of
whether it in fact is), a registered "investment company" under the Investment
Company Act or is excluded from the definition of "investment company" under the
Investment Company Act pursuant to Section 3(c)(1) or Section 3(c)(7) thereof to
the extent that such Person would beneficially own, at the time of (and after
giving to) such transfer, 10% or more of either (1) the Aggregate Principal
Balance of the Certificates of any Series outstanding at such time or (2) the
Aggregate Principal Balance of all Certificates of all Series outstanding at
such time, (x) any other Person which for purposes of the Investment Company Act
(i) was formed for the purpose of investing in the Certificates or would
otherwise be treated as more than one Person for purposes of determining the
number of owners of the Certificates issued by the Trust or (ii) would cause the
number of beneficial owners of the securities issued by the Trust (other than
short term paper) to exceed 100, (y) 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, or would cause the assets of the
Trust to be deemed to be assets of any "Employee Benefit Plan" for purposes of
ERISA or to be assets of a "Plan" for purposes of Section 4975 of the Internal
Revenue Code or (z) any Person if such issuance to such Person would cause the
Trust to have more than 85 beneficial owners (other than the Seller, the Company
or any Affiliate of
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either of the foregoing) of the Certificates issued by the Trust (after
application of applicable ownership and anti-avoidance rules under Section 7704
of the Internal Revenue Code and the United States Treasury Department
regulations thereunder or would cause the Trust (or any portion thereof) to be
classified as a publicly traded partnership for federal income tax purposes
(and, in each of the cases in clauses (u), (v), (w), (x) (other than subclause
(ii) thereof, and (y), each prospective purchaser shall be required to represent
and warrant that it is not such a Person prior to the issuance of any such
Certificate to it and to the extent any such representation and warranty is
incorrect such issuance shall be rescinded and deemed not to have occurred);
provided that the Trustee shall have no duty to perform any independent
investigation with respect to any representation or warranty by a prospective
purchaser as to the matters set forth in clauses (u), (v), (w), (x) (other than
subclause (ii) thereof, and (y).
SECTION 6.10. Transfer of Certificates. The obligation of the Trustee to
execute, authenticate and issue any Investor Certificate to any transferee
pursuant to any written instrument of transfer or other direction to do so
received by the Trustee pursuant to Section 6.03 shall be subject to the
satisfaction of the following conditions on or prior to the proposed date of
such transfer (the "Transfer Date"):
(i) the Trustee and the Certificate Registrar shall have received a
written instrument of transfer of the subject Investor Certificates
executed by the transferring Certificateholder (or its attorney-in-fact,
duly authorized), and the original Certificates which are the subject of
such transfer;
(ii) the Seller shall have delivered to the Trustee an Opinion of
Counsel of the Seller or the transferring or transferee Certificateholder,
dated as of the Transfer Date, to the effect that the transfer of such
Investor Certificates of such Series (A) does not violate the Act, (B) will
not result in the Trust becoming subject to registration as an investment
company under the Investment Company Act and (C) will not require this
Agreement or the related Supplement to be qualified under the Trust
Indenture Act of 1939, as amended;
(iii)the Seller shall have delivered to the Trustee a Tax Opinion from
counsel of the Seller or the transferring or transferee Certificateholder,
dated as of the Transfer Date, with respect to such transfer;
(iv) the Seller shall have delivered to the Trustee copies of the
Investor Letters executed by each such transferee Certificateholder; and
(v) the Seller shall have satisfied such other conditions to the
transfer thereof as may be specified in any Supplement.
Notwithstanding anything contained herein or in any Supplement to the contrary,
no Investor Certificates may be transferred to (u) a Foreign Person, (v) any
Pass-Through Entity, (w) any Person that is, or is required to be (regardless of
whether it in fact is), a registered "investment company" under the Investment
Company Act or is excluded from the definition of "investment company" under the
Investment Company Act pursuant to Section 3(c)(1) or Section 3(c)(7) thereof to
the extent that such Person would beneficially own, at the time of (and after
giving to) such transfer, 10% or more of either (1) the Aggregate Principal
Balance of the Certificates of any Series outstanding at such time or (2) the
Aggregate Principal Balance of all Certificates of all Series outstanding at
such time, (x) any other Person which for purposes of the Investment Company Act
(i) was formed for the purpose of investing in the Certificates or would
otherwise be treated as more than one Person for purposes of determining the
number of owners of the Certificates issued by the
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Trust or (ii) would cause the number of beneficial owners of the securities
issued by the Trust (other than short term paper) to exceed 100, (y) 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, or (z) any Person if such issuance to such Person would cause the Trust to
have more than 85 beneficial owners (other than the Seller, the Company or any
Affiliate of either of the foregoing) of the Certificates issued by the Trust
(after application of applicable ownership and anti-avoidance rules under
Section 7704 of the Internal Revenue Code and the United States Treasury
Department regulations thereunder) or would cause the Trust (or any portion
thereof) to be classified as a publicly traded partnership for federal income
tax purposes (and, in each of the cases in clauses (u), (v), (w), (x) (other
than subclause (ii) thereof), and (y), each prospective transferee shall be
required to represent and warrant that it is not such a Person prior to the
transfer of any such Certificate to it and to the extent any such representation
and warranty is incorrect such transfer shall be rescinded and deemed not to
have occurred); provided that the Trustee shall have no duty to perform any
independent investigation with respect to any representation or warranty by a
prospective purchaser as to the matters set forth in clauses (u), (v), (w), (x)
(other than subclause (ii) thereof, and (y).
Upon satisfaction of the above conditions, the Trustee shall execute,
authenticate and deliver the Investor Certificates so transferred to the Persons
so designated in the written order of transfer (and shall destroy the earlier
Certificates surrendered to it for transfer) and shall notify and register such
transfer with the Certificate Registrar and Transfer Agent.
ARTICLE VII
OTHER MATTERS RELATING TO THE SELLER
SECTION 7.01. Obligations Not Assignable. The obligations of the Seller
hereunder shall not be assignable nor shall any Person succeed to the
obligations of the Seller hereunder.
SECTION 7.02. Limitations on Liability. None of the members, managers,
officers, employees, agents, or holders of limited liability company interests
of or in the Seller, past, present or future, shall be under any liability to
the Trust, the Trustee, the Certificateholders or any other Person for any
action taken or for refraining from the taking of any action in such capacities
or otherwise pursuant to this Agreement or for any obligation or covenant under
this Agreement, it being understood that, with respect to the Seller, this
Agreement and the obligations created hereunder shall be, to the fullest extent
permitted under applicable law, solely the limited liability company obligations
of the Seller. The Seller and any member, manager, officer, employee, agent, or
holder of a limited liability company interest of or in the Seller may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person (other than the Seller or any Affiliate thereof)
respecting any matters arising hereunder.
SECTION 7.03. Indemnification by the Seller. The Seller hereby agrees to
indemnify the Trustee (in its individual and trust capacities), the Trust, the
Investor Certificateholders for any Series, the Series Enhancer for any Series
and such other Persons as may be named as indemnified parties in the Supplement
for any Series from and against such claims, losses and liabilities as may be
specified in the applicable Supplement, and subject to such limitations as may
be set forth therein.
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ARTICLE VIII
OTHER MATTERS RELATING TO THE APPLICABLE MASTER SERVICERS
SECTION 8.01. Liability of Each Applicable Master Servicer. Each Applicable
Master Servicer shall be liable under this Agreement and the applicable
Supplements for the Series for which such Person acts as Master Servicer only to
the extent of the obligations specifically undertaken by it in its capacity as
Master Servicer with respect to such Series.
SECTION 8.02. Merger or Consolidation of, or Assumption of the Obligations
of, any Applicable Master Servicer. No Master Servicer shall consolidate with or
merge into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person unless:
(a) (i) the Person formed by such consolidation or into which such Master
Servicer is merged or the Person which acquires by conveyance or transfer the
properties and assets of such Master Servicer substantially as an entirety shall
be, if such Master Servicer is not the surviving entity, a corporation, limited
partnership or limited liability company organized and existing under the laws
of the United States of America or any State or the District of Columbia, and
such entity shall have expressly assumed, by an agreement supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, the performance of every covenant and obligation of such Master
Servicer hereunder and under the Supplements for each of the Series for which
such Person shall act as Master Servicer; (ii) if such Master Servicer is an
Affiliated Entity, the surviving entity of such merger or conveyance or transfer
of property and assets is a consolidated subsidiary of Wentworth; and (iii) such
Master Servicer shall have delivered to the Trustee an Officer's Certificate and
an Opinion of Counsel each in form reasonably satisfactory to the Trustee and
stating that such consolidation, merger, conveyance or transfer complies with
this Section 8.02 and that all conditions precedent herein provided for relating
to such transaction have been complied with;
(b) each Rating Agency rating any Series for which such Master Servicer
shall act in such capacity shall have notified the Seller, such Master Servicer
and the Trustee, in writing, that such merger or consolidation or conveyance or
transfer, as the case may be, will not result in a reduction or withdrawal of
the rating of any such outstanding Series or Class of such Series; and
(c) the corporation, limited partnership or limited liability company
formed by such consolidation or into which such Master Servicer is merged or
which acquires by conveyance or transfer the properties and assets of such
Master Servicer substantially as an entirety shall have all licenses and
approvals of Governmental Authorities required to service the Series Receivables
for each Series of Certificates for which such Master Servicer shall act in such
capacity, except to the extent the failure to have any such license does not
have, and could not reasonably be expected to have, a material adverse effect on
its ability to perform the obligations of Master Servicer hereunder and under
any applicable Supplement.
SECTION 8.03. Limitations on Liability. None of the members, managers,
officers, directors, partners, employees, agents, shareholders, or holders of
limited liability company interests, as applicable, of or in any Master
Servicer, past, present or future, shall be under any liability to the Trust,
the Trustee, the Certificateholders or any other Person for any action taken or
for refraining from the taking of any action in such capacities or otherwise
pursuant to this Agreement or for any obligation or covenant under this
Agreement, it being understood that, with respect to any such Master Servicer,
this Agreement and the obligations created hereunder shall be, to the fullest
extent permitted under applicable law, solely the corporate, partnership or
limited liability company, as applicable, obligations of such
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Master Servicer. Each Master Servicer and any member, manager, officer,
director, partner, employee, agent, shareholder or holder of limited liability
company interest of or in such Master Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
(other than any Affiliate thereof) respecting any matters arising hereunder. No
Master Servicer shall be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties as Master Servicer in
accordance with this Agreement and which in its reasonable judgment may involve
it in any material expense or liability.
SECTION 8.04. Indemnification by Master Servicers. Each Master Servicer, if
an Affiliated Entity, hereby agrees to indemnify the Trustee (in its individual
and trust capacities), the Trust, the Investor Certificateholders for any
Series, the Series Enhancer for any Series and such other Persons as may be
named as indemnified parties in the Supplement for any Series against such
claims, losses and liabilities as may be specified in the applicable Supplement,
and subject to such limitations as may be set forth therein.
SECTION 8.05. Master Servicer Not to Resign. No Master Servicer shall
resign from the obligations and duties imposed on it hereby and under any
applicable Supplement except upon determination that (a) its performance of its
duties hereunder and thereunder is no longer permissible under applicable law
and (b) there is no reasonable action which such Master Servicer could take to
make its performance of its duties hereunder permissible under applicable law.
Any determination permitting the resignation of such Master Servicer shall be
evidenced by an Opinion of Counsel who is not an employee of such Master
Servicer or any Affiliate of such Master Servicer with respect to clause (a)
above, delivered to, and in form reasonably satisfactory to, the Trustee. No
resignation shall become effective until the Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of such Master Servicer
in accordance with Section 10.02 hereof. If within 60 days of the date of the
determination that such Master Servicer may no longer act as a Master Servicer
hereunder for any reason the Trustee has not appointed a Successor Servicer, the
Trustee shall serve as Successor Servicer hereunder with respect to those Series
for which such resigning Master Servicer acted in such capacity. Notwithstanding
the foregoing, the Trustee shall, if it is legally unable so to act, petition a
court of competent jurisdiction to appoint any established institution that is
an Eligible Master Servicer (other than the Trustee) as the Successor Servicer
with respect to such Series hereunder.
SECTION 8.06. Examination of Records. Each Master Servicer shall indicate
in its records that the Series Receivables and other Series Trust Assets for the
Series for which it acts in such capacity have been Transferred to the Trustee,
on behalf of the Trust, pursuant to this Agreement and each applicable
Supplement for the benefit of the Certificateholders of the applicable Series
secured thereby.
ARTICLE IX
SIGNIFICANT EVENTS
SECTION 9.01. Significant Events. If any one of the following events shall
occur:
(a) an Insolvency Event shall occur with respect to the Seller, the Company
or the Trust; or
(b) the Trust shall become subject to the registration requirements of the
Investment Company Act; or
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(c) with respect to any Series, any Series Significant Event set forth in
the related Supplement;
then, subject to applicable law, in the case of any event described in clause
(a) or (b), a Significant Event shall occur with respect to all outstanding
Series without any notice or other action on the part of the Trustee or the
Certificateholders immediately upon the occurrence of such event, and in the
case of any Series Significant Event, such Series Significant Event shall give
rise to a Significant Event only for such Series and the applicable Supplement
shall set forth provisions which shall determine whether such Series Significant
Event shall constitute a Significant Event for such Series.
The Trustee, upon learning of the occurrence of any event described in
clause (a) or (b) or of any Series Significant Event, shall promptly notify each
Series Enhancer and each Rating Agency for any Series affected thereby.
SECTION 9.02. Additional Rights Upon the Occurrence of any Significant
Event. Upon the occurrence and during the continuance of any Significant Event,
in addition to all other rights and remedies under this Agreement, any
applicable Supplement or otherwise and all other rights and remedies provided
under the UCC of all applicable jurisdictions and other applicable laws (which
rights shall be cumulative):
(a) Each of the Applicable Master Servicers, at the direction of the
Trustee, and the Trustee may, and shall upon the direction of the Majority
Control Parties, in the case of a Significant Event described in Section 9.01(a)
or (b), or the Majority Certificateholders for any such affected Series, in the
case of a Significant Event described in Section 9.01(c), exercise any and all
rights and remedies of the Seller under or in connection with the Seller
Purchase Agreement, including, without limitation, any and all rights of the
Seller to demand or otherwise require payment of any amount under, or
performance of any provision of, the Seller Purchase Agreement.
(b) Upon the occurrence of a Significant Event described in Section 9.01
(a) or (b), all amounts owing under the Investor Certificates of all outstanding
Series shall automatically become due and payable without any action or notice
on the part of the Certificateholders or the Trustee. Subject to the terms of
each applicable Supplement, upon the occurrence and during the continuance of a
Significant Event described in Section 9.01(c), the Trustee, at the direction of
the applicable Control Party for each such Series, may declare all amounts owing
under the Investor Certificates of such Series to be immediately due and
payable. Subject to the limitations thereon set forth in any applicable
Supplement for any Series in respect of which such amounts have been so declared
immediately due and payable, the Trustee, at the direction of the Control
Parties for each affected Series, shall, or shall cause the Applicable Master
Servicers to, foreclose upon (to the extent the Transfers hereunder are not
deemed to be sales and/or absolute transfers) and/or sell the Series Trust
Assets for any such affected Series for the benefit of the Certificateholders of
such Series and apply such monies in accordance with the terms of the applicable
Supplement for such Series.
(c) The Trustee shall have any other additional rights with respect to any
particular Series and/or Series Trust Assets as shall be set forth in the
Supplement relating thereto.
SECTION 9.03. Certain Specific Rights Upon the Occurrence of an Insolvency
Event. If an Insolvency Event with respect to the Seller occurs, the Seller
shall make no further transfers, substitutions or exchanges of Receivables of or
to the Trust and shall promptly give notice to the Trustee, who shall promptly
forward such notice to the Investor Certificateholders, the Series Enhancers and
each Master Servicer of such event. Notwithstanding the foregoing, Receivables
transferred to the Trust prior to the occurrence of
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such Insolvency Event and Collections in respect of such Receivables shall
continue to be part of the Trust.
ARTICLE X
SERVICER DEFAULTS
SECTION 10.01. Servicer Defaults. Upon the occurrence of a Servicer Default
with respect to any Series, and for so long as such Servicer Default shall not
have been remedied or waived, the Trustee, at the direction of the Majority
Certificateholders of such Series, by notice then given in writing to the
Applicable Master Servicer (such notice being a "Termination Notice"), shall
terminate all but not less than all of the rights and obligations of such
Applicable Master Servicer as servicer under this Agreement and any related
Supplement with respect to each such Series with respect to which such notice
was so given. The Trustee shall not be deemed to have knowledge of a Servicer
Default with respect to any Series until a Responsible Officer has received
written notice thereof.
After receipt by any Applicable Master Servicer of a Termination Notice,
and on the date that a Successor Servicer shall have been appointed by the
Trustee pursuant to Section 10.02, all authority and power of such Master
Servicer under this Agreement and any Supplements for any Series for which such
Person acts as Master Servicer shall pass to and be vested in such Successor
Servicer (a "Service Transfer"); and, without limitation, the Trustee is hereby
authorized, empowered and instructed (upon the failure of such Master Servicer
to cooperate) to execute and deliver, on behalf of such Master Servicer, as
attorney-in-fact or otherwise, all documents and other instruments upon the
failure of such Master Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such Service Transfer. Each Master
Servicer hereby agrees to cooperate, at its expense (other than with respect to
out-of-pocket costs and expenses payable to third parties (other than Affiliated
Entities or their Affiliates or employees), which amounts shall be reimbursed by
the Successor Servicer), with the Trustee and such Successor Servicer in (i)
effecting the termination of the responsibilities and rights of such Master
Servicer to conduct servicing hereunder and under the applicable Supplements,
including, without limitation, the transfer to such Successor Servicer of all
authority of such Master Servicer to service the Receivables as provided under
this Agreement and under the applicable Supplements, including all authority
over all Collections which shall on the date of such Service Transfer be held by
such Master Servicer for deposit to any Lock-Box Account, the Master Collection
Account, any Series Collection Account, any Series Payment Account, the
Trustee's Account or the Seller's Account, for payment to any Claimant in
respect of any Split Payment, or which have been deposited by such Master
Servicer to any Lock-Box Account, the Collection Account, any Series Collection
Account, any Series Payment Account, or any other account, or which shall
thereafter be received with respect to the Receivables, and (ii) assisting the
successor servicer. Such Master Servicer shall, at its expense (other than with
respect to out-of-pocket costs and expenses payable to third parties (other than
Affiliated Entities or their Affiliates or employees), which amounts shall be
reimbursed by the Successor Servicer), as soon as practicable, and in any event
within three Business Days of such Service Transfer, (A) assemble such
documents, instruments and other records (including computer tapes and disks,
which evidence the affected Series Receivables and the other Series Trust
Assets, and which are necessary or desirable to collect the affected Series
Receivables, and shall make the same available to the Successor Servicer or the
Trustee or its designee at a place selected by the Successor Servicer or the
Trustee and in such form as the Successor Servicer or the Trustee may reasonably
request, and (B) segregate all cash, checks and other instruments received by it
from time to time constituting Collections of Receivables and Split Payments in
a manner acceptable to the Successor Servicer and the
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Trustee, and, promptly upon receipt, remit all such cash, checks and instruments
to the Successor Servicer or the Trustee or its designee.
SECTION 10.02. Trustee to Act; Appointment of Successor. (a) On and after
the receipt by any Master Servicer for any Series of a Termination Notice
pursuant to Section 10.01 or upon a resignation by any such Master Servicer
pursuant to Section 8.05, such Master Servicer shall continue to perform all
servicing functions under this Agreement and the applicable Supplement, until
(i) in the case of any such receipt, the date specified in such Termination
Notice or otherwise specified by the Trustee in writing or, if no such date is
specified in such Termination Notice or otherwise specified by the Trustee,
until a date mutually agreed upon by such Master Servicer and the Trustee, and
(ii) in the case of any such resignation, until the Trustee or a Successor
Servicer shall have assumed the responsibilities and obligations of such Master
Servicer pursuant to this Section. The Trustee shall as promptly as possible
after the giving of a Termination Notice or such a resignation appoint an
Eligible Master Servicer (which, unless the Back-up Servicer has given notice to
the Trustee that it shall be unable to perform such services or the Back-up
Servicing Agreement shall have previously been terminated, shall be the Back-up
Servicer) as a successor servicer (the "Successor Servicer"), and such Successor
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Trustee (which such notice, in the case of the Back-up
Servicer, shall be given by the Back-up Servicer within two Business Days after
any such notice of appointment as required pursuant to the Back-up Servicing
Agreement). In the event that a Successor Servicer has not been appointed or has
not accepted its appointment by the earlier of 60 days after the date of such
Termination Notice or at the time when such terminated or resigning Master
Servicer ceases to act as a Master Servicer hereunder, the Trustee without
further action shall automatically be appointed the Successor Servicer with
respect to those Series for which such terminated or resigning Master Servicer
acted in such capacity. Subsequent to such appointment, the Trustee may cease to
act as the Master Servicer with respect to such Series provided that another
Successor Servicer is appointed therefor in accordance with and subject to the
terms of this Agreement. The Trustee may delegate any of its servicing
obligations to an Affiliate or agent in accordance with the terms of this
Agreement. Notwithstanding the foregoing, the Trustee shall, if it is legally
unable so to act as Successor Servicer, petition a court of competent
jurisdiction to appoint any established institution that is an Eligible Master
Servicer (other than the Trustee) as the Successor Servicer hereunder with
respect to such Series.
(b) Upon its appointment, the Successor Servicer shall be the successor in
all respects to the terminated or resigning Master Servicer with respect to
servicing functions for those Series formerly serviced by such terminated or
resigning Master Servicer under this Agreement and each related Supplement and
shall be subject to all the responsibilities, duties and liabilities relating
thereto placed on the Master Servicer by the terms and provisions hereof and
thereof accruing from and after the effective date of such appointment. Form and
after such appointment, all references in this Agreement and any such related
Supplement to the Master Servicer or the Applicable Master Servicer for such
Series shall be deemed to refer to such Successor Servicer.
(c) In connection with any Termination Notice, the Trustee will review any
bids which it obtains from Eligible Master Servicers and shall be permitted to
appoint any Eligible Master Servicer submitting such a bid as a Successor
Servicer (other than the Back-up Servicer) for servicing compensation not in
excess of the applicable Master Servicing Fee for such affected Series; it being
understood and agreed that the appointment of the Back-up Servicer as Successor
Servicer with respect to any Series is not subject to the condition set forth in
this clause (c) and that the Back-up Servicer shall be entitled to receive such
fee for such services as shall be set forth in the Back-up Servicing Agreement;
and it being further understood
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and agreed that if no Successor Servicer (other than the Back-up Servicer) will
perform such services for an amount less than the applicable Master Servicing
Fee for such Series, then the Trustee shall be permitted to appoint an Eligible
Master Servicer reasonably acceptable to the Trustee and the Seller submitting
the lowest bid as among all such acceptable Eligible Master Servicers.
(d) All authority and power granted to the Successor Servicer under this
Agreement with respect to any Series shall automatically terminate upon the
earliest of (x) termination of the Trust pursuant to Section 12.01(a) and (y)
the payment in full in cash of all amounts owing to any Persons (other than the
Affiliated Entities) hereunder and the related Supplement, and shall pass to and
be vested in the Seller (or its designee) (subject to the proviso to Section
12.01(a)) and, without limitation, the Seller is hereby authorized and empowered
to execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact
or otherwise, all documents and other instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights. The Successor Servicer agrees to cooperate with
the Seller (or its designee) in effecting the termination of the
responsibilities and rights of the Successor Servicer to conduct servicing of
the Receivables. The Successor Servicer shall transfer its electronic records
relating to such Series Receivables to the Seller (or its designee) in such
electronic form as the Seller (or its designee) may reasonably request and shall
transfer all other records, correspondence and documents to the Seller (or its
designee) in the manner and at such times as the Seller (or its designee) shall
reasonably request.
SECTION 10.03. Notification to Certificateholders. Promptly and in any
event within one Business Day after the Seller or a Master Servicer becomes
aware of any Servicer Default with respect to any Master Servicer for any
Series, the Seller or such Master Servicer, as applicable, shall give written
notice thereof to a Responsible Officer of the Trustee, and the Trustee shall
deliver a copy of such notice to the affected Certificateholders and each
affected Series Enhancer. Upon any termination or appointment of a Successor
Servicer pursuant to this Article X, the Trustee shall give prompt written
notice thereof to the Seller, the affected Certificateholders, each affected
Series Enhancer and each Rating Agency then rating any outstanding Series or
Class of Certificates.
ARTICLE XI
THE TRUSTEE
SECTION 11.01. Duties of Trustee. (a) The Trustee, undertakes to perform
such duties and only such duties as are specifically set forth in this Agreement
and the Supplements. If and to the extent the Trustee is required to act as a
Successor Servicer with respect to any Series, the Trustee shall exercise such
of the rights and powers vested in it by this Agreement and any applicable
Supplement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement or any Supplement, shall examine them to determine
whether they substantially conform to the requirements of this Agreement or any
Supplement. The Trustee shall give prompt written notice to the
Certificateholders of any affected Series of any material lack of conformity of
any such instrument to the applicable requirements of this Agreement or any
applicable Supplement discovered by the Trustee.
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(c) Subject to Section 11.01(a), no provision of this Agreement shall be
construed to relieve the Trustee from liability for its own grossly negligent
action, its own grossly negligent failure to act or its own willful misconduct;
provided, however, that:
(i) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Majority Control Parties, any Control
Party or the Majority Certificateholders of a Series (to the extent the
Trustee is authorized or directed to rely on the directions of any such
constituency) relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Agreement or any applicable
Supplement; and
(iii) the Trustee shall not be charged with knowledge of any failure
by any Master Servicer to comply with the obligations of such Person
referred to in Section 10.01 unless a Responsible Officer of the Trustee
obtains actual knowledge of such failure or a Responsible Officer of the
Trustee receives written notice of such failure.
(d) The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or under any Supplement or in the exercise of any of its rights or
powers, if there is reasonable ground for believing that the repayment of such
funds and/or adequate indemnity (and, to the extent requested by the Trustee,
advancement of funds) against such risk or liability is not reasonably assured
to it, and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any obligations of any Master Servicer under this Agreement or any
applicable Supplement except during such time and only in respect of such
Series, if any, as the Trustee shall be a Successor Servicer to, and be vested
with the rights, duties, powers and privileges of, a Successor Servicer in
accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement or any
applicable Supplement, the Trustee shall take no action reasonably likely to
impair the interests of the Trust in any Trust Asset now existing or hereafter
created or the value of any Trust Asset now existing or hereafter created.
(f) Except as expressly provided in this Agreement or any applicable
Supplement, the Trustee shall have no power to vary the corpus of the Trust in
respect of any Series including, without limitation, by (i) accepting any
substitute obligation for any Series Trust Asset initially Transferred to the
Trust for the benefit of any Series under Section 2.01 and the related
Supplement, (ii) adding any other investment, obligation or security to the
Trust for the benefit of any Series, or (iii) withdrawing from the Trust any
Series Trust Asset.
(g) In the event that the Paying Agent, the Authenticating Agent or the
Certificate Registrar and Transfer Agent (in each case, if other than the
Trustee) shall fail to perform any obligation, duty or agreement in the manner
or on the day required to be performed by the Paying Agent, the Authenticating
Agent or the Certificate Registrar and Transfer Agent, as the case may be, under
this Agreement or under any Supplement, the Trustee shall
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be obligated, promptly upon the obtaining of actual knowledge thereof by a
Responsible Officer of the Trustee, to perform such obligation, duty or
agreement in the manner so required.
(h) The Trustee shall have no responsibility or liability for investment
losses on Eligible Investments.
SECTION 11.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 11.01:
(a) the Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accord with, any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other paper
or document believed by it to be genuine and to have been signed or presented to
it pursuant to this Agreement or any applicable Supplement by the proper party
or parties;
(b) the Trustee may consult with counsel and any advice or opinion of
counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion of counsel;
(c) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement or any Supplement, or to institute,
conduct or defend any litigation hereunder or thereunder or in relation hereto
or thereto, at the request, order or direction of any of the Certificateholders
(or any constituent portion thereof authorized to give any such directions to
the Trustee), pursuant to the provisions of this Agreement or any Supplement,
unless such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; provided, however, that nothing contained herein
shall relieve the Trustee of the obligations, upon the occurrence of a Servicer
Default with respect to any Series (which has not been cured or waived), to
exercise such of the rights and powers vested in it by this Agreement, and to
use the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs;
(d) the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement or
any applicable Supplement;
(e) the Trustee shall not be bound to make any investigation into the facts
of matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, approval, bond or
other paper or document, unless requested in writing so to do by the Control
Party of any affected Series;
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent (including, without
limitation, any Master Servicer, the Back-up Servicer or Successor Servicer),
attorney or custodian appointed with due care by it hereunder;
(g) except as may be required by Section 11.01(b), the Trustee shall not be
required to make any initial or periodic examination of any documents or records
related to the Receivables or the Seller for the purpose of establishing the
presence or absence of defects, the compliance by the Seller with its
representations and warranties or for any other purpose;
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(h) nothing in this Agreement shall be construed to require the Trustee to
monitor the performance of any of the Master Servicers or act as a guarantor of
any Master Servicer's performance;
(i) the Trustee in its individual capacity or otherwise may engage in any
business, lending or other transactions or activities in the ordinary course of
its business with any of the Affiliated Entities, and shall be entitled to
exercise all of its rights, powers and remedies in connection therewith to the
same extent as if the Trustee were not acting as the Trustee hereunder and
without any duty to account to the Certificateholders therefor; and
(j) any reference in this Agreement or any Supplement to the knowledge of
the Trustee with regard to any matter shall be construed to mean the actual
knowledge of any Responsible Officer of the Trustee's corporate trust department
with respect to such matter.
SECTION 11.03. Trustee Not Liable for Recitals in Certificates. The Trustee
assumes no responsibility for the correctness of the recitals contained herein,
in any Supplement and/or in the Certificates (other than the certificate of
authentication on the Certificates). Except as set forth in Section 11.14, the
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the certificate of authentication
on the Certificates) or of any Receivable or related document. The Trustee shall
not be accountable for the use or application by the Seller of any of the
Certificates, or for the use or application of any proceeds of the Certificates
paid to the Seller in respect of the Certificates, the Receivables or deposited
in or withdrawn from any Lock-Box Account, the Master Collection Account, any
Series Collection Account, any Series Payment Account, the Seller's Account, the
Trustee's Account or any other account hereafter established to effectuate the
transactions contemplated by and in accordance with the terms of this Agreement
and any applicable Supplement.
SECTION 11.04. Compensation; Trustee's Expenses. (a) As full compensation
for its services hereunder with respect to any Series, the Trustee shall be
entitled to receive, solely out of Collections of Trust Assets of such Series
and, to the extent provided in the Supplement for such Series, any available
Series Enhancement for such Series and subject to the priority of payments set
forth in any such Supplement, the fees separately agreed between the Seller and
the Trustee by separate letter agreements for each such Series.
(b) Expenses. The Applicable Master Servicer for any Series or, if such
Applicable Master Servicer is not an Affiliated Entity, the Seller, will pay or
reimburse the Trustee upon its request, for all reasonable out-of-pocket
expenses, disbursements and advances incurred or made by the Trustee in respect
of such Series in accordance with any of the provisions of this Agreement or the
applicable Supplement or in connection with any amendment hereto (including the
reasonable fees and expenses of its agents, any co-trustee and counsel), except
any such expense, disbursement or advance as may arise from its gross
negligence, willful misconduct or bad faith and except as provided in the
following sentence; it being agreed that any such expenses allocable to one or
more Series shall be divided among all such Series pro rata based on the
respective Original Aggregate Principal Balances of the Investor Certificates of
each such Series. If the Trustee is appointed Successor Servicer pursuant to
Section 10.02, the provision of this Section 11.04 shall not apply to expenses,
disbursements and advances made or incurred by the Trustee in its capacity as
Successor Servicer all of which shall be payable from the Master Servicing Fee
for the affected Series. The terms of this Section 11.04 shall survive the
termination of this Agreement.
SECTION 11.05. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be an Eligible Institution. If such corporation
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publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then, for the
purpose of this Section 11.05, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be an Eligible Institution in accordance with the
provisions of this Section 11.05, the Trustee shall resign immediately in the
manner and with the effect specified in Section 11.06.
SECTION 11.06. Resignation or Removal of Trustee. (a) The Trustee may at
any time resign and be discharged from the trust hereby created by giving
written notice thereof to the Seller, each Master Servicer and each Rating
Agency then rating any outstanding Series or Class of Certificates. Upon
receiving such notice of resignation, the Seller shall promptly appoint a
successor trustee acceptable to the Control Party for each Series by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor trustee
shall have been so appointed and have accepted appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be an Eligible Institution in
accordance with Section 11.05 hereof and shall fail to resign after written
request therefor by any Master Servicer, the Seller or any Control Party, or if
at any time the Trustee shall be legally unable to act, or shall be adjudged a
bankrupt or insolvent, or if a receiver or a Trustee for it or for its property
shall be appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then any Master Servicer or the Seller may (or, at
the direction of any Control Party, shall) remove the Trustee and promptly
appoint a successor trustee acceptable to the Majority Control Parties by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and appointment of successor
trustee pursuant to any of the provisions of this Section 11.06 shall not become
effective until acceptance of appointment by the successor trustee as provided
in Section 11.07 hereof.
SECTION 11.07. Successor Trustee. (a) Any successor trustee appointed as
provided in Section 11.06 shall execute, acknowledge and deliver to the Seller,
to each Master Servicer and to its predecessor Trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein. The predecessor Trustee shall
deliver to the successor trustee all documents or copies thereof and statements
held by it hereunder; and the Seller and the predecessor Trustee shall execute
and deliver such instruments and do such other things as may reasonably be
required for fully and certainly vesting and confirming in the successor trustee
all such rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in this
Section 11.07 unless at the time of such acceptance such successor trustee shall
be an Eligible Institution in accordance with Section 11.05 hereof and
concurrently therewith such successor trustee would accept appointment as the
Collateral Trustee under the Intercreditor Agreement.
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(c) Upon acceptance of appointment by a successor trustee as provided in
this Section 11.07, such successor trustee shall mail notice of such succession
hereunder to all Investor Certificateholders.
SECTION 11.08. Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be an Eligible Institution in
accordance with Section 11.05, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
SECTION 11.09. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Assets may at the time be located, the Trustee shall have the power
and may execute and deliver all instruments to appoint one or more persons to
act as a co-trustee or co-trustees, or separate trustee or separate trustees, of
all or any part of the Trust Assets, and to vest in such Person or Persons, in
such capacity and for the benefit of the Certificateholders, such title to the
Trust Assets, or any part thereof, and, subject to the other provisions of this
Section 11.09, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 11.05 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 11.07 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or
as Successor Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
Assets or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the
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provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to any affected Master Servicer.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 11.10. Tax Returns. In connection with the preparation of any
necessary tax returns for the Trust, the Seller, based on the information
provided to it by the Master Servicers shall prepare or shall cause to be
prepared such tax returns and shall provide such tax returns to the Trustee for
signature at least ten Business Days before such returns are due to be filed by
the Trustee on behalf of the Trust. The Seller, based on the information
provided to it by each Applicable Master Servicer in accordance with the related
Supplements shall also prepare or shall cause to be prepared all tax information
required by law to be distributed to Certificateholders of each separate Series
and shall deliver such information to the Trustee at least ten Business Days
prior to the date it is required by law to be distributed to such
Certificateholders. The Trustee, upon request, will furnish the Seller with all
such information known to the Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust, and shall, upon
request of the Seller, execute and file such returns.
SECTION 11.11. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
SECTION 11.12. Suits for Enforcement. (a) If a Servicer Default with
respect to any Series shall occur and be continuing, the Trustee, in its
discretion may, subject to the provisions of Sections 11.01 and 11.13, proceed
to protect and enforce its rights and the rights of the Certificateholders of
such Series under this Agreement and the related Supplement by suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or such
related Supplement or in aid of the execution of any power granted in this
Agreement or such related Supplement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or such
Certificateholders.
(b) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Certificateholder of
such Series any plan of reorganization, arrangement, adjustment or composition
affecting the Certificates of such Series or the rights of any Certificateholder
of such Series, or to authorize the Trustee to vote in respect of the claim of
any Certificateholder of such Series in any such proceeding.
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SECTION 11.13. Rights of Certificateholders to Direct Trustee. The Trustee
will perform its duties as Trustee hereunder and under each Supplement
(including, without limitation, the exercise of any trust, power or remedy
conferred on or available to the Trustee hereunder and under each Supplement) at
the direction of the Majority Control Parties or, if any such duties, trusts,
powers or remedies relates to less than all then outstanding Series jointly,
then with respect to the exercise of such duties, powers, trusts or remedies
with respect to each Series, at the direction of the Majority Certificateholders
of such Series; provided, however, that if any provision of this Agreement or
any Supplement imposes a duty on the Trustee and requires the approval or other
action of Certificateholders of a Series holding a specified percentage of the
Aggregate Principal Balance of such Series or Classes thereof, then the Trustee
shall perform such duty with respect to such Series or Class thereof only at the
direction of the same percentage of Certificateholders as is specified in such
provision; provided further, however, that subject to Section 11.01, the Trustee
shall have the right to decline to follow any such direction if the Trustee
after being advised by counsel determines that the action so directed may not
lawfully be taken, or if the Trustee in good faith shall, by a Responsible
Officer or Responsible Officers of the Trustee, determine that the proceedings
so directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Certificateholders not parties to such direction;
and, provided, further, that nothing in this Agreement shall impair the right of
the Trustee to take any action deemed proper by the Trustee and which is not
inconsistent with such direction of any such constituency of Certificateholders.
SECTION 11.14. Representations and Warranties of Trustee. The Trustee
represents and warrants as of the date hereof and as of Series Issuance Date for
each Series that:
(a) the Trustee is duly organized and validly existing as a national
banking association in good standing under the laws of the United States;
(b) the Trustee has full power, authority and right to execute, deliver and
perform this Agreement, and has taken all necessary action to authorize the
execution, delivery and performance by it of this Agreement and each Supplement;
and
(c) each of this Agreement and each Supplement has been duly executed and
delivered by the Trustee and constitutes a legal, valid and binding obligation
of the Trustee enforceable against it in accordance with its terms except as
such enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights generally, and
except as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
SECTION 11.15. Maintenance of Office or Agency. The Trustee will maintain
at its expense in Wilmington, Delaware, or the Borough of Manhattan, The City of
New York, an office or agency (the "Corporate Trust Office") where notices and
demands to or upon the Trustee in respect of the Certificates and this Agreement
may be served. The Trustee initially designates its office at PNC Bank, DE, 222
Delaware Avenue, 17th Floor, Wilmington, DE 19801 as such office. The Trustee
will give prompt written notice to each Master Servicer and to
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
SECTION 11.16. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the Holder or beneficial owner of any Investor
Certificate with the same rights as it would have if it were not the Trustee
hereunder.
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ARTICLE XII
TERMINATION
SECTION 12.01. Termination of Trust. The Trust and the respective
obligations and responsibilities of the Seller, the Master Servicers and the
Trustee created hereby (other than the obligation of the Trustee to make
payments to Certificate- holders as hereinafter set forth) shall terminate,
except with respect to the duties described in Sections 7.03, 8.04, 11.04,
12.02(b), 13.11 and 13.14 upon the earlier to occur of (i)the date which is 21
years from the death of the last survivor of the descendants living as of the
Closing Date of Joseph P. Kennedy of Boston, Massachusetts, and (ii) at the
option of the Seller exercisable by a Seller Order to the Trustee to such
effect, any day following the Collection Date of the last outstanding Series;
provided, however, that if, at any time after the payment that would have
otherwise resulted in the termination of the Trust and such obligations, such
payment is rescinded or must otherwise be returned for any reason, effective
upon such rescission or return such termination of the Trust and such
obligations shall automatically be deemed never to have occurred and the Trust
and such obligations shall be deemed to be in full force and effect.
SECTION 12.02. Final Distribution. (a) The Seller shall give the Trustee,
each Certificateholder and each Series Enhancer at least twenty days' prior
written notice of the date on which (i) the Trust is expected to terminate in
accordance with subsection 12.01 and (ii) the final distribution on the
Certificates will be made. Not later than five Business Days after the Trustee
shall receive such notice, the Trustee shall mail notice to the
Certificateholders specifying (w) the date upon which such final distribution
will be made, (x) the amount of any such final distribution, (y) if applicable,
that the Distribution Date otherwise applicable to such final distribution is
not applicable and (z) that following such distribution, all outstanding
Certificates shall be deemed canceled. The Trustee shall give such notice to the
Certificate Registrar and Transfer Agent and the Paying Agent at the time such
notice is given to the Certificateholders.
(b) Notwithstanding the Seller's delivery to the Trustee, or the Trustee's
delivery to the Certificateholders, of the notices required under Section
12.02(a), all funds then on deposit in the Master Collection Account (or any
sub-account thereof, including any Series Collection Account), any Series
Collection Account, any Series Payment Account or the Trustee's Account shall
continue to be held in trust for the benefit of the applicable
Certificateholders and Series Enhancers, and the Paying Agent or the Trustee
shall pay such funds to such Certificateholders and to all other applicable
parties on the date specified in such notice, subject to the priorities set
forth in the applicable Supplement (as if such distribution occurred on an
applicable Distribution Date).
SECTION 12.03. Seller's Termination Rights. Upon the termination of the
Trust pursuant to Section 12.01, the payment in full of all amounts due to the
Investor Certificateholders (other than those owned by the Affiliated Entities),
and the surrender of any Seller Certificates, the Trustee shall assign and
convey to the Seller or its designee, without recourse, representation or
warranty, all right, title and interest of the Trust in and to the Receivables,
whether then existing or thereafter created, and all other Trust Assets. The
Trustee at the expense of the Seller shall execute and deliver such instruments
of transfer and assignment, in each case without recourse, representation or
warranty, as shall be prepared by the Seller for execution by the Trustee which
are reasonably requested by the Seller to vest in the Seller all right, title
and interest which the Trust had in the Receivables and all other Trust Assets.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Amendment; Waiver of Default Events. (a) This Agreement may
be amended from time to time by each Master Servicer (to the extent such consent
is required in accordance with the final proviso of this sentence), the Seller
and the Trustee to cure any ambiguity or to correct or supplement any provision
herein which may be inconsistent with any other provision herein; provided that
such action shall not adversely effect the interests of any Investor
Certificateholder (other than an Affiliated Entity) or any Series Enhancer; and
provided, further, that the Master Servicers' consent shall not be required with
respect to any such amendment which does not modify any of their respective
obligations, duties, rights or benefits hereunder or under any of the other
Operative Documents. The Trustee may request an Officer's Certificate from the
Seller and an Opinion of Counsel from outside counsel of the Seller, in each
case, with respect to an amendment entered into pursuant to this Section
13.01(a) concerning the effect of any such action.
(b) This Agreement may be amended or any term or provision thereof waived
from time to time by each Master Servicer (to the extent such consent to any
such amendment would be required pursuant to the first sentence of Section
13.01(a)), the Seller and the Trustee, with the consent of the Control Party for
each adversely affected Series, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Certificateholders; provided,
however, that no such amendment or waiver shall (i) reduce in any manner the
amount of, or delay the timing of, allocations, payments or distributions to be
made to any Certificateholder without the consent of such Certificateholder and
the Series Enhancer in respect of the relevant Certificates, (ii) change the
definition of or the manner of calculating the Certificateholders' Interest or
any Investor Certificateholder's interest therein without the consent of each
affected Investor Certificateholder and each Series Enhancer in respect of the
relevant Certificates, (iii) modify the foregoing consent requirements with
respect to any amendment or waiver so as to eliminate the requirement that the
Control Party for each adversely affected Series shall have consented to such
amendment without the consent of each affected Investor Certificateholder and
each Series Enhancer in respect of the relevant Certificates or (iv) cause any
adverse tax effect for any Investor Certificateholder without the consent of
each affected Investor Certificateholder and each Series Enhancer in respect of
the relevant Certificates. The Trustee may, but shall not be obligated to, enter
into any such amendment which affects the Trustee's rights, duties or immunities
under this Agreement or otherwise. The Trustee shall request an Officer's
Certificate and an Opinion of Counsel with respect to an amendment entered into
pursuant to this Section 13.01(b) concerning compliance with the requirements of
this Agreement. Any amendment to be effected pursuant to this paragraph shall be
deemed to adversely affect all outstanding Series, other than any Series with
respect to which such action shall not, as evidenced by an Opinion of Counsel
(which counsel shall not be an employee of, or counsel for any Affiliated
Entity), addressed and delivered to the Trustee, adversely affect in any
material respect the interests of any Investor Certificateholder (other than an
Affiliated Entity) of or the Series Enhancer for such Series.
(c) Notwithstanding anything to the contrary in Section 13.01(a) and
13.01(b), neither this Agreement nor any Supplement shall be amended in
violation of any restrictions or limitations set forth in any Supplement.
(d) Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
a copy of such amendment to each Investor Certificateholder, Series Enhancer
and, to the extent the Master Servicers were not parties thereto, each Master
Servicer.
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(e) It shall not be necessary for the consent of Investor
Certificateholders or any Series Enhancer under this Section 13.01 to approve
the particular form of any proposed amendment, but it shall be sufficient if
such consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the execution thereof by
Investor Certificateholders shall be subject to such reasonable requirements as
the Trustee may prescribe.
(f) Any Supplement executed in accordance with the provisions of Section
6.09 shall not be considered an amendment to this Agreement for the purposes of
this Section.
(g) Prior to the execution of any amendment to this Agreement or any
Supplement, the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel of outside counsel to the Seller stating that the execution of such
amendment is authorized or permitted by this Agreement or the applicable
Supplement, as the case may be. The Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Trustee's own rights, duties or
immunities under this Agreement, any Supplement or otherwise.
SECTION 13.02. Protection of Right, Title and Interest to Trust. (a) The
Seller and the Applicable Master Servicers shall cause this Agreement, all
amendments hereto and all financing statements and continuation statements and
any other necessary documents covering the Certificateholders' and the Trustee's
right, title and interest in and to the Trust and the respective Trust Assets to
be promptly recorded, registered and filed, and at all times to be kept
recorded, registered and filed, all in such manner and in such places as may be
required by law to preserve and protect fully the right, title and interest of
the Certificateholders of each Series entitled thereto and the Trustee hereunder
in and to all property comprising the Trust. Each Applicable Master Servicer
shall deliver to the Trustee file-stamped copies of, or filing receipts for,
each document recorded, registered or filed by it as required above, promptly
following such recording, registration or filing. The Seller shall cooperate
fully with the Master Servicers in connection with the obligations set forth
above and will execute any and all documents reasonably required to fulfill the
intent of Section 13.02(a).
(b) Within 30 days after the Seller makes any change in its name, identity
or corporate structure which would make any financing statement or continuation
statement filed in accordance with the terms of this Agreement seriously
misleading within the meaning of Section 9-402(7) (or any comparable provision)
of the UCC as in effect in the jurisdiction the law of which governs the
perfection of the interest in the Trust Assets created hereunder or under any
Supplement, the Seller shall give the Trustee notice of such change and shall
file such financing statements or amendments as may be necessary to continue the
perfection of the Trust's interest in the Trust Assets and the proceeds thereof
contemplated by Section 2.01 hereof.
(c) The Seller and each Master Servicer will give the Trustee prompt
written notice of any relocation of any office from which it services
Receivables (or any portion thereof) or keeps records concerning the Receivables
(or any portion thereof) or of its principal executive office and whether, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall file such financing
statements or amendments as may be necessary to perfect or to continue the
perfection of the Trust's interest in the Receivables (or any portion thereof)
and the other Trust Assets (or any portion thereof) and the proceeds thereof
contemplated by Section 2.01 hereof. The Seller and each Master Servicer will at
all times maintain each office from which it services Receivables and its
principal executive offices within the United States of America.
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(d) Notwithstanding anything contained herein to the contrary, neither the
Company nor the Seller shall be required to file assignments in favor of the
Seller and the Trustee, respectively, with respect to the UCC financing
statements filed by the Company against each of the Claimants in connection with
the respective Settlement Purchase Agreements, but the Seller hereby covenants
to file, or cause the Company to file, continuation statements thereof as and
when necessary to maintain the effectiveness of such statements; it being
understood and agreed that neither the Company nor the Seller shall have any
duty to monitor the continued effectiveness of the financing statements
originally filed against such Claimants (other than with respect to the lapse
thereof due to time).
SECTION 13.03. Limitation on Rights of Certificateholders. (a) The death or
incapacity of any Investor Certificateholder shall not operate to terminate this
Agreement, or any Supplement or the Trust, nor shall such death or incapacity
entitle such Investor Certificateholders' legal representatives or heirs to
claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust or any Series, nor otherwise
affect the rights, obligations and liabilities of the parties hereto or to any
Supplement or any of them.
(b) No Investor Certificateholder or Series Enhancer shall have any right
by virtue of any provisions of this Agreement to file or otherwise institute any
suit, action or proceeding in equity or at law upon or under or with respect to
this Agreement or any Supplement, unless such Investor Certificateholder or
Series Enhancer previously shall have made, and unless a majority of the Control
Parties effected thereby (which, if such action, suit or proceeding relates to
this Agreement, shall be deemed to be all Control Parties) shall have made, a
written request to the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 30 days
after such request and offer of indemnity, shall have failed to file or
otherwise refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted, by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Certificateholders shall have any right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
or any Supplement to affect, disturb or prejudice the rights of the holders of
any of the Investor Certificates, or to obtain or seek to obtain priority over
or preference to any such Investor Certificateholder, or to enforce any right
under this Agreement or any Supplement, except in the manner herein and therein
provided and for the equal, ratable and common benefit of all Investor
Certificateholders of the Series or Classes affected thereby. For the protection
and enforcement of the provisions of this Section 13.03, each and every Investor
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
SECTION 13.04. Governing Law; Jurisdiction; Consent to Service of Process.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS DISTINGUISHED FROM THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF DELAWARE, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(b) Jurisdiction. Each of the parties hereto and to each Supplement hereby
irrevocably and unconditionally submits to the nonexclusive jurisdiction of any
Delaware State court or Federal court of the United States of America sitting in
Delaware, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such Delaware State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto and to each Supplement agrees that
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a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(c) Consent to Service of Process. Each party to this Agreement and to each
Supplement irrevocably consents to service of process in the manner provided for
notices in Section 13.05. Nothing in this Agreement will affect the right of any
party to this Agreement or to any Supplement to serve process in any other
manner permitted by law.
SECTION 13.05. Notices; Payments. (a) All demands, notices, instructions,
directions, requests, authorizations and communications (collectively,
"Notices") under this Agreement shall be in writing and shall be deemed to have
been duly given (x) upon delivery, if personally delivered, (y) three Business
Days after being deposited in the mails, postage paid, if mailed by registered
mail, return receipt requested, or (z) one Business Day after being sent for
next Business Day delivery by national overnight courier service, in each case,
to (i) in the case of the Seller, 15th and Ranstead Streets, Philadelphia,
Pennsylvania 19102, Attention: Gary Veloric, (ii) in the case of the Applicable
Master Servicer (if the Master Servicer is the Initial Master Servicer) 15th and
Ranstead Streets, Philadelphia, Pennsylvania 19102, (iii) in the case of the
Trustee, c/o PNC Bank, DE, 222 Delaware Avenue, 17th Floor, Wilmington, DE
19801, Attention: Corporate Trust Department, (iv) in the case of the Paying
Agent or the Certificate Registrar and Transfer Agent, PNC Bank, National
Association, c/o PNC Bank, DE, 222 Delaware Avenue 17th Floor, Wilmington, DE
19801, Attention: Corporate Trust Department; and (v) in the case of any Series
Enhancer or applicable Rating Agency with respect to any Series, the address for
such Series Enhancer or Rating Agency specified in the relevant Supplement; or,
as to each party, such other address as shall be designated by such party in a
written notice to each other party. If the Applicable Master Servicer is not the
Initial Master Servicer, notices shall be given to the Applicable Master
Servicer at the address designated by it, to the Initial Master Servicer.
(b) Any Notice required or permitted to be mailed to an Investor
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Certificateholder as shown in the Certificate Register. Notice
so mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
SECTION 13.06. Assignment of the Seller Purchase Agreement; Substitution
under the Powers of Attorney. (a) The Seller hereby assigns to the Trustee, for
the benefit of the Certificateholders and the Series Enhancers, all of the
Seller's right and title to and interest in the Seller Purchase Agreement. The
Trustee shall have the right to exercise and enforce, or to direct the Seller to
exercise and enforce, the Seller's rights and remedies under the Seller Purchase
Agreement for the benefit of the Certificateholders (or any of them) and the
Series Enhancers (or any of them) (including, without limitation, the right to
give or withhold any and all consents, requests, notices, directions, approvals,
demands, extensions or waivers under or with respect to the Settlement Purchase
Agreements), upon the failure of the Seller to do so, but in no event shall
there be any obligation on the part of the Trustee, any Certificateholder, any
Series Enhancer or any of their respective Affiliates to perform any of the
obligations of the Seller under the Seller Purchase Agreement. The Trustee shall
enforce or refrain from enforcing any of the Seller's rights and remedies under
each the Seller Purchase Agreement to the extent so instructed by the Majority
Control Parties.
(b) The Seller also hereby substitutes the Trustee in place of the Seller
under the Power of Attorney in accordance with the power of substitution
provided in each of the Powers of Attorney whereupon the Trustee
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shall have all of the Seller's rights, title, interests and powers under each
such Power of Attorney.
(c) The assignments to the Trustee pursuant to this Section 13.06 shall
terminate upon the termination of the Trust in accordance with Section 12.01;
provided, however, that the rights of the Trustee, the Investor
Certificateholders and the Series Enhancers pursuant to such assignment in
clause (a) with respect to rights and remedies in connection with (i) any breach
of any representation and warranty made by the Company pursuant thereto and (ii)
the indemnification and payment provisions of Article VIII thereof shall, in
each case, be continuing and survive any termination of such assignment.
SECTION 13.07. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held to be invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other covenants, agreements, provisions or
terms of this Agreement or of the Certificates or rights of the
Certificateholders.
SECTION 13.08. Assignment. Notwithstanding anything to the contrary
contained herein or any Supplement, (i) neither this Agreement nor any of the
Seller Certificate may be assigned by the Seller, and (ii) except as provided in
Section 8.02, this Agreement may not be assigned by the Master Servicer without
the prior consent of the Control Parties for the Series for which such person
acts in such capacity.
SECTION 13.09. Certificates Nonassessable and Fully Paid. It is the
intention of the parties to this Agreement that the Certificateholders shall not
be personally liable for obligations of the Trust, that the interests in the
Trust (and, in particular, any Series of the Trust) represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever and that Certificates upon authentication thereof by
the Trustee pursuant to Section 6.02 are and shall be deemed fully paid.
SECTION 13.10. Further Assurances. The Seller and each Applicable Master
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments and documents required or reasonably
requested by the Trustee more fully to effect the purposes of this Agreement or
any applicable Supplement, including, without limitation, the execution of any
financing statements or continuation statements relating to the Receivables (or
any portion thereof) for filing under the provisions of the UCC of any
applicable jurisdiction.
SECTION 13.11. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement, each Master Servicer, the Trustee, the Seller and by its
acceptance of a Certificate each Certificateholder hereby agrees that it shall
not, prior to the date which is one year and one day after the termination of
this Agreement with respect to the Trust, acquiesce, petition or otherwise
invoke or cause the Trust, the Seller or the Company to invoke the process of
any Governmental Authority for the purpose of commencing or sustaining a case
against the Trust, the Seller or the Company under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Trust, the Seller or the Company or any substantial part of its property or
ordering the winding-up or liquidation of the affairs of the Trust, the Seller
or the Company.
SECTION 13.12. No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of any Person, any right, remedy, power or
privilege hereunder or under any Supplement shall operate as
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a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege under this Agreement or under any Supplement preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges provided herein
or in any Supplement are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.
SECTION 13.13. Counterparts. This Agreement may be executed in two or more
counterparts and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
SECTION 13.14. Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Certificateholders of
each Series, the Series Enhancers for each Series and their respective
successors and permitted assigns. Except as otherwise provided in this
Agreement, no other person will have any right or obligation hereunder.
SECTION 13.15. Actions by Certificateholders. (a) Wherever in this
Agreement a provision is made that an action may be taken or a Notice given by
Investor Certificateholders, such action or Notice may be taken or given by any
Investor Certifi cateholder, unless such provision requires a specific
percentage of Investor Certificateholders.
(b) Any Notice, consent, waiver or other act by the Holder of a Certificate
shall bind such Holder and every subse quent Holder of such Certificate and of
any Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or omitted to be done by
the Trustee or the Applicable Master Servicer in reliance thereon, whether or
not notation of such action is made upon such Certificate.
SECTION 13.16. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modi fied, amended, waived or supplemented except as provided herein.
SECTION 13.17. Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
SECTION 13.18. Construction of Agreement. Without prejudice to the
provisions of Section 2.01 or of any Supplement providing for the Transfer of
the Seller's right, title and interest in, to and under the Receivables (or any
Series Receivables) and the other Trust Assets to the Trust and confirming the
parties' intent that such Transfers constitute sales and absolute transfers of
the Trust Assets conveyed thereby, to the extent the Transfers hereunder are
deemed not to constituted sales and/or absolute transfers, the Seller hereby
grants to the Trustee a security interest in all of the Seller's right, title
and interest in, to and under the Receivables now existing and hereafter
created, all monies due or to become due and all amounts received with respect
thereto, and all other Trust Assets, and all "proceeds" thereof, to secure all
the Seller's and the Master Servicer obligations hereunder, including, without
limitation, the Seller's obligations under the Seller Purchase Agreement. This
Agreement shall constitute a security agreement under applicable law.
SECTION 13.19. Tax and Usury Treatment. The Seller, the Initial Master
Servicer and the Trustee have entered into this Agreement, and the Certificates
will be issued to and acquired by the Certificateholders, with the intention
that, for federal, state and local income and franchise tax and
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usury law purposes, the Certificates be treated as either debt, an interest in a
partnership and not in an association (or publicly traded partnership) taxable
as a corporation, or as an interest in an entity, which entity is disregarded
for federal income tax purposes, in accordance with the Intended
Characterization therefor as set forth in the Supplement relating to each such
Certificate, and the Trust will not be treated as an association (or publicly
traded partnership) taxable as a corporation. The Seller, the Initial Master
Servicer and the Trustee, by entering into this Agreement, and each
Certificateholder, by the acceptance of its Certificate, agree to treat and
report the Certificates and the Trust for federal, state and local income and
franchise tax and usury law purposes in accordance with the Intended
Characterization thereof set forth in the applicable Supplement relating thereto
unless and until required to do otherwise by a relevant taxing or judicial
authority.
SECTION 13.20. Liability of the Seller. Notwithstanding any provision to
the contrary in this Agreement or any Supplement, indemnification payments and
other amounts described herein as payable by the Seller hereunder (including,
without limitation, amounts payable pursuant to Section 7.03) shall be payable
only from Available Seller Funds (and, as a result, may be payable from any
allocable Trust Asset only if, to the extent that, and after such Trust Asset
shall have been distributed to the Seller in accordance with the terms of the
Agreement and the Supplements thereto). Unless and until sufficient Available
Seller 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.
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<PAGE>
IN WITNESS WHEREOF, the Seller, the Master Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers as of the
day and year first above written.
J.G. WENTWORTH RECEIVABLES I LLC
By: J.G. Wentworth S.S.C. Limited
Partnership, as a member and as the
Designated Manager
By: J.G. Structured Settlement Funding
Corporation, as its General Partner
By:
-------------------------------------
Name:
Title:
J.G. WENTWORTH & 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:
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form S-1 of our
report dated September 19, 1997, except for Note 15 as to which the date is
October 8, 1997, on our audits of the combined financial statements of
J.G. Wentworth Affiliated Companies. We also consent to the reference to our
firm under the captions "Experts" and "Selected Combined Financial Data."
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
October 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 611
<SECURITIES> 0
<RECEIVABLES> 71,757
<ALLOWANCES> (1,520)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,390
<DEPRECIATION> (265)
<TOTAL-ASSETS> 81,445
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> (692)
<TOTAL-LIABILITY-AND-EQUITY> 81,445
<SALES> 8,743
<TOTAL-REVENUES> 20,548
<CGS> 0
<TOTAL-COSTS> 14,279
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,630
<INTEREST-EXPENSE> 4,783
<INCOME-PRETAX> 6,269
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,269
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,269
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
<PAGE>
CONSENT OF GERALD E. BISBEE, JR.
I, Gerald E. Bisbee, Jr., hereby accept the nomination to
serve as director of J.G. Wentworth & Company, Inc., a Delaware corporation (the
"Company"), and consent to be named as a nominee director in the Company's
Registration Statement on Form S-1 and all amendments thereto.
/s/ Gerald E. Bisbee, Jr.
-------------------------
Gerald E. Bisbee, Jr.
Dated: October 13, 1997
<PAGE>
CONSENT OF PHILIP J. KENDALL
I, Philip J. Kendall, hereby accept the nomination to serve as
director of J.G. Wentworth & Company, Inc., a Delaware corporation (the
"Company"), and consent to be named as a nominee director in the Company's
Registration Statement on Form S-1 and all amendments thereto.
/s/ Philip J. Kendall
----------------------
Philip J. Kendall
Dated: October 13, 1997
<PAGE>
CONSENT OF ANTHONY C. SALVO
I, Anthony C. Salvo, hereby accept the nomination to serve as
director of J.G. Wentworth & Company, Inc., a Delaware corporation (the
"Company"), and consent to be named as a nominee director in the Company's
Registration Statement on Form S-1 and all amendments thereto.
/s/ Anthony C. Salvo
---------------------
Anthony C. Salvo
Dated: October 13, 1997
