As filed with the Securities and Exchange Commission on November 5, 1999
Registration No. 333-90439
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Amendment No. 1 to
Form S-1
Registration Statement
under
The Securities Act of 1933
-----------------------
Senior Insurance Settlements Funding Trust 1999
(Issuer of Certificates)
Capital Resource Group One, LLC
--------------------------------------------------
(Exact name of Registrant as specified in Charter)
Delaware 6411 Applied For
- ------------------------ ---------------------------- ----------------------
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employee
Classification Code Number) Identification number)
650 E. Carmel Drive
Suite 150
Carmel, Indiana 46032
------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
THOMAS J. LARUSSA
650 E. Carmel Drive
Suite 150
Carmel, Indiana 46032
(317) 705-5555
------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
Copies of all communications to:
Albert S. Dandridge, III, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson, LLP
1735 Market Street, 38th Floor
Philadelphia, Pennsylvania 19103
(215) 994-1257
<PAGE>
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement has been effective.
If any of the securities 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.
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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Item and Caption in Form S-1 Caption or Location in Prospectus
---------------------------- ---------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Cover Page of the Registration Statement; Outside
Front Cover Page of Prospectus Front Cover Page of the Prospectus
2. Inside Front and Outside Back Cover Pages of the Front Cover Page of the Registration Statement; Outside
Prospectus Front Cover Page of the Prospectus
3. (a) Summary of Information Summary
(b) Risk Factors Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not applicable
6. Dilution Not applicable
7. Selling Security Holders Not applicable
8. Plan of Distribution Plan of Distribution; Cover Page; Summary; Description
of the Certificates and the Pooling and Servicing
Agreement
9. Description of Securities to be Registered Cover Page; Summary; Description of the Certificates
and the Pooling and Servicing Agreement
10. Interests of Named Experts and Counsel Not applicable
11. Information with Respect to the Registrant Cover Page; Summary; United, Capital, 21st Services and
the Trust; and Description of the Certificates and the
Pooling and Servicing Agreement
12. Disclosure of Commission Position on Indemnification Part II of Registration Statement
for Securities Act Liabilities Item 17 - Undertakings
</TABLE>
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION
- ----------
$150,000,000
Senior Insurance Settlements Funding Trust 1999
$46,000,000 9.0% Asset Backed Certificates Maturing ___, 2007
$104,000,000 9.25% Asset Backed Certificates Maturing ___, 2009
[LEGEND]
CAPITAL RESOURCE GROUP ONE, LLC, Seller
21st Holdings, LLC, Master Servicer
The senior insurance settlements asset backed certificates offered hereby,
evidence fractional, undivided interests in the assets of Senior Insurance
Settlements Funding Trust 1999 to be created pursuant to a pooling and servicing
agreement among:
o Capital Resource Group One, LLC, as the originator of the trust and
assignor of the senior insurance settlements to the trust
o The Chase Manhattan Bank, as trustee
o 21st Holdings, LLC, as the master servicer
o United Funds, LLC, as the subservicer of the senior insurance
settlements and seller of the senior insurance settlements to Capital
The trust assets will include a portfolio of senior insurance settlements to be
generated by the purchase of insurance policies at a discount from elderly
insureds, a liquidity facility, and monies due or to become due with respect to
the senior insurance settlements held by the trust. The certificates, in the
aggregate, will represent a 100% interest in the trust assets.
Prospective investors should consider the factors set forth under "Risk
Factors."
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.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Underwriting Proceeds To Issuer
Discount and or Other
Price to Public(1) Commissions(2) Person(3)
------------------ -------------- -------------------
<S> <C> <C> <C>
Per Certificate $ 5,000 $ 175 $ 4,875
Total Maximum $150,000,000 $5,250,000 $144,750,000
Total Minimum $ 20,000,000 $ 700,000 $ 19,300,000
- ------------------------------------------------------------------------------------------------
</TABLE>
See footnotes on inside cover page.
The certificates will be delivered by the transfer agent 5 days after the
closing date. The certificates will be registered by individual book-entry by
the trustee.
Pryor, Counts & Co., Inc.
The date of the Prospectus is _________, 1999.
(1) Plus accrued interest, if any, at the applicable rate.
(2) An underwriting commission of 3.5% of the aggregate proceeds from
certificate subscriptions will be paid to Pryor, Counts & Co., Inc.
("Placement Agent") in connection with the offering. In addition, Capital
will grant to the Pryor, Counts & Co., Inc. a right entitling the Pryor,
Counts & Co., Inc. to receive up to 2.75% and 10% of the assets,
respectively, if any, remaining in Tranche I and Tranche II of the trust,
respectively, after all interest and principal payments have been made to
certificateholders. United and Capital have also agreed to indemnify Pryor,
Counts & Co., Inc. against certain civil liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(3) In addition to the 3.5% underwriting commission payable to Pryor, Counts &
Co., Inc., other fees and expenses of issuance and distribution are being
paid by the trust.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in the prospectus. Certain capitalized
terms which are used in the following summary and elsewhere in the prospectus
are defined in the Glossary located on page 73.
Senior Insurance Settlements A senior insurance settlement is a cash
Industry payment in exchange for the assignment
of an ownership interest in a fully
underwritten life insurance policy
insuring the life of an individual of
advanced age. This assignment carries
with it the right to receive the death
benefit payable upon the death of the
insured. Insureds generally are
motivated to sell their life insurance
policies during the final months or
years of their lives because such sales
better enable the insureds to both
prepare for their expected death, for
the estate planning purposes or to
obtain a certain quality and dignity of
life that would otherwise be
unavailable because of mounting medical
and living expenses.
Entities purchasing settlements pay the
insured an amount discounted from the
face value of the policy to be
assigned. The amount of the discount is
negotiated and varies depending upon
the nature of the life insurance
policy, the stability of the insurer,
prevailing interest rates, the medical
condition of the insured and the
insured's estimated life expectancy.
The gross income of entities trading in
insurance settlements is generated
almost exclusively by the difference
between the discounted amount paid for
each policy purchased and the face
value of such policies. Net income is
arrived at by subtracting from gross
income such significant operating
expenses as commissions payable to
sourcing brokers, premium payments, due
diligence costs, legal and accounting
fees, interest and other miscellaneous
expenses.
The Insurance Settlement Market The insurance settlement market has
grown significantly since its beginning
in the late 1980's. Each year, more
than $10 billion in death benefits are
paid to the beneficiaries of insureds
who died of predictable terminal
illnesses or chronic incurable
diseases.
The market potential for policies
insuring the lives of individuals
seeking to sell for reasons of estate
purposes, advanced age, incurable
medical conditions, life care, etc. is
estimated by various sources, to be in
excess of $200 billion.
This figure represents those policies
that are purchasable because of the
accuracy in predicting the life
expectancy of these insureds. Medical
advances coupled with actuarial
statistics have created the potential
for this market.
Title of Securities 9% Asset Backed Certificates Maturing
___, 2007.
9.25% Asset Back Certificates Maturing
____, 2009.
Issuer Senior Insurance Settlements Funding
Trust 1999.
1
<PAGE>
The Offering A maximum of $150,000,000 and a
minimum of $20,000,000 principal amount
of Certificates will be offered for
sale to the public. The offering will
terminate 12 months from the effective
date of the registration statement
unless, prior to such date,
subscriptions to purchase $150,000,000
principal amount of Certificates have
been accepted. Each investor must
subscribe to purchase Certificates in
the minimum denominations of $5,000 and
integral multiples of $1,000 in excess
of such minimum denomination.
The Certificates are being offered by
Pryor, Counts & Co., Inc. on a "best
efforts-minimum maximum" basis. A
minimum of $20,000,000 principal amount
of Certificates must be sold not later
than 90 days from the effective date of
the Registration Statement (subject to
Capital's option to extend such period
for 30 days) or all funds will be
returned to subscribers with interest.
If a minimum of $20,000,000 of
Certificates are sold within said
period, the offering will continue on a
"best efforts" basis until the
remaining $130,000,000 principal amount
of Certificates are sold or until
expiration of the offering period,
which is 12 months from the effective
date of the registration statement,
whichever occurs first. All proceeds
from subscriptions to purchase the
Certificates will be promptly
transmitted by Pryor, Counts & Co.,
Inc. or participating broker/dealers by
noon of the next business day after
receipt of such proceeds, to an
interest bearing account of The Chase
Manhattan Bank. All checks and other
orders for the payment of money should
be made to "THE CHASE MANHATTAN BANK
ESCROW ACCOUNT FOR SENIOR INSURANCE
SETTLEMENTS FUNDING TRUST 1999."
All offering proceeds will be deposited
in an interest bearing escrow account
with The Chase Manhattan Bank until
subscriptions totaling $20,000,000 have
been accepted, which must occur within
90 days from the effective date of the
Registration Statement, subject to
Capital's option to extend such period
for 30 days. If this minimum amount of
subscriptions has been timely received,
then, with 2 days prior notice, on the
closing date, The Chase Manhattan Bank
shall release to Capital funds equal to
the amount of the Senior Insurance
Settlements available for purchase in
exchange for Certificates in the
similar principal amount which amount
shall not be less than $20,000,000. All
subsequent subscription proceeds will
be deposited in the escrow account with
The Chase Manhattan Bank until the
earlier of (a) such time and from time
to time Senior Insurance Settlements
are available for purchase by Capital
in exchange for Certificates of
equivalent amounts (less amounts paid
to Pryor, Counts & Co., Inc.); (b) 12
months from the effective date of the
registration statement; or (c) the date
on which a total of $150,000,000
principal amount of Certificates has
been issued.
2
<PAGE>
If subscriptions for a minimum of
$20,000,000 have not been accepted
within 90 days from the effective date
of this registration statement (subject
to Capital's option to extend that
period for 30 days), all subscription
proceeds then held in the escrow
account will be returned promptly with
interest earned thereon. The Chase
Manhattan Bank will be entitled to
retain, from disbursements from the
escrow account that are payable to
Capital for Senior Insurance
Settlements assigned to the trust,
outstanding fees and/or expenses owed
to it under the escrow agreement and
which have not been paid by Capital.
Capital shall have the option to
purchase such Certificates at 102.50%
of the outstanding principal amount
thereof after each 5 year period,
respectively. The entire principal
amount of Tranche I of the Certificates
shall be due and payable no later than
the first distribution date following
the Tranche I final maturity date which
has been defined as the close of
business on the first business day and
the date 8 years from the first closing
date and the entire principal amount of
Tranche II the Certificates shall be
due and payable no later than the first
distribution date following the Tranche
II final maturity date which has been
defined as the close of business on the
first business Day and date occurring
10 years from the first closing date.
The Trust Senior Insurance Settlements Funding
Trust 1999 will be formed pursuant to
the pooling and servicing agreement.
The assets of the trust will include
(a) an irrevocable beneficial interest
in all Senior Insurance Settlements
assigned to the trust by Capital, (b)
monies due or to become due with
respect to the Senior Insurance
Settlements, (c) funds or proceeds
collected or to be collected with
respect to the Senior Insurance
Settlements, (d) funds on deposit in
certain bank accounts of the trust and
funds invested in permitted investments
(inclusive of any interest earned or
accrued or those funds), and (e) all
right, title and interest in and to the
Senior Insurance Settlements and any
supporting documentation or agreements
related to the Senior Insurance
Settlements.
Capital Capital Resource Group One, LLC, a
Delaware limited liability company,
was incorporated on October 21, 1999
and was formed for the purpose of
acquiring Senior Insurance Settlements
from United and assigning them to the
Trust pursuant to the pooling and
servicing agreement. Capital is a
wholly owned subsidiary of United and
will be the originator of the Trust.
Trustee The Chase Manhattan Bank, a New York
corporation, will perform the functions
of trustee described in the pooling and
servicing agreement. The trustee will
also act as paying agent and transfer
agent and registrar under the terms of
the pooling and servicing agreement. In
addition, The Chase Manhattan Bank will
perform the services of escrow agent
pursuant to the escrow agreement.
3
<PAGE>
Master Servicer 21st Holdings, LLC ("21st Services"),
a Minnesota limited liability company
and a national insurance services
organization, will perform the
functions of master servicer as
described in the pooling and servicing
agreement and the master servicer
agreement and will receive a fee in the
amount of .175% of the principal amount
of Certificates outstanding, payable
monthly up until the final closing
date. After the final closing date the
amount will be .0875% of the principal
amount of the Certificates outstanding,
payable monthly. 21st Services has not
previously acted as master servicer of
senior insurance settlements but has
had extensive experience in
underwriting, performing diagnostic
services and evaluating senior
insurance settlements. 21st Services is
qualified to perform the duties of
master servicer of the Senior Insurance
Settlements. 21st Services will also
receive additional fees, payable
monthly, for diagnostic and evaluation
services.
The master servicer shall receive and
maintain data relating to the Senior
Insurance Settlements assigned to
the trust such that at all times the
records of the master servicer will
accurately reflect the transactions
involving the Senior Insurance
Settlements. Upon the removal of the
subservicer, the master servicer will
be appointed successor servicer and
will assume the duties of the
subservicer under the pooling and
servicing agreement except those duties
specifically excluded.
The Master Servicer shall have the
responsibility for (a) reviewing
medical, insurance, and financial
underwriting for the Senior Insurance
Settlements, (b) managing the
assignment of the policies between
United, Capital and the trust, (c)
reviewing financial analysis for each
insurance policy and its relationship
to the aggregate pool of insurance
policies, (d) reviewing Senior
Insurance Settlements purchase
recommendations, (e) auditing the
integrity of financial models on a
periodic basis, (f) tracking of
insureds and maintenance of medical
files, and (g) maintaining data on
pool characteristics.
Subservicer United Funds, LLC, a Delaware limited
liability company, incorporated on
October 21, 1999, as subservicer, will
service the Senior Insurance
Settlements for the trust pursuant to
the pooling and servicing agreement.
United will also be the "seller" of the
Senior Insurance Settlements to be
purchased by Capital under the senior
insurance settlements purchase
agreement.
4
<PAGE>
United does not have a portfolio of
senior insurance settlements nor does
it presently have any contracts to
purchase senior insurance settlements
for its own account.
United, as subservicer, will service
the Senior Insurance Settlements for
the trust for which United will receive
an annual subservicer's fee which shall
be equal to the product of .275%
multiplied by the principal amount of
the Certificates outstanding, payable
monthly up until the final closing
date. After the final closing date the
amount will be .3625% of the principal
amount of the Certificates outstanding,
payable monthly.
Aggregate Servicing Fee The aggregate servicing fee is .45% of
the principal amount of the
Certificates outstanding, consisting of
the .175% master servicer's fee and
.275% subservicer's fee up until the
final closing date. After the final
closing date the fees will be .0875%
and .3625%, respectively.
The Certificates The Certificates will be offered in
minimum denominations of $5,000 and
integral multiples of $1,000 in excess
of such minimum denominations. Upon
issuance, the Certificates will be
executed by Capital and authenticated
by the trustee. Each Certificate shall
be executed by manual or facsimile
signature on behalf of the trust by an
authorized officer of the trustee. No
Certificate shall be valid for any
purpose unless so authenticated and
signed.
Each Certificate offered hereby
represents an undivided interest in the
trust. Each Certificate represents its
owner's right to receive semi-annual
payments of interest at the certificate
rate during the period that the
certificates are outstanding, primarily
from collections attributable to the
collection of policy proceeds and the
liquidity account. See "Description of
the Certificates and the Pooling and
Servicing Agreement - Principal
Payments." The entire principal amount
of the outstanding Certificates shall
be due and payable no later than the
first distribution date following the
final maturity date which shall be the
close of business on the first business
day and date occurring 8 years and 10
years, respectively, from the first
closing date.
The principal amount of each
Certificate will remain fixed at its
initial principal amount until the
final maturity date.
The Certificates will represent
beneficial interests in the trust only
and will not represent or constitute an
interest in Capital or United.
Certificate Interest Certificate interest will accrue at
the rate of 9.0% and 9.25% per annum,
respectively, from the closing date
applicable to each Certificate and is
payable to the Certificateholders
semi-annually which is defined as the
distribution date, after the date of
purchase of the Certificates, which is
defined as the closing date. Principal
is payable commencing on the first
5
<PAGE>
distribution date following the close
of busness on the 8th and 10th year
anniversary, respectively, of the
closing date. The Certificates are
subject to optional repurchase at
102.50% of the outstanding principal
amount thereof after each 5 year
period, respectively. The trust will
terminate at the close of business on
the first business day 10 years from
the date of the first closing date.
Interest will be calculated as of the
1st day of the month during the period
in which the applicable distribution
date occurs or, in the case of the
initial distribution date, on the
principal amount of the Certificates
issued on the initial closing date.
Certificate interest will be calculated
on the basis of a 360 day year
comprised of 12 months of 30 days each.
Beginning with the distribution date in
the period immediately following the
applicable closing date, certificate
interest at the certificate rate
will be due and payable.
Certificate interest payments on any
distribution date will be funded from
collections attributable to Senior
Insurance Settlements during the
preceding six months, or such shorter
period as applicable. Certificate
interest will be paid only after that
portion of the trustee's fees and
master servicer's fees due on the
applicable distribution date have been
paid. If collections attributable to
Senior Insurance Settlements are
insufficient to fund the payment of
such trustee's fees, master servicer's
fees and certificate interest, the
deficiency will be paid from
withdrawals from the liquidity account,
to the extent available. See
"Description of the Certificates and
the Pooling and Servicing Agreement".
Tax Matters Capital (under the pooling and
servicing agreement) and each
Certificateholder (by acceptance of its
Certificate) agree to treat the
Certificates as indebtedness of Capital
for federal, state and local income and
business tax purposes. However, no tax
ruling will be requested by Capital or
the trust with respect to this
characterization. If the
characterization of the Certificates as
debt obligations of Capital were
successfully challenged by the Internal
Revenue Service, there may be adverse
tax consequences to Certificateholders.
See "Tax Matters".
Registration of Certificates The Certificates will be registered by
individual book-entry by the transfer
agent and registrar who shall be The
Chase Manhattan Bank. There currently
is no secondary market for the
Certificates, and there is no assurance
that one will develop.
6
<PAGE>
Senior Insurance Settlements Senior Insurance Settlements shall mean
insurance policies purchased from
elderly insureds in the newly emerging
senior and elder settlement market.
United intends to enter into agreements
with referral sources, primarily
sourcing brokers, financial planners,
healthcare professionals and elder care
organizations to purchase insurance
policies from insureds pursuant to
which United will purchase the senior
insurance settlements at a discount of
between 20% and 90% of the face amount
of the insurance policies. United may
also use 21st Services or its
affiliates as sourcing brokers. United
will then evaluate and process the
senior insurance settlements. 21st
Services will also make an extensive
evaluation of such policies. United
will then sell the senior insurance
settlements, without recourse to
Capital. The purchased policies will
then be deemed to be Senior Insurance
Settlements upon their acquisition by
Capital and the assignment of the
beneficial interest in such Senior
Insurance Settlements to the trust,
except as otherwise provided in the
pooling and servicing agreement.
Capital will enter into a senior
insurance settlements purchase
agreement dated of even date with the
pooling and servicing agreement between
Capital, as buyer, and United, as
seller, containing the terms and
conditions under which Capital will
purchase Senior Insurance Settlements
from United. Pursuant to the senior
insurance settlements purchase
agreement, United will (a) sell,
transfer, assign, and convey to Capital
all of United's right and interest in
and to the Senior Insurance Settlements
and (b) take all actions that are
required under state law to establish
Capital's ownership interest in and to
the Senior Insurance Settlements, as
more fully described in the senior
insurance settlements purchase
agreement. See "Description of the
Senior Insurance Settlements Purchase
Agreement."
Pursuant to the pooling and servicing
agreement, simultaneously with the
purchase of the Senior Insurance
Settlements from United, Capital will
(a) designate the trust as an
irrevocable beneficiary of the Senior
Insurance Settlements and (b) cause to
be taken all actions that are required
under state law to establish the
trust's interest in and to the Senior
Insurance Settlements. See "Description
of the Certificates and the Pooling and
Servicing Agreement - Assignment of
Senior Insurance Settlements".
7
<PAGE>
Diversification Requirements: Capital
will covenant to structure its
purchase, acquisition and transfer of
Senior Insurance Settlements so that
(a) at acquisition, no less than 75% of
the cumulative death benefits of the
Senior Insurance Settlements held or
beneficially owned by the trust shall
be payable by insurance companies with
an A.M. Best rating of A or better, or
its equivalent as set by other
nationally recognized rating agencies,
(b) at acquisition no more than 25% of
the cumulative death benefits of the
Senior Insurance Settlements held or
beneficially owned by the trust shall
be payable by insurance companies with
an A.M. Best rating of B+, or its
equivalent as set by other nationally
recognized rating agencies, (c) at any
time after $50,000,000 of Senior
Insurance Settlements have been
assigned to the Trust no more than 10%
of the outstanding cumulative death
benefits of the Senior Insurance
Settlements held or beneficially owned
by the trust shall be payable by any
one insurance company, and (d) no more
than $4 million in Tranche I and $10
million in Tranche II will be
cumulative death benefits relating to
any one individual.
Senior Insurance Settlements Servicing United shall perform the duties of
subservicer as described in the pooling
and servicing agreement, which include
responsibility for (a) the day-to-day
operations of the pool of Senior
Insurance Settlements; (b) all data
management functions; (c) system
development and maintenance; (d)
allocating collections to the
appropriate accounting categories; (e)
preparing certain periodic reports and
certificates and otherwise tending to
the collection of the Senior Insurance
Settlements; and (f) coordinating the
escrow agent and trust functions. See
"United, Capital, 21st Services and the
Trust - United."
Should United fail to perform the
duties of subservicer, the trustee
shall require the master servicer to
perform the duties of subservicer and
appoint the master servicer as
successor servicer. In this regard, the
master servicer will receive the entire
amount of the servicing fee as well as
a $100,000 transfer of management fee.
Collections and Investor Accounts All death benefit payments received
with respect to the Senior Insurance
Settlements constitute collections.
8
<PAGE>
Lockbox Account. Collections will be
sent by the insurer directly to The
Chase Manhattan Bank lockbox account
or, if sent to the subservicer, will
be deposited within one (1) business
day of its receipt into the lockbox
account by the subservicer.
Senior Insurance Settlements Account.
The senior insurance settlements
account shall be a segregated,
interest-bearing account into which
collections attributable to Senior
Insurance Settlements will be deposited
from the lockbox account.
Liquidity Account. The liquidity
account will be a segregated account
formed to provide additional security
for the distributions required under
the pooling and servicing agreement and
to provide for premium payments on the
insurance policies. Any amounts of
excess of the Senior Insurance
Settlements purchase price will be
maintained in the liquidity account.
The liquidity account will be funded
with a minimum of $___________.
Distribution Account. The distribution
account is a segregated, non-interest
bearing account into which funds are
deposited and from which distributions
are made to the Certificateholders.
The lockbox Account, the senior
insurance settlements account, the
liquidity account, and the distribution
account are collectively referred to as
investor accounts.
Permitted Investments The trust may invest funds from the
senior insurance settlements account
and the liquidity account in permitted
investments. See "Glossary."
Amortization Period With respect to each Certificate, the
amortization period shall mean the
period commencing on the date of the
first issuance of the Certificates
(i.e., the applicable closing date) and
ending on the earlier to occur of (a)
the close of business on the first
business day and date 8 years and 10
years, respectively, from the first
closing date or (b) the date on which a
pay out event is deemed to occur. The
first closing date shall not occur
prior to the effective date of the
registration statement. No Certificate
principal will be distributed to
Certificateholders during the
amortization period.
The last distribution of Certificate
principal to Certificateholders will be
due and payable on the final maturity
date. See "Description of the
Certification and the Policy and
Servicing Agreement - Principal
Payments."
9
<PAGE>
Distributions From the Senior On each transfer date, The Chase
Insurance Settlements Account Manhattan Bank will withdraw, to the
and Liquidity Account extent available from collections
attributable to the senior insurance
settlements account and from the
liquidity account if insufficient funds
are available from the senior insurance
settlements account, and deposit in the
distribution account for payment in the
following order of priority: (a)
trustee's fees and expenses; (b) master
servicer's fee; (c) Certificate
interest; and (d) subservicer's fee.
See "Description of the Certificates
and the Pooling and Servicing Agreement
- Interest Payments" and - "Investor
Accounts and Allocation of
Collections."
On each transfer date, after the final
maturity date, The Chase Manhattan Bank
will withdraw from the senior insurance
settlements account and liquidity
account, if necessary, and deposit into
the distribution account, for payment
of principal to the Certificateholders
on the next distribution date,
collections attributable to Senior
Insurance Settlements. See "Description
of the Certificates and the Pooling and
Servicing Agreement - Principal
Payments" and - "Investor Accounts and
Allocation of Collections."
10
<PAGE>
Affiliation Between United and Capital United is a Delaware limited liability
corporation who will be the seller of
the Senior Insurance Settlements to
Capital and the subservicer of the
Senior Insurance Settlements.
Capital is a single purpose
wholly-owned subsidiary of United and
is the originator of the trust
Placement Agent Pryor, Counts & Co., Inc. is a New York
corporation and will be the
broker/dealer who will use its best
efforts to offer and sell the
Certificates. Pryor, Counts & Co., Inc.
is a member in good standing, of the
National Association of Securities
Dealers, Inc. and registered as a
broker/dealer with the Securities and
Exchange Commission. Pryor, Counts &
Co., is not an "affiliate" of United or
Capital.
21st Services Fees 21st Services will receive a fee of
.30% for each Senior Insurance
Settlement purchased by Capital. 21st
Services is not an "affiliate" of
either United or Capital.
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Financial Information Capital has determined that its
financial statements are not material
to the offering made hereby.
The trust will be formed to benefically
own Senior Insurance Settlements and to
issue the Certificates. The trust will
have no assets or obligations prior to
the issuance of the Certificates and
will not engage in activities other
than those described herein.
Accordingly, no financial statements
with respect to the trust are included
in the prospectus.
Reports to Certificateholders Once every year during the term of the
trust, the financial statements of the
trust will be audited by independent
public accountants and such statements
will be made available to
Certificateholders upon request.
Additionally, a semi-annual
certificateholders' statement and an
annual certificateholders' tax
statement will be sent to each
Certificateholder. See "Description of
the Certificates and the Pooling and
Servicing Agreement."
The certificates represent beneficial undivided interests in the trust only and
do no represent interests in or obligations of capital, united or
any affiliate thereof except to the extent described herein. The certificates
are not insured or guaranteed by any Federal or State Governmental Agency.
The certificates are offered subject to prior sale, to allotment and withdrawal
and to cancellation or modification of the offer without notice. The placement
agent reserves the right, in its discretion, to reject orders in whole or in
part for the purchase of certificates offered hereby, notwithstanding the tender
of payment by check or otherwise.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authoried by the trust, Capital or United. This prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the certificates, or an offer or solicitation of any person in any jurisdiction
in which such offer or solicitation would be unlawful. The delivery of this
prospectus at any time does not imply that information herein is correct as of
any time subsequenet to its date.
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RISK FACTORS
Potential investors should be aware that an investment in the trust
involves a high degree of risk. There can be no assurance that the trust's
investment objectives will be achieved or that an investor will receive a return
of its capital. We also caution you that this prospectus includes
forward-looking statements that are based upon our beliefs and assumptions and
on information currently available to us. The following considerations should be
carefully evaluated before making an investment in the trust.
Dependence on United, Capital and 21st Services and on Ability to Predict
Life Expectancy. The trust shall look solely to Capital and Capital shall look
solely to United for the acquisition of Senior Insurance Settlements. There can
be no assurance that there will be sufficient Senior Insurance Settlements to
utilize the entire $150,000,000 anticipated to be raised from this offering of
Certificates. If United were to cease acting as subservicer, and if 21st
Services were to cease acting as master servicer, delay in processing payments
on the Senior Insurance Settlements and information with respect thereto could
occur, resulting in (a) delays in payments to the Certificateholders; (b) the
early termination of the trust; and (c) early maturity of the Certificates.
United, in turn is dependent upon Thomas LaRussa, the loss of whom could
adversely affect United's business and its ability to perform its duties and
obligations under the pooling and servicing agreement and the senior insurance
settlements purchase agreement. The loss of Paul Kirkman, Robert Simon and
Steven Walker of 21st Services who will perform the master servicer functions,
could also adversely affect its obligations under the pooling and services
agreement. See "United, Capital, 21st Services and the Trust."
The trust's operations and financial results are highly dependent on the
ability of United and 21st Services, to predict accurately life expectancy. Life
expectancy is a significant factor in United's determination of the purchase
price of an insurance policy. Unanticipated delays in the collection of policies
will reduce the trust's actual yield on its portfolio and adversely affect the
trust's cash flow. See "United, Capital, 21st Services and the Trust."
Cures and Advances in Medical Treatments For Terminal Illnesses Will Reduce
the Need for Senior Insurance Settlements. The development of a cure for or
vaccine against diseases and other terminal illnesses or the development of new
drugs or other treatments which extend the life expectancy of individuals with
such illnesses could delay substantially the collection of the face value of
policies assigned to the trust. Any such delay could materially reduce the
trust's actual yield on its portfolio, materially adversely affect the trust's
cash flows and extend the period over which the trust would recognize future
income. In addition, such medical developments would likely reduce the number of
individuals seeking insurance settlements. Substantial reductions is the cost of
treating terminal illnesses (including reductions from the development of less
costly treatments) may also reduce the number of individuals seeking insurance
settlements. The trust's profitability is directly linked to its ability to
collect the face value of its life insurance policies within the estimated life
expectancy of the insured. While some individual insureds will outlive their
estimated life expectancy, others will not. The trust will mitigate this risk by
investing in fully underwritten insurance policies of seniors and having two
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<PAGE>
Tranches with maturities of 8 and 10 years, respectively, thereby reducing the
impact of some insureds outliving their life expectancy. Advances in medical
treatment or cures that significantly prolong the lives of insureds who have
sold their life insurance policies to the trust may eliminate any profits and
may lead to substantial losses. However, United anticipates that almost all
of its purchases will be senior settlements which represent a much more diverse
array of life threatening or life shortening illnesses than has historically
been present in the viatical settlement market which to date has largely
involved AIDS patients.
Shortfall in Liquidity Account. Inaccurate life expectancy estimates could
result in the depletion of the liquidity account. While investing in a large
portfolio of Senior Insurance Settlements mitigates this risk, if the liquidity
account is depleted for any reason, the trust would be unable to pay premiums on
outstanding policies and the policies would lapse. Anticipating such
circumstances, the trust could attempt to liquidate its remaining Senior
Insurance Settlements through a sale to one or more third parties. The sale
price would take into account the then estimated life expectancies of Senior
Insurance Settlements plus a further discount representing a reserve to permit
the purchaser to pay premiums for a period of time after the sale.
The risk of shortfalls in the liquidity account will be mitigated somewhat
since funds will not be released from the liquidity account as Senior Insurance
Settlements are liquidated. Thus, the liquidity account will benefit from any
overestimates of life expectancies.
Delay in Payment and Non-Payment of Policy Proceeds. A number of arguments
may be addressed by former beneficiaries under a policy or by the insurance
company issuing a policy to deny or delay payment to the trust of the proceeds
of a policy following an insured's death, including arguments related to lack of
mental capacity of the client or applicable periods of contestability or suicide
provisions. Furthermore, the trust may be unable to collect the face value of
any insurance policy issued by an insurance company which becomes insolvent.
While virtually all states have established guarantee funds to pay the face
value of life insurance policies issued by insolvent insurance companies, the
face value of a policy may exceed the amount provided by such fund and, in any
event, a significant delay in the receipt of payment may occur. Prior to
purchasing a policy, United and 21st Services, will follow a procedure designed
to minimize the risk that any of the foregoing will result in non-payment of
proceeds to the trust. Delay for any reason in the trust's collection of the
face value of a life insurance policy following the death of the insured could
have an adverse effect on the trust's profits and distributions. The types of
events that could cause a delay in payment include disputes with third parties
concerning the mental capacity of the insured at the time of sale of the policy,
inability to obtain a death certificate in a timely manner, disputes with former
beneficiaries concerning the release of their interests, and other problems
relating to the transfer of title of the life insurance policy. The trust could
also experience difficulty obtaining a death certificate for a deceased insured
if the insured disappears prior to such insured's death, the insured dies
outside of the Unites States or the trust is unable to immediately determine the
country where the insured died.
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<PAGE>
Nonpayment of policy proceeds is a less likely but far more serious risk
than delay in payment. Nonpayment of a life insurance policy will significantly
reduce the trust's profits and distributions. Nonpayment could result from the
insolvency of the insurer or a dispute with the insurer concerning the issuance
of the life insurance policy.
To minimize the risk of a delay in payment or of nonpayment of life
insurance policy proceeds, United and/or 21st Services will take these steps,
among others, during the policy evaluation phase:
o Obtain notarized consents and releases from the former beneficiaries
of the life insurance policies;
o Review statements provided by the insured's physicians regarding the
owner and/or insured's mental capacity;
o Review policy documents to confirm contestability periods and other
matters; and
o Review the credit standing of life insurance companies as rated by
recognized ratings agencies.
Nontransferability of Certificates. Pryor, Counts & Co.,Inc. has advised
Capital that the Pryor, Counts & Co., Inc. does not intend to act as a market
maker of the Certificates.
Negative Effect of Increasing Interest Rates. Changes in interest rates,
and expectations about changing interest rates, will have a variety of affects
on the trust's business. The trust's profitability is dependent to a significant
degree on the difference ("spread") between the cost of the Senior Insurance
Settlements and the yield that it earns on its portfolio of policies. Increase
in interest rates may affect the price the trust is willing to pay for the
Senior Insurance Settlements. Any substantial increase in interest rates will
result in either a decrease in the purchase price the trust is willing to pay
for Senior Insurance Settlements or a lower spread. If the trust's purchase
prices were to become significantly lower than its competition's purchase
prices, the number of policies available to the trust could decrease. In
addition, due to current and proposed regulations in several states which
provide minimum purchase prices for policies, the trust may be unable to
decrease its purchase prices to fully account for the interest rates paid on the
Certificates. See "Risk Factors-Government Regulation."
Competition from other Insurance Settlement Companies and/or Insurance
Companies. The acquisition and servicing of insurance settlements is not unique.
Several other companies offer similar services and many of them are larger and
have greater resources than United and Capital. These other companies could
choose to enter United's and Capital's target market and devote greater
resources and capital to the acquisition of senior insurance settlements. The
resources and capital of the other companies are much greater than those which
United and Capital currently have available to them or which United and Capital
may have available in the future and thus United and Capital may be restricted
in their abilities to engage in business competitively with these other
companies.
United believes that approximately 50 to 60 insurance settlement companies
currently operate in the United States. Although lack of traditional funding
sources and high financing costs have limited the industry's growth in the past,
competition has recently increased. This increased competition has contributed
to higher prices and lower original estimated annual yields for such policies.
In addition, recently, the number of life insurance companies offering
accelerated death benefits to their policyholders has increased substantially
and the number of policyholders covered by some form of accelerated death
benefit feature has increased at an even higher rate. Accelerated death benefits
allow policyholders to access all or a portion of the death benefits of their
life insurance prior to their death under circumstances defined by the issuing
insurance company. Although the terms of accelerated death benefit features very
considerably, most provide for the payment to the policyholder prior to the
death of the insured of a specified percentage (generally ranging from 25% to
50%) of the policy's death benefit upon the certification by a physician that
the insured has a terminal illness and that death is expected to occur within a
specified period of time (generally within six to 12 months). Although United
believes insurance companies have generally offered accelerated death benefits
on terms more restrictive than the terms of senior insurance settlements, the
life insurance industry may become more aggressive in offering such benefits and
other benefits to elderly and terminally ill persons. In addition, more
insurance companies may engage in the insurance settlement business itself,
although United is aware of only a limited number having done so to date. Given
the life insurance industry's financial resources and direct access to
policyholders, life insurance companies could become much stronger and more
effective competitors to insurance settlement companies in the future. In
addition, it is possible that other capital providers that do not currently
provide insurance settlements will in the future offer insurance settlements or
similar financial services. Any increased competition could increase the
purchase price of policies, thus reducing the trust's future yield on its
portfolio, and could also reduce the number of policies available for purchase
by United. The trust's existing and future competitors may have substantially
greater financial resources than the trust.
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<PAGE>
Costs of and delays attributable to Government Regulation. Capital and
United either will be not required to be licensed, will be licensed, or will
temporarily be permitted to do business without a license. Currently only one
state, Texas, regulates senior life insurance settlements.
Generally, the statutes are designed to protect the rights of insureds by
ensuring, to the extent possible, that they receive (a) appropriate disclosures
from the settlement company negotiating the purchase of their life insurance
policy, (b) a fair and reasonable purchase price for their life insurance
policy, and (c) an opportunity for a brief period after the closing of the
sale of their life insurance policy to rescind the sale transaction. An
additional goal of most of the regulations are to enable state agencies to
monitor the financial soundness and business activities of entities engaged in
the buying and selling of insurance settlements.
United generally welcomes increased regulation of the insurance settlement
market and does not expect broader regulation to adversely affect its business.
For the most part, compliance with state laws regulating the insurance
settlement industry involves fulfilling certain licensing and reporting
requirements and adherence to certain disclosure and procedural requirements
when buying and selling insurance settlements. Capital and United intend to
comply with all applicable state statutes regulating the conduct of entities
engaged in the buying and selling of senior insurance settlements. Capital and
United intend to obtain all required state licenses or permits but there can be
no assurance that they will be able to obtain such licenses. United will be
prohibited from purchasing insurance settlements in any state in which it is
unable to obtain or maintain the appropriate licenses.
At present, Capital and United have no reason to believe that they will be
unable to comply with the licensing requirements of any particular jurisdiction.
However, the number of states enacting statutes governing the insurance
settlement industry is growing, and states with existing insurance settlement
statutes are broadening the scope of their regulations.
There can be no assurance that, in the future, there will not be periods
when Capital and United are not in compliance with state regulations and during
which Capital and United will be unable to comply.
A few states, have either adopted or are seriously considering the adoption
of legislation that regulates the minimum purchase prices to be paid for
insurance settlements. Capital and United will comply with any and all
legislation enacted by these jurisdictions and others. Compliance with minimum
purchase price requirements may significantly reduce the trust's profitability
and ability to make distributions. Because minimum purchase price requirements
may prevent the trust from earning an acceptable margin of profit on the life
insurance policies in its portfolio, such requirements may force the trust not
to purchase life insurance policies in states imposing such restrictions.
Every state has statutes governing persons and entities engaged in the
conduct of an insurance business. United is not aware of any judicial or
administrative opinion from any jurisdiction conclusively finding that
investment in insurance settlements constitutes the conduct of an insurance
business. It is possible, however, that investment in insurance settlements
will, in the future, be interpreted as the conduct of an insurance business. The
trust will not be organized as an insurance company. If a significant number of
jurisdictions, particularly jurisdictions from which the trust will obtain a
large amount of senior insurance settlements limit the trade in senior insurance
settlements to insurance companies, this is likely to have a material adverse
effect on the Trust and its prospects for financial success.
Limited Assets. The Trust does not have, nor is it expected to or permitted
to have, any assets other than Senior Insurance Settlements and temporary
investments. Investors, therefore, must rely on payment of death benefits on
policies beneficially owned by the trust.
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No Regulation as an Investment Company. While the trust may be considered
similar to an investment company, it does not intend to register as such under
the Investment Company Act of 1940, and accordingly, the provisions of that Act
(which, among other matters, require investment companies to have a majority of
disinterested directors and regulate the relationship between the investment
advisers and the investment company) will not be applicable. See "Investment
Company Act of 1940."
Bankruptcy or Insolvency of United. United will warrant to Capital in the
senior insurance settlements purchase agreement between them that the sale of
the Senior Insurance Settlements by United to Capital is a true and valid sale.
In addition, United will take all actions that are required under the law of
each of the jurisdictions in which the Senior Insurance Settlements are
purchased to protect Capital's ownership interest in the Senior Insurance
Settlements in the event a court should rule that the sale to Capital was not a
true sale but a financing arrangement. United will treat each transaction as a
sale, and as such, the Senior Insurance Settlements would not be part of
United's estate should United be subject to bankruptcy proceedings or creditors'
rights proceedings. Notwithstanding the foregoing, if United were to become a
debtor in a bankruptcy proceeding and a creditor, Trustee-in-Bankruptcy, or
United itself, as debtor, were to assert that the sale of the Senior Insurance
Settlements to Capital should be recharacterized as a pledge of such Senior
Insurance Settlements to secure the borrowing of United, then delays in payments
of collections to the trust and the Certificateholders could occur or, in the
event a bankruptcy court were to rule in favor of any such trustee, creditor, or
United, then reductions in the amount of such payments could result. See
"Certain Legal Aspects of the Senior Insurance Settlements - Certain Matters
Relating to Bankruptcy."
Bankruptcy or Insolvency of Capital. Capital will warrant in the pooling
and servicing agreement that the assignment of the Senior Insurance Settlements
to the trust is an irrevocable assignment of its beneficial interest in the
Senior Insurance Settlements to the trust. Capital will take all actions
required under the law of each jurisdiction in which the Senior Insurance
Settlements are assigned to establish the trust's interest in the Senior
Insurance Settlements. Notwithstanding the foregoing, if Capital were to become
a debtor in a bankruptcy proceeding, and a bankruptcy trustee, Capital as a
debtor in possession, or a creditor of Capital were to assert that the
assignment of the Senior Insurance Settlements from Capital to the Trust should
be recharacterized as a pledge of such Senior Insurance Settlement to secure the
borrowing of Capital or, if a bankruptcy court were to rule in favor of any such
trustee, debtor in possession, or creditor, then delays or reductions in the
distribution of the Certificates to Certificateholders could result.
Breach of Warranties. Capital will represent and warrant to the trust and
United will represent and warrant to Capital that the Senior Insurance
settlements are valid and enforceable. However, it is not anticipated that the
trustee will make any examination of the Senior Insurance Settlements or the
records relating thereto for the purpose of establishing the presence or absence
of defects, compliance with such representations and warranties, or for any
other purpose. In addition, there are no provisions in the senior insurance
settlements purchase agreement for any repurchases of policies by United or
Capital.
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No Operating History; New Industry. Both Capital and United were
incorporated in October 1999 and have no operating history. The trust was
created under the pooling and servicing agreement dated _____________, 1999 and
has no operating history. In addition, the senior insurance settlements industry
is relatively new. There can be no assurance that the insurance settlements
industry will remain a viable industry or that the trust will remain competitive
in the industry.
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Limited Obligations of United and Capital. Neither United nor Capital has
any obligation to make any payments with respect to the Certificates or the
Senior Insurance Settlements.
Certificate Yield. The effective yield to Certificateholders on their
Certificates will be below that otherwise produced by the certificate rate
because, while interest will accrue on the Certificates from the first day of
each calendar month, distributions of such interest will be made semi-annually.
Limited Credit Enhancement. Credit enhancement of the Certificates will be
provided by the liquidity account and overcollateralization at the final
maturity date (based upon the trust advancing funds in an amount significantly
less than the face amount of the insurance policies represented by the Senior
Insurance Settlements).
Dependence on and Concentration of Sourcing Brokers. United will purchase
policies referred by sourcing brokers and other referral sources, including 21st
Services. None of these sourcing brokers is under a contractual agreement to
refer policies to United, and none is restrained from referring policies to
United's competitors. Sourcing brokers tend to be relatively small independent
businesses with limited capital resources. Therefore, no assurance can be given
that existing sourcing brokers will remain in business or that relationships
with sourcing brokers or other referral sources can be established. In the event
that United's relationship with the sourcing brokers were not to be established
or to cease, the trust's operations could be adversely affected. United believes
that it can establish a good relationship with sourcing brokers, including 21st
Services.
Rating of the Certificates. A rating by a rating agency is not a
condition to issuance of the Certificates. You are advised to make your decision
to purchase Certificates based on the Certificates being unrated unless and
until a rating has been secured. Capital has requested a ___ rating of the
Certificates from _____________________. If such rating has been secured it will
be included in the final prospectus. If an investment grade rating is not
available, Capital will withdraw the rating request. There can be no assurance
that the Certificates will be rated. There is no assurance that a rating, if
given, will remain for any given period of time or that a rating will not be
lowered or withdrawn entirely by a rating agency if in its judgment
circumstances so warrant. A rating is based on the following factors: the
type of Senior Insurance Settlements; the financial stability of the insurance
companies who must pay claims used in payment of the Senior Insurance
Settlements; the diversification of the pool of Senior Insurance Settlements
based upon the underlying concentration of life insurance claims from a
particular life insurance company; the degree of overcollateralization of the
Certificates; the size of the pool of Senior Insurance Settlements; the
collecton history, or lack thereof, of United; and the credit ratings of the
credit enhancement, if any, of the Certificates. A rating is not a
recommendation to purchase, hold or sell Certificates, inasmuch as a rating does
not comment as to market price or suitability of the market or investment for a
particular investor. A rating agency does not evaluate the likelihood of
successful remarketing of the Certificates. The Certificates are considered by a
rating agency to be securities.
ERISA Considerations. It is anticipated, although no assurance is hereby
given, that the trust's assets will not be deemed or characterized as "plan
assets" under the Plan Asset Regulations of the Department of Labor (the
"Regulations"), and that transactions involving the trust will not be prohibited
under those Regulations or under Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended. Benefit plans, benefit plans'
fiduciaries or anyone purchasing the Certificates should consult with their
counsel concerning the effect that ERISA, the Regulations, or the Internal
Revenue Code may have on such benefit plan or person. See "ERISA
Considerations."
Tax Matters. Capital (under the pooling and servicing agreement) and each
Certificateholder (by acceptance of its Certificate) agree to treat the
Certificates as indebtedness of Capital for federal, state and local income and
business tax purposes. No tax ruling will be requested by Capital or the Trust
with respect to this characterization. If the characterization of the
Certificates as debt obligations of Capital were successfully challenged by the
Internal Revenue Service, there may be adverse tax consequences to
Certificateholders. See "Tax Matters". There can be no assurance that the IRS
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will not assert that the legal relationship among Capital and the
Certificateholders is that of a partnership, publicly traded partnership or an
association taxable as a corporation. If the arrangement were treated as a
publicly-traded partnership (unless certain exceptions apply) or as an
association taxable as a corporation, it would be subject to federal income
taxes at corporate tax rates on the taxable income generated by the ownership of
the Senior Insurance Settlements. Such a tax would result in reduced
distributions to Certificateholders. Distributions to Capital and to the
Certificateholders would not be deductible in computing the taxable income of
the corporation. In addition, all or a portion of any such distributions made to
the Certificateholders would, to the extent of the current and accumulated
earnings and profits of such corporation, be treated as dividend income to the
Certificateholders. You should consult with your counsel concerning the effect
of the tax matters discussed herein. See "Tax Matters".
FORWARD-LOOKING STATEMENTS
Some statements in this prospectus constitute forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements or
industry results to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements. Such
factors include those described in "Risk Factors." The forward-looking
statements included in this prospectus may prove to be inaccurate. In light of
the significant uncertainties inherent in these forward-looking statements, you
should not consider this information to be a guarantee by us or any other person
that our objectives and plans will be achieved.
UNITED, CAPITAL, 21ST SERVICES AND THE TRUST
United
The trust will be subserviced by United Funds, LLC. The trust
will also engage 21st Services as master servicer, to assist it in the
identification, evaluation, monitoring and collection of Senior Insurance
Settlements.
United contemplates conducting business on behalf of Capital and the trust.
United will make arrangements to buy, and buy Senior Insurance Settlements as
described in more detail below. United will then sell, transfer, assign and
convey the Senior Insurance Settlements to Capital. United will service the
Senior Insurance Settlements transferred from Capital to the trust pursuant to
the pooling and servicing agreement. United's agreement to sell to Capital are
governed by the senior insurance settlements purchase agreement. See
"Description of the Senior Insurance Settlements Purchase Agreement." United's
duties and obligations with respect to servicing the Senior Insurance
Settlements are governed by the pooling and servicing agreement. See
"Description of the Certificates and the Pooling and Servicing Agreement."
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United was incorporated in Delaware on October 21, 1999. United has no
operating history. After the formation of the trust, United will (a) purchase
senior insurance settlements for its own account and will sell and transfer
those Senior Insurance Settlements to Capital pursuant to the senior insurance
settlements purchase agreement and (b) service those Senior Insurance
Settlements assigned to the trust from Capital pursuant to the pooling and
servicing agreement. United's address is 650 S. Carmel Drive, Suite 150, Carmel,
Indiana 46033. Its telephone number is (317)705-5555. United is managed by
Thomas J. LaRussa. Mr. LaRussa age 31, comes to United from the Mergers and
Acquisitions section of Merrill Lynch & Co, Inc.'s investment banking section.
Mr. LaRussa's background in finance is complimented by his experience in Merrill
Lynch's Mergers and Acquisitions Department as an Informational Services (IS)
Analyst. Mr. LaRussa received his Bachelor of Arts Degree from the University of
Rochester, cum laude, in 1990.
Business Strategy and Industry Overview
The senior insurance settlement industry expanded significantly in the late
1980's. Therefore, this industry is relatively new and contains a very different
profile of insureds than the traditional viatical settlement industry.
United intends to be is a nationwide specialty financial services company
that purchases senior insurance settlements from elderly insures. A senior
insurance settlement is the payment of cash in return for an ownership interest
in, and the right to receive the face value of a life insurance policy. Upon
such payment, the policyholder assigns his or her policy to the
United, which becomes the holder, owner or certificate holder of the policy and
the beneficiary thereunder and would receive from the insurance company the face
value payable under the policy following the death of the insured. The amount
paid by United for a policy is determined by United based on various factors,
including the United's estimated life expectancy of the insured, the estimated
premiums payable under the policy over the expected life of the insured and
certain other costs of the senior insurance settlement.
United's business will involve the following principal steps: (a)
origination of policy purchases through a nationwide referral network that will
include insurance settlement sourcing brokers; (b) underwriting, which includes
evaluating the terms of each policy and, with the assistance 21st Services,
estimating the life expectancy of the insured; (c) closing the transaction,
which includes execution of a sale agreement, releases of beneficiaries and an
insurance policy assignment as well as payment of the purchase price; (d)
monitoring the insured and the policy; and (e) collecting the policy proceeds
following the insured's death. All information obtained by United in connection
with policy purchases (including the identities of the insureds) is held in
confidence and access thereto is restricted by United to its employees, 21st
Services and other representatives.
Origination
United will obtain information regarding potential policy purchases from a
nationwide referral network that includes sourcing brokers and community groups
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and professionals (including health care practitioners, care groups, financial
planners, attorneys and doctors) involved in the treatment of and provision of
services to the elderly.
While the United does not have formal agreements with any referral sources,
it hopes to establish close relationships with several referral sources who have
established market niches within the elder communities. Many referral sources
advertise their services in the geographic area in which they operate and target
such advertising to specific communities. The use of referral sources will allow
United to operate in market niches that otherwise would be cost prohibitive for
it to pursue through direct advertising. United intends to pay certain of its
referral sources (typically sourcing brokers) fees based on negotiated informal
fee arrangements. Sourcing brokers are typically paid an up-front fee (typically
based on the face value of the policy) upon the funding of the policy and may
also be paid a back-end fee (also typically based on the face value of the
policy) upon receipt by the trust of the proceeds of the policy. United does not
intend to pay referral fees to doctors, lawyers or other professionals to whom
United is prohibited by applicable law from paying a referral fee and will not
do business with referral sources which United does not believe to be reputable.
Sourcing brokers and certain other referral sources also handle other
administrative functions, such as collecting and processing applications from
potential clients and collecting medical and insurance records.
Underwriting
The underwriting process is designed to obtain accurate information
regarding both the insured and the life insurance policy (a) to determine
whether United will offer to purchase the policy and, if so, the price it will
offer and (b) to ensure that certain criteria are met to minimize challenges by
former beneficiaries or other persons to the purchase or by an insurance company
to payment of the face value of the policy. See "Risk Factors - Non Payment or
Delay in Payment of Policy Proceeds."
Once a potential client contacts United, an application and consent forms
permitting United to obtain medical and insurance coverage information for the
insured are sent to the potential client. All information obtained by United in
connection with policy purchases (including the identities of the insureds) is
held in confidence and access thereto will be restricted by United to its
employees, 21st Services and other representatives. Upon receipt by United of
the completed application, it is reviewed to determine preliminarily the
insured's life expectancy and, if the face value exceeds the applicable state
guarantee fund limit, whether the insurance company which issued the policy is
of a credit quality deemed acceptable to United.
If it appears from the application that the policy is one United would be
interested in purchasing, United will obtain from the attending physician
medical information about the insured which usually includes several years'
worth of laboratory reports and physicians' notes, as well as the attending
physician's estimate of the insured's life expectancy and a written statement as
to whether or not the insured is of sound mind. United will forward such
information to 21st Services for review and evaluation.
Simultaneously, United will obtain verification of insurance coverage and
other policy information from the insurance company, the employer or the group
administrator. The insurance documents will be reviewed to determine the type of
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policy (e.g. whole. term or other) and any provisions which may effectively
reduce the face value of the policy (e.g. loan against the policy) and to
ensure, among other things, that: (a) the policy under consideration is past any
contestability periods (i.e. the periods during which the insurance company may
deny payment for various persons, including suicide and a misstatement of
material facts); (b) all current primary beneficiaries are willing to execute
releases with respect to any present or future claims they may have with respect
to the policy; and (c) United is able to obtain ownership of the policy and
the associated policy proceeds. United will not purchase a policy if a minor is
a named beneficiary at the time of purchase. United will also review the policy
premium schedule and determines whether the policy contains a disability waiver
of premium rider which impacts future premium payments. United will attempt to
ensure that the policy is compatible with the trust's portfolio in terms of
monthly cash flow. The review process for the insurance documents generally will
take one to three weeks, depending on the extent of cooperation received from
third parties.
If a referral source identifies a potential client some, of the
documentation gathering described above (primarily collection of necessary
medical, personal and insurance information) may be performed by such referral
source prior to submission of the application to United, but the determination
of the insured's life expectancy and compatibility with investment criteria.
review of insurance documents and determination of legal and contractual issues
will be made by United and 21st Services.
Closing
If United determines that the policy meets its criteria (including
underwriting and investment criteria), United will make an offer to the insured
to purchase the policy. The purchase price will be based upon the face value of
the policy, United's estimate of the insured's life expectancy, the premiums
estimated to be paid under the policy over the insured's estimated life
expectancy, and certain other costs of the policy. If the insured accepts the
offer, purchase documents are prepared from forms generated by United's
management information system. The documents include a sale agreement, releases
from beneficiaries, a change of ownership or assignment form and a change of
beneficiary form. United will acquire ownership in each insurance policy by
filing a change of ownership or absolute assignment form and a change of
beneficiary form with the applicable insurance company, employer or group
administrator. Following receipt of appropriate acknowledgment of the
recordation of such changes, closing occurs and funds are disbursed as directed
by the insured. United anticipates that the closing process will take one to
three weeks and the entire purchase process (from application to closing) will
take from four to eight weeks. United will provide an "out option" through which
the insured may, for any reason, return the disbursed funds (and any premium
payments made by the trust in the interim) and be unconditionally released from
the sale agreement. The "out option" period is at least 15 days from receipt of
the purchase price and is longer if required by applicable law.
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Monitoring
Following the disbursement of funds, the insured is regularly monitored to
obtain timely information concerning the insured so that proceeds may be
collected as promptly as possible following the death of the insured. Monitoring
will be conducted in a sensitive and professional manner and will be assisted by
the 21st Services' management information system. In addition to tracking the
medical status and location of an insured, the 21st Services also will monitor
the policy to ensure it does not lapse because of a failure to timely pay
premiums. Some protection against the failure to pay premiums is provided by
statutory or policy provisions that require insurance companies to provide
written notice before terminating a policy for failure to pay premiums. As owner
of record of the policy, Capital generally will receive such notice directly.
Collection
Once an insured has died, a request for a copy of the death certificate
will be filed in the appropriate governmental office. Often the insured's family
or companion will also submits a copy of the death certificate to the insurance
company. United will then files the death certificate with the insurance company
and requests payment of the policy proceeds. United will monitor the collection
status until it receives the face value of the policy. Monitoring of collection
status will be assisted by United's management information system. Insurance
companies have an incentive to pay promptly on policies because most states
require insurance companies to pay interest on claims which take more than 30
days to settle. Actual collections generally occur within 30 to 55 days
following the death of the insured. However, in certain states (e.g., New York)
actual collections take a longer period of time due to delays in processing of
documents by state authorities.
Policy and Portfolio Information
General Description of Types of Policies to be Purchased by United
Term Policies. Term policies provide life insurance protection for a
limited number of years (e.g., until age 65). Generally, term policies are less
costly (compared to whole life policies) for younger insureds, although premiums
increase over time. Such policies are usually one-year renewable policies,
though some term policies have fixed premiums for longer intervals. Term
policies do not build up any cash value or pay dividends, although many are
convertible to whole life policies.
Whole Life Policies. Whole life policies typically provide protection for
the life of the insured. Based on a fixed premium payment, these policies build
up a cash value because premiums paid in the earlier years are higher than those
required to maintain the insurance. Many whole life policies have dividends
which the insured can receive in cash or can apply to premiums applicable to
additional coverage.
Universal Life Policies. This type of policy is generally a flexible
premium, adjustable death benefit policy and allows premiums to be skipped so
long as the cash value of the policy is sufficient to pay the premiums. There
are many variations of this type of policy.
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Group Life Policies. Many group policies provide term coverage, though some
provide universal life coverage. Such policies are either provided by an
employer or are provided to members of a particular group.
Yield Analysis
Unlike specialty financial services companies whose performance depends
primarily on the ability to collect on a portfolio, the trust's performance
depends primarily on the timing of collection on its portfolio. To a great
extent, United will determine its purchase price for policies based on the
estimated date of collection. To the extent, the trust collects a policy earlier
than expected, the actual annualized yield on such policy will be higher than
the original estimated annual yield. Conversely, to the extent that the trust
collects on a policy later than expected, the actual annualized yield on such
policy will be lower than the original estimated annual yield. Thus, the actual
collection date of each policy affects the actual annualized yield on the trust
portfolio.
Competition
United believes potential clients distinguish insurance settlement
companies based on three principal factors: (a) price; (b) response time; and
(c) sensitivity and professionalism in dealing with the client, the insured
and their friends and relatives. A settlement company typically determines the
price that it is willing to pay for a life insurance policy principally based
upon its estimate of the life expectancy of the insured and, hence, the present
value of such policy discounted at a rate as determined by such life expectancy.
Response time is affected by the settlement company's internal ability to meet
demand, the cooperation received from the potential client's insurance company
and the insured's doctor and, ultimately, the insurance settlement company's
access to capital to fund its purchase of a policy.
United believes that approximately 50 to 60 insurance settlement companies
currently operate in the United States. Although lack of traditional funding
sources and high financing costs have limited the industry's growth in the past,
competition has recently increased. The increased competition has contributed to
higher prices and lower original estimated annual yields.
Most insurance companies also offer some form of accelerated death benefits
to holders of their policies with terminal illnesses, but the types of benefits
and cost thereof vary substantially among such companies. According to a study
conducted In March 1994 by the American Council of Life Insurance and LIMRA
International, at least 215 life insurance companies (issuing approximately 70%
of the life insurance in force in the United States) offered some form of
accelerated death benefit to their customers at the time of the study. The
number of insurance companies offering some form of accelerated death benefit
has likely increased since the study was conducted. During the last five years,
the number of life insurance companies offering accelerated death benefits has
increased substantially, and there have been limited instances of insurance
companies acquiring settlement operations and providing settlements directly.
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Despite those offered alternatives, claim experience for accelerated death
benefits appears to be limited. United believes the limited use of accelerated
benefits is a result of the restrictive nature of the benefits offered by
insurance companies. For example, over 90% of the products offered by insurance
companies responding to the study required the customer to have a life
expectancy of 12 months or less and 30% required a life expectancy of six months
or less. In addition. many products reported in the study specified a minimum
face value for the policy and over 50% of the products specified a maximum
benefit ranging from 26% to 50% of the face amount. United believes that
insurance companies, on an industry-wide basis, have not aggressively
participated in the market for senior insurance settlements or related products
or services primarily because of the undeveloped nature of the market and the
potential for public relations problems for the insurance industry resulting
from insurance companies redeeming policies for less than the death benefit
promised to their policyholders. Given the restrictions typically imposed on the
availability of accelerated death benefits, senior insurance settlements have,
to date, been an attractive alternative to accelerated death benefits for
elderly individuals. Senior insurance settlements can also offer some people
with terminal illnesses the opportunity to pursue lifelong goals while they are
still relatively healthy. Although United believes that insurance companies may
continue to be reluctant to enter the senior settlement market, insurance
companies may reduce their restrictions applicable to accelerated death
benefits, may begin to provide senior settlements directly or through separate
settlement companies or may offer other competing products or services on a
broader basis. See "Risk Factors--Competition."
United believes that it will be well-positioned within the senior
insurance settlement industry. As an early entrant it intends to establish a
nationwide referral network which will include various sourcing brokers,
community groups and professionals who are involved in treatment of and services
for the elderly. United also believes it will develop a reputation in the
industry for providing settlements in a professional, efficient and responsible
manner. In addition, United believes its strict underwriting procedures and its
relationship with 21st Services will provide it with a competitive advantage.
Government Regulation
United will monitor the progress of new legislation and regulation in each
state in which it purchases policies. However, given the emerging nature of
senior settlement regulations there may be periods in which United is not in
compliance, or is unable to comply, with the effective provisions of each
applicable, statute and regulation. Only Texas has enacted permanent statutes
governing senior insurance settlement companies and brokers.
Under most state regulatory schemes insurance settlement companies must be
licensed by the state insurance commissioner in order to solicit or enter into
an insurance settlement contract in that state. Licenses are normally renewable
on an annual basis but may be revoked if the licensee fails to comply with the
provisions of the statute or regulations. Licensees typically must file annual
operating reports with the commissioner, permit the commissioner to examine
their records; disclose alternatives to a insurance settlement to each potential
client; obtain representations as to the mental competency of the potential
client; deposit the purchase price for a policy into a trust or escrow account
in a bank; and allow the client a 15 to 30 day rescission period. United and
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Capital will either not be required to be licensed, are licensed, or will be
temporarily permitted to do business without a license, in each state in which
it purchases policies. However, United may not be able to obtain licenses in
every state when required or to renew or prevent revocation of a previously
issued license. United may be precluded from doing business in any state in
which it is unable to obtain or maintain a required license.
A limited number of states have also enacted statutes or adopted or
proposed regulation, that establish minimum purchase prices to be paid to
insured according to the insured's life expectancy.
Every state has statutes that regulate "conducting an insurance business."
Although United is not aware of any judicial authority interpreting whether the
senior insurance settlement business constitutes "conducting an insurance
business," some or all of these statutes may be interpreted in the future to
include senior insurance settlements and to preclude United, which is not an
insurance company, from operating in those states.
Capital Resource Group One, LLC.
Capital was incorporated in the State of Delaware on October 21, 1999 and
is a wholly-owned subsidiary of United. Capital was organized for the
restricted, limited purpose of forming the trust, purchasing the Senior
Insurance Settlements from United, assigning the Senior Insurance Settlements to
the Trust, executing the Certificates, and for incidental, necessary or
convenient purposes related to the foregoing. Capital is prohibited from
incurring any debts except to the extent the Certificates are characterized as
debt obligations of Capital. Capital's current assets consist of [$ ]. Capital's
address is 650 E. Carmel Drive, Suite 150, Carmel, Indiana 46032. Its telephone
number is (317) 705-5555. Prior to its incorporation, Capital had no operating
history. Mr. Thomas LaRussa may be deemed to be finder and/or promoter of
Capital.
Capital's sole director and officer is Thomas LaRussa. Mr. LaRussa shall
serve as officer and director until the first annual meeting of the shareholders
of Capital or until his successor is elected and qualified.
Investment in Senior Insurance Settlements
The trust's investment in Senior Insurance Settlements will be a
seven-phase process which will consist of: (1) identification of life insurance
policies available for purchase, (2) estimating the average life expectancy of
the insured, (3) the evaluation of the value of the life insurance policy
proposed to be purchased, (4) the purchase of the life insurance policy, (5)
monitoring of the insured and maintenance of the life insurance policy during
the remainder of the insured's lifetime, (6) the collection of the face amount
of the life insurance policy from the insurance company following the death of
the insured, and (7) making payments to Certificateholders.
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Policy Identification
United will purchase life insurance policies from individuals living
throughout the world but primarily in the United States. United's primary source
for potential policy purchases are brokers located throughout the United States.
These sourcing brokers will receive fees for their services in an amount
generally equal to 3% to 6% of the face amount of the life insurance policy, but
other compensation plans are sometimes utilized. United may also purchase
policies identified by 21st Services.
United also may purchase life insurance portfolios consisting of individual
life insurance policies owned and offered for sale by third-party settlement
companies.
Evaluation
During the evaluation phase, United will gather and develop information
regarding the life insurance policy to be purchased, the life insurance company
issuing such policy, the insured, the insured's medical condition and estimated
life expectancy. There are three key objectives of this phase. The first
objective is to determine whether the insurance policy is of sufficient quality
to purchase. The second objective is to predict the estimated life expectancy of
the insured as accurately as possible, for the purpose of determining the price
to be offered for such policy. The final objective is to properly evaluate the
insured and the beneficiaries of the life insurance policy to reduce the risk of
challenges to the purchase of the life insurance policy or to the payment of the
face value to the trust following the death of the insured.
Specifically, the evaluation procedures are as follows:
o Identify beneficiary rights that require waiver and other impediments
to transfer.
o Potential settlement recipients are sent application and consent forms
authorizing United to obtain medical and insurance information with
respect to the insured and the insured's life insurance policy.
o Once United has received the completed application, as well as the
medical and insurance information, the medical information is reviewed
to determine the insured's estimated life expectancy. The insurance
information will be reviewed to determine (i) whether the issuing
insurance company is credit worthy and (ii) that the life insurance
policy may be transferred to assure clear title to the new owner.
o If the life insurance policy passes the first stage of the evaluation
process, United will contact the insured's attending physician to
obtain certain of the insured's medical records. In most cases, United
also will elicit from the insured's attending physician whether the
insured is of sound mind.
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o The insured's medical information will be reviewed by 21st Services'
medical underwriters who will render a life expectancy estimate of the
insured. The review will be conducted in strict confidence.
During the evaluation phase, United will also investigate the insured's
life insurance policy and its status. First, United will review relevant
insurance documents to determine (1) the type of insurance coverage being
considered for Senior Insurance Settlements, (e.g., whole life, term, universal,
individual or group), and (2) whether any event has occurred or any condition
exists that has or may reduce the face value of the policy (e.g., a loan against
the cash value of the policy). Second, United will determine whether the life
insurance policy has passed any contestability period. Third, United will
identify the primary beneficiaries of the life insurance policy and confirm that
such beneficiaries will execute complete releases of all present and future
claims with respect to the policy proceeds. Because minors cannot effectively
consent to a release of future claims, United will not purchase any life
insurance policy where a minor is a beneficiary. Finally, United will confirm
that the life insurance policy is assignable to the trust. If it is assignable,
United will check to see if it contains a disability waiver of premium rider.
The existence of such a rider may reduce the premiums payable by the trust after
assignment, thereby affecting the policy's purchase price.
Under most circumstances, when a sourcing broker refers the insurance
settlements to United, United will rely on the sourcing broker to conduct a
substantial portion of the steps included in the evaluation phase. United will,
however, independently verify estimated life expectancy of the insured, the
assignability of the life insurance policy and issues with respect to payment of
policy premiums. Once United has completed its evaluation, United will forward
such policies to 21st Services for a life expectancy evaluation. See "21st
Services."
Purchase
If, after the completion of the evaluation phase, United believes that the
life insurance policy satisfies its purchase criteria and its underwriting
criteria, United will commence the process of negotiating the purchase price.
The purchase price will be a discount from the face value of the policy. The
discount generally will vary from 20% to 90% percent depending upon the
estimated life expectancy of the insured and independently verified by 21st
Services. The longer the estimated life expectancy, the deeper the discount.
If the Senior Insurance Settlement candidate (and his or her agent) and
United reach an agreement with respect to the purchase price, United will
prepare all of the documents necessary to transfer ownership of the policy to
United. Generally, United will require the execution of five different types of
documents. These basic documents include (1) a purchase agreement, (2) a bill of
sale, (3) an assignment of life insurance policy, (4) a change of beneficiary
form, and (5) releases from all beneficiaries of the life insurance policy
immediately prior to assignment. During the ten (10) days following the
disbursement of the sale proceeds to the settlement recipient, the settlement
recipient will have the option of rescinding his or her decision to sell the
life insurance policy. The settlement recipient may regain title to the life
insurance policy at any time during this "open" period by sending United written
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notice of the intent to terminate the sale along with the return of the sale
proceeds, plus the amount of any premiums paid by the trust with respect to the
life insurance policy during the open period. If state law requires a longer or
shorter period of time during which the settlement recipient may reverse the
sale of the life insurance policy, such longer or shorter period shall apply.
Monitoring
After the trust is assigned a life insurance policy, United and 21st
Services will take steps to monitor the status of the insured. Such monitoring
is necessary to ensure that the trust will be able to collect policy proceeds as
soon as possible after the death of the insured. In addition, the monitoring
phase involves the regular payment of premiums on all life insurance policies
owned by the trust. Premium payments will be tracked by united using a computer
database and paid out of the liquidity account, established from the proceeds of
the offering at closing. Additional protection against a lapse in premium
payments is provided by requirements in some insurance policies that the insurer
send notice to the owner of the life insurance policy prior to canceling a
policy for failure to pay policy premiums. United shall be responsible for
making timely payment of all premiums to keep insurance policies in force and
21st Services will be responsible for tracking the status of the insured.
Collection
Collection of the face value of the life insurance policy following the
death of the insured will require 21st Services on behalf of the trust to submit
a copy of a death certificate to the insurer. The amount of time that the trust
must wait for the insurer to disburse the face value of the life insurance
policy will vary from insurer to insurer and state to state. Many states require
insurers to pay interest on unpaid death benefits following the insurer's
receipt of the death certificate as an added incentive for the insurance company
to make timely benefit payments.
Quality Control
The master servicer provides valuation, verification and advisory services
in connection with purchases and administration of Senior Insurance Settlements.
21st Services independently evaluates the medical aspects of potential Senior
Insurance Settlements and estimates life expectancies. The master servicer
audits on a sample basis, the quality of closing documentation generated and
retained by Untied, Capital and the trust and also audits on a sample basis, the
integrity of the premium data base records maintained by the subservicer.
21ST Services
21st Services, located in Minneapolis, Minnesota, provides high quality
medical and insurance underwriting in the insurance settlements industry. 21st
Services is nationally recognized for its experience in evaluating and
underwriting insurance settlements. The Trust will engage 21st Services to
provide an independent medical evaluation of all insureds prior to United
purchasing the life insurance policies. 21st Services currently provides this
service to many of the participants in the insurance settlement industry. 21st
Services will receive a separate fee, payable monthly, for its diagnostic and
evaluation services.
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Depending on the insured's medical condition, the life expectancy review is
accomplished through independent reviewing physicians, a proprietary
computerized life expectancy model or a combination of the two methods. Whatever
method is utilized, the life expectancy review includes a comprehensive review
of the insured's medical chart and specialized forms, if available, and, if
necessary, an interview with the insured's attending physician.
Subject to availability, the insured's medical chart should contain the
following items:
o Progress notes from the primary care provider and physician
specialists
o Laboratory results
o X-ray reports and other diagnostic tests
o Surgical reports
o Hospital admit/discharge summaries
o Pathology reports
o Previous and current therapy/treatment
o Lifestyle risk factors
o Functional impairments
o Psychological parameters.
If the life expectancy is generated by the proprietary computer model, data
from the insured's medical records and applicable forms are abstracted and key
risk factors are entered to the model. The model uses the risk factors to tailor
the general mortality statistics to the health and lifestyle profile specific to
the insured. The core of the model is the Industry Average Mortality Tables
licensed by 21st Services from Tillinghast-Towers Perrin. The statistical
mortality data on the these tables relates solely to insured individuals and
does not include the indigent or uninsurable populations. The basic mortality
data is adjusted by a system of debits complied by an accredited life
underwriting researcher who has degrees in epidemiology and public health. The
sources of information driving the risk factor adjustments include underwriting
criteria from large insurance companies, the Medical Information Bureau,
governmental studies and privately secured research. The life expectancy
certificate will highlight all pertinent risk factors used to determine life
expectancy. The model provides a median life expectancy for the specific
insured, expressed in months.
If the life expectancy review is completed by a physician specialist,
the reviewer will fully evaluate the insured's medical history, write a summary
of the highlights, provide an estimated life expectancy and justifications for
the life expectancy. Factors influencing each decision may include their own
clinical experience, peer review, rigorous analysis of medical journals, library
or internet research, non-public information concerning clinical trials,
investigational new drugs, and statistical information.
21st Services will provide master servicer functions, such as:
o Review medical, insurance and final underwriting for proposed policies
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o Review financial analysis of each policy and its relationship to the
aggregate pool of policies
o Review purchase recommendations
o Audit integrity of financial model on a periodic basis
o Track all insureds and maintain updated medical files
o Maintain data on pool characteristics
o Monitor premium calendar database
o Prepare reports as needed
The trust will be dependent on 21st Services, whose managers are:
Paul Kirkman (President - 21st Diagnostics, managing director of 21st Holdings,
LLC) obtained his college education from Michigan State University, and several
years later began his viatical career as an underwriter for ViatiCare Financial
Services, LLC, where he became an expert in dissecting the complexities of group
life insurance. He later assumed the role of Service Group Manager and Manager
of Medical Affairs. As Service Group Manager he trained new client service
representatives in the art and science of insurance underwriting and actively
participated in the underwriting of difficult policies and those with particular
financial appeal to the company. As manager of Medical Affairs he managed the
company's consulting physician network and interacted with the clients'
attending physicians to ensure that life expectancies were obtained on a timely
basis.
At 21st Services, Kirkman leads the Diagnostic division. With Mervyn F.
Silverman, M.D., MPH, he developed a high quality network of consulting
physician specialists who review medical charts to provide life expectancies for
clients with terminal illness. Kirkman's network is one of two "re-insurer
certified" diagnostic companies in the United States. Kirkman also led the
development of 21st Services elder life expectancy model with an accredited life
underwriting researcher who has backgrounds in epidemiology and public health.
He combined the expertise of an international actuarial firm, a life
underwriting consultant and a respected geriatrician with 21st Services'
knowledge of the insurance settlement industry to create the most sophisticated,
credible elder life expectancy model in the industry. To date, this model is the
only automated computer model in the industry.
Kirkman has 4-1/2 years of life insurance settlement industry experience.
Robert Simon (President - Manna Financial, managing director of 21st Holdings,
LLC) became the controller for a large midwestern viatical funding company in
1995 and became chief financial officer for the company in 1997. In these
capacities he was responsible for developing procedures, controls and
information systems that allowed the company to dramatically increase its
purchasing volumes and manage a growing portfolio of insurance settlements in a
controlled fashion. Simon implemented a complex corporate structure designed to
support the public securitization of insurance settlements. He managed all
administrative, compliance and reporting functions for a $600 million revolving
credit facility to fund policy purchases. Simon was also responsible for
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negotiating a reinsurance treaty with a major reinsurance firm and a backup
servicing agreement with a national bank. Before entering the life insurance
settlement industry, Simon held a variety of financial, audit and marketing
positions with several large financial, transportation and energy companies.
As President of Manna Financial, Simon has developed a senior insurance
settlement originations network of insurance agents that has produced a steady
stream of senior insurance settlements. Simon is a recognized expert in the life
insurance settlement field and regularly teaches life insurance settlement
concepts and applications to insurance agents and health care workers around the
region. As Managing Director of 21st Holdings, LLC, Simon has developed
proprietary information systems to control life expectancy, underwriting and
post-purchase policy servicing operations.
Simon holds a bachelor's degree in accounting from the University of Minnesota
and an MBA in marketing from the University of St. Thomas. Simon also holds
designations as a Certified Public Accountant and Certified Information Systems
Auditor. Simon has 5 years of life insurance settlement industry experience.
Steven Walker (President - 21st Underwriting and 21st Guardian, managing
director of 21st Holdings, LLC) was an underwriter, Service Group Manager and
Manager of Policy Purchasing for a large mid-western viatical funding company.
In these positions, he was responsible for evaluating the insurance risk of
insurance settlements against strict acceptance parameters mandated by the
institutional lender. He was also responsible for managing the closing process
for settlement transactions, including compliance reviews before files were
forwarded to the escrow agent for closing.
At 21st Services, Walker has created a substantial insurance underwriting
practice that manages the underwriting and placement operations for a large
number of regional and national brokers and funders. Other funders rely on
Walker's insurance underwriting expertise to help them evaluate special
insurance risks that they would not understand or could not verify without his
expertise. Walker is also responsible for managing the contact and death claim
filing processes for approximately 500 insureds who have sold their life
insurance policies to several funding companies.
Walker earned his college degree from the University of Minnesota. Walker has 4
years of life insurance settlement industry experience.
The Trust
The issuer of the Certificates is Senior Insurance Settlements Funding
Trust 1999, a trust organized on _____________, 1999. The purpose of the trust
is to invest the proceeds of the offering in Senior Insurance Settlements and
thereafter collect the death benefit proceeds associated with such Senior
Insurance Settlements and distribute the proceeds to the Certificateholders.
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The trust was formed in accordance with the laws of the State of Delaware
and pursuant to the pooling and servicing agreement. The originator of the trust
is Capital. The trust was formed for the restricted, limited purposes of
beneficially owning the Senior Insurance Settlements acquired from Capital and
the proceeds derived therefrom, issuing Certificates and making payments
thereon, and making certain specified permitted investments. See "Description of
the Certificates and The Pooling and Servicing Agreement." The trust is not
expected to have any need for, or source of, capital other than the assets of
the trust. Upon formation, the initial assets of the trust will be [$100]
provided by Capital and thereafter shall consist of (a) an irrevocable
beneficial interest in the Senior Insurance Settlements acquired from Capital in
consideration of the proceeds of this offering, (b) an assignment of all of
Capital's interests under the senior insurance settlements purchase agreement,
and (c) all funds collected or to be collected with respect to the Senior
Insurance Settlements and deposited into certain accounts of the trust. It is
expected, but there can be no assurance, that there will be assets remaining in
the trust after all interest and principal payments have been made to
Certificateholders. All excess assets, if any, after the final distribution
dates will be transferred to Capital. See "Description of the Certificates and
the Pooling and Servicing Agreement." The Trustee of the Trust is .
The Escrow Agent
The trust will retain The Chase Manhattan Bank to serve as escrow agent for
the trust. As escrow agent, The Chase Manhattan Bank, will not evaluate medical
information or make assumptions as to estimated life expectancy.
Management Fee
The master servicer and subservicer shall receive a management fee equal to
.45% of the principal amount of the Certificates outstanding as determined at
the closing date. Capital will grant to the master servicer a right entitling
the master servicer to receive 5% of the trust's assets remaining in Tranche I
and Tranche II of the trust, respectively, after all interest and principal
payments have been made to Certificateholders. If the master servicer is
required to become the successor servicer, it will be paid a one-time management
transfer fee of $100,000. 21st Services will also receive additional fees,
payable monthly, for diagnostic and evaluation services.
The management fee will be paid monthly in arrears, for each preceding
month. This management fee will compensate the master servicer and subservicer
for their services in managing the affairs of the trust including identifying
and qualifying potential senior insurance settlements for purchase, negotiating
the price to be paid for senior insurance settlements, monitoring Senior
Insurance Settlements assigned to the trust, assuring that premiums are paid
when due and liquidating Senior Insurance Settlements purchased by the trust if
necessary or advisable.
The trust will have no employees or office space. The master servicer and
subservicer will bear all costs and expenses of providing to the trust any
office space, furniture, fixtures, equipment, facilities, supplies, telephone,
secretarial, internal bookkeeping and necessary ongoing overhead support
services for the trust's operations, the compensation of the master servicer's
and subservicer's personnel, and expenses incurred in connection with monitoring
and
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collecting Senior Insurance Settlements. The trust will pay all other costs and
expenses of the trust including the following:
(a) all routine administrative expenses of the trust, including the cost
of the preparation of the annual audit, financial and tax returns and
tax returns and tax reports required for investors or the trust, cash
management fees and routine legal and accounting expenses,
(b) all out-of-pocket costs and expenses, if any, incurred in identifying,
evaluating, purchasing, acquiring, holding, valuing and disposing of
Senior Insurance Settlements, including without limitation any
financing, legal, accounting, advisory and consulting expenses in
connection therewith,
(c) all third-party expenses in connection with Senior Insurance
Settlements or proposed Senior Insurance Settlements that are not
ultimately made, including, without limitation, the out-of-pocket
costs and expenses incurred in connection with obtaining third-party
financing (such as commitment fees), if any,
(d) brokerage commissions, license and registration fees and expenses,
custodial expenses and other investment costs actually incurred in
connection with the Senior Insurance Settlements,
(e) interest on and fees and expenses arising out of all borrowings, if
any, made by the trust, including, but not limited to, the arranging
thereof,
(f) the out-of pocket costs of any litigation, liability or other
insurance and indemnification or extraordinary expense or liability
relating to the affairs of the trust,
(g) license fees and associated costs of obtaining all necessary licenses
such as licenses as a senior insurance settlement provider,
registration expenses and any taxes, fees or other governmental
charges levied against the trust and all expenses incurred in
connection with any tax audit, investigation, settlement or review of
the Trust, and
(h) similar expenses to the extent that such expenses are not servicing
expenses.
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USE OF PROCEEDS
On each closing date, the proceeds received from the sale of Certificates,
net of payments to Pryor, Counts & Co., Inc. and certain other fees and
expenses, will be paid to the trust to purchase Senior Insurance Settlements
from Capital which Capital will acquire from United and which United will
acquire from sourcing brokers. The amount of proceeds which will be paid to
Pryor, Counts & Co., Inc., as its commission, shall be equal to 3.5% of the
aggregate principal amount of the Certificates issued on each closing date. The
Chase Manhattan Bank will be entitled to retain, from any disbursements from the
escrow account that are payable to Capital for Senior Insurance Settlements
assigned to the trust, any outstanding fees and/or expenses due The Chase
Manhattan Bank under the escrow agreement and which have not been paid by
Capital.
MATURITY ASSUMPTIONS
The pooling and servicing agreement provides that Certificateholders will
not begin to receive payments of principal until the final maturity dates.
During the amortization period, the Certificateholders will be entitled to
receive semi-annual payments of interest. See "Description of the Certificates
and the Pooling and Servicing Agreement - Principal Payments." The Certificates
are also subject to optional repurchase by the trust after a 5 year period,
respectively, at 102.50% of the outstanding principal amount of the
Certificates. See "Description of the Certificates and the Pooling and Servicing
Agreement - Reacquisition of the Senior Insurance Settlements; Termination."
PLAN OF DISTRIBUTION
Pryor, Counts & Co., Inc. has entered into an agreement with Capital and
United, to act as the agent with respect to the sale of the Certificates offered
hereby. Pryor, Counts & Co., Inc. has made no agreement to purchase or take down
all or part of the Certificates offered hereby, but has agreed to use its "best
efforts" on a "minimum-maximum" basis to sell a minimum of $20,000,000 principal
amount of Certificates within 90 days after the date of this prospectus (subject
to Capital's option to extend such period for 30 days). If the minimum amount of
Certificates are not sold within said period, the agreement between Pryor,
Counts & Co., Inc. and Capital and United will terminate and all funds will be
returned to subscribers with interest. If, however, the minimum $20,000,000
principal amount of Certificates are sold within the initial 90 (or 120) day
period, the offering will continue on a "best efforts" basis until the earlier
of (a) the sale of the remaining $130,000,000 principal amount of Certificates;
(b) twelve months after the effective date of this registration statement; or
(c) the mutual agreement of Pryor, Counts & Co., Inc. and Capital to terminate
sales of the Certificates.
All proceeds from subscriptions to purchase the Certificates will be
promptly transmitted by Pryor, Counts & Co., Inc. or other participating
broker/dealers by noon the next business day after receipt of such proceeds, to
an interest bearing escrow account at The Chase Manhatttan Bank.
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All subscriber's checks should be made payable to "The Chase Manhattan Bank
ESCROW ACCOUNT FOR SENIOR INSURANCE SETTLEMENTS FUNDING TRUST 1999."
Pryor, Counts & Co., Inc. is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and registered as a
broker/dealer with the Securities and Exchange Commission. It will receive a
one-time sales commission equivalent to 3.5% of the principal amount of the
Certificate subscriptions obtained by them. Capital will direct The Chase
Manhattan Bank to remit Pryor, Counts & Co., Inc.'s fee to them at each closing
date. Participating dealers will receive a commission out of the 3.5% paid to
Pryor, Counts & Co., Inc.
Upon the sale of $20,000,000 principal amount of Certificates, Capital will
grant to Pryor, Counts & Co., Inc. a right entitling them to receive up to 2.75%
and 10% of the assets, respectively, if any, remaining in Tranche I and Tranche
II of the trust, respectively, after all interest and principal payments have
been made to Certificateholders. This right serves as additional compensation to
Pryor, Counts & Co., Inc. for selling the Certificates.
Capital and United have agreed, under the placement agent agreement, to
jointly and severally, indemnify and hold harmless Pryor, Counts & Co., Inc. and
its controlling persons, respective officers, directors, employees, agents,
successors and assignees ("indemnities") against any and all losses, claims,
damages, liabilities, costs and expenses to which the indemnitie(s) may become
subject and which arise directly or indirectly out of or are based upon any
breach of the placement agent agreement by Capital; any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement and prospectus or any amendment or supplement thereto; any omission or
alleged omission in the registration statement or prospectus of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or the representations by Pryor, Counts & Co., Inc. of Capital in
selling the Certificates.
The placement agent agreement may be terminated by Pryor, Counts & Co.,
Inc. at its option by giving notice to Capital and Capital's counsel, if Capital
materially fails to fulfill its obligations thereunder or if Pryor, Counts &
Co., Inc. learns of any material misrepresentations made by Capital.
There can be no assurance that Pryor, Counts & Co., Inc. will be successful
in selling any or all of the Certificates offered hereby. Pryor, Counts & Co.,
Inc. does not intend to sell any Certificates to any account over which it may
exercise discretionary authority.
The foregoing is a brief summary of all material provisions of the
placement agent agreement. A copy of the placement agent agreement has been
filed as an exhibit to the registration statement of which this prospectus forms
a part.
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DESCRIPTION OF THE CERTIFICATES
AND THE POOLING AND SERVICING AGREEMENT
The Certificates will be issued pursuant to the pooling and servicing
agreement to be entered into among Capital, as assignor of the Senior Insurance
Settlements and originator of the trust, United as Seller and subservicer of the
Senior Insurance Settlements, 21st Services, as master servicer, and the
trustee, and which agreement will be substantially in the form filed as an
exhibit to the registration statement of which this prospectus is a part. The
trustee will provide a copy of the pooling and servicing agreement to any
Certificateholder on written request. The following summary describes certain
terms of the pooling and servicing agreement. It does not purport to be a
complete recitation of the pooling and servicing agreement and, therefore, is
qualified in its entirety by reference to the pooling and servicing agreement.
In addition, unless otherwise defined below, or in the Glossary on page 73,
each of the terms which is capitalized is defined in the pooling and servicing
agreement.
General
The Certificates will evidence undivided interests in the trust and
represent the right of the Certificateholders to receive from the trust the
amounts required to make payments of principal and interest on the Certificates.
The trust's assets will consist primarily of (a) an irrevocable beneficial
interest in the Senior Insurance Settlements; (b) monies due or to become due
thereunder; (c) monies received from insurance companies in payment of the
Senior Insurance Settlements; (d) monies on deposit in bank accounts of the
trust or other permitted investments, (inclusive of interest earned or accrued
on the funds deposited in said accounts); and (e) all right, title, and interest
with respect to the Senior Insurance Settlements and any supporting
documentation or agreements related to the Senior Insurance Settlements and with
United under the senior insurance settlements purchase agreement. See
"Description of the Senior Insurance Settlements Purchase Agreement."
The Certificates in the aggregate will represent a 100% interest in the
trust's assets up until the final maturity dates. the principal amount of the
Certificates outstanding at any time will equal the original principal amount of
the Certificates as of their respective dates of issuance minus the amount of
principal payments made to the Certificateholders. See "Application of
Collections." Each Certificate will represent the right to receive (i)
semi-annual payments of certificate interest at the certificate
rate primarily from the liquidity account and (ii) payments of certificate
principal funded from collections attributable payments by insurance companies
pursuant to the Senior Insurance Settlements. The Certificates are structured to
facilitate a secured, credit-enhanced financing with the intention that the
Certificates will constitute indebtedness of Capital for federal income, state
and local tax purposes, and Capital and each Certificateholder, by acceptance of
its Certificate, agrees to recognize and report the Certificate as indebtedness
of Capital for purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income, and to report all receipts
and payments relating to the Certificates in a manner that is consistent with
such characterization.
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The principal amount of the Certificates will remain constant. Distribution
of interest and principal on the Certificates on each distribution date will be
made by the trustee, directly to the Certificateholders in whose names the
Certificates were registered at the close of business on the record date.
Distributions will be made by check mailed to the address of each of the
Certificateholders as it appears on the register maintained by the trustee, or
its designee. The final payment on any Certificate, however, will be made only
upon presentation and surrender of such Certificate at the office or agency
specified in the notice of final distribution to Certificateholders. The trustee
will provide such notice to registered Certificateholders not later than the 5th
day prior to the final distribution.
The Certificates
For federal tax purposes, Capital intends that the Certificates will
constitute evidence of indebtedness of Capital. The Certificates will be
substantially in the form filed as an exhibit to the registration statement of
which this prospectus forms a part and which is attached to the pooling and
servicing agreement as an exhibit. The Certificates will be issued in the
minimum denominations of $5,000 and integral multiples of $1,000 in excess
thereof equal to the original principal amount for which each Certificateholder
subscribed to purchase; provided, however, that one Certificate may be issued on
each closing date in a residual amount of less than $1,000.
On each closing date, upon the order of Capital, the trustee shall
authenticate and deliver the Certificates to the Certificateholders against
payment to Capital of the subscription proceeds for such Certificates (net of
any placement fee). The Certificates will be issued contemporaneously with the
assignment of the Senior Insurance Settlements to the trust.
Registration, Transfer and Exchange of Certificates
The trustee shall cause the certificate register to be kept at the office
or agency to be maintained by the transfer agent and registrar in which, subject
to such reasonable regulations as it may prescribe, the transfer agent and
registrar shall provide for the registration of the Certificates and of
transfers and exchanges of the Certificates. The trustee is initially appointed
the transfer agent and registrar, but shall be permitted to resign as transfer
agent and registrar upon 30 days written notice to Capital, in which event, the
trustee shall appoint a successor transfer agent and registrar.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the transfer agent and registrar for such purpose, Capital
shall execute, and the trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Certificates in
authorized denominations of like aggregate principal amount. The transfer agent
and registrar will maintain at its expense in New York, NY an office or offices
or agency or agencies where Certificates may be surrendered for registration of
transfer or exchange.
Whenever any Certificates are surrendered for registration of transfer or
exchange, Capital shall execute, and the trustee shall authenticate and deliver,
the Certificates which the Certificateholder making the exchange is entitled to
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receive. Every 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 transfer agent and the transfer agent and registrar duly
executed by the Certificateholder thereof or his attorney duly authorized in
writing. No service charge to the Certificateholder shall be made for any
registration of transfer or exchange of Certificates, but the transfer agent and
registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates. All Certificates surrendered for registration of
transfer or exchange shall be cancelled and disposed of in a manner satisfactory
to Capital, the trustee and the transfer agent and registrar. Unless Capital
provides the trustee with written notice to the contrary, all Certificates so
surrendered will be destroyed pursuant to customary procedures.
Prior to presentation of a Certificate for registration of transfer,
Capital and the trustee, the paying agent, the transfer agent and registrar and
any agent of any of them may treat the person in whose name any Certificate is
registered as the owner of such Certificates for the purpose of receiving
distributions and for all other purposes whatsoever, and neither Capital and the
trustee, the paying agent, the transfer agent and registrar, nor any agent of
any of them shall be affected by any notice of the contrary.
The paying agent shall make all withdrawals, deposits and payments in
accordance with the subservicer's reports which reports are described below in
detail. The paying agent shall be the trustee and shall have revocable power to
transfer funds among investor accounts and make distributions to
Certificateholders from the distribution account (which account is described
below in greater detail). The trustee, as the paying agent, shall be permitted
to resign as paying agent upon 30 days written notice to Capital at which point
the trustee shall appoint a successor paying agent acceptable to Capital. The
provisions of the pooling and servicing agreement governing the duties of the
trustee, the trustee's liability for recitals in the Certificates, and certain
other matters affecting the trustee shall also apply to the trustee to its role
as paying agent, for so long as the trustee shall act as paying agent. if the
trustee determines in its sole discretion that the paying agent (assuming it is
not the trustee) has failed to perform its obligations under the pooling and
servicing agreement in any material respect, the trustee may revoke the paying
agent's power and remove the paying agent, unless the paying agent is the
trustee.
List of Certificateholders
The trustee will furnish or cause to be furnished by the transfer agent and
registrar (if other than the trustee) to Capital within five (5) business days
after receipt by the trustee of a request therefor from Capital, in writing, a
list in such form as Capital may reasonably require, of the names and addresses
of the Certificateholders as of the most recent record date for payment of
distributions to Certificateholders. If Certificateholders holding an aggregate
amount of the Certificates then outstanding (the "applicants") apply in writing
to the trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under the
pooling and servicing agreement or under the Certificates and is accompanied by
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a copy of the communication which such applicants propose to transmit, then the
trustee, after having been adequately indemnified by such applicants for its
costs and expenses, shall afford or shall cause the transfer agent and registrar
(if other than the trustee) to afford such applicants access during normal
business hours to the most recent list of Certificateholders held by the trustee
which shall be as of a date not more than 45 days prior to the date of receipt
of such applicants' request and shall give the subservicer notice that such
request has been made, within 5 business days after the receipt of such
application. Every Certificateholder, by receiving and holding Certificates,
agrees with the trustee that neither the trustee, the transfer agent and
registrar (if other than the trustee), nor any of their respective agents shall
be held accountable by reason of the disclosure of the names and addresses of
the Certificateholders, regardless of the source from which such information was
obtained.
Interest Payments
Certificate Interest will accrue on a Certificate from the applicable
closing date of the particular Certificate. Beginning with the distribution date
immediately following the date in which occurred the closing date applicable to
the particular Certificate, interest at the certificate rate shall be paid on
each distribution date on the basis of a 360 day year comprised of twelve 30 day
months. Certificate interest due on any distribution date will be calculated on
the outstanding principal amount of the Certificate as of the applicable closing
date. Certificate interest payments will be funded from the liquidity account.
Certificate interest will be paid to the Certificateholders after the trustee's
fees and expenses and master servicer's fee, but before the successor servicer's
fee has been paid in that order of priority. If there are insufficient amounts
in the liquidity account to pay Certificate interest, such deficits shall
constitute a deficiency amount payable on succeeding distribution dates from the
liquidity account.
Principal Payments
No payments of Certificate principal will be made to Certificateholders
until the final maturity date, as applicable, except as provided below. The
first payment of Certificate principal will be made to Certificateholders
beginning on the first distribution date following the first maturity date.
Additional payments of Certificate principal will be made on succeeding
distribution dates until the full outstanding balance of Certificate principal
with respect to all Certificates has been paid in full which will be deemed the
final maturity date. If there remains any outstanding balance of Certificate
principal, then all remaining trust's assets shall first be used to repay
the outstanding balance of Certificate principal of the Certificates. Any funds
remaining in any of the investor accounts, including the liquidity account,
after the full outstanding balance of Certificate principal on all Certificates
has been paid in full and all fees and expenses have been paid shall be the
property of Capital.
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Assignment of Senior Insurance Settlements To The Trust
On or before the second business day prior to each closing date, Capital
shall give the trustee written notice of the proposed irrevocable assignment of
beneficial interest in the of Senior Insurance Settlements specifying the amount
of the Senior Insurance Settlements to be assigned and the trustee shall, in
turn, notify Capital of the amount available in the escrow account to acquire
Senior Insurance Settlements. Capital, on each closing date, will then
transfer, assign and set over to the trust for the benefit of the
Certificateholders, without recourse, (a) an irrevocable beneficial interest in
the Senior Insurance Settlements which shall be acquired by Capital from United
(as seller under the Senior Insurance Settlements Purchase Agreement ("seller"))
pursuant to the senior insurance settlements purchase agreement, including all
monies due or to become due with respect to the Senior Insurance Settlements and
all proceeds from the Senior Insurance Settlements and (b) all of Capital's
rights, remedies, powers and privileges with respect to the Senior Insurance
Settlements under the senior insurance settlements purchase agreement.
Representations and Warranties of Capital
General. Capital shall represent and warrant to the trust as of each
closing date that (1) it is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has full corporate
power, authority and right to own its properties and conduct its business as
such properties are presently owned and such business is presently conducted,
and to execute, deliver and perform its obligations under the pooling and
servicing agreement and to execute and deliver to the trustee the certificates
pursuant thereto; (2) it is neither required to qualify, nor to register, as a
foreign corporation in any state other than those states in which it has so
qualified in order to conduct business, and has obtained all necessary licenses
and approvals required under federal and applicable state law; (3) the
execution and delivery of the pooling and servicing agreement and the senior
insurance settlements purchase agreement and the execution and delivery to the
trustee of the Certificates by Capital and the consummation of the transactions
provided for in the pooling and servicing agreement and the senior insurance
settlements purchase agreement have been duly authorized by Capital by all
necessary corporate action; (4) the execution and delivery of the pooling and
servicing agreement and the senior insurance settlements purchase agreement and
the Certificates, the performance of the transactions contemplated by the
pooling and servicing agreement and the fulfillment of the terms thereof will
not conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default under,
any indenture, contract, agreement, mortgage, deed of trust or other instrument
to which Capital is a party or by which it or any of its property is bound; (5)
the execution and delivery of the pooling and servicing agreement, the senior
insurance settlements purchase agreement and the Certificates, the performance
of the transactions contemplated by the pooling and servicing agreement or
the senior insurance settlements purchase agreement and the fulfillment of the
terms thereof will not conflict with or violate any requirements of law
applicable to Capital; (6) there are no proceedings or investigations pending
or, to the best knowledge of Capital, threatened against Capital, before any
court, regulatory body, administrative agency, or other governmental
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instrumentality (a) asserting the invalidity of the pooling and servicing
agreement, the senior insurance settlements purchase agreement or the
Certificates, (b) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by the pooling and
servicing agreement, the senior insurance settlements purchase agreement or the
Certificates, (c) seeking any determination of ruling that, in the reasonable
judgment of Capital, would materially and adversely affect the performance by
Capital of its obligations under the pooling and servicing agreement or the
senior insurance settlements purchase agreement, (d) seeking any determination
or ruling that would materially and adversely affect the validity or
enforceability of the pooling and servicing agreement, the senior insurance
settlements purchase agreement or the Certificates or (e) seeking to affect
adversely the income tax attributes of the trust; and (7) all appraisals,
authorizations, consents, orders or other actions of any person or of any
governmental body or official required in connection with the execution and
delivery of the pooling and servicing agreement, the senior insurance
settlements purchase agreement and the Certificates, the performance of the
transactions contemplated by the pooling and servicing agreement or the senior
insurance settlements purchase agreement, and the fulfillment of the terms
thereof, have been obtained. These representations and warranties of Capital
will survive the assignment of the senior insurance settlements to the trust and
the termination of the rights and obligations of the subservicer. Upon discovery
by Capital or the subservicer or upon written notice to the trustee of a breach
of any of the foregoing representations and warranties, the party discovering
such breach or the trustee, as applicable, is obligated to give prompt written
notice to the other parties to the pooling and servicing agreement.
Pooling and Servicing Agreement. Capital shall also represent and warrant to the
trust, with respect to any Certificates, as of each closing date that (a) the
pooling and servicing agreement and any assignment of the Senior Insurance
Settlements each constitute a legal, valid and binding obligation of Capital,
enforceable against Capital in accordance with its terms, except as such
enforceability may be limited by debtor relief laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity); and (b) the pooling and servicing
agreement and any assignment of the Senior Insurance Settlements each constitute
either (a) a valid assignment to the trust of all right, title and interest of
Capital in, to and under the Senior Insurance Settlements being assigned to the
trust, all monies due or to become due with respect to the Senior Insurance
Settlements, and all proceeds of the Senior Insurance Settlements, free and
clear of any lien of any person claiming through or under Capital, (except for
any tax lien), all monies due or to become due with respect to the Senior
Insurance Settlements and the proceeds of the Senior Insurance Settlements upon
transfer of the Senior Insurance Settlements to the trust, and of the pooling
and servicing agreement.
Eligibility of Senior Insurance Settlements, Selection Procedures, Solvency
In connection with the assignment of Senior Insurance Settlements to the
trust, Capital also shall represent and warrant to the trust as to each closing
date, that (a) no selection procedures believed by Capital to be in violation of
the diversification requirements (which are described below in greater detail)
were utilized in selecting the Senior Insurance Settlements being transferred to
the trust and (b) neither Capital nor the seller is insolvent. See "Covenants
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of Capital." On each closing date, Capital will be deemed to represent and
warrant that the representation and warranties set forth above are true and
correct with respect to each Senior Insurance Settlement assigned on such date
as if made on such date. In addition, these representations and warranties shall
survive the assignment of the respective Senior Insurance Settlements to the
trust and the termination of the rights and obligations of the subservicer. Upon
discovery by Capital, the subservicer or the trustee of a breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give prompt written notice to the others.
Representations and Warranties Regarding Senior Insurance Settlements Purchase
Agreement. Capital shall also represent and warrant to the trust that seller,
under the senior insurance settlements purchase agreement, that it has
covenanted and agreed to comply with and perform its obligations with respect to
the Senior Insurance Settlements, except insofar as any failure so to comply or
conform would not materially and adversely affect the rights of the trust or the
Certificateholders under the pooling and servicing agreement or under the
Certificates.
Covenants of Capital
Capital shall covenant to the trust that (1) each Senior Insurance
Settlement shall be evidenced by an appropriate insurance policy; (2) except for
the assignments contemplated in the pooling and servicing agreement, Capital
will not sell , pledge, assign or transfer to any other person the Senior
Insurance Settlements; (3) Capital agrees to tender to the subservicer for
deposit in the investor accounts all payments received by Capital with respect
to the Senior Insurance Settlements as soon as practicable after receipt thereof
by Capital; (4) Capital will enforce the provisions of the senior insurance
settlements purchase agreement prohibiting the seller from conveying, assigning,
exchanging or otherwise transferring the Senior Insurance Settlements to any
other person prior to termination of the trust; (5) Capital shall make any
filings, reports, motion, application, registration with, and shall seek any
consents or authorizations from the Securities and Exchange Commission and any
state securities authority on behalf of the trust as may be necessary or
advisable, and shall comply with any federal or state securities or reporting
requirement laws; and (6) Capital's purchase, acquisition and transfer of Senior
Insurance Settlements will be structured so that (a) at acquisition, no less
than 75% of the cumulative death benefits of the Senior Insurance Settlements
held or beneficially owned by the Trust shall be payable by insurance companies
with an A.M. Best rating of A or better, or its equivalent as set by other
nationally recognized rating agencies, (b) at acquisition no more than 25% of
the cumulative death benefits of the Senior Insurance Settlements held or
beneficially owned by the Trust shall be payable by insurance companies with
A.M. Best rating of B+, or its equivalent as set by other nationally recognized
agencies, (c) at any time after $50,000,000 of Senior Insurance settlements have
been assigned to the trust no more than 10% of the outstanding cumulative death
benefits of the Senior Insurance Settlements held or beneficially owned by the
trust shall be payable by any one insurance company, and (d) no more than $4
million in Tranche I and $10 million in Tranche II will be cumulative death
benefits relating to any one individual.
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Administration and Servicing of Senior Insurance Settlements.
The subservicer has undertaken to service and administer the Senior
Insurance Settlements and to collect payments due under the Senior Insurance
Settlements in accordance with customary and usual servicing procedures and it
shall have full power and authority, acting alone or through any party properly
designated by it to do any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting
generality of the foregoing, the subservicer is authorized and empowered unless
such power and authority is revoked by the trustee or the master servicer on
account of the occurrence of a subservicer default (as discussed below in
greater detail) to execute and deliver, on behalf of the trust for the benefit
of the Certificateholders, any and all instruments of satisfaction or
cancellation, or of partly or full release or discharge, and all other
comparable instruments, with respect to the Senior Insurance Settlements. The
trustee shall furnish the subservicer upon request with any powers of attorney
and other documents reasonably necessary or appropriate to enable the
subservicer to carry out its servicing and administrative duties.
The master servicer and subservicer are not obligated to use separate
servicing procedures, offices or employees for servicing the Senior Insurance
Settlements from the procedures, offices, or employees used by the master
servicer in connection with servicing other senior insurance settlements;
provided, however, that subservicer is at all times required to be able to
accurately reflect the status of collections and shall maintain separate
accounts. The subservicer is not required to maintain fidelity bond coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of the Senior Insurance Settlements.
Servicing Compensation and Payment of Expenses
As compensation for its servicing activities under the pooling and
servicing agreement and as reimbursement for its expenses in connection with its
activities under the pooling and servicing agreement, the master servicer and
subservicer shall be entitled to receive a monthly servicing fee with respect to
any month (or portion thereof) prior to the termination of the Trust, payable in
arrears on each fee distribution date. The master servicer and subservicer shall
not be liable for any liabilities, costs or expenses of the trust or the
Certificateholders arising under any tax law, including without limitation any
federal, state or local income or franchise taxes or any other tax imposed on or
measured by income (or any interest or penalties with respect thereto or arising
from a failure to comply therewith).
The subservicer shall be required to pay from its servicing compensation
all expenses, but not including fees paid to independent accountants which shall
be paid by the trust, incurred in connection with servicing the Senior Insurance
Settlements and shall not be entitled to any payment from Capital or the trust
other than the monthly servicing fee.
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Representations, Warranties and Covenants of the Subservicer (and Seller)
As of each closing date, the subservicer will make the following
representations, warranties and covenants upon which the trustee will rely in
accepting the assignment of the Senior Insurance Settlements and is
authenticating the Certificates that (1) the subservicer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has full corporate power, authority and right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under the pooling and servicing agreement; (2) it is qualified as a
foreign corporation in every state where it is required to be so qualified to
service the Senior Insurance Settlements as required by the pooling and
servicing agreement and has obtained all necessary licenses and approvals as
required under federal and state law, in each case, where the failure to be so
qualified, licensed or approved, could reasonably be expected materially and
adversely to affect the ability of the subservicer to comply with the terms of
the pooling and servicing agreement; (3) the execution, delivery, and
performance of the pooling and servicing agreement (and the senior insurance
settlements purchase agreement) have been duly authorized by the subservicer
(and by United as seller, as applicable) by all necessary corporate action on
the part of the subservicer, that said agreements constitute legal, valid and
binding obligations of the subservicer (and by united as seller, as applicable)
enforceable in accordance with their respective terms, except as enforceability
may be limited by debtor relief laws and except as such enforceability may be
limited by general principles of equity (whether considered in a proceeding at
law or in equity) and that the execution and delivery of the pooling and
servicing agreement (and the senior insurance settlements purchase agreement) by
the subservicer (and by United as seller, as applicable), and the performance of
the transactions contemplated by said agreements and the fulfillment of the
terms thereof applicable to the subservicer (and seller, as applicable), will
not conflict with, violate, or result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or both( a
default under, any requirements of law applicable to the subservicer (and
seller, as applicable) or any indenture contract, agreement, mortgage, deed of
trust or other instrument to which the subservicer (or the seller, as
applicable) is a party or by which it is bound; and (4) there are no
proceedings or investigations pending or, to the best knowledge of the
subservicer (or the seller, as applicable), threatened against the subservicer
(or the seller, as applicable), before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality seeking
to prevent the issuance of the Certificates or the consummation of any of the
transactions contemplated by the pooling and servicing agreement, seeking any
determination or ruling that, in the reasonably judgment of the subservicer (or
the seller, as applicable), would materially and adversely affect the
performance by the subservicer (or the seller, as applicable) of its obligations
under the pooling and servicing agreement (or the senior insurance settlements
purchase agreement), or seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of the pooling
and servicing agreement (or the senior insurance settlements purchase
agreement). Seller shall also make agreements with or deliver binding
instructions to each insurance company such that Collections are to be deposited
directly in the lockbox account.
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Reports and Records of the Master Servicer and Subservicer
The master servicer and subservicer is required to deliver certain reports
and certificates to Capital and the trustee at specified times.
Closing Date Reports. The subservicer shall prepare and deliver to Capital
and to the trustee on 2 business days prior to the initial closing date and,
thereafter, on the first business day of each week, an officer's certificate
setting forth the amount of Senior Insurance Settlements to be purchased on the
initial closing date as measured by the senior insurance settlements purchase
price expended therefor and by their face value.
Daily and Weekly Reports. On each business day, the subservicer shall
prepare and make available at the office of the subservicer for inspection by
the master servicer and the trustee (which trustee may do at its option, but has
no obligation to so inspect) and/or Capital a record setting forth (1) the
aggregate amount of collections processed by the subservicer on the preceding
business day and (2) the amount of Senior Insurance Settlements as of the close
of business on the preceding business day. On the first business day of each
week, commencing in the week following the first closing date, the subservicer
shall prepare and deliver to Capital and the trustee a record setting forth (1)
the aggregate amount of collections processed by the Subservicer in the
preceding week and (2) the aggregate amount of Senior Insurance Settlements as
of the close of business on the last business day in such week.
Master Servicer's Semi-Annual Certificate. On each determination date the
master servicer shall prepare and forward to the trustee and the paying agent
the semi-annual master servicer's certificate substantially setting forth (1)
the aggregate amount of collections processed during the preceding six months;
(2) the aggregate amount of collections attributable to Senior Insurance
Settlements processed by the subservicer during the preceding six months; (3)
the aggregate amount of Senior Insurance Settlements and the balance on deposit
in the senior insurance settlements account, with respect to collections
processed as of the end of the last day of the preceding six months; (4) the
aggregate amount, if any, of withdrawals from the liquidity account required to
be made on the next succeeding transfer date; (5) the aggregate amount of funds,
if any, to be deposited in the liquidity account on the next succeeding transfer
date; (6) the six months Certificateholders statement; (7) the sum of all
amounts payable to the Certificateholders on the next succeeding distribution
date in respect of Certificate interest and Certificate principal; and (8) the
interest and earnings (net of losses and investment expenses) from the senior
insurance settlements account and liquidity account for the preceding six
months.
Master Servicer's Annual Certificate. In addition to the closing date
reports, the daily and weekly reports and the six month master servicer's
certificate, the master servicer will deliver to the trustee on or before April
15th of each calendar year, beginning with April 15, 2000, an officer's
certificate stating that (1) a review of the activities of the subservicer
during the preceding calendar year and of its performance under the pooling and
servicing agreement was made under the supervision of the officer signing such
certificate and (2) to the best of such officer's knowledge, based on such
review, the subservicer has fully performed all its obligations under the
pooling and servicing agreement throughout such year, or, if there has been a
default in the performance of any such obligation, specifying each such default
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known to such officer and the nature and status thereof. A copy of such
certificate may be obtained by any Certificateholder by a request in writing to
the trustee.
Annual Independent Public Accountants Subservicing Reports. The
subservicer, at cost of the trust, has also undertaken to cause certain annual
reports to be prepared by independent public accountants for the trustee, which
reports will be available for inspection by the Certificateholders. On or before
April 15th of each calendar year, beginning with April 15, 2000, the master
servicer shall cause, at cost and expense of the trust, a firm of nationally
recognized independent public accountants to furnish a report to the Trustee
covering the preceding annual period to the effect that such accountants have
applied certain agreed-upon procedures to certain documents and records relating
to the servicing of Senior Insurance Settlements, compared the information
contained in the master servicer's certificates delivered during the period
covered by such report with such documents and records and that no matters came
to the attention of such accountants that caused them to believe that such
servicing was not conducted in compliance with the pooling and servicing
agreement, except for such exceptions as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such statement. In
addition, each report shall set forth the agreed upon procedures performed. A
copy of such report may be obtained by any Certificateholder by a request in
writing to the trustee. In addition, on or before April 15th of each calendar
year, beginning with April 15, 2000, the subservicer also, at its sole cost and
expense, shall cause a firm of nationally recognized independent public
accountants to furnish a report to the trustee to the effect that they have
compared the mathematical calculations of each amount set forth in the six
months subservicer's certificates forwarded by the master servicer during the
period covered by such report (which shall be the period from January 1, or such
date which is the initial closing date, to and including December 31, or such
date which is the final maturity date, of such calendar year) with the
subservicer'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. A
copy of such report may be obtained by any Certificateholder by a request in
writing to the trustee.
In the event that United is no longer acting as subservicer, the master
servicer or any successor servicer appointed pursuant to the provisions
governing said appointment under the pooling and servicing agreement, shall
deliver or make available to the trustee each certificate and report required to
be prepared, forwarded or delivered thereafter.
Subservicer Default
Upon the occurrence of a subservicer default (as discussed below in greater
detail), the subservicer will give prompt written notice of such default to the
master servicer and the trustee and the trustee will give notice to the
Certificateholders at the addresses appearing in the certificate register.
Should the subservicer fail to cure such subservicer default or be incapable of
curing such, the trustee or the Certificateholders representing not less than
51% of the principal amount of the Certificates then outstanding by written
notice then given to the subservicer (and the trustee if given by the
certificateholders) (a "termination notice") may (a) terminate all of the rights
and obligations of the subservicer as subservicer under the pooling and
servicing agreement or (b) only if Certificateholders representing not less
than 51% of the principal amount of Certificateholders so elect, waive such
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default by the subservicer (except a default in the failure to make any required
deposits or payments, which may not be waived). Upon any such waiver of a past
default, such default shall cease to exist, and any default arising therefrom
shall be deemed to have been remedied for every purpose of the pooling and
servicing agreement. No such waiver shall extend to any subsequent or other
default or impair any right consequent thereto except to the extent expressly so
waived.
If a termination notice is delivered to subservicer, the subservicer shall
continue to perform all servicing functions under the agreement until the date
specified in the 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 the
master servicer and the trustee. The trustee shall as promptly as possible after
the giving of a termination notice appoint the master servicer as successor
servicer (the "successor servicer") and such successor servicer shall accept its
appointment by a written assumption in a form acceptable to the trustee.
A subservicer default refers to any one of the following events which shall
occur and be continuing:
(a) any failure by the subservicer to report or give instructions or notice
to the trustee required by the pooling and servicing agreement on or before the
date occurring 5 business days after the date such report or such instruction or
notice is required to be given, as the case may be; or
(b) failure on the part of the subservicer duly to observe or perform in
any material respect any other covenants or agreements of the subservicer set
forth in the pooling and servicing agreement which has a material adverse effect
on the Certificateholders and which continues unremedied for a period of 30 days
after the date on which written notice of such failure requiring the same to be
remedied shall have been given to the subservicer by the trustee, or to the
subservicer and the trustee by the holders of Certificates representing not less
than 25% of the principal amount of the Certificates then outstanding; or
(c) the subservicer's delegation of its duties under the pooling and
servicing agreement except as permitted by the pooling and servicing agreement;
or
(d) any representation, warranty or certification made by the Subservicer
in the pooling and servicing agreement, or in any certificate delivered pursuant
to the pooling and servicing agreement shall prove to have been incorrect when
made, which has a material adverse effect on the rights of the
Certificateholders and which continues to be incorrect in any material respect
for a period of 30 days after the date on which written notice of such failure
requiring the same to be remedied shall have been given to the subservicer by
the trustee or master servicer, or to the master servicer and the trustee by the
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holders of Certificates representing not less than 51% of the principal amount
of the Certificates then outstanding, or if such failure cannot be cured within
such 30 day period owing to causes beyond the control of the subservicer, if
subservicer shall fail to proceed promptly to cure the same and thereafter
prosecute the curing of such failure with continued diligence; or
(e) the subservicer shall (a) become insolvent, (b) fail to pay its debts
generally as they become due, (c) voluntarily seek, consent to, or acquiesce in
the benefit or benefits of any debtor relief law, or (d) become a party to (or
be made the subject of) any proceeding provided by any debtor relief law, other
than as a creditor or claimant, and, in the event such proceeding is
involuntary, the petition instituting same is not dismissed within 90 days after
its filing.
Appointment of Successor Servicer
Upon the occurrence of a subservicer default which results in a termination
of the subservicer, the trustee shall appoint the master servicer as "successor
servicer." the master servicer shall execute an acknowledgment agreeing to be
bound by the terms and provisions of the pooling and servicing agreement. The
trustee shall have no liability for the appointment of the master servicer as
successor servicer. If the master servicer fails or is unable (through no fault
of the master servicer) to accept its appointment as successor servicer, the
trustee may obtain bids from other parties to act as a successor servicer. If
the Master Servicer becomes the Successor Servicer, it shall receive a
management transfer fee of $100,000. If the trustee is unable to obtain any
bids, then the trustee shall automatically become the successor servicer. If the
trustee does not wish to continue in such capacity, it may, as its option,
petition a court of competent jurisdiction to appoint any established financial
institution whose regular business includes servicing senior insurance
settlements or other insurance settlements to act as successor servicer.
Upon its appointment, the successor servicer shall be the successor in all
respects to the subservicer with respect to servicing functions under the
pooling and servicing agreement and shall be subject to all the
responsibilities, duties and liabilities placed on the subservicer by the terms
and provisions of the pooling and servicing agreement. In connection with such
appointment and assumption, the successor servicer shall be entitled to receive
as compensation, such fees as it and the trustee shall agree (the priority of
payment, however, shall not be that for subservicer, but that for the trustee or
master servicer, as hereinafter discussed). If the trustee should become a
successor servicer it shall also receive compensation for performing such
services.
On the date that a successor servicer shall have been appointed by the
trustee, all power and authority of the subservicer under the pooling and
servicing agreement shall pass to and vest in the successor servicer, and,
without limitation, the trustee is authorized and empowered to execute and
deliver, but shall have no obligation to execute and deliver, on behalf of the
subservicer (upon the failure of subservicer to so execute, deliver or
cooperate), as attorney-in-fact or otherwise, all documents and other
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instruments required of the subservicer to be executed or delivered, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights to the successor servicer.
Upon any termination or appointment of a successor servicer, the trustee
shall give prompt written notice thereof to Certificateholders at their
addresses appearing in the certificate register and trustee shall again obtain
bids for a new successor servicer.
The Trustee
The Chase Manhattan Bank will be the trustee. Capital, the subservicer,
the master servicer and their affiliates may from time to time enter into normal
banking and trustee relationships with the trustee and its affiliates. The
trustee, Capital, the subservicer, the master servicer, and any of their
affiliates may hold Certificates in their own names. In addition, for purposes
of meeting the legal requirements of certain local jurisdictions, the trustee
shall have the power to appoint a co-trustee or separate trustee(s) of all or
any part of the trust. In the event of such appointment, all rights, powers,
duties and obligations conferred or imposed upon the trustee by the pooling and
servicing agreement shall be conferred or imposed upon the trustee and such
separate trustee or co-trustee jointly, or, in any jurisdiction in which the
trustee shall be incompetent or unqualified to perform certain acts, singly upon
such separate trustee or co-trustee, which is so qualified and who shall
exercise and perform such rights, powers, duties and obligations solely at the
discretion of trustee. The trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
The trustee may resign at any time by giving written notice to Capital and
the master servicer and, upon receiving such written notice of resignation,
Capital shall be obligated to appoint a successor trustee. If no successor
trustee has been appointed within 30 days of Capital's receipt of the notice of
resignation, the resigning trustee shall petition any court of competent
jurisdiction for the appointment of a successor trustee. Capital may also remove
the trustee if the trustee ceases to be eligible to continue as such or the
trustee becomes insolvent or is adjudged a bankrupt. Any resignation or removal
of the trustee and appointment of a successor trustee does not become effective
until acceptance of the appointment by the successor trustee.
Amendment of Pooling and Servicing Agreement.
The pooling and servicing agreement may be amended from time to time by
seller, master servicer, Capital and the trustee, without the consent of any of
the Certificateholders, to cure any ambiguity, to correct or supplement any
provisions which may be inconsistent with any other provisions therein, or to
add any other provisions with respect to matters or questions arising under the
pooling and servicing agreement which shall not be inconsistent with the
existing provisions of the pooling and servicing agreement; provided, however,
that such action shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of the Certificateholders. Further,
the trustee may, but shall not be obligated to, enter into any such amendment
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which affects the trustee's rights, duties or immunities under the pooling and
servicing agreement or otherwise. Any assignments regarding the transfer of
Senior Insurance Settlements to the trust shall not be considered amendments to
the pooling and servicing agreement.
Other than as provided above, the pooling and servicing agreement may also
be amended from time to time by seller, master servicer, Capital and the trustee
with the consent of the Certificateholders representing not less than 66-2/3% of
the principal amount of the Certificates then outstanding, for the purpose of
adding, modifying or eliminating any provisions of the pooling and servicing
agreement or modifying in any manner the rights of the Certificateholders;
provided, however, that no such amendment shall (a) reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Certificate without the consent of such Certificateholder, or (b) reduce
the aforesaid percentage required to consent to any such amendment, without the
consent of each Certificateholder.
Promptly after the execution of any amendment or consent the trustee shall
furnish written notification of the substance of such amendment to each
Certificateholder.
With respect to the amendment of the pooling and servicing agreement or the
modification of the rights of the Certificateholders, the consent of the
Certificateholders shall not be necessary to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance of the proposed amendment. The manner of obtaining any consents
required to amend the pooling and servicing agreement and evidence of
authorization by Certificateholders shall be subject to such reasonable
requirements as the trustee may prescribe.
Investor Accounts and Allocation of Collections.
The trust's assets shall also include investor accounts which consist of
the lockbox account, the senior insurance settlements account and liquidity
account, each of which shall be established and maintained by the trustee for
the benefit of the Certificateholders. In addition, the trustee shall establish
a distribution account (which shall also be an investor account) for payments to
the Certificateholders, subservicer, trustee, Capital, master servicer and such
others as are entitled to receive payments under the pooling and servicing
agreement.
Lockbox Account. The lockbox account has been established and shall be
maintained with the trustee in the name of the trust as an interest bearing
segregated demand deposit account and its shall bear a designation clearly
indicating that the funds deposited therein are held in trust for the benefit of
the Certificateholders.
Senior Insurance Settlements Account. The senior insurance settlements
account shall be established and maintained by the trustee as a segregated,
interest-bearing account and it shall bear a designation clearly indicating that
the funds deposited therein are held in trust for the benefit of the
Certificateholders and shall be subject to distribution pursuant to the pooling
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and servicing agreement. The senior insurance settlements account shall contain
collections attributable to Senior Insurance Settlements.
Liquidity Account. The trustee shall also establish and maintain the
liquidity account with the trustee in the name of the trust as a segregated
interest bearing account, indicating that the funds therein are held for the
benefit of the Certificateholders. On each closing date, Capital shall deposit
or cause to be deposited in the liquidity account an amount equal to the
difference between the senior insurance settlements purchase price and the face
amount of the Certificates issued on such closing date.
Distribution Account. The trustee shall also establish and maintain with
the trustee the distribution account, which shall be a non-interest bearing
segregated demand deposit account from which the paying agent shall make the
distributions and other payments described in the pooling and servicing
agreement.
Distributions from Investor Accounts. The paying agent or the trustee shall
have the revocable authority to make withdrawals and distributions from, or
transfers between, the investor accounts. On each business day, the trustee
shall withdraw all funds from the lockbox account and deposit same in the senior
insurance settlements account and the liquidity account. Funds on deposit in the
senior insurance settlements account and the liquidity account may at all times
be invested in permitted investments, provided that any such investment shall
mature and such funds shall be available for withdrawal (i) on or prior to the
transfer date immediately preceding the fee distribution date and distribution
date on which such funds are required for distribution. The trustee shall hold
for the benefit of the Certificateholders the negotiable instruments or
securities, if any, evidencing the permitted investments from the time of
purchase until the time of sale or maturity. Subject to the maturity
restrictions set forth above, Capital shall instruct the trustee, in writing or
if orally, then promptly confirmed in writing, as to the investment of funds on
deposit in the senior insurance settlements account and the liquidity account.
If, for any reason, Capital does not provide investment instructions to the
trustee, then the trustee shall invest such funds in a Chase Institutional Money
Market Account. For purposes of determining the availability of funds or the
balances in the senior insurance settlements account and the liquidity account,
all investment earnings on such funds shall be deemed not to be available or on
deposit except upon the occurrence of a pay out event. The trustee shall not be
responsible for any losses incurred in connection with any such permitted
investments.
The subservicer is required to deposit immediately or cause to be deposited
in the senior insurance settlements account all collections which it receives
that are not otherwise made or deposited directly into the lockbox account.
Priority of Payments
On each fee determination date and determination date, as applicable, the
master servicer shall instruct the trustee to withdraw on the succeeding
transfer date the amounts required to be withdrawn from the senior insurance
settlements account, and deposited into the distribution account as discussed
below. The trustee will then withdraw from the
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senior insurance settlements account to the extent funds are available from
collections attributable to Senior Insurance Settlements processed during the
preceding six months, and the deposit in the distribution account for payment in
the following order of priority;
(a) an amount equal to the trustee's fees and the expenses of trustee;
(b) an amount equal to the master servicer's fees or successor servicer's
fees;
(c) an amount equal to Certificate interest for the six months;
(d) an amount equal to the subservicer's fee, and
(e) an amount to fund any deficiency in the liquidity account.
If the collections attributable to Senior Insurance Settlements are less
than the amount required to be distributed from the senior insurance settlements
account, to fund items (a) through (d) above, the trustee shall withdraw from
the liquidity account funds in the amount of such deficiency and deposit same in
the distribution account. If the senior insurance settlements account or funds
in the liquidity account are insufficient in any six months to pay Certificate
interest to the Certificateholders, the amount of such deficiency for any six
months shall be referred to as the "deficiency amount" and shall be payable in
later months as sufficient funds become available.
In the event the master servicer or a successor servicer shall be appointed
subservicer, such party shall receive the monthly servicing fee in accordance
with the priority set forth in the first paragraph.
Repayment of Certificate Principal. With respect to the payment of
certificate principal on each transfer date, the trustee shall withdraw from the
senior insurance settlements account collections attributable to Senior
Insurance Settlements which have been on deposit in the senior insurance
settlements account and deposit same in the distribution account for payment to
the Certificateholders.
With respect to the final transfer date, the trustee shall withdraw from
the amount deposited in the senior insurance settlements account and deposit in
to the distribution account an amount equal to the outstanding amount of
Certificate principal of the Certificates as of the end of the day on the
preceding record date. If the amounts on deposit in the senior insurance
settlements account on the final transfer date are less than the outstanding
amount of certificate principal of the Certificates as of the end of the day on
the preceding record date, the trustee, will withdraw from the liquidity account
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funds in the amount of such deficiency and deposit same in the distribution
account for payment to the Certificateholders. The Certificates are subject to
optional repurchase at 102.50% of the outstanding principal amount thereof after
each 5 year period, respectively.
Failure to Make Deposits. If the paying agent, subservicer or Capital fails
to make, or give instructions to make, any withdrawal, payment or deposit, the
trustee shall make or cause such withdrawal, payment or deposit to be made from
the applicable investor accounts. The master servicer and/or subservicer shall
promptly provide the trustee with all information necessary to allow the trustee
to make such payment. Such funds shall be applied by the trustee in the manner
in which such payment or deposit should have been made by the paying agent or
Capital, as the case may be.
Distributions and Reports to Certificateholders
On each distribution date, the paying agent will distribute to each
Certificateholder of record on the preceding record date such
Certificateholder's pro rata share of the Certificate interest and the
Certificate principal, if applicable, as previously discussed. The paying agent
shall make such distributions by check mailed to each Certificateholder.
In addition, on each distribution date, the paying agent shall forward to
each Certificateholder a certificateholders' statement, prepared by the master
servicer substantially in the form of exhibit 5.2 attached to the pooling and
servicing agreement filed as an exhibit to the registration statement of which
this prospectus is a part, setting forth the following information (which, in
the case of (a), (b) and (c) below, shall be stated on the basis of an
original principal amount of $1,000 per Certificate): (a) the total amount
distributed for the preceding six months; (b) the amount of such distribution
allocable to certificate principal; (c) the amount of such distribution
allocable to certificate interest; (d) the amount of collections of Senior
Insurance Settlements processed during the preceding six months; the (e) amount
of the monthly servicing fee for the preceding six months; (f) the aggregate
amount of funds deposited in the liquidity account as of such distribution date;
and (g) the amount of trustee's fees and expenses of the trustee for the
preceding six months.
On or before January 31 of each calendar year, beginning with calendar year
2000, Capital will furnish to each person who at any time during the preceding
calendar year was a Certificateholder an annual certificateholders' tax
statement prepared by an independent public accounting firm containing the
information required to be contained in the regular monthly report to
Certificateholders, as set forth in subclauses (a), (b) and (c) of the preceding
paragraph above, aggregated for such calendar year or the applicable portion
thereof during which such person was a Certificateholder, together with such
other customary information (consistent with the treatment of the Certificates
as debt) as the trustee, Capital master service or the subservicer deems
necessary or desirable to enable the Certificateholders to prepare their
respective tax returns. Such obligations of Capital shall be deemed to have been
satisfied to the extent that Capital provides information which is substantially
comparable to information which is required by applicable requirements of the
Internal Revenue Code, as from time to time in effect.
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Pay Out Events
A pay out event refers to any of the following events:
(a) the failure on the part of Capital or the subservicer to make any
payment or deposit required by the terms of the pooling and servicing agreement
on or before the date occurring 5 business days after the date such payment or
deposit is required to be made; or
(b) the failure on the part of Capital or the subservicer duly to observe
or perform in any material respect any other material covenants or agreements
set forth in the pooling and servicing agreement which failure(s) continues
unremedied for a period of 60 days after the date on which written notice of
such failure requiring the same to be remedied shall have been given to Capital
and/or the subservicer by the trustee, or to Capital, the master servicer and
the trustee by Certificateholders representing not less than 51% of the
principal amount of the Certificates then outstanding; or
(c) in the event that any representation or warranty made by Capital or the
subservicer in the pooling and servicing agreement or any information contained
in a computer printout required to be delivered by Capital shall prove to have
been incorrect in any material respect when made or when delivered, which
continues to be incorrect in any material respect for a period of 60 days after
the date on which written notice of such failure requiring the same to be
remedied shall have been given to Capital and the subservicer by the trustee, or
to Capital, the master servicer and the trustee by Certificateholders
representing not less than 5% of the principal amount of the Certificates then
outstanding and as a result of which the interests of such Certificateholders
are materially and adversely affected, or if such failure cannot be cured within
such 60 day period owing to causes beyond the control of Capital or the
subservicer, as the case may be, if Capital or the subservicer shall fail to
proceed promptly to cure the same and thereafter prosecute the curing of such
failure with continued diligence; or
(d) Capital or the Subservicer shall (1) become insolvent; (2) fail to pay
its debts generally as they become due; (3) voluntarily seek, consent to, or
acquiesce in the benefit or benefits of any debtor relief law; (4) become a
party to (or be made the subject of) any proceeding provided for by any debtor
relief law, other than as a creditor or claimant, and, in the event such
proceeding is involuntary, the petition instituting same is not dismissed within
90 days after its filing; or
(e) the trust shall become an "investment company" within the meaning of
the Investment Company Act of 1940, as amended; or
(f) any subservicer default shall occur which would have a material adverse
effect on the Certificateholders; or
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(g) the balance of the funds available in the liquidity account is less
than % of the amount of certificate principal of the Certificates then
outstanding for a period of 2 consecutive months; or
(h) the appointment of the trustee as successor servicer.
Then in the case of an event described in subparagraphs (a), (b), (c) or (f),
after the applicable grace period set forth in such subparagraphs or other
relevant provisions, either the trustee or the Certificateholder representing
not less than 51% of the principal amount of the Certificates then outstanding,
may give written notice to Capital and the subservicer (and to the trustee if
given by the Certificateholders) declaring that a pay out event had occurred as
of the date of such notice, and, in the case of any event descried in
subparagraphs (d), (e), (g), or (h) a pay out event shall occur without any
notice or other action on the part of the trustee or the Certificateholder,
immediately upon the occurrence of such event.
Additional Rights Upon the Occurrence of Certain Events
If Capital voluntarily seeks, consents to or acquiesces in the benefit or
benefits of any debtor relief law or becomes party to (or is made the subject
of) any proceeding provided for by any debtor relief law, other than as a
creditor or claimant, and, in the event such proceeding is involuntary, and the
petition instituting same is not dismissed within 90 days after its filing (a
"bankruptcy event"), Capital shall on the date of such bankruptcy event
immediately cease to assign Senior Insurance Settlements to the trust and shall
promptly give notice to the trustee of such bankruptcy event. Within 15 days
after receipt by the trustee of notice of the bankruptcy event, the trustee
shall (i) publish a notice in the authorized newspapers that a bankruptcy event
has occurred and that the trustee intends to sell, dispose of or otherwise
liquidate the Senior Insurance Settlements in a commercially reasonable manner
and (ii) send written notice to the Certificateholders describing such
proceeding and requesting instructions from such Certificateholders. No such
sale, disposition or liquidation, whether in whole or in part, of the Senior
Insurance Settlements shall be consummated until and unless the trustee shall
have first received written instructions as aforementioned, or other written
response or affirmative refusal to provide a written response from
Certificateholders representing in excess of 51% of the principal amount of the
Certificates then outstanding. The trustee may obtain a prior determination from
any conservator or receiver appointed to handle the affairs of Capita that the
terms and manner of any proposed sale, disposition or liquidation are
commercially reasonable.
The proceeds from the sale, disposition or liquidation of the Senior
Insurance Settlements as discussed above shall be treated as collections. On the
distribution date on which such proceeds are scheduled to be distributed to the
Certificateholders, the trust shall terminate.
Other Matters Relating to Capital
Scope of Liability. Capital shall be liable for the obligations
specifically undertaken by Capital under the pooling and servicing agreement.
Except as provided in the pooling and servicing agreement with respect to the
trust and the trustee, neither Capital nor any of the directors, officers,
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employees or agents of Capital shall be under any liability to the trust, the
trustee, the Certificateholders or any other legal person for taking any action
or for refraining from taking any action under the pooling and servicing
agreement whether arising from express or implied duties under such agreement;
provided, however, this limitation on liability shall not protect Capital or any
director, officer, employee or agent of Capital against any liability which
would otherwise be imposed by reason of willful malfeasance, bad faith or gross
negligence in the performance of duties or by reason of its willful misconduct
under the pooling and servicing agreement or under any agreement executed an
delivered in connection with the pooling and servicing agreement or in any way
relating to or arising out of the creation of the trustee or any transactions
related thereto.
Indemnification. Further, Capital shall agree to indemnify and hold
harmless the trust, trustee and master servicer from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of any
acts, omissions or alleged acts or omissions arising out of activities of the
trust, trustee, or master servicer pursuant to the pooling and servicing
agreement or any agreement executed or delivered in connection with such
agreement or in any way relating to or arising out of the creation of the
trust or the transactions related thereto, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim; provided, however, that although Capital shall
indemnify the trustee and master servicer if such acts, omissions or alleged
acts or omissions constitute ordinary negligence, Capital shall not indemnify
the trustee or master servicer if such acs, omissions or alleged acts or
omissions constitute willful malfeasance, bad faith or gross negligence by the
trustee or master servicer; and provided, further, Capital shall not indemnify
the trust or the Certificateholders for any liabilities, costs or expenses of
the trust with respect to any action taken by the trustee at the request of the
Certificateholders; provided, further, Capital shall not indemnify the trust or
the Certificateholders as to any losses, claims or damages incurred by any of
them in their capacities as investors; and provided further, Capital shall not
indemnify the trust or the Certificateholders with respect to any federal, state
or local income or franchise taxes (or any interest or penalties with respect
thereto) required to be paid by the trust or the Certificateholders in
connection herewith to any taxing authority, which taxes shall be the sole
obligation of the trust of the pooling and servicing agreement shall only be
from assets of Capital. The provisions of the pooling and servicing agreement
relating to this indemnity shall run directly to and be enforceable by an
injured party, subject to the limitations discussed in this paragraph, and shall
survive termination of the trust and the resignation or removal of the trustee
or master servicer.
Other Matters Relating to the Subservicer
Scope of Liability. The subservicer shall be liable under the terms of the
pooling and servicing agreement for the accuracy and sufficiency of the
information contained in any certificate it delivers to the master servicer and
otherwise only to the extent of the obligations specifically undertaken by the
subservicer in such capacity under the pooling and servicing agreement (and as
seller under the senior insurance settlements purchase agreement to the extent
any rights in such agreement have been assigned to the trust). Except as
provided in the next succeeding paragraph with respect to the trust and the
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trustee, neither the subservicer nor any of the directors, officers, employees
or agents of the subservicer shall be under any liability to the trust, the
trustee, the Certificateholders, the master servicer or any other legal person
for taking any action or for refraining from taking any action in its capacity
as subservicer under the pooling and servicing agreement; provided, however,
this limitation on liability shall not protect the subservicer or any director,
officer, employee or agent of the subservicer against any liability which would
otherwise be imposed by reason of willful malfeasance, bad faith or gross
negligence in the performance of duties or by reason of its willful misconduct
under the pooling and servicing agreement. The subservicer and any director,
officer, employee or agent of the subservicer may rely in good faith on any
document of any kind properly executed and submitted by any person respecting
any matters arising under the pooling and servicing agreement. The subservicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties to service the Senior Insurance
Settlements in accordance with the pooling and servicing agreement and which in
its reasonable opinion may involve it in any expense or liability.
Indemnification. The subservicer shall indemnify and hold harmless the
trust, trustee and master servicer from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts, omissions
or alleged acts or omissions arising out of activities of the trust, trustee, or
master servicer under the pooling and servicing agreement including those
arising from acts or omissions of the subservicer pursuant to such agreement or
any agreement executed or delivered in connection with such agreement or in any
way relating to or arising out of the creation of the trust or the transactions
related thereto including, but not limited to, any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim;
provided, however, that although the subservicer shall indemnify the trust,
trustee, and master servicer if such acts, omissions or alleged acts or
omissions constitute ordinary negligence, the subservicer shall not indemnify
the trust, trustee, or master servicer if such acts, omissions or alleged acts
or omissions constitute willful malfeasance, bad faith or gross negligence by
the trustee; provided further, the subservicer shall not indemnify the trust,
the trustee, or any Certificateholders for any liabilities, costs or expenses of
the trust with respect to any action taken by the trustee at the request of such
Certificateholders; for any liabilities, costs or expenses of the trust with
respect to any action taken by the trustee at the request of such
Certificateholders; provided further, the subservicer shall not indemnify the
trust or the Certificateholders as to any losses, claims or damages incurred by
any of them in their capacities as investors; and provided further, the
subservicer shall not indemnify the trust or the Certificateholders with respect
to any federal, state or local income or franchise taxes (or any interest or
penalties with respect thereto) required to be paid by the trust or the
Certificateholders in connection herewith to any taxing authority, which taxes
shall be the sole obligation of the trust or the Certificateholders. Any
indemnification under the pooling and servicing agreement shall only be from
assets of the subservicer. The provisions of the pooling and servicing agreement
relating to this indemnity shall run directly to and be enforceable by an
injured party, subject to the limitations hereof, and shall survive termination
of the trust and the resignation or removal of the trustee.
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Resignation of Master Servicer. The master servicer is not permitted to
resign from its obligations and duties under the pooling and servicing
agreement, except (a) upon determination that (1) the performance of its
obligations and duties is or becomes impermissible under applicable law and (2)
the master servicer can take no reasonable action to make the performance of its
obligations and duties hereunder permissible under applicable law, or (b) if the
master servicer fails to receive its fees and expenses for a period of at least
90 days after they become due, master servicer shall be entitled to resign upon
giving written notice to Capital, the trustee, and United. Any such
determination permitting the resignation of the subservicer shall be evidenced
by an opinion of counsel to such effect delivered to the trustee. No such
resignation shall become effective until the trustee or a successor servicer
shall have assumed the responsibilities and obligations of the subservicer. If
the trustee is unable within 30 days of the date of such determination to
appoint a successor servicer, the trustee shall petition a court of competent
jurisdiction to appoint any established financial institution whose regular
business includes the servicing of senior insurance settlements or other
insurance settlements similar to the Senior Insurance Settlements serviced or to
be serviced by the successor servicer hereunder and whose appointment shall not
adversely affect the rating, if any, of the securities offered pursuant to the
agreement.
Master Servicer's Delegation of Duties. In the ordinary course of
business, the master servicer may at any time delegate any of its duties under
the pooling and servicing agreement to any person who agrees to conduct such
duties in accordance with the provisions of the pooling and servicing agreement.
Any such delegation shall not relieve the master servicer of its liability and
responsibility with respect to such duties and shall not constitute a
resignation within the meaning of the preceding paragraph.
Termination
The trust shall terminate on the earlier of (a) the day designated by
Capital after the final distribution date due to an appointment of the trustee
as successor servicer or an optional repurchase of certificates (the "final
trust termination date"), (b) the final distribution date after the occurrence
of a pay out event or (c) the scheduled trust termination date. If on the
transfer date preceding the scheduled trust termination date there remains
certificate principal outstanding the subservicer shall sell all remaining
Senior Insurance Settlements on behalf of the trust and deposit and proceeds as
collections for subsequent allocation and distribution.
The amount of certificate principal outstanding on the final maturity date
(or on the final distribution date, due to a Pay Out Event) shall become payable
on the next distribution date specified in the "trustee's termination notice."
On such date, the Certificateholders shall surrender their Certificates for
final payment. If the amount in the senior insurance settlements account is not
sufficient to pay the outstanding amount of certificate principal then the
paying agent may withdraw funds from the liquidity account to pay such
deficiency. In the event that not all Certificateholders have surrendered their
Certificates for final payment, the trustee shall retain amounts in the
distribution account pending such surrender. If a Certificateholder has not
surrendered his Certificate within some 18 months, the trustee may take
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affirmative steps to locate the remaining Certificateholders and charge the cost
to such funds on deposit in the distribution account.
If the amount of the certificate principal outstanding is less than
$250,000, Capital may also terminate the trust by repaying certificate principal
and accrued interest.
Upon termination of the trust and final payments, the trustee shall
reconvey to Capital all right, title and interest of the trust in the Senior
Insurance Settlements, all monies due or to become due with respect to the
Senior Insurance Settlements and all proceeds from the Senior Insurance
Settlements and the amounts remaining in the liquidity account.
DESCRIPTION OF THE SENIOR INSURANCE
SETTLEMENTS PURCHASE AGREEMENT
General
The Senior Insurance Settlements assigned to the Trust by Capital will be
acquired by Capital from United pursuant to the senior insurance settlements
purchase agreement entered into between Capital, as purchaser of the Senior
Insurance Settlements, and United, as seller of the Senior Insurance
Settlements. The trustee will provide a copy of the senior insurance settlements
purchase agreement to Certificateholders without charge, upon receipt of a
written request therefor. Under the senior insurance settlements purchase
agreement, United will agree to transfer the Senior Insurance Settlements to
Capital. The following summary describes certain terms of the senior insurance
settlements purchase agreement and is qualified in its entirety by reference to
the senior insurance settlements purchase agreement.
Sale or Transfer of Senior Insurance Settlements
United will sell, transfer, assign, and convey to Capital all its right,
title and interest in and to all of the Senior Insurance Settlements being
transferred on each closing date. Upon the request of Capital, United will
notify Capital of the amount of Senior Insurance Settlements available for
purchase on each closing date. The purchase price for the Senior Insurance
Settlements shall at least be equal the amount advanced by United to the insured
as payment for the insurance policy, excluding United's fees. The monies
advanced by Capital with respect to any one Senior Insurance Settlement shall
not exceed an amount agreed upon between United and Capital as to the discount
from the face amount of the insurance policy, excluding fees. Such advance will
be payable to United in cash or other immediately available funds.
In connection with the sale and transfer of the Senior Insurance
Settlements to Capital, United will indicate in its computer master file that
the Senior Insurance Settlements have been sold to Capital by United and then
assigned by Capital to the trust. In addition, United will furnish to the
trustee and Capital a computer printout readable by the trustee and by Capital
containing a true and complete list of all such Senior Insurance Settlements,
identified by account number and by the total outstanding face amount on the
closing date. the senior insurance settlements purchase agreement shall
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constitute a security agreement between United and Capital. See "Risk Factors -
Certain Legal Aspects."
Representations and Warranties
United will make representations and warranties to Capital as of each
closing date, that United is duly incorporated and in good standing and that it
has the authority to consummate the transactions contemplated by the senior
insurance settlements purchase agreement.
United will also represent and warrant to Capital that the senior insurance
settlements purchase agreement constitutes a legal, valid and binding obligation
of United, and the sale and transfer of the Senior Insurance Settlements to
Capital constitute a valid sale and transfer to Capital of all right, title and
interest of United in and to the Senior Insurance Settlements, and the proceeds
thereof. United covenants to indemnify Capital and to hold Capital harmless from
and against any and all losses, damages and expenses (including reasonable
attorneys' fees) suffered or incurred by Capital if the foregoing
representations and warranties are materially false.
United covenants in the senior insurance settlements purchase agreement
that it will perform its obligations under the agreements relating to Senior
Insurance Settlements and observe all its policies and procedures relating to
the Senior Insurance Settlements, unless the failure to do so would not have a
material adverse effect on the rights of the trust, as assignee of the Senior
Insurance Settlements, or the Certificateholders.
United will expressly acknowledge and consent to the assignment by Capital
of all of its right, title and interest in and to the Senior Insurance
Settlements to the trust for the benefit of the Certificateholders. United will
also agree that any amounts payable by United to Capital, and that are to be
paid by Capital to the trustee for the benefit of the Certificateholders, will
be paid by United on behalf of Capital directly to the trustee.
United covenants that all of its right, title and interest in and to any
Senior Insurance Settlements shall inure to Capital. Except for the sale and
conveyances under the senior insurance settlements purchase agreement, United
will not sell, pledge, assign or transfer any interest in the Senior Insurance
Settlements to any other person or entity.
Termination
The senior insurance settlements purchase agreement will continue in full
force and effect until (a) the trust terminates, or (b) United shall (1) become
insolvent; (2) fail to pay its debts generally as they become due; (3)
voluntarily seek, consent to, or acquiesce in the benefit or benefits of any
debtor relief law; or (4) become a party to (or be made the subject of) any
proceeding provided for by any debtor relief law and, if such proceeding is
involuntary and is not dismissed within 90 days of its institution. United will
immediately cease to transfer to Capital and promptly give notice of such event
to Capital and to the trustee.
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CERTAIN LEGAL ASPECTS OF THE SENIOR INSURANCE SETTLEMENTS
Sale and Transfer of Senior Insurance Settlements
Transfer of Senior Insurance Settlements. On each closing date united will
sell, transfer, assign the Senior Insurance Settlements to Capital and Capital
will transfer, assign an irrevocable beneficial interest in the Senior Insurance
Settlements to the trust. Simultaneously with such transfers from United to
Capital and from Capital to the trust, Capital will execute and the trust will
authenticate Certificates offered hereby and pay Capital for the Senior
Insurance Settlements from the proceeds of such offering. Capital will pay
United the proceeds received from the trust in consideration for the Senior
Insurance Settlements sold to Capital by United. On each closing date United
will indicate in its master computer file of Senior Insurance Settlements that
the Senior Insurance Settlements have been sold to Capital and whose interests
are transferred to the trust. In addition, on each closing date, United, as
subservicer, will deliver to the master servicer and trustee, a computer
printout containing a true and complete list of all Senior Insurance
Settlements, identified by account number and by the total outstanding face
amount of such Senior Insurance Settlements on the closing date. Furthermore,
the insurers, in most instances, may not be notified of such transfers except
that United will direct the insurers to send all payments to the lockbox account
which will be owned by the trust.
United will represent and warrant to Capital in the senior insurance
settlements purchase agreement that the sale and transfer of the Senior
Insurance Settlements to Capital as of each closing date constitutes a true and
valid sale and transfer to Capital of all right, title and interest of United in
and to the Senior Insurance Settlements. Capital will make similar
representations and warranties with respect to its assignment of an irrevocable
beneficial interest to the trustee, in the pooling and servicing agreement.
Article 9 of the UCC ("Article 9") does not apply to a transfer of an
interest or claim in or under any policy of insurance and, consequently, the
trust may not have access to Article 9 remedies since its interest in the Senior
Insurance Settlements is characterized as an interest or claim in or under a
policy of insurance.
Under the senior insurance settlements purchase agreement, United will (a)
represent and warrant that United has acquired the Senior Insurance Settlements
from the insureds and has transferred the Senior Insurance Settlements to
Capital free and clear of the lien of any third party and (b) covenant that
United will not sell, pledge, assign, grant, transfer or otherwise convey any
lien or other interest in and to the Senior Insurance Settlements other than to
Capital. Under the pooling and servicing agreement, Capital will (a) represent
and warrant that Capital has acquired the Senior Insurance Settlements from
United and has assigned an irrevocable beneficial interest in the Senior
Insurance Settlements to the trust and (b) covenant that Capital will not sell,
pledge, assign, grant, transfer or otherwise convey any lien or other interest
in and to the Senior Insurance Settlements other than to the trust.
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Capital will not engage in any activities except acquiring Senior Insurance
Settlements from United, transferring an irrevocable beneficial interest in the
Senior Insurance Settlements to the trust and engaging in activities incidental
to, or necessary or convenient to accomplish the foregoing. Capital has no
intention of filing a voluntary petition under the United States Bankruptcy Code
or any applicable state law so long as Capital is solvent and does not
reasonably foresee becoming insolvent.
The voluntary or involuntary application for relief under the United States
Bankruptcy Code or any comparable state law with respect to Untied should not
necessarily result in a similar voluntary application with respect to Capital so
long as Capital is solvent and does not reasonably foresee becoming insolvent by
reason of United's insolvency or otherwise. Capital believes that (a)
a voluntary application for relief under the United States Bankruptcy Code or
any similar applicable state law with respect to Capital may not lawfully be
filed without the prior consent of all directors of Capital, (b) subject to
certain assumptions (including the assumption that separateness and corporate
formalities are observed by United and Capital), the assets and liabilities of
Capital should not be substantively consolidated with the assets and liabilities
of United in the event of an application for relief under the United States
Bankruptcy Code with respect to United, and (c) the sale and transfer of
Senior Insurance Settlements by United to Capital constitute a valid sale and
transfer and, therefore, such Senior Insurance Settlements would not be the
property of United in the event of the filing of an application for relief by or
against United under the United States Bankruptcy Code. If, however, a
bankruptcy trustee for United, United as debtor in possession, or a creditor of
United were to assert that United and Capital should be substantively
consolidated or that the transfer of the Senior Insurance Settlements from
United to Capital (and therefore from Capital to the trust) should be
recharacterized as a pledge of such Senior Insurance Settlements, then delays in
payments on the Certificates or (should the bankruptcy court rule in favor of
any such trustee, debtor in possession or creditor) reductions in such payments
could result.
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TAX MATTERS
General
Set forth below is a general description of certain of the anticipated
federal income tax consequences to Certificates. This discussion does not
purport to deal with all aspects of federal income taxation that may be relevant
to Certificateholders in light of their personal investment circumstances, nor
to certain types of Certificateholders subject to special treatment under the
federal income tax laws (for example, banks and life insurance companies). In
addition, this description does not consider the effect of any applicable
foreign, state or local income tax laws. Prospective investors are urged to
consult their own tax advisors as to the precise federal, state, local and other
tax consequences of acquiring, holding and disposing of the Certificates. This
discussion is based upon present provisions of the Internal Revenue Code, the
treasury regulations promulgated thereunder, and rulings of the Internal Revenue
Service and judicial decisions now in effect, all of which are subject to
change, possibly retroactively. No ruling will be sought from the IRS with
respect to the transactions contemplated hereby.
Treatment of the Certificates as Evidences of Indebtedness of Capital
As expressly provided in the pooling and servicing agreement, Capital has
structured the pooling and servicing agreement and the Certificates to
facilitate a secured, credit-enhanced financing with the intention that for
federal, state and local income tax purposes the Certificates will constitute
evidences of indebtedness of Capital collateralized by the Senior Insurance
Settlements it owns. Moreover, Capital and each Certificateholder, by the
acceptance of a Certificate, will agree to recognize and report such Certificate
as evidence of indebtedness of Capital for federal, state and local income or
franchise tax purposes. However, as integral elements of this financing
technique, Capital will transfer the Senior Insurance Settlements to the trust,
each Certificateholder will receive a Certificate that will represent an
undivided interest in the trust, and, for financial accounting purposes, the
transaction will be treated as a transfer of an ownership interest in the Senior
Insurance Settlements by Capital thereby avoiding the necessity for recording
the debt on the books of Capital.
Whether a transaction constitutes a sale of property or a loan secured by
the transferred property for federal income tax purposes depends on the
substance of the transaction determined from an analysis of the facts and
circumstances as reflected in the underlying documents for the transaction, the
intent of the parties, and on the basis of numerous factors primarily concerning
whether the transferor has relinquished substantial incidents of ownership of
the property. Among the many factors evidencing the incidents of ownership, the
primary factors examined by the courts and the IRS are whether the transferor
has retained or shifted substantial benefits and burdens of ownership of the
property. If the form and the substance of a transaction are consistent, the
characterization of the transaction would generally be conclusive for federal
income tax purposes.
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Even if the form and substance of a transaction are deemed to differ in
material respects, courts have allowed taxpayers, under appropriate
circumstances, to disregard the form chosen and rely instead on the substance of
the transaction for federal income tax purposes. Assuming that the form of the
transaction contemplated by the pooling and servicing agreement is not
determined to be consistent in all material respects with the substantive
characterization of the transaction as a secured financing by Capital, the
parties would be permitted to disregard the form of the transaction and
characterize the transaction in accordance with its substance.
The real economic gains from the transaction would be attributable to the
residual funds that are anticipated to accumulate as excess cash and the
interest and other earnings realized on investments of the funds in the senior
insurance settlements accounts and the liquidity account. Some of these gains
may be realized by Capital and are a further indication that the transaction
should be classified as a secured loan arrangement.
Possible Classification of the Transaction as a Partnership, or a
Publicly-Traded Partnership or an Association Taxable as a Corporation
There can be no assurance that the IRS will not assert that, for purposes
of the Internal Revenue Code, the transaction contemplated by Capital and the
Certificateholders constitutes a sale of the Senior Insurance Settlements (or an
interest therein) and/or that the proper classification of the legal
relationship among Capital and the Certificateholders resulting from this
transaction is that of a partnership, or a publicly-traded partnership or an
association taxable as a corporation.
If the arrangement created by the pooling and servicing agreement were
characterized as a partnership among Capital and the Certificateholders for
federal income tax purposes, the partnership would be treated as the owner of
the Senior Insurance Settlements. The amount and timing of income and deductions
of a Certificateholder with respect to the Certificates may differ if the
Certificates are held to constitute interests in a partnership rather than
evidences of indebtedness of Capital. The partnership itself would not be
subject to federal income tax; rather, Capital and each Certificateholder as
partners would report on their tax return their distributive share of the
partnership's income, gain, loss, deduction and credit, determined under
partnership tax accounting rules. Cash distributions to a Certificateholder
would not be separately taxable except to the extent that such distributions
exceeded the Certificateholder's basis in the Certificateholder's partnership
interest (as adjusted to reflect the Certificateholder's distributive share of
partnership income and loss and cash contributions made to and distributions
from the partnership).
If the arrangement were treated as a publicly-traded partnership (unless
certain exceptions apply) or an association taxable as a corporation, it would
be subject to federal income taxes at corporate tax rates on the taxable income
generated by the ownership of the Senior Insurance Settlements. Such a tax would
result in reduced distributions to Certificateholders. Distributions to Capital
and to the Certificateholders would not be deductible in computing the taxable
income of the corporation. In addition, all or a portion of any such
distributions made to the Certificateholders would, to the extent of the current
and accumulated earnings and profits of such corporation, be treated as dividend
income to the Certificateholders.
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No attempt will be made to comply with any IRS reporting or tax payment
requirements which might be applicable if the arrangement among Capital and the
Certificateholders were treated as creating a partnership or a publicly-traded
partnership or an association taxable as a corporation. If this transaction were
later held to constitute a partnership, a publicly-traded partnership or an
association taxable as a corporation, the manner of bringing it into compliance
with such requirements is unclear at this time.
Interest Income to Certificateholders
Assuming the Certificates constitute evidences of indebtedness of Capital
for federal income tax purposes, interest will be includible as ordinary income
when received or accrued by Certificateholders in accordance with their
respective methods of tax accounting. Interest received on the Certificates may
also constitute "investment income" for purposes of certain limitations of the
Internal Revenue Code concerning the deductibility of "investment interest"
expense.
Capital has indicated that the Certificates will not be issued at a price
resulting in a discount that exceeds a statutory de minimis amount and, thus,
the Certificates should not be issued with original issue discount ("OID")
within the meaning of Section 1273 of the Code. Each Certificateholder should
consult his own tax advisor regarding the impact to him of the original issue
discount rules if the Certificates are issued with OID.
A Certificateholder who purchases a Certificate for less than its stated
principal amount will be subject to the "market discount" rules of the Internal
Revenue Code, and a Certificateholder who purchases a Certificate for more than
its stated principal amount will be subject to the premium amortization rules of
the Internal Revenue Code. A Certificateholder should consult his own tax
advisor regarding the tax consequences of these rules if they apply to the
Certificateholder.
Gain or Loss on Disposition of Certificates
Subject to the application of the market discount rules, if a Certificate
is sold, exchanged or otherwise disposed of, the Certificateholder will
recognize gain or loss equal to the difference between the amount realized on
the sale, exchange or other disposition and the adjusted basis of such
Certificate. The adjusted basis of the Certificate will equal the
Certificateholder's cost, increased by any market discount previously includible
in income by the Certificateholder with respect to the Certificate, and reduced
by the principal payments previously received and any premium amortized, by the
Certificateholder with respect to the Certificate. Any such gain or loss will be
capital gain or loss if the Certificate was held as a capital asset.
Foreign Investors
In general, interest paid to a foreign person (within the meaning of the
Internal Revenue Code) would be exempt from United States withholding taxes
provided that the interest is not effectively
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connected with the conduct of a trade or business of the recipient in the United
States and, if the foreign person (i) is not a "10 percent shareholder" or
"controlled foreign corporation" to which Capital is a related person within the
meaning of the Internal Revenue Code, and (ii) provides an appropriate
statement, signed under penalties of perjury, certifying that the beneficial
owner of the Certificate is a foreign person, and providing the foreign person's
name and address. If the IRS were to contend successfully that the Certificates
are interests in a partnership, a Certificateholder that is a foreign person
might be required to file a United States individual or corporation income tax
return and pay tax on its share of partnership income at regular United States
rates, including the branch profits tax (and would be subject to withholding tax
on its share of partnership income). If the Certificates are recharacterized as
interests in an association taxable as a corporation or a "publicly traded
partnership" taxable as a corporation, to the extent distributions under the
pooling and servicing agreement were treated as dividends, a foreign person
would generally be taxed on the gross amount of such dividends (and be subject
to withholding) at a rate of 30% unless such rate were reduced by an applicable
treaty.
In general, any capital gain realized on the sale, redemption, retirement
or other taxable disposition of a Certificate by a foreign person will be exempt
from United States federal income tax and withholding, provided that (i) the
gain is not effectively connected with the conduct of a trade or business in the
United States by the nonresident alien or foreign corporation and (ii) in the
case of an individual foreign person, (a) the foreign person is not present in
the United States for 183 days or more in the taxable years of the sale,
exchange, retirement or other taxable disposition or (b)(1) the foreign person
does not have a "tax home" in the United States and (2) the gain is not
attributable to an office or other fixed place of business maintained in the
United States by the foreign person.
There could also be state and local tax considerations to foreign persons
who hold Certificates.
The foregoing description is very general in nature, and foreign investors
should consult their own tax advisors to ascertain the application of these
matters to them.
Backup Withholding
Certificateholders may be subject to backup withholding at the rate of 20%
with respect to interest paid on a Certificate, unless such Certificateholder
(a) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (b) provides a correct taxpayer
identification number, certifies as to the Certificateholder's exemption from
backup withholding and otherwise complies with applicable requirements of the
backup withholding rules. A Certificateholder, who does not provide Capital or
the Certificateholder's broker with such Certificateholder's correct taxpayer
identification number may be subject to penalties imposed by the IRS. Any amount
paid as backup withholding will be credited against the Certificateholder's
income tax liability. Capital will report to the Certificateholders and the IRS
the amount of any "reportable payments" for each calendar year and the amount of
tax withheld, if any, with respect to payments made on the Certificates.
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<PAGE>
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit
certain pension, profit sharing or other employee benefit plans, individual
retirement accounts or annuity and employee annuity plans from engaging in
certain transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Internal Revenue Code
with respect to the plan. A violations of these "prohibited transaction" rules
may generate excise tax and other liabilities under ERISA and the Internal
Revenue Code for such persons.
The Department of Labor has issued a regulation ("regulation") concerning
the definition of what constitutes the "plan assets" of certain employee benefit
plans and annuities described in ERISA or the Internal Revenue Code, and of
individual retirement accounts or annuities (collectively referred to herein as
"benefit plans"). Under the regulation the assets and properties of
corporations, partnerships and certain other entities in which a benefit plan
makes an equity investment could be deemed to be investments by benefit plans
are made in the trust, the trust could be deemed to hold plan assets of such
benefit plan unless an exception is applicable to the trust.
Debt Interest Exception.
The regulation applies to the purchase by a benefit plan of an "equity
interest" in an entity. An equity interest is defined as any interest in an
entity other than an instrument that is treated as debt under applicable local
law and which has no substantial equity features. Capital is of the opinion that
the Certificates would be characterized as evidences of indebtedness of Capital
for federal income tax purposes. Although no assurance can be given that the
Certificates will be treated as debt under applicable law, if the Certificates
are deemed to be debt rather than equity interests, the trust's assets would not
be treated as plan assets solely as a result of the purchase of a Certificate by
a benefit plan.
Publicly-Offered Security Exception.
Assuming that the Certificates represent equity interests, the regulation
contains an exception that provides that if a benefit plan acquires a
"publicly-offered security," the issuer of the security is not deemed to hold
plan assets. A publicly-offered security is a security that is (1) freely
transferable, (2) part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another and (iii) either is (a)
part of a class of securities registered under section 12(b) or 12(g) of the
Securities Exchange Act of 1934, or (b) sold to the plan as part of an offering
of securities to the public pursuant to an effective registration statement
under the Securities Act of 1933 and the class of securities of which such
security is a part is registered under the Securities Exchange Act of 1934
within 120 days (or such later time as may be allowed by the Securities and
Exchange Commission) after the end of the fiscal year of the issuer during which
the offering of such securities to the public occurred.
Although there are no restrictions imposed under the terms of the pooling
and servicing agreement on the transfer of the Certificates and Capital intends
the registration requirements to be satisfied, it is uncertain whether the
Certificates will be held by at least 100 unrelated persons
69
<PAGE>
at the conclusion of the offering made by this prospectus. Accordingly, no
assurances can be given that the offering of the Certificates will meet the
criteria of this publicly-offered security exception.
Exception for Insignificant Participation by Benefit Plan Investors.
The regulation also states that an entity's assets will not be deemed to be
plan assets if equity participation in the entity by "benefit plan investors"
(e.g., employee welfare benefit plans and employee pension benefit plans defined
pursuant to Section 3(3) of ERISA, trusts described in Section 401(a) of the
Internal Revenue Code or a plan described in Section 403(a) of the Internal
Revenue Code, which trust or plan is exempt from tax under Section 501(a) of the
Internal Revenue Code, an individual retirement account or annuity under Section
408 of the Internal Revenue Code and any entity whose underlying assets include
plan assets by reason of a plan's investment in the entity) is not
"significant." Equity participation in an entity by benefit plan investors is
not significant on any date if, immediately after the most recent acquisition of
any equity interest in the entity, less than 25% of the value of any class of
equity interests in the entity (excluding the value of any equity interests held
by Capital, the trustee or its affiliates) is held by benefit plan investors. No
assurance can be given by Capital as to whether the value of the interests in
the trust held by benefit plan investors will be less than 25%, or whether the
value will remain below 25%.
If the trust were deemed to hold "plan assets" of benefit plans that are
Certificateholders, transactions involving the trust and "parties in interest"
or "disqualified persons" with respect to such plans might be prohibited under
Section 406 of ERISA and Section 4975 of the Internal Revenue Code unless an
exemption is applicable. There is no assurance that any exemptions, even if all
of the conditions specified therein are satisfied, will apply to all
transactions involving the trust's assets.
In light of the foregoing, fiduciaries of a benefit plan considering the
purchase of Certificates should consult their own counsel regarding whether the
assets of the trust which are represented by the Certificates would be
considered "plan assets", the consequences that would apply if the trust's
assets were considered "plan assets" and the applicability of exemptive relief
from the prohibited transaction rules.
Regardless of whether the trust were deemed to hold "plan assets" of
benefit plans that are Certificateholders, the purchase of Certificates by a
benefit plan with respect to which Capital or any entity related to it is a
"party in interest" under ERISA or a "disqualified person" under the Internal
Revenue Code could constitute a prohibited transaction under Section 4975 of the
Internal Revenue Code or under Section 406 of ERISA if, for instance, the
benefit plan's purchase is part of an "arrangement" to benefit Capital or any
entity related to it. Accordingly, fiduciaries of a benefit plan with respect to
which Capital or any entity related to it is a "party in interest" or
"disqualified person" should consult their own counsel concerning the propriety
of the investment prior to making the purchase.
Moreover, a possible violation of the prohibited transaction rules could
occur if Certificates were purchased during the offering with assets of any
benefit plan if the trustee or
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<PAGE>
any of its affiliates were a fiduciary with respect to such benefit plan.
Accordingly, the fiduciaries of any benefit plan should not purchase
Certificates during the offering with assets of any benefit plan if the trustee
or any of its affiliates perform or have any discretionary investment powers or
any other fiduciary power as to such benefit plan.
Finally, fiduciaries of a benefit plan should consider fiduciary standards
under ERISA or other applicable law in the context of the benefit plan's
particular circumstances before authorizing an investment of a portion of a
benefit plan's assets in Certificates. Accordingly, among other factors, such
fiduciaries should consider whether the investment (i) satisfies the
diversification requirement of ERISA or other applicable law (ii) is in
accordance with the benefit plan's governing instruments and (iii) is prudent
considering the "Risk Factors" and other factors discussed in this prospectus.
TRANSFERABILITY OF CERTIFICATES
Pryor, Counts & Co., Inc. has advised Capital that it does not intend to
act as a market maker of the Certificates.
INVESTMENT COMPANY ACT OF 1940
The Investment Company Act of 1940 (the "Act") applies to "investment
companies" as defined by the Act.
Section 3(c)(5)(A) of the Act provides that an investment company does not
include a "person who is not engaged in the business of issuing redeemable
securities, face-amount certificates of the installment type or periodic payment
plan certificates, and who is primarily engaged in . . . (A) purchasing or
otherwise acquiring notes, drafts, acceptances, open accounts receivable, and
other obligations representing part or all of the sales price of merchandise,
insurance and service." The Securities and Exchange Commission staff takes the
position that an issuer qualifies under Section 3(c)(5)(A) if at least 55% of
its assets consist of notes, open accounts receivable, or other obligations
representing part or all of the sale price of merchandise, insurance or
services.
The Senior insurance Settlements represent payment obligations of insurance
companies. The trust will also consist of no more than [ ]% in permitted
investments. The trust will therefore satisfy the requirements of Section
3(c)(5)(A) of the Act and is not an investment company subject to the Act.
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<PAGE>
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
Capital by Mesirov Gelman Jaffe Cramer & Jamieson, LLP, Philadelphia,
Pennsylvania.
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<PAGE>
GLOSSARY
"Assignment" shall mean a written assignment transferring the Senior
Insurance Settlements to the trust and executed by Capital.
"Authorized newspapers" shall mean each newspaper of general circulation in
New York, or Carmal, Indiana, or in any other place specified by Capital,
printed in the English language and customarily published on each business day,
whether or not published on Saturdays, Sundays or holidays.
"Business day" shall mean each day which is neither a Saturday, a Sunday
nor any other day on which banking institutions in New York are authorized or
obligated by law or required by executive order to be closed.
"Certificate" shall mean any one of the certificates issued by the trust
and representing an undivided interest in the trust and the right to receive
payments of principal and interest on such certificates.
"Certificate interest" shall mean any and all interest which shall accrue
on a Certificate from the applicable closing date of the particular Certificate.
"Certificate principal" shall mean the outstanding principal amount of the
Certificate at the time of determination.
"Certificate rate" shall mean, with respect to the Tranche I Certificates,
9.0% per annum and with respect to the Tranche II Certificates, 9.25% per annum,
calculated on the basis of a 360 day year consisting of 30 day months, provided
that, in the case of the month in which any such Certificate is first issued,
such rate shall be calculated for the number of actual days remaining in the
month from the date of issuance.
"Certificate register" shall mean a register kept at the office or agency
in which the transfer agent and registrar shall provide for the registration of
the Certificates and of transfer and exchanges of the Certificates.
"Closing date" shall mean, with respect to any Certificate, the date of
issuance of such Certificate.
"Collections" shall mean all payments (including all payments received from
an insurance company) received by the subservicer with respect to the Senior
Insurance Settlements, in the form of cash, checks, wire transfers, electronic
transfers or other form of payment.
"Debtor relief laws" shall mean the United States Bankruptcy Code and all
other applicable liquidation, rearrangement, receivership or conservatorship or
similar laws affecting rights of creditors generally.
73
<PAGE>
"Determination date" shall mean the 10th day of the month after the month
in which the first closing date occurs and the 10th day of each calendar month
thereafter, or, if any such 10th day is not a business day, the next succeeding
business day.
"Distribution date" shall mean the 15th day of the month after six months
in which the first closing date occurs and the 15th day of each calendar six
month period thereafter, or, if any such 15th day is not a business day, the
next succeeding business day.
"Escrow account" shall mean an interest bearing account established by the
trustee for the benefit of the Certificateholders to deposit subscription
proceeds prior to a closing date.
"Fee determination date" shall mean the tenth (10th) day of the month after
the month in which the first closing date occurs and the tenth (10th) day of
each calendar month thereafter, or, if any such tenth (10th) day is not a
business day, the next succeeding business day.
"Fee distribution date" shall mean the fifteenth (15th) day of the month
after the month in which the first closing date occurs and the fifteenth
(15th) day of each calendar month thereafter, or, if any such fifteenth (15th)
day is not a business day, the next succeeding business day.
"First maturity date" shall mean the close of business on the first
business day and date 8 and 10 years, respectively, from the date of the first
closing date whereby the first Certificate is issued by the trust.
"Governmental authority" shall mean the United States of America, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Insurance claims" means a claim for payment under a life insurance policy
issued by an insurance company.
"Insurance company" or "insurance companies" shall mean those legal
entities authorized and admitted by governmental authority to do insurance
business in the state under a certificate of authority and authorized to write
life insurance policies.
"Investor accounts" shall mean each of the senior insurance settlements
account, lockbox account, liquidity account, and the distribution account.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
encumbrance of lien or preferential arrangement, and the filing of a financing
statement to evidence any of the foregoing.
"Master servicer's fee" shall mean an annual fee equal to .175% or .0825%
of the principal amount of Certificates outstanding payable monthly in
accordance with the pooling and servicing agreement.
"Monthly subservicing fee" shall be an amount equal to 1/12th of the
product of (i) the servicing fee percentage and (ii) the principal amount of the
Certificates outstanding as of the first day of such month, or portion thereof.
"Officer's certificate" shall mean a certificate signed by any officer of
Capital or the subservicer, as appropriate, and delivered to the trustee.
74
<PAGE>
"Paying agent" shall mean the trustee or any paying agent appointed by the
trustee.
"Permitted investment" shall mean any one or all of the following types of
investments (1) negotiable instruments or securities represented by instruments
in bearer or registered form which evidence any one or all of the following
types of obligations (a) obligations fully guaranteed by the United States of
America; (b) time deposits in, or bankers' acceptances issued by, any depository
institution or trust company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and examination by
federal or state banking or depository institution authorities which the
certificates of deposit, short-term deposits or long-term secured debt
obligations, if any, of such depository institution or trust company shall meet
certain credit rating standards of Duff & Phelps, Moody's and/or Standard &
Poor's, as may be applicable, or such time deposits are fully insured by the
Federal Deposit Insurance Corporation; (c) certificates of deposit which meet,
at the time of the trust's investment or contractual commitment to invest
therein, certain rating standards of Duff & Phelps, Moody's and/or Standard &
Poor's, as may be applicable; (d) investments in money market funds rated in the
highest investment category or otherwise approved, in writing by Duff & Phelps,
Moody's and/or Standard & Poor's; and (e) investments in Chase Institutional
Money Market Account; (2) demand deposits in the name of the trust or the
trustee in any depository institution or trust company referred to in (1) (b)
above; and (3) securities not represented by an instrument, which are
registered in the name of the trustee upon books maintained for that purpose by
or on behalf of the issuer thereof and which consists of shares of any open end
diversified investment company which is registered under the Investment Company
Act of 1940, as amended, and which meets certain other prescribed investment
guidelines.
"Person" shall mean any legal person, including any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, governmental entity or other entity of
similar nature.
"Record date" shall mean with respect to any distribution date the last
business day of the preceding month.
"Requirements of law" for any legal person shall mean the certificate of
incorporation or articles of association or bylaws or other organizational or
governing documents of such person and any law, treaty, rule or regulation, or
determination of an arbitrator or governmental authority (defined as the United
States of America or any state or local subdivision thereof), in each case
applicable to or binding upon such person or to which such person is subject
(including, without limitation, the Federal Trust in Lending Act, Fair Debt
collection Act and retail installment sales acts).
"Scheduled trust termination date" shall mean the close of business on the
first business day and date six (6) months after the final maturity date.
"Servicing fee percentage" shall equal .45%.
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<PAGE>
"Subservicer" shall mean United, the master servicer or successor servicer
as applicable, which entity is then performing duties of subservicer under the
pooling and servicing agreement.
"Subservicer's fee" shall mean an annual fee equal to the product of (a)
.3625% multiplied by (b) the outstanding principal amount of the Certificates as
of the first day of each month after the first closing date.
"Transfer Agent and Registrar" shall initially be the trustee's corporate
trust office in New York, New York or any transfer agent and registrar appointed
by Trustee.
"Transfer Date" shall mean the Business Day next preceding each
distribution date or fee distribution date, as applicable.
"Trustee's fee" shall mean the fees and charges outlined in its letter of
November 18, 1999 shall be the customary and usual charges made by the trustee
for similar services provided to its customers.
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<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by Capital, Trustee, Master Servicer, United or the Placement Agent.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer in such jurisdiction.
TABLE OF CONTENTS
Page
----
Prospectus Summary......................................................... 1
Risk Factors............................................................... 13
Forward-Looking Statements................................................. 20
United, Capital, 21st Services and the Trust............................... 20
Use of Proceeds............................................................ 36
Maturity Assumptions....................................................... 36
Plan of Distribution....................................................... 36
Description of the Certificates and the Pooling and Servicing Agreement.... 38
Description of the Senior Insurance Settlements Purchase Agreement......... 61
Certain Legal Aspects of the Senior Insurance Settlements.................. 63
Tax Matters................................................................ 65
ERISA Considerations....................................................... 69
Transferability of Certificates............................................ 71
Investment Company Act of 1940............................................. 71
Legal Matters.............................................................. 72
Until ________________________, ______________________2000 (90 days after the
date of this Prospectus) all dealers effecting transaction in the Certificates,
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.
$150,000,000
SENIOR
INSURANCE
SETTLEMENTS
FUNDING
TRUST 1999
9.0%
Asset Backed Certificates
and
9.25%
Asset Backed Certificates
Capital Resource Group One, LLC
21st Holdings, LLC
Master Servicer of the Senior Insurance Settlements
---------------------------------------------------------
PROSPECTUS
Pryor, Counts & Co. Inc.
---------------------------------------------------------
77
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the amount of fees and expenses (other
than commissions) to be incurred in connection with the issuance and
distribution of the Certificates.
SEC Filing Fee $ 41,700
Trustee's Fees and Expenses 35,000
(including counsel fees)
Legal Fees and Expenses 150,000
Printing and Engraving Expenses 5,000
Blue Sky Qualification Expenses 5,250
Miscellaneous 2,000
--------
*Total $238,950
========
- ----------
* The actual total will be filed by amendment.
Item 14. Indemnification and Directors and Officers.
Capital was incorporated under Delaware law. Pursuant to Section 145 of the
Delaware General Corporation Law, a Delaware corporation may indemnify an
officer, director, or controlling person or purchase and maintain insurance
against liability which such persons may incur in this corporate capacity. Under
certain circumstances, Section 145 mandates that a Delaware corporation
indemnify such persons.
Section 145 provides that a corporation may indemnify a person, including
officers and directors, who was, is or is threatened to be made a named
defendant or respondent in a threatened, pending or completed legal action, suit
or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including appeals therein, by reason of the fact that such person
was an officer or director of such corporation or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise, if (1) such person conducted himself in good faith;
(2) if a director, he reasonably believed that (a) his conduct as a director was
in the corporation's best interest or (b) his conduct was at least not opposed
to the corporation's best interest; and (3) in a criminal proceeding, the person
had no reasonable cause to believe his conduct was unlawful.
Pursuant to Section 145, if the person is found liable to the corporation
or is found liable on the basis that personal benefit was improperly received by
the person, the indemnification (1) is limited to reasonable expenses actually
incurred by the person in connection with the proceeding and (2) shall not be
made in respect of any proceeding in which the person shall have been found
liable for willful or intentional misconduct in the performance of his duty to
the corporation. Except to the extent provided in Section 145, a director may
not be indemnified in
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<PAGE>
respect of a proceeding (1) in which the person is found liable on the basis
that personal benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity or (2) in which
the person is found liable to the corporation.
Pursuant to Section 145, a corporation may purchase and maintain insurance
or another arrangement on behalf of any person who is or was a director,
officer, employee or agent of the corporation or who is or was serving at the
request of the corporation as a director, officer, partner, trustee, etc. of
another corporation, trust or enterprise.
Pursuant to Section 145, a corporation is obligated to indemnify an officer
or director against reasonable expenses incurred by him in connection with a
proceeding in which he is named defendant or respondent because he is or was an
officer or director, if he has been wholly successful, in the merits or
otherwise, the defense of the proceeding.
The indemnity provided for in Section 145 may include judgments, penalties
(including excise and similar taxes), fines, settlements, and reasonable
expenses (including court costs and attorneys' fees) actually incurred by the
person in connection with the proceeding.
Article ___ of Capital's Articles of Incorporation provides that no person
shall be liable to Capital for any loss or damage suffered by it on account of
any action taken or omitted to be taken by him as a director or officer of
Capital in good faith, if such person exercised or used the same degree of care
and skill as a prudent man would have exercised or used in the circumstances in
the conduct of his own affairs.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
3.1 -- Articles of Incorporation of Registrant. (To be filed by
amendment)
3.2 -- Bylaws of Registrant. (To be filed by amendment)
4.1 -- Pooling and Servicing Agreement among Registrant, the Servicer
and the Trustee, including the form of Certificates and
other exhibits thereto, defining the rights of the
Certificateholders. (Filed herewith)
4.2 -- Form of Certificate. (Filed herewith)
5.1 -- Opinion of Mesirov Gelman Jaffe Cramer & Jamieson, LLP, with
respect to legality. (To be filed by amendment)
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<PAGE>
10.1 -- Placement Agent Agreement. (Filed herewith)
10.2 -- Senior Insurance Settlements Purchase Agreement. (Filed
herewith)
10.3 -- Master Servicer Agreement. (Filed herewith)
10.4 -- Escrow Agreement. (To be filed by amendment)
24.1 -- Consent of Mesirov Gelman Jaffe Cramer & Jamieson, LLP
(included in opinion filed as Exhibit 5.1). (To be filed by
amendment)
25.1 -- Form T-1 (To be filed by amendment)
28.2 -- Form of Subscription Agreement. (To be filed by amendment)
(b) Financial Statement Schedules:
Not applicable with respect to the Registrant.
Item 17. Undertakings.
The undersigned Registrant on behalf of the Trust or the Trust hereby
undertakes to provide to the Placement Agent on each Closing Date as specified
in the Pooling and Servicing Agreement and the Placement Agent Agreement,
Certificates in such denominations and registered in such names as required by
the Placement Agent to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes:
(1) To file during any period in which offers or sales are being made, a
post-effective amendment to this amended Registration Statement.
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933:
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
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<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) 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.
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 the foregoing provisions, 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 directors, officers or controlling persons of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
directors, officers or controlling persons 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Carmel, and State of Indiana, on the 3rd day of December, 1999.
CAPITAL RESOURCE GROUP ONE, LLC
By: /s/ Thomas J. LaRussa
-------------------------------
Thomas J. LaRussa, President
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<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Officers Title Date Signed
-------- ----- -----------
/s/ Thomas J. LaRussa President December 3, 1999
- ---------------------
Thomas J. LaRussa
/s/ Thomas J. LaRussa Secretary December 3, 1999
- ---------------------
Thomas J. LaRussa
Board of Directors:
/s/ Thomas J. LaRussa Director December 3, 1999
- ---------------------
Thomas J. LaRussa
82
Exhibit 4.1
================================================================================
SENIOR INSURANCE SETTLEMENTS FUNDING TRUST 1999
9% Asset Backed Certificates and
9.25% Asset Backed Certificates
================================================================================
POOLING AND SERVICING AGREEMENT
among
CAPITAL RESOURCE GROUP ONE, LLC,
as Originator of the Trust
21st HOLDINGS, LLC,
as Master Servicer
THE CHASE MANHATTAN BANK,
as Trustee
and
UNITED FUNDS, LLC
as Subservicer
<PAGE>
Page
----
ARTICLE I DEFINITIONS..........................................................1
Section 1.1 Definitions..................................................1
Section 1.2 Other Definitional Provisions................................8
ARTICLE II TRANSFER OF SENIOR INSURANCE SETTLEMENTS;
ISSUANCE OF CERTIFICATES.......................................................8
Section 2.1 Transfer of Senior Insurance Settlements.....................8
Section 2.2 Acceptance by Trustee.......................................10
Section 2.3 Representations and Warranties of Capital
Relating to Capital.......................................11
Section 2.4 Representations and Warranties of Capital Relating to the
Agreement and the Senior Insurance Settlements............12
Section 2.5 Covenants of Capital........................................14
ARTICLE III ADMINISTRATION AND SERVICING OF SENIOR
INSURANCE SETTLEMENTS.........................................................15
Section 3.1 Duties of the Master Servicer and Subservicer...............15
Section 3.2 Subservicing Compensation...................................17
Section 3.3 Representations, Warranties, and Covenants of
the Subservicer...........................................17
Section 3.4 Reports and Records for the Trustee and Capital;
Bank Account Statements...................................18
Section 3.5 Subservicer's Annual Certificate............................19
Section 3.6 Annual Independent Public Accountants'
Subservicing Report.......................................19
ARTICLE IV RIGHTS OF CERTIFICATFHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS................................................20
Section 4.1 Rights of Certificateholders................................20
Section 4.2 Establishment and Administration of Investor Accounts.......20
Section 4.3 Collections and Distributions...............................21
Section 4.4 Semi-Annual Withdrawals.....................................22
Section 4.5 Payment of Certificate Principal............................23
Section 4.6 Failure to Make a Deposit or Payment........................24
Section 4.7 Payment In Accordance with the Subservicer's Reports........24
ARTICLE V DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS............24
Section 5.1 Distributions...............................................24
Section 5.2. Semi-Annual Certificateholders'Statement....................25
ARTICLE VI THE CERTIFICATES...................................................26
Section 6.1 The Certificates............................................26
Section 6.2 Authentication of Certificates..............................26
Section 6.3 Registration of Transfer and Exchange of Certificates.......26
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates...........27
Section 6.5 Persons Deemed Owners.......................................28
Section 6.6 Appointment of Paying Agent.................................28
Section 6.7 Access to List of Certificateholders' Names
and Addresses.............................................29
Section 6.8 Authentication Agent........................................29
ARTICLE VII OTHER MATTERS RELATING TO CAPITAL.................................30
Section 7.1 Special Purpose Corporation.................................30
Section 7.2 Merger or Consolidation; Assumption of Capital's
Obligations; Amendment of Capital's Articles
of Incorporation..........................................30
ii
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Section 7.3 Limitation on Liability of Capital..........................31
Section 7.4 Capital's Indemnification of the Trust, Trustee,
Master Servicer and Successor Servicer....................31
ARTICLE VIII OTHER MATTERS RELATING TO THE SUBSERVICER........................32
Section 8.1 Liability of the Subservicer................................32
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Subservicer............................................32
Section 8.3 Limitation on Liability of the Subservicer and Others.......32
Section 8.4 Subservicer's Indemnification of the Trust, Trustee,
Master's Servicer, and Successor Servicer..................................33
Section 8.5 The Subservicer Not to Resign...............................33
Section 8.6 Access to Certain Documentation and Information Regarding
the Senior Insurance Settlements..........................34
Section 8.7 Delegation of Duties........................................34
Section 8.8 Examination of Records......................................34
ARTICLE IX PAY OUT EVENTS.....................................................34
Section 9.1 Pay Out Events..............................................34
Section 9.2 Additional Rights Upon the Occurrence of
Certain Events............................................36
ARTICLE X SUBSERVICER DEFAULTS................................................36
Section 10.1 Subservicer Defaults........................................36
Section 10.2 Trustee to Act; Appointment of Successor....................38
Section 10.3 Notification to Certificateholders..........................40
Section 10.4 Waiver of Past Defaults.....................................40
ARTICLE XI THE TRUST..........................................................40
Section 11.1 Creation of the Trust.......................................40
Section 11.2 Duties of Trustee...........................................41
Section 11.3 Certain Matters Affecting the Trustee.......................42
Section 11.4 Trustee Not Liable for Recitals in Certificates.............43
Section 11.5 Trustee May Own Certificates................................43
Section 11.6 Capital to Pay Trustee's Fees and Expenses..................43
Section 11.7 Eligibility Requirements for Trustee........................44
Section 11.8 Resignation or Removal of Trustee...........................44
Section 11.9 Successor Trustee...........................................45
Section 11.10 Merger or Consolidation of Trustee..........................45
Section 11.11 Appointment of Co-Trustee or Separate Trustee...............45
Section 11.12 Tax Returns.................................................46
Section 11.13 Trustee May Enforce Claims Without Possession
of Certificates...........................................47
Section 11.14 Suits for Enforcement.......................................47
Section 11.15 Rights of Certificateholders to Direct Trustee..............47
Section 11.16 Representations and Warranties of Trustee...................47
Section 11.17 Maintenance of Office or Agency.............................48
Section 11.18 Requests for Agreement......................................48
ARTICLE XII TERMINATION.......................................................48
Section 12.1 Termination of Trust........................................48
Section 12.2 Optional Repurchase of Certificates and Final
Maturity Date of Certificates.............................49
Section 12.3 Final Distributions.........................................49
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Section 12.4 Capital's Termination Rights................................50
ARTICLE XIII MISCELLANEOUS PROVISIONS.........................................50
Section 13.1 Amendment...................................................50
Section 13.2 Protection of Right, Title and Interest to Trust............51
Section 13.3 Limitation on Rights of Certificateholders..................51
Section 13.6 Severability of Provisions..................................53
Section 13.7 Assignment..................................................53
Section 13.8 Certificates Nonassessable and Fully Paid...................53
Section 13.9 Further Assurances..........................................53
Section 13.10 No Waiver; Cumulative Remedies..............................54
Section 13.11 Third-Party Beneficiaries...................................54
Section 13.12 Actions by Certificateholders...............................54
Section 13.13 Merger and Integration......................................54
Section 13.14 Headings....................................................54
Section 13.15 Tax Treatment...............................................54
Section 13.16 Counterparts................................................55
Exhibits Exhibit Number
- -------- --------------
1. Form of Assignment of Senior Insurance Settlements.......................2.1
2. Form of Closing Date Report.............................................3.4A
3. Form of Semi-Annual Subservicer's Certificate...........................3.4B
4. Form of Annual Subservicer's Certificate.................................3.5
5. Form of Monthly Payment Instructions and Notification to the Trustee.....4.4
6. Form of Semi-Annual Certificateholder's Statement........................5.2
7. Form of Certificate.....................................................6.1A
8. Form of Certificate.....................................................6.1B
9. Master Servicer Agreement...............................................10.2
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POOLING AND SERVICING AGREEMENT
POOLING AND SERVICING AGREEMENT, dated as of ____________________, 1999,
by and among CAPITAL RESOURCE GROUP ONE, LLC, a Delaware limited liability
corporation ("Capital"), as originator of SENIOR INSURANCE SETTLEMENTS
FUNDING TRUST 1999 (the "Trust"), 21st HOLDINGS, LLC, a Minnesota limited
liability corporation ("21st Services"), as Master Servicer, THE CHASE
MANHATTAN BANK a New York corporation as Trustee of the Trust (the
"Trustee"), and UNITED FUNDS, LLC, a Delaware limited liability corporation
("United"), as Subservicer.
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties and for the benefit of
the Certificateholders (as hereinafter defined):
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
Whenever used in this Agreement, the following words and phrases shall
have the following meanings:
"Acquisition Period" shall mean, with respect to each Certificate, the
period commencing on the related Closing Date for each Certificate and ending
on the earlier of (a) the Final Closing Date or (b) date on which a Pay Out
Event is deemed to occur.
"Affiliate" of any specified Person shall mean any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such 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.
"Agreement" shall mean this Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Amortization Period" shall mean, with respect to each Certificate, the
period between the Closing Date and the Final Maturity Date.
"Applicants" shall have the meaning specified in Section 6.7.
"Assignment" shall have the meaning specified in Section 2.1(c).
"Authorized Newspapers" shall mean each newspaper of general circulation
in New York, New York, or Carmel, Indiana, or in any other place specified by
Capital, printed in the
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English language and customarily published on each Business Day, whether
or not published on Saturdays, Sundays or holidays.
"Bankruptcy Event" shall have the meaning specified in Section 9.2.
"Business Day" shall mean each day which is neither a Saturday, a Sunday
nor any other day on which banking institutions in New York, New York are
authorized or obligated by law or required by executive order to be closed.
"Capital" shall mean Capital Resource Group One, LLC a Delaware limited
liability corporation.
"Certificate" shall mean any one of the certificates issued by the Trust
as more specifically described in Section 6.1.
"Certificateholder" or "Holder" or "Certificate Owner" or "Owner" shall
mean the Person in whose name a Certificate is registered as shown on the
Certificate Register.
"Certificate Interest" shall mean interest payable in respect of
Certificates under Section 4.4(a)(ii) and paid pursuant to Section 5.1.
"Certificate Principal" shall mean the outstanding principal amount of
the Certificate at the time of determination.
"Certificate Rate" shall mean, with respect to any Certificate in
Tranche I, nine percent (9.0%) per annum and with respect to any Certificate
in Tranche II, nine and one-quarter percent (9.25%) per annum, each
calculated on the basis of a three hundred sixty (360) day year consisting of
twelve thirty (30) day months, provided that, in the case of the month in
which any such Certificate is first issued, such rate shall be calculated for
the number of actual days remaining in the month from the date of issuance.
"Certificate Register" shall mean the register maintained pursuant to
Section 6.3, providing for the registration of the Certificates and transfers
and exchanges thereof.
"Closing Date" shall mean, with respect to any Certificate, the date of
purchase of such Certificate (i.e. the date on which the funds from the
Escrow Account are applied to the Certificate).
"Collections" shall mean all payments (including all payments received
from an Insurance Company) received by the Subservicer with respect to the
Senior Insurance Settlements, in the form of cash, checks, wire transfers,
electronic transfers or other form of payment.
"Corporate Trust Office" shall mean the office of the Trustee at which
its corporate trust business shall be administered at any particular time,
which office on the date of the execution of this Agreement is located at 450
W. 33rd Street, 15th Floor, New York, New York 10001.
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"Date of Collection" shall mean any date during any month that Collections
are processed by Subservicer.
"Date of Processing" shall mean, with respect to any transaction, the
date on which such transaction is first recorded on the Subservicer's computer
file of Senior Insurance Settlements (without regard to the effective date
of such recordation).
"Debtor Relief Laws" shall mean the Bankruptcy Code of the United States
of America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization,
suspension of payments or similar debtor relief laws from time to time in
effect affecting the rights of creditors generally.
"Determination Date" shall mean the tenth (10th) day of the month after
the month in which the first Closing Date occurs and the tenth (10th) day of
each calendar six month thereafter, or, if any such tenth (10th) day is not a
Business Day, the next succeeding Business Day.
"Distribution Account" shall have the meaning specified in Section 4.2(d).
"Distribution Date" shall mean the fifteenth (15th) day of the month
after the six-months in which the first Closing Date occurs and the fifteenth
(15th) day of each calendar six-months thereafter, or, if any such fifteenth
(15th) day is not a Business Day, the next succeeding Business Day.
"Duff & Phelps" shall mean Duff & Phelps Credit Rating Co.
"Escrow Account" shall mean an interest bearing account established by
the Trustee for the benefit of the Certifcateholders to deposit subscription
proceeds prior to a Closing Date.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Fee Determination Date" shall mean the tenth (10th) day of the month
after the month in which the first Closing Date occurs and the tenth (10th)
day of each calendar month thereafter, or, if any such tenth (10th) day is
not a Business Day, the next succeeding Business Day.
"Fee Distribution Date" shall mean the fifteenth (15th) day of the month
after the month in which the first Closing Date occurs and the fifteenth
(15th) day of each calendar month thereafter, or, if any such fifteenth
(15th) day is not a Business Day, the next succeeding Business Day.
"Final Closing Date" shall mean with respect to each Certificate the
earlier of (a) the Termination Date or (b) the date on which a total of
$150,000,000 principal amount of Certificates have been issued.
"First Maturity Date" shall mean the close of business on the first
(1st) Business Day and date 8 years and 10 years, respectively, from the date
of the first (1st) Closing Date whereby the first (1st) Certificate is issued
by the Trust.
"Final Maturity Date" shall mean the date on which the full outstanding
balance of Certificate Principal has been paid in full.
3
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"Final Trust Termination Date" shall have the meaning specified in
Section 12.1(a).
"Governmental Authority" shall mean the United States of America, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Insurance Company" shall mean a legal entity authorized and admitted by
Governmental Authority to do insurance business in the state under a
certificate of authority and authorized to write life insurance policies.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Investor Accounts" shall mean each of the Senior Insurance Settlements
Account, Lockbox Account, Liquidity Account and the Distribution Account.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, 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 Uniform Commercial Code (other
than any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing;
provided, however, that any assignment pursuant to Section 7.2 shall not be
deemed to constitute a Lien.
"Liquidity Account" shall have the meaning specified in Section 4.2(c).
"Lockbox Account" shall have the meaning specified in Section 4.2(a).
"Master Servicer" shall mean 21st Services.
"Master Servicer's Fee" shall mean an annual fee equal to the product of
(a) point one seven five percent (.175%) multiplied by (b) the outstanding
principal amount of Certificates as of the first day of each month, until the
Final Closing Date. After the Final Closing Date, the amount will be equal to
the product of (a) point zero eight seven five percent (.0875%) multiplied by
(b) the outstanding principal amount of Certificates as of the first day of
each month. The minimum fee shall be Five Thousand Dollars ($5,000.00) per
month. The Master Servicer's Fee will be payable monthly in accordance with
Article IV.
"Master Servicer Agreement" shall have the meaning specified in Section
10.2.
"Minimum Liquidity Account Amount" shall mean an amount equal to ___
percent (__%) of the outstanding principal amount of the Certificates at the
time of determination.
"Monthly Subservicing Fee" shall have the meaning specified in Section
3.2.
4
<PAGE>
"Moody's" shall mean Moody's Investors Service, Inc.
"Officer's Certificate" shall mean a certificate signed by any officer
of Capital or the Subservicer, as appropriate, and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel, who may be
counsel for Capital and who shall be reasonably acceptable to the Trustee.
"Paying Agent" shall mean the Trustee or any paying agent appointed by
the Trustee pursuant to Section 6.6.
"Pay Out Event" shall have the meaning specified in Section 9.1.
"Permitted Investments" shall mean (a) negotiable instruments or
securities represented by instruments in bearer or registered form which
evidence (i) obligations fully guaranteed by the United States of America;
(ii) time deposits in, or bankers' acceptances issued by, any depository
institution or trust company incorporated under the laws of the United States
of America or any state thereof and subject to supervision and examination by
federal or state banking or depository institution authorities; provided,
however, that at the time of the Trust's investment or contractual commitment
to invest therein the certificates of deposit or short-term deposits, if any,
or long-term unsecured debt obligations (other than such obligation whose
rating is based on collateral or on the credit of a Person other than such
institution or trust company) of such depository institution or trust company
shall have a credit rating from Moody's and Standard & Poor's of P-1 and
A-1+, respectively, in the case of the certificates of deposit or short-term
deposits, or a rating from Moody's of Aa3 and from Standard & Poor's of AA in
the case of the long-term unsecured debt obligations, or such time deposits
are fully insured by the FDIC; (iii) certificates of deposit having, at the
time of the Trust's investment or contractual commitment to invest therein, a
rating from Moody's and Standard & Poor's of P-1 and A-l+, respectively; (iv)
investments in money market funds rated in the highest investment category or
otherwise approved in writing by Moody's and Standard & Poor's; and (v)
investments in a Chase Institutional Money Market Account, (b) demand
deposits in the name of the Trust or the Trustee in any depository
institution or trust company referred to in (a) (ii) above, and (c)
securities not represented by an instrument, which are registered in the name
of the Trustee upon books maintained for that purpose by or on behalf of the
issuer thereof and identified on books maintained for that purpose by the
Trustee as held for the benefit of the Trust or the Certificateholders, and
consisting of shares of any open end diversified investment company which is
registered under the Investment Company Act of 1940, as amended, and which
(i) invests its assets exclusively in obligations of or guaranteed by the
United States of America or any instrumentality or agency thereof having in
each instance a final maturity date of less than one year from their date of
purchase or other Permitted Investments, (ii) seeks to maintain a constant
net asset value per share, and (iii) has aggregate net assets of not less
than one Hundred Million and No/100 Dollars ($100,000,000.00) on the date of
purchase of such shares, and which is acceptable to the Rating Agencies, if
any, that may rate the Certificates without causing a reduction in their
ratings of the Certificates (as confirmed in writing by such Rating
Agencies).
5
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"Person" shall mean any legal person, including any individual,
corporation, partnership, joint venture, association, joint stock company,
trust, unincorporated organization, governmental entity or other entity of
similar nature.
"Rating Agency" shal1 mean the rating agency or rating agencies, if any,
that rates the Certificates, including, if applicable, Duff & Phelps, Moody's
or Standard & Poor's.
"Record Date" shall mean with respect to any Distribution Date the last
Business Day of the preceding month.
"Registration Statement" shall mean that registration statement filed
with the Securities and Exchange Commission by Capital on behalf of the Trust
whereby a maximum One Hundred and Fifty Million and 00/100 Dollars
($150,000,000.00) and a minimum of Twenty Million and 00/100 Dollars
($20,000,000.00) principal amount of Certificates are offered to the public
thereby.
"Requirements of Law" for any Person shall mean the certificate of
incorporation or articles of association and bylaws or other organizational
or governing documents of such Person, and any law, treaty, rule or
regulation, or determination of an arbitrator or Governmental Authority, in
each case applicable to or binding upon such Person or to which such Person
is subject, whether federal, state or local (including, without limitation,
usury laws, and the Federal Truth in Lending Act).
"Responsible Officer" shall mean any Vice President, Assistant Vice
President Trust Officer or Assistant Trust Officer employed in the corporate
trust office of the Trustee, or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above-designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Scheduled Trust Termination Date" shall mean the close of business on
the first (1st) Business Day and date six (6) months after the Final Maturity
Date.
"Seller" shall mean United.
"Senior Insurance Settlement" shall mean the cash payment in exchange
for the assignment of an ownership interest in a fully underwritten life
insurance policy on an individual of advanced age which carries with it the
right to receive the death benefit payable upon the death of the insured
which is purchased by United, sold to Capital and which Capital irrevocably
assigns its beneficial interest to the Trust.
"Senior Insurance Settlements Account" shall have the meaning
specified in Section 4.2(c).
"Senior Insurance Settlements Purchase Agreement" shall mean the Senior
Insurance Settlements Purchase Agreement between United, as Seller, and
Capital, dated as of the date
6
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hereof, governing the terms and conditions upon which Capital will
acquire from the Seller Senior Insurance Settlements to be assigned to the
Trust on each Closing Date.
"Senior Insurance Settlements Purchase Price" shall mean the amount
advanced by the Seller to the insureds, which amount shall not exceed ____
percent (__%) of the face value of each insurance policy, less any fees of
Seller.
"Servicing Officer" shall mean any employee of United or the Subservicer
involved in or responsible for the administration and servicing of the Senior
Insurance Settlements whose name appears on a list of servicing officers
furnished to the Trustee by the Subservicer, as such list may from time to
time be amended.
"Standard & Poor's" shall mean Standard & Poor's Corporation.
"Subservicer" shall mean United, the Master Servicer or Successor
Servicer as applicable, which entity is then performing the duties of
subservicer hereunder, except that for purposes of Sections 3.6 and 8.4, the
term shall continue to refer to United after the Master Servicer becomes the
Successor Servicer hereunder.
"Subservicer Default" shall have the meaning specified in Section 10.1.
"Subservicer's Fee" shall mean an annual fee equal to the product of (a)
point two seven five percent (.275%) multiplied by (b) the outstanding
principal amount of the Certificates as of the first day of each month, until
the Final Closing Date. After the Final Closing Date the amount will be equal
to the product of (a) point three six two five percent (.3265%) multiplied by
(b) the outstanding principal amount of Certificates as of the First day of
each month. In the case of any month in which a Closing Date has occurred for
any Certificates, the Subservicer's Fee with respect to the principal amount
of such Certificates shall accrue from the date interest begins to accrue
with respect to such Certificates.
"Successor Servicer" shall have the meaning specified in Section 10.2.
"Successor Servicer's Fee" shall have the meaning specified in Section
10.2(c).
"Termination Date" shall mean 12 months from the effective date of the
Registration Statement.
"Termination Notice" shall have the meaning specified in Section 10.1.
"Transfer Agent and Registrar" shall have the meaning specified in
Section 6.3 and shall initially be the Trustee.
"Transfer Agent's Office" shall be the office or offices or agency or
agencies described in Section 6.3(b).
"Transfer Date" shall mean the Business Day next preceding each
Distribution Date or Fee Distribution Date, as applicable.
7
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"Trust" shall mean the trust created by this Agreement, the corpus
of which shall consist of the Senior Insurance Settlements now existing or
hereafter transferred thereto from time to time in accordance herewith and
all monies due or to become due with respect thereto, all proceeds (as
defined in Section 9.306 of the UCC as in effect in any state where the
Subservicer's chief executive offices or books and records relating to the
Senior Insurance Settlements are located) of the Senior Insurance Settlements
and such funds as from time to time are deposited in the Lockbox Account, the
Senior Insurance Settlements Account, and the Liquidity Account, and certain
funds as from time to time are deposited in the Distribution Account as
described in Section 4.2(d), and all of Capital's rights, remedies, powers
and privileges with respect to the Senior Insurance Settlements under the
Senior Insurance Settlements Purchase Agreement.
"Trustee" shall mean the institution executing this Agreement as
Trustee, or its successor in interest, or any successor trustee appointed as
herein provided.
"Trustee's Fee" shall mean the fees and charges outlined in the
Trustee's letter of November 18, 1999.
"UCC" shall mean the Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction.
Section 1.2 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) 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 and Exhibit references contained in this Agreement are
references to Sections, Subsections, Schedules and Exhibits in or to this
Agreement unless otherwise specified.
ARTICLE II
TRANSFER OF SENIOR INSURANCE SETTLEMENTS; ISSUANCE OF CERTIFICATES
Section 2.1 Transfer of Senior Insurance Settlements.
(a) On or before the second (2nd) Business Day prior to each Closing
Date, Capital shall give the Trustee and the Subservicer written notice of
the proposed transfer of Senior Insurance Settlements (stated in terms of the
face value of the Senior Insurance Settlements and the Senior Insurance
Settlements Purchase Price for the Senior Insurance Settlements, as
hereinafter described) specifying the aggregate amount of the Senior
Insurance Settlements to be transferred on the next Closing Date. The Trust
shall have no obligation to purchase an amount of Senior Insurance
Settlements on the next Closing Date, in excess of the lesser of (i) the
amount offered for assignment by Capital or (ii) the total amount in the
Escrow Account on the date of such notice less amounts to be expended under
Section 2.1(h).
8
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(b) Capital does hereby agree on each Closing Date to transfer, assign
and set-over to the Trust for the benefit of the Certificateholders (i) the
irrevocable beneficial interest of Capital in, to and under the Senior
Insurance Settlements which the Trust has agreed to acquire under Section
2.1(a) and which Capital shall acquire from time to time from the Seller
pursuant to the Senior Insurance Settlements Purchase Agreement, all monies
due or to become due with respect thereto and all proceeds thereof and (ii)
all of Capital's rights, remedies, powers and privileges with respect to the
Senior Insurance Settlements under the Senior Insurance Settlements Purchase
Agreement. On each Closing Date, the Trustee shall pay to Capital, from the
Escrow Account the Senior Insurance Settlements Purchase Price for the Senior
Insurance Settlements transferred on such date less, on each Closing Date
only, amounts transferred to the Liquidity Account under Section 2.1(h).
Notwithstanding anything to the contrary contained herein, during the term of
this Agreement the Trust shall never be obligated to expend to acquire Senior
Insurance Settlements more than the cumulative amount of the lesser of (1)
One Hundred and Fifty Million and No/100 Dollars ($150,000,000.00) or (2) the
amount raised from the sale of Certificates for the purpose of acquiring
Senior Insurance Settlements, and, in either case, less amounts to be
expended under Section 2.1(g).
(c) In connection with each such transfer, (i) Subservicer, and the
Master Servicer pursuant to the terms of the Master Servicing Agreement,
further agree, at their own expense, on or prior to each such Closing Date
(A) to indicate in their respective computer file of Senior Insurance
Settlements and to cause the Seller to indicate in its computer files as
required by the Senior Insurance Settlements Purchase Agreement that (1)
Senior Insurance Settlements have been sold to Capital in accordance with the
Senior Insurance Settlements Purchase Agreement and transferred to the trust
pursuant to this Agreement for the benefit of the Certificateholders, (2) for
tax and accounting purposes the Senior Insurance Settlements have been sold
to Capital and its beneficial interest in such Senior Insurance Settlements
is irrevocably assigned to the Trust, and (3) that the Subservicer is holding
the Senior Insurance Settlements as Subservicer for the Trust, (4) to respond
to third-party inquiries that the Senior Insurance Settlements have been sold
to Capital and assigned to the Trust, (5) to deliver to Capital and to the
Trustee (or cause the Seller so to do) a computer file, computer printout or
microfiche list in a form readable by Capital and by the Trustee containing a
true and complete list of all such Senior Insurance Settlements, identified
by account number and by the Senior Insurance Settlements balance as of each
such Closing Date, (each such file or list shall be marked as Schedule 1 to
the Assignment (as hereinafter defined) of such Senior Insurance Settlements,
delivered to the Trustee as confidential and proprietary, and upon delivery
incorporated into and made a part of this Agreement), and (ii) Capital shall
(A) deliver to the Trustee a written assignment (including an acceptance by
the Trustee on behalf of the Trust for the benefit of the Certificateholders)
in substantially the form of Exhibit 2.1A, attached hereto, (the
"Assignment") and (B) deliver to the Trustee an Officer Certificate of
Capital confirming the truth and correctness of the representations sat forth
in Sections 2.3, 2.4(a) and 2.4(b) of this Agreement.
(d) The parties intend that, at the time Senior Insurance Settlements
are assigned to the Trust, Capital shall be deemed to grant, and does hereby
grant, to the Trustee an irrevocable beneficial interest in all of Capital's
right, title and interest in, to and under such Senior Insurance Settlements,
all monies due or to become due with respect thereto and all
9
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proceeds thereof, and all of Capital's rights, remedies, powers and privileges
under the Senior Insurance Settlements Purchase Agreement; therefore, this
Agreement shall constitute a security agreement under applicable law.
(e) In connection with each such transfer, Capital agrees, at its own
expense each Closing Date, to execute and deliver, and to cause the Seller to
execute and deliver as necessary and as required by the Senior Insurance
Settlements Purchase Agreement such other instruments, if any, to create a
security agreement under applicable law.
(f) On each Closing Date, contemporaneously with the transfer of Senior
Insurance Settlements, Capital shall execute the Certificates pursuant to
Section 6.1, and the Trustee shall authenticate and deliver the Certificates;
pursuant to Section 6.2 and shall cause the Transfer Agent and Registrar to
register such Certificates as required by Section 6.3.
(g) On each Closing Date, Capital shall deposit or cause to be deposited
in the Liquidity Account an amount equal to _____ percent (__%) of the
principal amount of the Certificates issued on such Closing Date; which
amount shall be withheld from the Senior Insurance Settlements Purchase Price
paid to Capital for Senior Insurance Settlements sold to Capital and
transferred to the Trust.
(h) On each Closing Date, the Trustee shall deposit or cause to be
deposited in the Distribution Account an amount equal to three point five
percent (3.5%) of the principal amount of the Certificates issued on such
Closing Date (the "Placement Fee"), which amount the Paying Agent shall pay
to Pryor, Counts & Co., Inc. on each Closing Date.
(i) On the initial Closing Date, Capital shall deliver to the Trustee an
Opinion of Counsel setting forth, among other things, that this Pooling and
Servicing Agreement constitutes a valid assignment to the Trust of Capital's
right, title, and interest in, to, and under the Senior Insurance
Settlements.
Section 2.2 Acceptance by Trust
(a) On each Closing Date the Trustee will accept on behalf of the Trust,
all right, title and interest previously held by Capital in, to and under the
Senior Insurance Settlements being transferred to the Trust, all monies due
or to become due with respect thereto and all proceeds thereof, and agrees
that it shall maintain such right, title and interest, upon the trust herein
set forth, for the benefit of all Certificateholders.
(b) The Trustee hereby agrees not to disclose to any Person any of the
account numbers or other information contained in the computer files,
computer printouts or microfiche lists delivered to the Trustee by the
Subservicer or the Master Servicer pursuant to Sections 2.1 and 2.6, except
as required in connection with the performance of its duties hereunder, as
required by law, as necessary in enforcing the rights of the Certificateholders,
or as necessary to a Successor Servicer appointed pursuant to Section
10.2. The Trustee agrees, at Capital's expense, to take such measures as
shall be reasonably requested by Capital, the Subservicer or the Seller to
protect and maintain the security and confidentiality of such information,
and, in
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connection therewith, shall allow Capital, the Subservicer and the Seller from
time to time upon written notice to inspect the Trustee's security and
confidentiality arrangements during normal business hours. To the extent
reasonably practicable, the Trustee shall provide Capital, the Subservicer
and the Seller with written notice five (5) days prior to any disclosure of
account numbers or other information contained in the computer files,
computer printouts or microfiche file made pursuant to this Section 2.2(b).
(c) 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 2.3 Representations and Warranties of Capital Relating to
Capital.
Capital hereby represents and warrants to the Trust and the Trustee,
with respect to any Certificates, as of each Closing Date that:
(a) Organization and Good Standing. Capital is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware, and has full corporate power, authority and right to own its
properties and conduct its business as such properties are presently owned
and such business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement and to execute and deliver to the
Trustee the Certificates pursuant hereto or thereto.
(b) Due Qualification. Capital is neither required to qualify, nor to
register, as a foreign corporation in any state other than those states in
which it has so qualified in order to conduct business, and has obtained all
necessary licenses and approvals required under federal and applicable state
law.
(c) Due Authorization. The execution and delivery of this Agreement and
the Senior Insurance Settlements Purchase Agreement and the execution and
delivery to the Trustee of the Certificates by Capital and the consummation
of the transactions provided for in this Agreement and the Senior Insurance
Settlements Purchase Agreement have been duly authorized by Capital by all
necessary corporate action.
(d) No Conflict. The execution and delivery of this Agreement and the
Senior Insurance Settlements Purchase Agreement and the Certificates, the
performance of the transactions contemplated by this Agreement and the Senior
Insurance Settlements Purchase Agreement and the fulfillment of the terms
hereof and thereof will not conflict with, result in any breach of any of the
terms and provisions of or constitute (with or without not ice or lapse of
time or both) a default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which Capital is a party or by which it
or any of its property is bound.
(e) No Violation. The execution and delivery of this Agreement, the
Senior Insurance Settlements Purchase Agreement and the Certificates, the
performance of the transactions contemplated by this Agreement and the Senior
Insurance Settlements Purchase Agreement and the fulfillment of the terms
hereof and thereof will not conflict with or violate
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any Requirements of Law applicable to Capital. Capital is not in violation of
any applicable law and has paid all taxes properly levied against it.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of Capital, threatened against Capital, before any
court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the in-ability of this Agreement,
the Senior Insurance Settlements Purchase Agreement or the Certificates, (ii)
seeking to prevent the issuance of the Certificates or the consummation of
any of the transactions contemplated by this Agreement, the Senior Insurance
Settlements Purchase Agreement or the Certificates, (iii) seeking any
determination or ruling that, in the reasonable judgment of Capital, would
materially and adversely affect Capital's performance of its obligations
under this Agreement or the Senior Insurance Settlements Purchase Agreement,
(iv) seeking any determination or ruling that would materially and adversely
affect the validity or enforceability of this Agreement, the Senior Insurance
Settlements Purchase Agreement or the Certificates or (v) seeking to affect
adversely the income tax attributes of the Trust.
(g) All Consents Required. All appraisals, authorizations, consents,
orders or other actions of any Person or of any governmental body or official
required in connection with the execution and delivery of this Agreement, the
Senior Insurance Settlements Purchase Agreement and the Certificates, the
performance of the transactions contemplated by this Agreement or the Senior
Insurance Settlements Purchase Agreement and the fulfillment of the terms
hereof or thereof have been obtained.
(h) Notice of Breach. The representations and warranties set forth in
this Section 2.3 shall survive the transfer of the respective Senior
Insurance Settlements to the Trust and termination of the rights and
obligations of the Subservicer pursuant to Section 10.1. Upon discovery by
Capital or the Subservicer or upon written notice to the Trustee of a breach
of any of the foregoing representations and warranties, the party discovering
such breach or the Trustee, as applicable, shall give prompt written notice
to the others.
Section 2.4 Representations and Warranties of Capital Relating to the
Agreement and the Senior Insurance Settlements.
(a) Binding Obligation; Valid Transfer and Security Interest. Capital
hereby represents and warrants to the Trust and the Trustee, with respect to
any Certificates, as of each Closing Date that:
(i) This Agreement and any Assignment each constitute a legal, valid
and binding obligation of Capital, enforceable against Capital in accordance
with its terms, except as such enforceability may be limited by Debtor
Relief Laws and except that such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
(ii) This Agreement and any Assignment each constitute a valid
assignment to the Trust of all right, title and interest of Capital in, to
and under the Senior Insurance Settlements being assigned to the Trust, all
monies due or to become due with respect
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thereto and all proceeds thereof and such property will be held by the
Trust free and clear of any Lien of any Person claiming through or under
Capital, except for Liens permitted under Section 2.5(a), and further,
Capital will treat the transfer of the Senior Insurance Settlements from
United to Capital as sale, for tax and accounting purposes. Neither Capital
nor any Person claiming through or under Capital shall have any claim to or
interest in the Investor Accounts except for the interest of Capital and the
Trustee, if any, in the earnings from such Investor Accounts.
(b) Eligibility of Senior Insurance Settlements, Selection Procedures,
Solvency. Capital represents and warrants to the Trust and the Trustee as of
each Closing Date that (i) each Senior Insurance Settlement being transferred
to the Trust is free and clear of any Lien of any Person claiming through or
under Capital (other than Liens permitted under Section 2.5(a)) and is in
compliance, in all material respects, with all Requirements of Law, (ii) all
consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority or Person required to be
obtained, effected or given by the Seller, and by Capital in connection with
the transfer of each such Senior Insurance Settlement to the Trust have been
duly obtained, effected or given and are in full force and effect, (iii) no
selection procedures believed by Capital to be in violation of Section 2.5(g)
were utilized in selecting the Senior Insurance Settlements being transferred
to the Trust, (iv) Capital is not insolvent and the Seller is not insolvent
(in reliance upon the Seller's representations and warranties set forth in
Senior Insurance Settlements Purchase Agreement), Capital does not anticipate
becoming insolvent as a result of the transfer of the Senior Insurance
Settlements to the Trust, and the transfer is not being made for an
antecedent debt, (v) Capital does not know of any fact that will cause the
Senior Insurance Settlement not to be paid, and (vi) Capital has not incurred
debts beyond its ability to pay those debts as they become due.
(c) Notice of Breach. The representations and warranties set forth in
this Section 2.4 shall survive the transfer of the respective Senior
Insurance Settlements to the Trust and termination of the rights and
obligations of the Subservicer pursuant to Section 10.1. Upon discovery by
Capital or the Subservicer or upon written notice to the Trustee of a breach
of any of the foregoing representations and warranties, the party discovering
such breach or the Trustee, as applicable, shall give prompt written notice
to the others.
(d) Seller's Obligations under the Senior Insurance Settlements. Capital
hereby represents and warrants to the Trust and the Trustee that, pursuant to
the Senior Insurance Settlements Purchase Agreement, Seller has covenanted
and agreed to comply with and perform its obligations with respect to the
Senior Insurance Settlements, except insofar as any failure so to comply or
conform would not materially and adversely affect the rights of the Trust or
the Certificateholders hereunder or under the Certificates.
(e) Seller's Purchase Price. Capital hereby represents and warrants to
the Trust and the Trustee that pursuant to the Senior Insurance Settlements
Purchase Agreement, Seller has covenanted and agreed that, except as required
by any Requirement of Law, or as is deemed by Seller to be necessary in order
for Seller to maintain its business on a competitive basis based an Seller's
good faith assessment of the nature of its competition in its business, the
Seller pay no more than _____ percent (__%) of the face amount for any Senior
Insurance Settlement.
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Section 2.5 Covenants of Capital.
Capital hereby covenants that:
(a) Security Interests. Except for the security interests granted
hereunder, Capital will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume, or suffer to exist any Lien on any
Senior Insurance Settlement transferred to the Trust or any interest therein;
Capital will immediately notify the Trustee of the existence of any Lien on
any Senior Insurance Settlement; and Capital shall defend the right, title
and interest of the Trust in, to and under the Senior Insurance Settlements
transferred to the Trust, against all claims of third parties claiming
through or under Capital; provided, however, that nothing in this
Section.2.5(a) shall prevent or be deemed to prohibit Capital from suffering
to exist upon any of the Senior Insurance Settlements any Liens for state,
municipal or other local taxes if such taxes shall not at the time be due and
payable or if Capital shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto.
(b) Delivery of Collections. Capital shall tender to the Subservicer for
deposit in the Senior Insurance Settlements Account all payments received by
Capital, if any, with respect to the Senior Insurance Settlements as soon as
practicable after receipt thereof by Capital.
(c) Nonconveyance of Senior Insurance Settlements. Capital covenants and
agrees that it will enforce the provisions of the Senior Insurance
Settlements Purchase Agreement prohibiting the Seller from conveying,
assigning, exchanging or otherwise transferring the Senior Insurance
Settlements to any other Person prior to the termination of this Agreement
pursuant to Article XII hereof.
(d) Regulatory Filings. Capital shall make any filings, reports,
notices, applications, registrations with, and shall seek any consents or
authorizations from, the Securities and Exchange Commission and any state
securities authority on behalf of the Trust as may be necessary or advisable
or reasonably requested by the Trustee, and shall comply with any federal or
state securities or reporting requirements laws.
(e) Diversification of Senior Insurance Settlements and Insurers.
Capital covenants to structure its purchase, acquisition and assignment of
Senior Insurance Settlements so that, at any given time, (i) no less than
seventy-five percent (75%) of the cumulative death benefits of the Senior
Insurance Settlements held or beneficially owned by the Trust shall be
payable by Insurance Companies with a rating by A.M. Best of "A" or better or
the equivalent rating by other nationally recognized rating agencies, (ii) no
more than twenty-five percent (25%) of the cumulative death benefits of the
Senior Insurance Settlements held or beneficially owned by the Trust shall be
payable by Insurance Companies with a rating by A.M. Best of "B+" or the
equivalent rating by other nationally recognized rating agencies, (iii) at
any time after Fifty Million Dollars ($50,000,000.00) of Senior Insurance
Settlements have been assigned to the Trust, no more than ten percent (10%)
of the cumulative death benefits of the Senior Insurance Settlements in the
Trust shall be payable by any single Insurance Company, and (iv) no more than
Four Million Dollars ($4,000,000.00) in Tranche I and Ten Million Dollars
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($10,000,000.00) in Tranche II will be cumulative death benefits relating to
any one individual ("Eligible Senior Insurance Settlements").
(f) Maintaining Corporate Formalities and Independence. Capital
covenants at all times to (i) restrict its business solely to the acquisition
of Senior Insurance Settlements from United and the irrevocable assignment of
its beneficial interest in such Senior Insurance Settlements to the Trust and
to such other actions which are corollary to the acquisition and assignment
of the Senior Insurance Settlements or which are required to perform its
duties and obligations under this Pooling and Servicing Agreement; (ii)
maintain its own separate bank accounts, tax identification number, financial
and corporate records, and the like from that of the Subservicer; (iii)
conduct independent board of directors meetings to authorize all corporate
actions; (iv) pay its own expenses, and (v) otherwise observe all corporate
formalities.
(g) Senior Insurance Settlements Purchased from United. Capital
covenants to indicate in its records that the Senior Insurance Settlements
have been purchased by Capital from United, to treat the transfer of the
Senior Insurance Settlements from United to Capital, for tax and accounting
purposes, as a sale, and to respond to third-party inquiries that the Senior
Insurance Settlements have been purchased from United.
ARTICLE III
ADMINISTRATION AND SERVICING OF SENIOR INSURANCE SETTLEMENTS
Section 3.1 Duties of the Master Servicer and Subservicer.
(a) Commencing upon the Closing Date, the Subservicer shall service and
administer the Senior Insurance Settlements and shall collect the Senior
Insurance Settlements in accordance with this Agreement. The Subservicer
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 administering which it may deem necessary or
desirable. Without limiting the generality of the foregoing and subject to
Section 10.1, the Subservicer is hereby authorized and empowered to execute
and deliver, on behalf of the Trust for the benefit of the Certificateholders,
any and all instruments of satisfaction or cancellation, or of partial
or full release or discharge, and all other comparable instruments, with
respect to the Senior Insurance Settlements and, after the delinquency
payment, if any, of any Senior Insurance Settlement and to the extent
permitted under and in compliance with applicable law and regulations, to
commence enforcement proceedings with respect to such Senior Insurance
Settlements. The Trustee shall furnish the Subservicer upon request with any
powers of attorney and other documents reasonably necessary or appropriate to
enable the Subservicer to carry out its servicing and administrative duties
hereunder.
(b) The Subservicer shall not be required to maintain fidelity bond
coverage insuring against losses through wrongdoing of its officers and
employees who are involved in the servicing of the Senior Insurance
Settlements.
(c) The rights and duties of the Master Servicer are set forth in the
Master Servicer Agreement attached hereto as Exhibit 10.2A and in this
Agreement. In the event any
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provisions of the Master Servicer Agreement shall be inconsistent or in
conflict with any provisions of this Pooling and Servicing Agreement, the
provisions of the Pooling and Servicing Agreement shall control. The Master
Servicer, whether acting as Master Servicer or Successor Servicer, shall be
entitled to the following rights, remedies, and protections in carrying out
its duties and responsibilities as Master Servicer or Successor Servicer.
(i) The Master Servicer undertakes to perform such duties and only
such duties as are specifically set forth in the Master Servicer Agreement
and this Agreement, and the Master Servicer shall not be liable for any
act or omission in carrying out its duties as a Master Servicer or Successor
Servicer, except that this Agreement shall not be construed to relieve the
Master Servicer from liability for its own bad faith, negligence or willful
misconduct;
(ii) The Master Servicer shall not be liable for an error of judgment
made in good faith by a responsible officer, unless it shall be proved that
the Master Servicer was negligent in ascertaining the pertinent facts;
(iii) The Master Servicer shall not be required to expend or risk its
own funds or otherwise incur financial liability in the performance of its
duties as a Master Servicer or Successor Servicer if the Master Servicer
reasonably believes that the repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it;
(iv) The Master Servicer may rely on and shall be fully protected in
acting or refraining from acting in accordance with any resolution,
certificate, letter, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond, or other document delivered by it to be
genuine and to have been signed or presented to it by a proper party;
(v) The Master Servicer may consult with counsel, and any opinion
from such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered, or omitted by the Master Servicer
in accordance with such opinion and in good faith;
(vi) the Master Servicer shall not be responsible or liable for the
validity, perfection, priority, continuation, or value of any security
interest securing the Certificates unless the Master Servicer becomes the
Successor Servicer or for the value or collectibility of any Senior Insurance
Settlements; and
(vii) the Master Servicer shall not resign as Master Servicer
during the term of the Pooling and Servicing Agreement, provided that if
the Master Servicer fails to receive its fees and expenses for a period of at
least 90 days after they become due it shall be entitled to resign by giving
written notice to Capital, the Trustee, and United.
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Section 3.2 Subservicing Compensation.
As compensation for its subservicing activities hereunder and reimbursement
for its expenses incurred in connection therewith, the Subservicer shall
be entitled to receive the Monthly Subservicing Fee for each month (or
portion thereof) prior to the termination of the Trust pursuant to Section
12.1. The Paying Agent shall pay the Subservicer the Monthly Subservicing Fee
in arrears on each Distribution Date. The "Monthly Subservicing Fee" shall be
an amount equal to one-twelfth (1/12th) of the Subservicer's Fee.
Section 3.3 Representations, Warranties, and Covenants of the Subservicer.
As of each Closing Date the Subservicer hereby makes the following
representations and warranties on which Capital has relied in irrevocably
assigning its interest in the Senior Insurance Settlements to the Trust and
on which the Trustee has relied in accepting the Senior Insurance Settlements
in Trust and in authenticating Certificates:
(a) Organization and Good Standing. The Subservicer is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, and has full corporate power, authority and right
to own its properties and conduct its business as such properties are
presently owned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement and the Senior
Insurance Settlements Purchase Agreement.
(b) Due Qualification. The Subservicer is qualified as a foreign
corporation in every state where it is required to be so qualified to service
the Senior Insurance Settlements as required by this Agreement and has
obtained all necessary licenses and approvals as required under federal and
state law in each case where the failure to be so qualified, licensed or
approved could reasonably be expected materially and adversely to affect the
ability of the Subservicer to comply with the terms of this Agreement.
(c) Due Authorization. The execution, delivery, and performance of this
Agreement and the Senior Insurance Settlements Purchase Agreement have been
duly authorized by the Subservicer by all necessary corporate action on the
part of the Subservicer.
(d) Binding Obligation. This Agreement and the Senior Insurance
Settlements Purchase Agreement constitute a legal, valid and binding
obligation of the Subservicer, enforceable in accordance with their
respective terms, except as enforceability may be limited by Debtor Relief
Laws and except as such enforceability may be limited by general principles
of equity (whether considered in a proceeding at law or in equity).
(e) No Violation. The execution and delivery of this Agreement and the
Senior Insurance Settlements Purchase Agreement by the Subservicer, and the
performance of the transactions contemplated by this Agreement and the Senior
Insurance Settlements Purchase Agreement and the fulfillment of the terms
hereof and thereof applicable to the Subservicer, will not conflict with,
violate, or result in any breach of any of the terms and provisions of or
constitute (with or without notice or lapse of time or both) a default under,
any Requirements of
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Law applicable to the Subservicer or any indenture contract, agreement,
mortgage, deed of trust or other instrument to which the Subservicer is a
party or by which it is bound.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of the Subservicer, threatened against the
Subservicer before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions contemplated
by this Agreement, seeking any determination or ruling that, in the
reasonable judgment of the Subservicer would materially and adversely affect
the performance by the Subservicer of its obligations under this Agreement or
the Senior Insurance Settlements Purchase Agreement, or seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of this Agreement or the Senior Insurance
Settlements Purchase Agreement.
(g) Deposits in the Lockbox Account. The Subservicer shall make
agreements with or deliver binding instructions to each Insurance Company
such that Collections are deposited directly in the Lockbox Account. The
Subservicer shall provide information on the life insurance claim forms filed
with each Insurance Company so as to instruct the Insurance Company to send
payments to the Lockbox Account.
Section 3.4 Reports and Records for the Trustee and Capital; Bank
Account Statements.
(a) Closing Date Reports. The Subservicer shall prepare and deliver to
Capital, Master Servicer and to the Trustee on two (2) Business Days prior to
the initial Closing Date and, thereafter, the first (1st) Business Day of
each week, an officer's Certificate substantially in the form of Exhibit 3.4A
setting forth (i) the aggregate amount of Collections attributable to Senior
Insurance Settlements as of the end of the last Business Day of the preceding
week and (ii) the amount of Senior Insurance Settlements to be purchased on
the initial Closing Date or the amount of Senior Insurance Settlements
purchased since the immediately preceding Closing Date, as measured by the
Senior Insurance Settlements Purchase Price expended therefor and by their
face value.
(b) Daily and Weekly Reports. On each Business Day, the Subservicer
shall prepare and make available at the office of the Subservicer for
inspection by the Master Servicer and the Trustee, at their option, but with
no obligation to do so, and/or by Capital and the Master Servicer a record
setting forth (i) the aggregate amount of Collections processed by the
Subservicer on the preceding Business Day and (ii) the aggregate amount of
Senior Insurance Settlements as of the close of business an the preceding
Business Day. On the first Business Day of each week, commencing in the week
following the first Closing Date, the Subservicer shall prepare and deliver
to Capital, the Master Servicer, and the Trustee a record setting forth (i)
the aggregate amount of Collections processed by the Subservicer in the
preceding week and (ii) the aggregate amount of Senior Insurance Settlements
as of the close of business on the last Business Day in such week.
(c) Subservicer's Semi-Annual Certificate. On each Determination Date,
the Subservicer shall deliver to the Trustee, Master Servicer, Capital, and
the Paying Agent a
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certificate of a Servicing Officer substantially in the form of Exhibit
3.4C setting forth (i) the aggregate amount of Collections processed during
the preceding six months, (ii) the aggregate amount of Senior Insurance
Settlements and the balance on deposit in the Senior Insurance Settlements
Account with respect to Collections processed as of the end of the last day
of the preceding six month period, (iii) the aggregate amount of withdrawals,
if any, from the Liquidity Account required to be made on the next succeeding
Transfer Date, (iv) the aggregate amount of funds, if any, to be deposited in
the Liquidity Account on the next succeeding Transfer Date, (v) the statement
required by Section 5.2, (vi) the sum of all amounts payable to the
Certificateholders on the next succeeding Distribution Date in respect of
Certificate Interest and Certificate Principal, and (vii) the interest and
earnings from the Senior Insurance Settlements Account and Liquidity Account
(net of losses and investment expenses related to the Permitted Investments
in which the funds in such accounts were invested) for the preceding month.
Section 3.5 Subservicer's Annual Certificate.
The Subservicer shall deliver to the Trustee and the Master Servicer on
or before April 15 of each calendar year, beginning with April 15, 2000, an
Officer's Certificate substantially in the form of Exhibit 3.5 stating that
(i) a review of the activities of the Subservicer during the preceding
calendar year end of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (ii) to the best of
such officer's knowledge, based on such review, the Subservicer has fully
performed all its obligations under this Agreement throughout such year, or,
if there has been a default in the performance of any such obligation,
specifying each such default and the nature and status thereof. Any
Certificateholder may obtain a copy of such certificate by a request in
writing to the Trustee addressed to the Corporate Trust Officer.
Section 3.6 Annual Independent Public Accountants' Subservicing Report.
(a) On or before April 15 of each calendar year, beginning with April
15, 2000, the Subservicer, at the cost and expense of the trust, shall cause
___________ or another firm of nationally recognized independent public
accountants to furnish a report to the Trustee and Master Servicer covering
the preceding annual period to the effect that such accountants have applied
certain agreed-upon procedures to certain documents and records relating to
the servicing of Senior Insurance Settlements under this Agreement, compared
the information contained in the Subservicer's certificates delivered during
the period covered by such report with such documents and records and that no
matters came to the attention of such accountants that caused them to believe
that such servicing was not conducted in compliance with this Agreement,
except for such exceptions as such firm shall believe to be immaterial and
such other exceptions as shall be set forth in such statement. In addition,
each report shall set forth the agreed-upon procedures performed. Any
Certificateholder may obtain a copy of such report by a request in writing to
the Trustee addressed to the Corporate Trust Office.
(b) On or before April 15 of each calendar year beginning with April 15,
2000, the Subservicer, at its sole cost and expense, shall cause __________
or another firm of nationally recognized independent public accountants to
furnish a report to the Trustee and
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Master Servicer to the effect that such accountants have compared the
mathematical calculations of each amount set forth in the semi-annual
certificates forwarded by the Master Servicer pursuant to Section 3.4(c)
during the period covered by such report (which shall be the period from
January 1 to and including December 31 of such calendar year) with the
Subservicer'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. Any Certificateholder may obtain a copy of such report by a
request in writing to the Trustee addressed to the Corporate Trust Office.
ARTICLE IV
RIGHTS OF CERTIFICATFHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.1 Rights of Certificateholders.
The Certificates shall represent undivided interests in the Trust,
including, without limitation, an irrevocable beneficial interest in the
Senior Insurance Settlements, right to receive the Collections and other
amounts at the times and in the amounts specified in this Article IV to be
deposited in the Investor Accounts for the account of such Certificates or
paid to the Certificateholders. The aggregate interest in the Senior
Insurance Settlements represented by such Certificates shall at all times
equal one hundred percent (100%).
Section 4.2 Establishment and Administration of Investor Accounts.
(a) The Lockbox Account. The Trustee for the benefit of the
Certificateholders, shall establish and maintain with The Chase Manhattan
Bank, in the name of the Trust, an interest bearing segregated demand deposit
account (the "Lockbox Account") bearing a designation clearly indicating that
the funds deposited therein are held in trust.
(b) The Senior Insurance Settlements Account. The Trustee, for the
benefit of the Certificateholders, shall establish and maintain with The
Chase Manhattan Bank, in the name of the Trust, a segregated account (the
"Senior Insurance Settlements Account") bearing a designation clearly
indicating that the funds deposited therein, including the interest or other
earnings thereon, are held in trust for the benefit of the
Certificateholders. The Senior Insurance Settlements Account shall contain
Collections attributable to Senior Insurance Settlements. The funds in the
Senior Insurance Settlements Account shall be subject to distribution
pursuant to Section 4.2(e), Section 4.3(b), Section 4.3(c), Section 4.5(a), and
Section 12.3.
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(c) The Liquidity Account. The Trustee, for the benefit of the
Certificateholders, shall establish and maintain with The Chase Manhattan
Bank in the name of the Trust a segregated account (the "Liquidity Account")
bearing a designation, clearly indicating that the funds therein, including
interest or other earnings thereon, are held for the benefit of the
Certificateholders. Funds to be used for the payment of insurance premiums in
connection with the Senior Insurance Settlements shall be maintained in and
paid out of the Liquidity Account.
(d) The Distribution Account. The Trustee shall establish and maintain
with The Chase Manhattan Bank a non-interest bearing segregated demand
deposit account (the "Distribution Account") from which the Paying Agent
shall make the distributions and other payments described in this Article IV
and elsewhere in this Agreement. Certificate Interest and Certificate
Principal while on deposit in the Distribution Account are held in trust for
the benefit of the Certificateholders.
(e) Administration of the Accounts. The Paying Agent or the Trustee
shall have the revocable authority to make withdrawals and distributions from
the Investor Accounts. On each Business Day the Trustee shall withdraw all
funds from the Lockbox Account, based on the information provided by the
Subservicer, and deposit same in the Senior Insurance Settlements Account.
Funds on deposit in the Senior Insurance Settlements and Liquidity Account
shall at all times be invested in Permitted Investments; provided, that any
such investment shall mature and such funds shall be available for withdrawal
on or prior to the Transfer Date immediately preceding the Distribution Date
on which such funds are required for distribution or for the payment of
insurance premiums. The Trustee shall hold for the benefit of the
Certificateholders possession of the negotiable instruments or securities, if
any, evidencing the Permitted Investments. Subject to the maturity
restrictions set forth above, Capital shall instruct the Trustee, in writing
or if orally then with prompt written confirmation, as to the investment of
funds on deposit in the Senior Insurance Settlements Account and Liquidity
Account. If, for any reason, Capital does not provide investment instructions
the Trustee, then the Trustee shall invest such funds in a Chase
Institutional Money Market Account. For purposes of determining availability
of funds or balances in the Senior Insurance Settlements Account and
Liquidity Account for any reason under this Agreement, all investment
earnings on such funds shall be deemed neither available nor on deposit,
except in the event of a Pay Out Event. The Trustee shall not be responsible
or incur any liability for any losses incurred in connection with any
Permitted Investments or in following any instructions of Capital with
respect to Permitted Investments.
Section 4.3 Collections and Distributions.
(a) Collections. The Trustee shall deposit into the Senior Insurance
Settlements Account on the next Business Day, based upon the Subservicer's
reports, all Collections deposited in the Lockbox Account on the preceding
Business Day; provided that Trustee is not obligated to credit any such
deposit of Collections until Trustee actually receives or collects in good
funds the amounts represented by such Collections. In addition, the
Subservicer shall immediately deposit, or cause to be deposited, in the
Senior Insurance Settlements Account all Collections not otherwise made
directly to the Lockbox Account.
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(b) Payments to Capital During the Acquisition Period. During the
Acquisition Period upon Capital's written request given in accordance with
Section 2.1 but not more frequently than once per week on the third (3rd)
Business Day of the week, the Trustee shall pay to Capital:
from the Senior Insurance Settlements Account, an amount equal to the
Collections attributable to Senior Insurance Settlements, which funds Capital
shall use solely for the purpose of purchasing Senior Insurance Settlements
pursuant to the terms of Section 2.4. Capital shall not request payment of
such Collections unless and to the extent that Senior Insurance Settlements
are available for purchase. Such Collections shall be deemed to be used on a
first-in, first-out basis to purchase Senior Insurance Settlements. If
Capital does not request funds to purchase Senior Insurance Settlements, such
Collections shall remain in the Senior Insurance Settlements Account and
shall continue to be available for the purchase of Senior Insurance
Settlements, subject to the requirements of Section 4.5(a). During the
Acquisition Period all Collections shall be held in the Senior Insurance
Settlements Account until distributed pursuant to Section 12.3.
(c) Payments to Capital During the Amortization Period. During the
Amortization Period upon Capital's written request given in accordance with
Section 2.1 but not more frequently than once per week on the third (3rd)
Business Day of the week, the Trustee shall pay to Capital:
from the Liquidity Account, an amount equal to the required premium
payments attributable to Senior Insurance Settlements, which funds Capital
shall use solely for the purpose of paying insurance premiums with respect to
the Senior Insurance Settlements.
Section 4.4 Monthly and Semi-Annual Withdrawals.
On each Determination Date, the Subservicer shall instruct the Trustee
to withdraw and the Trustee, acting in accordance with such instructions,
shall withdraw on the succeeding Transfer Date the amounts set forth in such
instructions required to be withdrawn from the Senior Insurance Settlements
Account and deposited into the Distribution Account as set forth in Sections
4.4(a), (b) and (c), plus the amounts from the Liquidity Account, if any,
pursuant to Section 4.4(a) and Section 4.5(b). Each such instruction and
notice required under Section 4.4 shall be substantially in the form of
Exhibit 4.4, attached hereto.
(a) Payment of Fees and Certificate Interest. On each Fee Determination
Date or Transfer Date, as applicable, the Trustee shall withdraw from the
Senior Insurance Settlements Account, to the extent funds are available from
Collections attributable to Senior Insurance Settlements processed during the
preceding month, and deposit in the Distribution Account for payment (i) an
amount equal to the Trustee's Fees plus the documented expenses, including
reasonable attorney's fees, of the Trustee, (ii) then an amount equal to
Master Servicer's Fees and documented expenses, including reasonable
attorney's fees of the Master Servicer, (iii) then an amount equal to
interest, calculated at the Certificate Rate for the month ended prior to
each Transfer Date, on the outstanding principal amount of the Certificates
determined an the first day of such month, and (iv) then an amount equal to
the amount of any unpaid Deficiency Amount
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(as hereinafter defined). Furthermore, on the Distribution Date the Paying
Agent shall prioritize and make the payments of such fees and Certificate
Interest according to the order in which they appear in preceding
subsections (i) through (iii). If the Collections attributable to Senior
Insurance Settlements are less than the amount required to be distributed
from the Senior Insurance Settlements Account pursuant to this Section
4.4(a), the Trustee shall withdraw from the Liquidity Account funds in the
amount of such deficiency and deposit same in the Distribution Account. If
the Senior Insurance Settlements or the funds in the Liquidity Account are
insufficient in any month to pay Certificate Interest to the
Certificateholders, the amount of such deficiency for any month shall be
referred to as the "Deficiency Amount".
(b) Payment of Monthly Subservicing Fee to United as Subservicer. On
each Fee Determination Date after making the payments required by Section
4.4(a), the Trustee shall withdraw from the Senior Insurance Settlements
Account, to the extent funds are available from Collections attributable to
Senior Insurance Settlements processed during the preceding month, and
deposit in the Distribution Account for payment an amount equal to the
Monthly Subservicing Fees for the preceding month, together with all accrued
and unpaid Monthly Subservicing Fees, and the Paying Agent shall pay such
fees to the Subservicer on the Fee Distribution Date. If the Collections
attributable to Senior Insurance Settlements are less than the amount
required to be distributed from the Senior Insurance Settlements Account
pursuant to this Section 4.4(b), the deficiency shall be paid in succeeding
periods to the extent Collections from Senior Insurance Settlements are
available. Notwithstanding anything to the contrary contained herein, in the
event Master Servicer shall be appointed Successor Servicer pursuant to this
Agreement, such party shall receive the Monthly Subservicer's Fee and
expenses, including reasonable attorney's fees, (as well as the Master
Servicer's Fee) in accordance with the priority set forth in Section 4.4(a).
(c) Transfer to the Liquidity Account. On each Transfer Date, after
making the payments required by Sections 4.4(a) and (b), the Trustee shall
withdraw from the Senior Insurance Settlements Account all remaining funds
from Collections attributable to Senior Insurance Settlements processed
during the preceding six months and deposit such funds in the Liquidity
Account.
(d) Final Distributions from the Liquidity Account and the Excess Cash.
Upon the occurrence of a Pay Out Event, all remaining funds in the Liquidity
Account (after making payments under Section 4.4(a)) shall be utilized to
fund, first, the obligation, if any, to pay the cost and expense of
accountings under Section 3.6 should the Subservicer become insolvent or
bankrupt and, second, any deficiency in payments to Certificateholders until
termination of the Trust under Article XII.
Section 4.5 Payment of Certificate Principal.
(a) On each Transfer Date during the Amortization Period, the Trustee
shall withdraw from the Senior Insurance Settlements Account Collections
attributable to Senior Insurance Settlements processed during the preceding
month and deposit same in the Distribution Account for payment; provided,
however, with respect to the final Transfer Date, the
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Trustee shall withdraw from the Senior Insurance Settlements Account and deposit
into the Distribution Account an amount equal to the principal amount of the
Certificates outstanding as of the end of the day on the preceding Record Date.
If the amounts on deposit in the Senior Insurance Settlements Account on the
final Transfer Date are less than the principal amount of the Certificates
outstanding as of the end of the day an the preceding Record Date, the Trustee
shall withdraw from the Liquidity Account funds in the amount of such deficiency
and deposit same in the Distribution Account for payment.
(b) On each Distribution Date the Paying Agent shall pay to the
Certificateholders, in accordance with Section 5.1, the Certificate Principal
deposited in the Distribution Account pursuant to Sections 4.5(a).
Section 4.6 Failure to Make a Deposit or Payment.
If the Paying Agent (if other than the Trustee), Subservicer or Capital
fails to make, or fails to give instructions to make, any withdrawal, deposit
or payment at the time specified in this Agreement (including applicable
grace periods), the Trustee, to the extent it has all relevant information,
shall make or cause such withdrawal, deposit or payment from Investor
Accounts to be made in the amounts and in the manner in which the Paying
Agent, Subservicer, or Capital should have made same. Upon request, the
Subservicer shall promptly provide the Trustee with all information necessary
to enable the Trustee to make such a payment. The Trustee shall have no
liability and shall be fully protected in refraining from taking any action
prior to it receiving such written instruction from the Subservicer. To the
extent that such payments should have been made by Subservicer or Capital,
Trustee shall make or cause such withdrawal, deposit or payment to be made
only following its receipt from the Subservicer of all information necessary
to enable the Trustee to make such withdrawal, deposit or payment.
Section 4.7 Payment In Accordance with the Subservicer's Reports.
The Paying Agent shall make all withdrawals, deposits, and payments
under this Article IV and under Article V in accordance with and in reliance
on the Subservicer's reports described in Section 3.4 and Section 4.4.
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS
Section 5.1 Distributions.
On each Distribution Date, the Paying Agent shall distribute to each
Certificateholder of record on the preceding Record Date (other than as
provided in Section 12.3 hereof respecting a final distribution) such
Certificateholder's pro rata share of the Certificate Interest, as required
by Section 4.4(a), and the Certificate Principal, as required by Section 4.5.
The Paying Agent shall make such distributions by check mailed to each
Certificateholder. On each Distribution Date, the Paying Agent shall
distribute the Trustee's Fees and expenses, the Master Servicer's Fees, and
the Monthly Subservicing Fee pursuant to Section 4.4(a) and (b). The Paying
Agent shall make
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such distributions by check mailed to the respective recipients or by such
other methods as the recipients request.
Section 5.2 Semi-Annual Certificateholders' Statement.
(a) On each Distribution Date, the Subservicer shall prepare and deliver
to the Paying Agent, and the Paying Agent shall forward to each
Certificateholder a statement substantially in the form of Exhibit 5.2
setting forth the following information which, in the case of (i), (ii) and
(iii) below, shall be stated on the basis of an original principal amount of
One Thousand and No/100 Dollars ($1,000.00) per Certificate:
(i) the total amount distributed on such Distribution Date;
(ii) the amount of such distribution allocable to Certificate
Principal;
(iii) the amount of such distribution allocable to Certificate
Interest;
(iv) the aggregate amount of Collections attributable to Senior
Insurance Settlements processed during the preceding six months;
(v) the aggregate outstanding balance of Senior Insurance Settlements
as of the last day of the preceding month;
(vi) the amount of the Monthly Subservicing Fee for the preceding
six months;
(vii) the aggregate amount of funds deposited in the Liquidity
Account as of such Distribution Date;
(viii) the Minimum Liquidity Account Amount as of the close of
business on such Distribution Date after making the payment of Certificate
Interest and Certificate Principal;
(ix) the amount of Trustee's Fees, and expenses of the Trustee for
the preceding six months; and,
(x) the amount of Master Servicer's Fee for the preceding six months.
(b) Annual Certificateholders Tax Statement. On or before January 31 of
each calendar year, beginning with calendar year 2000, Capital shall have
___________ prepare and deliver to Capital, and Capital shall furnish to each
Person who at any time during the preceding calendar year was a
Certificateholder a statement containing the information required to be
contained in the Semi-Annual Certificateholders' Statement, as set forth in
Sections 5.2(a)(i), (ii) and (iii) above, aggregated for such calendar year
or the applicable portion thereof during which such Person was a
Certificateholder, together with such other customary information (consistent
with the treatment of the Certificates as debt, as provided in Section 13.15
hereof) as the Trustee or the Subservicer deems necessary or desirable to
enable the Certificateholders to prepare their tax returns. Such obligations
of Capital shall be deemed to have been satisfied to the extent that
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Capital provides to the Certificateholders substantially comparable information
pursuant to any requirements of the Internal Revenue Code, as from time to
time in effect.
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates.
The Certificates shall be substantially in the form of Exhibit 6.1A and
shall be duly executed by Capital and authenticated and delivered by the
Trustee as provided in Sections 2.1 and 6.2. The Certificates shall be
issuable in the minimum denomination of Five Thousand and No/100 Dollars
($5,000.00) and integral multiples of One Thousand and No/100 Dollars
($1,000.00) in excess thereof and shall be issued on each Closing Date in an
original principal amount equal to the amount for which each
Certificateholder subscribed to purchase on each such Closing Date; provided,
however, that one Certificate may be issued on each Closing Date in a
residual amount of less than One Thousand and No/100 Dollars ($1,000.00) ("
odd-lot Certificate"); provided that if a person purchases more than one
odd-lot Certificate, such Person shall, with each purchase of an odd-lot
Certificate, surrender pursuant to Section 6.3 all odd-lot Certificates for
exchange for one Certificate of like aggregate principal amount. An
authorized officer of Capital, on behalf of the Trust, shall execute each
Certificate by manual or facsimile signature for the purpose of
authentication. Certificates bearing the manual or facsimile signature of the
individual who was, at the time when such signature was affixed, authorized
to sign on behalf of Capital shall not be rendered invalid, notwithstanding
that such individual has ceased to be so authorized prior to the
authentication and delivery of such Certificate or does not hold such office
as of the date of such Certificates. No Certificate shall be entitled to any
benefit under this Agreement or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication substantially in
the form set forth in Exhibit 6.1A, and such certificate of authentication
upon any Certificate shall be conclusive evidence, and the only evidence,
that such Certificate has been duly authenticated and delivered hereunder.
All Certificates shall be dated the date of their authentication.
Section 6.2 Authentication of Certificates.
On each Closing Date, the Trustee shall authenticate and deliver the
Certificates being issued on such Closing Date, upon the written order of
Capital, to the Certificateholders. In addition, on each Closing Date Capital
shall deposit funds in the Liquidity Account as required by Section 2.1(g).
Section 6.3 Registration of Transfer and Exchange of Certificates.
(a) Capital shall cause a transfer agent and registrar (the "Transfer
Agent and Registrar") to maintain the Transfer Agent's Office and there to
keep a register (the "Certificate Register") in which, subject to such
reasonable regulations as it may prescribe, the Transfer Agent and Registrar
shall provide for the registration of the Certificates and of transfers and
exchanges of the Certificates. The Trustee is hereby initially appointed
Transfer Agent and Registrar. The Trustee may resign as Transfer Agent and
Registrar upon thirty (30) days written
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notice to Capital. In the event that the Trustee shall no longer be the
Transfer Agent and Registrar, the Trustee shall appoint a successor Transfer
Agent and Registrar.
Upon the surrender for registration of transfer of any Certificate at
the Transfer Agent's Office, Capital shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of like
aggregate principal amount; provided that, any transfer of a Certificate
representing residual amounts need not be in an authorized denomination. At
the option of a Certificateholder, Certificates may be exchanged for other
Certificates of authorized denominations of like aggregate principal amount
upon surrender of the Certificates to be exchanged at the Transfer Agent's
Office; provided, that a Certificateholder shall exchange all Certificates
representing residual amounts (odd-lot Certificates) for one Certificate
representing residual amounts of like aggregate principal amount which need
not be in an authorized denomination. Upon surrender Capital shall execute,
and the Trustee shall authenticate and deliver, the Certificates which the
Certificateholder making the exchange is entitled to receive. Every
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 Transfer Agent and Registrar duly
executed by the Certificateholder thereof or his attorney if duly authorized
in writing.
No service charge to the Certificateholder shall be made for any
registration of transfer or exchange of Certificates, but the Transfer Agent
and Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
All Certificates surrendered for registration of transfer or exchange
shall be cancelled and disposed of in a manner satisfactory to Capital, the
Trustee and the Transfer Agent and Registrar. Unless Capital provides the
Trustee with prior written notice to the contrary, the Transfer Agent and
Registrar shall destroy all Certificates in accordance with its customary
procedures.
(b) The Transfer Agent and Registrar will maintain at its expense in New
York, NY an office or offices or agency or agencies where Certificates may be
surrendered for registration of transfer or exchange.
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate is surrendered to the Transfer Agent
and Registrar or any Certificateholder provides satisfactory evidence to the
Transfer Agent and Registrar of the destruction, loss or theft of any
Certificate and (b) there is delivered to Capital, the Transfer Agent and
Registrar and the Trustee such security or indemnity as may be required by
them to save each of them harmless, then, in the absence of written notice to
the Trustee that such Certificate has been acquired by a bona fide purchaser,
Capital shall execute and the Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like form and aggregate principal amount.
In connection with the issuance of any new Certificate under this Section
6.4, the Trustee or the Transfer Agent and Registrar may require the payment
of a sum sufficient to cover any tax or other governmental charge, if any,
imposed in relation thereto and any other expense (including the
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fees and expenses of the Trustee and the Transfer Agent and Registrar)
connected therewith. Any duplicate Certificate issued pursuant to this
Section 6.4 shall constitute complete and indefeasible evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 6.5 Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of transfer,
Capital, the Trustee, the Paying Agent, the Transfer Agent and Registrar and
any agent of any of them may treat the person in whose name any Certificate
is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 5.1 and for all other purposes whatsoever,
and neither Capital, the Trustee, the Paying Agent, the Transfer Agent and
Registrar nor any agent of any of them shall be affected by any notice to the
contrary; provided, however, that in determining whether the Holders of
Certificates evidencing the requisite principal amount have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Certificates owned by Capital, the Subservicer or any Affiliate
thereof 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, notice, consent or waiver,
only Certificates which a Responsible Officer in the Corporate Trust Office
of 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 so to act with respect to such Certificates
and that the pledgee is not Capital, the Subservicer or an Affiliate thereof.
Section 6.6 Appointment of Paying Agent.
(a) The Paying Agent shall have the revocable power to distribute funds
from the Distribution Account for the purpose of making distributions
pursuant to this Agreement. The Trustee may revoke such power and remove the
Paying Agent, unless the Paying Agent is the Trustee, 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.
(b) The Paying Agent shall initially be the Trustee who shall serve
pursuant to the terms of this Agreement. The Trustee shall be permitted to
resign as Paying Agent upon thirty (30) days' written notice to Capital. In
the event that Trustee shall no longer be the Paying Agent, Capital shall
appoint a successor or if no successor Paying Agent shall have been appointed
by the Trustee and/or shall have accepted within thirty (30) days after the
Trustee gives its notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor paying
agent. Each Paying Agent must be reasonably acceptable to Capital. The
provisions of Sections 11.2. 11.3 and 11.4 shall apply to the Trustee also in
its role as Paying Agent, for so long as the Trustee shall act as Paying
Agent.
(c) The Paying Agent (if not the Trustee) shall execute and deliver to
the Trustee an instrument in which the Paying Agent shall agree with the
Trustee that such Paying Agent will hold all sums, it any, held by it for
payment to the Certificateholders in trust for the
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benefit of the Certificateholders entitled thereto until such sums shall
be paid to the Certificateholders.
Section 6.7 Access to List of Certificateholders' Names and Addresses.
The Trustee shall furnish, or cause to be furnished by the Transfer
Agent and Registrar, to Capital or the Paying Agent, as the case may be,
within five (5) Business Days after receipt by the Trustee of a written
request therefor from Capital or the Paying Agent a list of the names and
addresses of the Certificateholders as of the most recent Record Date for
payment of distributions to Certificateholders. If Holders of Certificates
(the "Applicants") aggregating not less than five percent (5%) of the
aggregate principal amount of the Certificates then outstanding apply in
writing to the Trustee, and such application states that the Applicants
desire to communicate with other Certificateholders with respect to their
rights under this Agreement or under the Certificates and is accompanied by a
copy of the communication which such Applicants propose to transmit to the
other Certificateholders, then, within five (5) Business Days after the
Trustee's receipt of such application, the Trustee, after having been
adequately indemnified by such Applicants for its costs and expenses, shall
afford or shall cause the Transfer Agent and Registrar to afford such
Applicants access during normal business hours to the most recent list of
Certificateholders held by the Trustee and shall give the Subservicer notice
that such request has been made. Such list shall be as of a date no more than
forty-five (45) days prior to the date of the Trustee's receipt of such
application. Every Certificateholder, by receiving and holding a Certificate,
agrees with the Trustee that neither the Trustee, the Transfer Agent and
Registrar, nor any of their respective agents shall be held accountable or
incur any liability by reason of the disclosure of the names and addresses of
the Certificateholders hereunder, regardless of the source from which such
information was obtained.
Section 6.8 Authentication Agent.
(a) The Trustee may appoint one or more authenticating agents, who shall
be authorized to act on behalf of the Trustee in authenticating the Certificates
for the issuance, delivery, or registration of transfer or exchange of
Certificates. Reference in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication
shall be deemed to include authentication of the Certificates and execution
of a certificate of authentication on behalf of the Trustee by an
authenticating agent. Each authenticating agent must be reasonably acceptable
to Capital.
(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 paper 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 Capital. The Trustee may at any
time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent and to Capital. Upon receiving such
a notice of resignation or upon terminating the agency, or in case at any
time an authenticating agent shall cease to be acceptable to the Trustee or
Capital, the Trustee promptly may appoint a successor authenticating agent.
Any successor authenticating
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agent upon acceptance of its appointment shall become vested with all
the rights, powers and duties of its predecessor hereunder, as if originally
named as an authenticating agent. Each successor authenticating agent must be
reasonably acceptable to Capital.
(d) The Trustee agrees to pay each authenticating agent from time to
time reasonable compensation for its services under this Section 6.8, and
Capital shall reimburse the Trustee for such payments actually made, subject
to the provisions of Section 11.6.
(e) The provisions of Sections 11.2, 11.3 and 11.4 shall be applicable
to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.8, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate
of authentication, an alternate certificate of authentication in
substantially in the form of Trustee's Certificate of authentication in
Exhibit 6.1A which alternate certificate of authentication shall state that
such authenticating agent is acting on behalf of the Trustee.
ARTICLE VII
OTHER MATTERS RELATING TO CAPITAL
Section 7.1 Special Purpose Corporation.
Capital shall at all times be a special purpose corporation. Capital's
business shall be restricted to (a) the purchase of Senior Insurance
Settlements from United and the irrevocable assignment of the beneficial
interest in such Senior Insurance Settlements to the Trust, (b) the execution
of the Certificates, and (c) those other specified limited functions set
forth and described in this Agreement and in Capital's Articles of
Incorporation. Capital shall incur no debts except those, if any, expressly
described in this Agreement. Capital shall not, and shall have no authority
to, subordinate or permit the subordination of the Trust's rights, title and
interest in the Senior Insurance Settlements assigned to the Trust.
Section 7.2 Merger or Consolidation; Assumption of Capital's Obligations;
Amendment of Capital's Articles of Incorporation.
(a) Capital shall not consolidate with or merge into any other Person or
convey or transfer substantially all its assets.
(b) Capital's obligations hereunder shall not be assignable nor shall
any Person succeed to Capital's obligations hereunder except in accordance
with the provisions of the Senior Insurance Settlements Purchase Agreement.
(c) Capital shall not amend Article ___ of its Articles of Incorporation
without the consent of the holders of Certificates representing not less than
fifty-one percent (51%) of aggregate principal amount of the Certificates
then outstanding.
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(d) Capital shall not file a voluntary petition for bankruptcy earlier
than ninety-one (91) days from the date the Certificates have been paid.
Section 7.3. Limitation on Liability of Capital.
Capital shall be liable in accordance herewith to the extent of the
obligations specifically undertaken by Capital hereunder. Except as otherwise
provided in this Agreement, neither Capital nor any of the directors,
officers, employees or agents of Capital shall be under any liability to the
Trust, the Trustee, the Certificateholders or any other Person for taking any
action or for refraining from taking any action pursuant to this Agreement
whether arising from express or implied duties under this Agreement;
provided, however, this provision shall not protect Capital or any director,
officer, employee or agent of Capital against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of its willful
misconduct hereunder or under any agreement executed and delivered in
connection herewith or in any way relating to or arising out of the creation
of the Trust or any transactions related thereto. Capital and any director,
officer, employee or agent of Capital may rely in good faith on any document
of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder.
Section 7.4 Capital's Indemnification of the Trust, Trustee, Master
Servicer and Successor Servicer.
Capital shall indemnify and hold harmless the Trust, Trustee, Master
Servicer and Successor Servicer from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts,
omissions or alleged acts or omissions arising out of activities of the
Trust, Trustee, Master Servicer or Successor Servicer pursuant to this
Agreement or any agreement executed or delivered in connection herewith or in
any way relating to or arising out of the creation or administration of the
Trust or the transactions related thereto, including but not limited to any
judgment award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any and all or threatened
action, proceeding or claim; provided, however, that although Capital shall
indemnify the Trustee, Master Servicer and Successor Servicer if such acts,
omissions or alleged acts or omissions constitute ordinary negligence,
Capital shall not indemnify the Trustee, Master Servicer or Successor
Servicer if such acts, omissions or alleged acts or omissions constitute
willful misfeasance, bad faith or gross negligence by the Trustee, Master
Servicer or Successor Servicer; and provided, further, Capital shall not
indemnify the Trust or the Certificateholders for any liabilities, costs or
expenses of the Trust with respect to any action taken by the Trustee at the
request of the Certificateholders; provided, further, Capital shall not
indemnify the Trust or the Certificateholders as to any losses, claims or
damages incurred by any of them in their capacities as investors; and
provided, further, Capital shall not indemnify the Trust or the
Certificateholders with respect to any federal, state or local income or
franchise taxes (or any interest or penalties with respect thereto) required
to be paid by the Trust or the Certificateholders in connection herewith to
any taxing authority, which taxes shall be the sole obligation of the Trust
or the Certificateholders. Any indemnification hereunder shall only be from
assets of Capital. The provisions of this indemnity shall run directly to and
be enforceable by an injured party, subject
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to the limitations hereof, and shall survive termination of the Trust and the
resignation or removal of the Trustee or Master Servicer.
ARTICLE VIII
OTHER MATTERS RELATING TO THE SUBSERVICER
Section 8.1 Liability of the Subservicer.
The Subservicer shall be liable for the accuracy and sufficiency of the
information contained in any certificate delivered in accordance with the
provisions of this Agreement and otherwise only to the extent of the
obligations specifically undertaken by the Subservicer in such capacity, in
accordance with the provisions of this Agreement.
Section 8.2 Merger or Consolidation of, or Assumption of the Obligations
of, the Subservicer.
The Subservicer shall not consolidate with or merge into any other
corporation or convey or transfer substantially all its assets, unless:
(a) the Person formed by such consolidation or into which the
Subservicer is merged or the Person which acquires by conveyance or transfer
substantially all the assets of the Subservicer shall be a Person organized
and existing under the laws of the United States of America or any State or
the District of Columbia, and, if the Subservicer is not surviving entity,
shall expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee in form satisfactory to the Trustee, the performance
of every covenant and obligation of the Subservicer hereunder; and
(b) the Subservicer has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger, conveyance or transfer and such supplemental agreement comply with
this Section 8.2 and that all conditions precedent herein provided for
relating to such transaction have been complied with.
Section 8.3 Limitation on Liability of the Subservicer and Others.
Except as provided in Section 8.4 with respect to the Trust and the
Trustee, neither the Subservicer nor any of the directors, officers,
employees or agents of the Subservicer shall be under any liability to the
Trust, the Trustee, the Certificateholders of any other Person for taking any
action or for refraining from taking any action in its capacity as
Subservicer pursuant to this Agreement, including its own negligence;
provided, however, this provision shall not protect the Subservicer or any
director, officer, employee or agent of the Subservicer against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties or by reason of its willful
misconduct hereunder. The Subservicer and any director, officer, employee or
agent of the Subservicer may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Subservicer shall not be under any obligation
to appear in, prosecute or defend any legal action which is not incidental to
its duties to service the
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Senior Insurance Settlements in accordance with this Agreement and which
in its reasonable opinion may involve it in any expense or liability.
Section 8.4 Subservicer's Indemnification of the Trust, Trustee, Master's
Servicer, and Successor Servicer.
The Subservicer shall indemnify and hold harmless the Trust, Trustee,
Master Servicer, and Successor Servicer from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts,
omissions or alleged acts or omissions arising out of activities of the
Trust, Trustee, Master Servicer, or Successor Servicer pursuant to this
Agreement including those arising from acts or omissions of the Subservicer
pursuant to this Agreement or any agreement executed or delivered in
connection herewith or in any way relating to or arising out of the creation
or administration of this Trust or the transactions related thereto
including, but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim; provided,
however, that although the Subservicer shall indemnify the Trust, Trustee,
Master Servicer, or Successor Servicer if such acts, omissions or alleged
acts or omissions constitute ordinary negligence, the Subservicer shall not
indemnify the Trust, Trustee, Master Servicer, or Successor Servicer if such
acts, omissions or alleged acts or omissions constitute willful misfeasance,
bad faith or gross negligence by the indemnified party; provided, further,
the Subservicer shall not indemnify the Trust, the Trustee, or any
Certificateholders for any liabilities, costs or expenses of the Trust with
respect to any action taken by the Trustee at the request of such
Certificateholders; provided, further, the Subservicer shall not indemnify
the Trust or the Certificateholders as to any losses, claims or damages
incurred by any of them in their capacities as investors; and provided
further, the Subservicer shall not indemnify the Trust or the
Certificateholders with respect to any federal, state or local income or
franchise taxes (or any interest or penalties with respect thereto) required
to be paid by the Trust or the Certificateholders in connection herewith to
any taxing authority, which taxes shall be the sole obligation of the Trust
or the Certificateholders. Any indemnification hereunder shall only be from
assets of the Subservicer. The provisions of this indemnity shall run
directly to and be enforceable by an injured party, subject to the
limitations hereof, and shall survive termination of the Trust and the
resignation or removal of the Trustee.
Section 8.5 The Subservicer Not to Resign.
The Subservicer shall not resign from its obligations and duties under
this Agreement, except upon determination that (a) the performance of its
obligations and duties hereunder is or becomes impermissible under applicable
law and (b) the Subservicer can take no reasonable action to make the
performance of its obligation and duties hereunder permissible under
applicable law. Any such determination permitting the resignation of the
Subservicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee. No such resignation shall become effective until a
Successor Servicer shall have assumed the responsibilities and obligations of
the Subservicer in accordance with Section 10.2 hereof. If the Trustee is
unable within thirty (30) days of the date of such determination to appoint a
Successor Servicer, the Trustee shall petition a court of competent
jurisdiction to appoint any established financial
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institution whose regular business includes the servicing of senior
insurance settlements similar to the Senior Insurance Settlements serviced or
to be serviced by the Successor Servicer hereunder and whose appointment
shall not adversely affect the rating, if any, of the securities offered
pursuant to this Agreement.
Section 8.6 Access to Certain Documentation and Information Regarding
the Senior Insurance Settlements.
The Subservicer shall afford the Trustee access to documentation
regarding the Senior Insurance Settlements, including, but not limited to,
the life insurance policies, whenever the Trustee is required, in connection
with the enforcement of the rights of the Certificateholders or by applicable
statutes or regulations, to review such documentation. The Subservicer shall
afford the Trustee such access without charge but only (a) upon reasonable
request, (b) during normal business hours, (c) subject to the Subservicer's
normal security and confidentiality procedures and (d) at offices designated
by the Subservicer. Nothing in this Section 8.6 shall relieve Capital, the
Trustee or the Subservicer from their respective obligations to observe any
applicable law prohibiting disclosure of information regarding the insureds
under the Senior Insurance Settlements, and the failure of the Subservicer to
provide access as provided in this Section 8.6 because applicable law
prohibits disclosure of information regarding the insureds under the Senior
Insurance Settlements shall not constitute a breach of this Agreement.
Section 8.7 Delegation of Duties.
In the ordinary course of business, the Subservicer may at any time
delegate any duties hereunder to any Person who agrees to conduct such duties
in accordance with the provisions of this Agreement. Any such delegation
shall not relieve the Subservicer of its liability and responsibility with
respect to such duties and shall not constitute a resignation within the
meaning of Section 8.5 hereof,
Section 8.8 Examination of Records.
The Subservicer shall clearly and unambiguously identify each Senior
Insurance Settlements in its computer or other records to reflect that such
Senior Insurance Settlements have been sold to Capital and assigned by
Capital to the Trust pursuant to this Agreement.
ARTICLE IX
PAY OUT EVENTS
Section 9.1 Pay Out Events.
Each of the following described events shall be a "Pay Out Event":
(a) Capital or the Subservicer shall fail to make any withdrawal,
deposit or payment required by the terms of this Agreement on or before the
date occurring five (5) Business Days after the date such withdrawal, deposit
or payment is required to be made herein (unless the Trustee shall make such
withdrawal, deposit or payment pursuant to Section 4.6);
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(b) failure by Capital or the Subservicer duly to observe or perform in
any material respect any material covenants or agreements of Capital (other
than Capital's failure to make any withdrawal, deposit or payment as set
forth in Section 9.1(a)) or the Subservicer as set forth in this Agreement
which continues unremedied for a period of sixty (60) days after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given to Capital and the Subservicer by the Trustee or to
Capital, the Subservicer and the Trustee by the Holders of Certificates
representing not less than fifty-one percent (51%) of the principal amount of
the Certificates then outstanding;
(c) any representation or warranty made by Capital or the Subservicer in
this Agreement or any information contained in a computer file, computer
printout or microfiche list required to be delivered by Capital pursuant to
Section 2.1 or 2.6 shall have been incorrect in any material respect when
made or when delivered, continues to be incorrect in any material respect for
a period of sixty (60) days after the date on which written notice of such
failure requiring the same to be remedied shall have been given to Capital
and the Subservicer by the Trustee, or to Capital, the Subservicer and the
Trustee by the Holders of Certificates representing not less than fifty-one
percent (51%) of the principal amount of the Certificates then outstanding,
or if such failure cannot be cured within such sixty (60) day period owing to
causes beyond the control of Capital or the Subservicer, as the case may be,
if Capital or the Subservicer shall fail to proceed promptly to cure the same
and thereafter prosecute the curing of such failure with continued diligence,
and as a result of such failure the interests of such Certificateholders are
materially and adversely affected;
(d) Capital or the Subservicer shall: (i) become insolvent, (ii) fail to
pay its debts generally as they become due, (iii) voluntarily seek, consent
to or acquiesce in the benefit or benefits of any Debtor Relief Law, (iv)
become a party to (or be made the subject of) any proceeding provided for by
any Debtor Relief Law, other than as a creditor or claimant, and, in the
event such proceeding is involuntary, the petition instituting same is not
dismissed within ninety (90) days after its filing, or (v) become unable for
any reason to assign Senior Insurance Settlements to the Trust in accordance
with the provisions of this Agreement;
(e) the Trust or Capital shall become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(f) any Subservicer Default shall occur which would have a material
adverse effect on the Certificateholders;
(g) the balance of the funds available in the Liquidity Account is less
than _______ percent (___%) of the principal amount of the Certificates then
outstanding for a period of two (2) consecutive months; and
(h) the appointment of the Trustee as Successor Servicer;
In the case of the occurrence of any events described in subparagraphs (a),
(b), (c) or (f), after expiration of the applicable grace period set forth in
such subparagraphs or other relevant provisions hereof, either the Trustee or
the Holders of Certificates representing not less than
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fifty-one percent (51%) of the principal amount of the Certificates then
outstanding by written notice to Capital, the Subservicer (and to the Trustee
if given by the Certificateholders), and the Trustee may declare that a Pay
Out Event has occurred as of the date of such notice. In the case of the
occurrence of any of the events described in subparagraphs (d), (e) (g), or (h),
a Pay Out Event shall occur without any notice or other action on the part of
the Trustee or the Certificateholder, immediately as of the date of the
occurrence of such event.
Upon the occurrence of a Pay Out Event, the Amortization Period shall
commence and the Paying Agent shall make distributions in accordance with the
provisions of Sections 4.5(a) and (b).
Section 9.2 Additional Rights Upon the Occurrence of Certain Events.
(a) If Capital voluntarily seeks, consents to or acquiesces in the
benefit or benefits of any Debtor Relief Law or becomes party to (or is made
the subject of) any proceeding provided for by any Debtor Relief Law, other
than as a creditor or claimant, and, in the event such proceeding is
involuntary, and the petition instituting same is not dismissed within ninety
(90) days after its filing (a "Bankruptcy Event"), Capital shall on the date
of such filing immediately cease to transfer Senior Insurance Settlements to
the Trust and shall promptly give written notice to the Trustee of such
Bankruptcy Event. Within fifteen (15) days after receipt by the Trustee of
such notice the Trustee shall (i) publish a notice in an Authorized Newspaper
that a Bankruptcy Event has occurred and that the Trustee intends to sell,
dispose of or otherwise liquidate the Senior Insurance Settlements in a
commercially reasonable manner and (ii) send written notice to the
Certificateholders describing the provisions of this Section 9.2 and
requesting instructions from the Certificateholders. No such sale,
disposition or liquidation, whether in whole or in part, of the Senior
Insurance Settlements shall be consummated until and unless the Trustee shall
have first received written instructions as aforementioned, other written
response or affirmative refusal to provide a written response from Holders of
Certificates representing in excess of fifty-one percent (51%) of the
principal amount of the Certificates outstanding as of the date of written
notice. The Trustee may obtain a prior determination from such conservator or
receiver that the terms and manner of any proposed sale, disposition or
liquidation are commercially reasonable. The provisions of Sections 9.1 and
9.2 shall not be deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of the Senior
Insurance Settlements pursuant to Section 9.2(a) above shall be treated as
Collections and shall be allocated and deposited in accordance with the
provisions of Article IV. On the day following the Distribution Date on which
such proceeds are distributed to the Certificateholders, the Trust shall
terminate.
ARTICLE X
SUBSERVICER DEFAULTS
Section 10.1 Subservicer Defaults
The following events shall be a "Subservicer Default":
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(a) the Subservicer shall fail to provide any report required by Section
3.4 or to give instructions or notice to the Trustee pursuant to Section 4.4
on or before the date occurring five (5) Business Days after the date such
report or such instruction or notice is required to be given, as the case may
be, under the terms of this Agreement; or
(b) the Subservicer shall fail to duly observe or perform in any
material respect any other covenants or agreements of the Subservicer set
forth in this Agreement and such failure has a material adverse effect on the
Certificateholders and continues unremedied for a period of thirty (30) days
after the date on which written notice of such failure requiring the same to
be remedied shall have been given to the Subservicer by the Trustee, or to
the Subservicer and the Trustee by the Holders of Certificates representing
not less than fifty-one percent (51%) of the principal amount of the
Certificates then outstanding; or
(c) the Subservicer shall delegate its duties under this Agreement,
except as permitted by Section 8.7; or
(d) any representation, warranty or certification made by the
Subservicer in this Agreement or in any certificate delivered pursuant to
this Agreement shall have been incorrect when made or when delivered, and
continues to be incorrect in any material respect for a period of thirty (30)
days after the date on which written notice of such failure requiring the
same to be remedied shall have been given to the Subservicer by the Trustee,
or to the Subservicer and the Trustee by the Holders of Certificates
representing not less than fifty-one percent (51%) of the principal amount of
the Certificates then outstanding, or if such failure cannot be cured within
such thirty (30) day period owing to causes beyond the control of the
Subservicer, if Subservicer shall fail to proceed promptly to cure the same
and thereafter prosecute the curing of such failure with continued diligence,
and as a result of such failure the interests of the Certificateholders are
materially and adversely affected; or
(e) the Subservicer shall (i) become insolvent, (ii) fail to pay its
debts generally as they become due, (iii) voluntarily seek, consent to or
acquiesce in the benefit or benefits of any Debtor Relief Law, or (iv) become
a party to (or be made the subject of) any proceeding provided for by any
Debtor Relief Law, other than as a creditor or claimant, and, in the event
such proceeding is involuntary, the petition instituting same is not
dismissed within ninety (90) days after its filing.
Upon the occurrence of a Subservicer Default, so long as such Subservicer
Default shall not have been remedied, either the Trustee, or the Holders of
Certificates representing not less than fifty-one percent (51%) of the
principal amount of the Certificates then outstanding by written notice given
to the Subservicer (and to the Trustee if given by the Certificateholders) (a
"Termination Notice") may terminate all of the rights and obligations of the
Subservicer as Subservicer under this Agreement and in and to the Senior
Insurance Settlements and the proceeds thereof. After the Subservicer's
receipt of such Termination Notice, on the date that the Trustee shall have
appointed a Successor Servicer pursuant to Section 10.2, all authority and
power of the Subservicer under this Agreement shall pass to and be vested in
such Successor Servicer, and, without limitation, the Trustee is hereby
authorized and empowered (upon the failure of the
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Subservicer to cooperate) to execute and deliver, but shall have no obligation
to execute and deliver, on behalf of the Subservicer, 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 transfer of
servicing rights, authority and power under this Agreement. The Subservicer
agrees to cooperate with the Trustee and such Successor Servicer (a) in
effecting the termination of the responsibilities and rights of the
Subservicer to conduct servicing hereunder, including, without limitation,
the transfer to such Successor Servicer of all authority of the Subservicer
to service the Senior Insurance Settlements under this Agreement, including,
without limitation, all authority over all Collections which shall on the
date of transfer be held by the Subservicer for deposit or which have been
deposited by the Subservicer in the Senior Insurance Settlements Account or
the Liquidity Account or which shall thereafter be received with respect to
the Senior Insurance Settlements and (b) in assisting the Successor Servicer.
The Subservicer shall promptly transfer and deliver its electronic records
relating to the Senior Insurance Settlements to the Successor Servicer in
such electronic form as the Successor Subservicer may reasonably request and
shall promptly transfer to the Successor Servicer in the manner and at such
times as the Successor Servicer shall reasonably request all other records,
correspondence and documents related to or necessary for the continued
servicing of the Senior Insurance Settlements. To the extent that compliance
with this Section 10.1 shall require the Subservicer to disclose to the
Successor Servicer information of any kind which the Subservicer reasonably
deems to be confidential, the Successor Subservicer shall be required to
enter into such customary licensing and confidentiality agreements as the
Subservicer shall deem necessary for the Subservicer's protection.
Section 10.2 Trustee to Act; Appointment of Successor.
(a) On and after the Subservicer's receipt of a Termination Notice, the
Subservicer shall continue to perform all servicing functions under this
Agreement until the date specified by the Trustee in the Termination Notice
(or otherwise in writing) or until a date mutually agreed upon by the
Subservicer and Trustee. The Trustee shall as promptly as possible appoint a
successor servicer (the "Successor Servicer"). Such Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to the
Trustee, a copy of which the Trustee shall deliver to Capital. For so long as
the Master Servicer Agreement dated on even date herewith (the "Master
Servicer Agreement"), in the form of Exhibit 10.2A, is in full force and
effect, the Trustee shall appoint the Master Servicer as Successor Servicer,
provided that the Master Servicer shall execute an acknowledgment pursuant to
which the Master Servicer, as Successor Servicer, acknowledges and agrees to
be bound by the terms and conditions of this Agreement and provided, further,
that the Trustee shall have no liability under this Agreement for the
selection of the Master Servicer as Successor Servicer. In such event, the
Master Servicer shall receive a one time transfer of management fee in the
amount of One Hundred Thousand ($100,000.00) Dollars. In the event any
provisions of the Master Servicer Agreement shall be inconsistent with any
provisions of this Pooling and Servicing Agreement, the provisions of the
Pooling and Servicing Agreement shall control. If the Master Servicer fails
to act or is unable to accept its appointment as Successor Servicer, the
Trustee may appoint a Successor Servicer satisfactory to Capital upon the
terms and conditions set forth in this Agreement, which shall accept its
appointment by a written assumption in a form acceptable to the Trustee, a
copy of
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which the Trustee shall deliver to Capital. If the Trustee has not appointed
a Successor Servicer or such Successor Servicer has not accepted its
appointment on the date when the Subservicer ceases to perform as Subservicer,
the Trustee may, at its option, petition a court of competent jurisdiction
to appoint any established financial institution whose regular business
includes the servicing of senior insurance settlements similar to the Senior
Insurance Settlements serviced hereunder, to act as the Successor Servicer.
If the Master Servicer becomes the Successor Servicer, it shall continue to
have the rights, remedies, and protections of the Master Servicer under
Section 3.1(d). If the Master Servicer does not become the Successor
Servicer, the Master Servicer shall promptly turn over to the Successor
Servicer all records, reports, computer files and information relating to the
Senior Insurance Settlements.
(b) Upon its appointment, the Successor Servicer shall be the successor
to the Subservicer with respect to servicing functions under this Agreement
and shall perform all the Subservicer's responsibilities and duties and be
subject to all the Subservicer's liabilities (as limited by Section 8.3)
under this Agreement, except under Section 3.6 and 8.4 which shall continue
to be liabilities of United. Except as otherwise provided herein, all
references in this Agreement to the Subservicer shall be deemed to apply to
the Successor Servicer; provided, however, (i) the Subservicer shall not
indemnify the Trust or the Trustee if the acts, omissions or alleged acts or
omissions upon which a claim for indemnification arises pursuant to Section
8.4 constitute willful misfeasance, bad faith or gross negligence by a
Successor Servicer and (ii) the Subservicer shall not pay or reimburse the
Trustee pursuant to Section 11.6 for any expense, d1sbursement or advance of
the Trustee related to or arising as a result of the negligence or bad faith
of the Successor Servicer. The Successor Servicer shall expressly be
authorized, subject to Section 8.7, to delegate any of its duties hereunder
to any Person.
(c) In connection with such appointment and assumption, the Trustee
shall be entitled to compensate and be reimbursed therefor, or to make such
arrangements for the compensation of, the Successor Servicer out of
Collections, as it and such Successor Servicer shall agree ("Successor
Servicer's Fee"); provided, however, that if the Master Servicer becomes the
Successor Servicer it shall cease to receive a Master Servicer Fee and shall
thereafter receive the Subservicer's Fee.
(d) All authority and power granted to the Successor Servicer under this
Agreement shall automatically cease and terminate upon termination of the
Trust pursuant to Section 12.1 and shall pass to and be vested in Capital
and, without limitation, Capital 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 transfer of
servicing rights, authority and power under this Agreement. The Successor
Servicer agrees to cooperate with Capital (i) in effecting the termination of
the responsibilities and rights of the Successor Servicer to conduct
servicing on the Senior Insurance Settlements, and (ii) in assisting Capital.
The Successor Servicer shall promptly transfer and deliver its electronic
records relating to the Senior Insurance Settlements to Capital in such
electronic form as Capital may reasonably request and shall promptly transfer
to Capital in the manner and at such times as Capital shall reasonably
request all other records, correspondence and documents related to the Senior
Insurance Settlements or
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the Successor Servicer's performance of its duties hereunder. To the
extent that compliance with this Section 10.2(d) shall require the Successor
Servicer to disclose to Capital information of any kind which the Successor
Servicer deems to be confidential, Capital shall be required to enter into
such customary licensing and confidentiality agreements as the Successor
Servicer shall deem necessary for the Successor Servicer's protection.
Section 10.3 Notification to Certificateholders.
Upon the occurrence of any Subservicer Default, the Subservicer shall
give prompt written notice thereof to the Trustee and Master Servicer, and
the Trustee shall give notice of the Subservicer Default to the
Certificateholders. Upon any termination of the Subservicer or appointment of
a Successor Servicer pursuant to this Article X, the Trustee shall give
prompt written notice thereof to Certificateholders.
Section 10.4 Waiver of Past Defaults.
The Holders of Certificates representing not less than fifty-one percent
(51%) of the principal amount of the Certificates then outstanding may, on
behalf of all Certificateholders waive any default by the Subservicer or
Capital in the performance of its obligations hereunder and its consequences,
except a default in the failure to make any required payments in accordance
with Sections 4.6 and 5.1. Upon any such waiver of a past default, such
default shall cease to exist, and any default arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto except to the extent expressly so waived.
ARTICLE XI
THE TRUST
Section 11.1 Creation of the Trust.
A trust is hereby and herein created by Capital as its originator. The
name of the Trust is "Senior Insurance Settlements Funding Trust 1999." The
initial res of the Trust is One Hundred Dollars ($100.00) transferred to the
Trustee, at the time of execution of this Agreement, by Capital. The corpus
of the Trust shall also consist of the Senior Insurance Settlements now
existing or hereafter transferred to the Trust from time to time in
accordance herewith and all monies due or to become due with respect thereto,
all proceeds of the Senior Insurance Settlements (as the term, "proceeds," is
defined in Section 9.306 of the UCC as in effect in any state where the
Subservicer's chief executive offices or books and records relating to the
Senior Insurance Settlements are located), such funds as from time to time
are deposited in the Investor Accounts, and all of Capital's rights,
interests, remedies, powers and privileges with respect to the Senior
Insurance Settlements under the Senior Insurance Settlements Purchase
Agreement. The Trustee shall be The Chase Manhattan Bank, or its successor in
interest or any successor trustee appointed as herein provided. The Trust's
sole purpose is and shall be to (i) acquire an irrevocable beneficial
interest in the Senior Insurance Settlements from Capital with the proceeds
from the public offering of the Certificates, and (ii) perform such other
functions, obligations and duties specified in this Agreement. The duration
of the Trust shall be until the earlier of the
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Scheduled Trust Termination Date or the late of termination under Section 12.1.
The termination, dissolution and winding-up of the Trust shall be as described
in Section.12.1 hereof and as provided elsewhere in this Agreement.
Section 11.2 Duties of Trustee.
(a) The Trustee, prior to the occurrence of a Subservicer Default and
after the curing of all Subservicer Defaults which may have occurred,
undertakes to perform such duties and only such duties as are specifically
set forth in this Agreement.
(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, shall examine them to determine
whether they purport to conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own willful malfeasance, bad faith or gross
negligence; provided, however:
(i) the Trustee shall not be 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 grossly negligent in
ascertaining the pertinent facts;
(ii) the Trustee shall not be 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 Holders of Certificates representing not less than
fifty-one percent (51%) of the principal amount of the Certificates then
outstanding relating to the time, method and place of (1) conducting any
proceeding for any remedy available to the Trustee or (2) exercising any
trust or power conferred upon the Trustee, under this Agreement or any
supplement hereto;
(iii) the Trustee shall not be charged with knowledge of any breach
of any representation or warranty by or any failure by the Subservicer
or Master Servicer to comply with the obligations of Subservicer or Master
Servicer hereunder, by Seller under the Senior Insurance Settlements Purchase
Agreement or of the occurrence of a breach, default, Subservicer Default, or
Pay Out Event, and the Trustee may conclusively assume that no breach,
default, Subservicer Default, or Pay Out Event has occurred unless a
Responsible Officer of the Trustee obtains actual knowledge of such failure
or the Trustee receives written notice of such failure or occurrence from the
Subservicer or from Certificateholders representing no less than twenty-five
percent (25%) of the principal amount of the Certificates then outstanding;
and
(iv) anything to the contrary notwithstanding, in no event shall the
Trustee be liable for special, punitive, indirect, consequential or incidental
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Trustee has been advised of the likelihood of
such loss or damage.
(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 in the
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exercise of any of its rights or powers, if the Trustee reasonably believes
that the repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it. Nothing in this Agreement
shall in any event require the Trustee to perform, or be responsible for the
manner of performance of, any of the Subservicer's duties or obligations
under this Agreement.
(e) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the interests of the
Trust in any Senior Insurance Settlement or to impair the value of any Senior
Insurance Settlement acquired by Capital from Seller pursuant to the Senior
Insurance Settlements Purchase Agreement.
(f) In the event a Responsible Officer of the Trustee receives written
notice from the Subservicer or a Certificateholder that the Transfer Agent
and Registrar fails to perform any obligation, duty or agreement in the
manner or on the day required under this Agreement, the Trustee shall
promptly perform such obligation, duty or agreement in the manner required.
Section 11.3 Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 11.2:
(a) the Trustee may rely on and shall be protected in acting on, or in
refraining from acting, in accordance 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 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, suffered or omitted by protect it hereunder in accordance
with such advice or Opinion of Counsel and in good faith;
(c) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or to institute, conduct or
defend any litigation hereunder or in relation hereto at the request, order
or direction of any of the Certificateholders pursuant to the provisions of
this Agreement unless such Certificateholders shall have offered to the
Trustee security or indemnity against the costs, expenses and liabilities
which the Trustee may incur by acting in accordance with such request, order
or direction;
(d) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Agreement;
(e) the Trustee shall not be bound to make any investigation into the
facts of matters stated or the accuracy of any information contained in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or
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document, unless requested in writing so to do by Holders of Certificates
representing not less than twenty-five percent (25%) of the principal amount of
the Certificates then outstanding;
(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, attorney or custodian
appointed with due care;
(g) except as may be required by Section 11.2(a), the Trustee shall not
be required to make any initial or periodic examination of any documents or
records related to the Senior Insurance Settlements for the purpose of
establishing the presence or absence of defects, the purpose of establishing
Capital's compliance with its representations and warranties or for any other
purpose; and
(h) the Trustee shall not be responsible for (i) determining or
maintaining the perfection of the security interests granted hereunder, (ii)
the calculations of amounts to be made hereunder, or (iii) collecting the
Senior Insurance Settlements or depositing the Collections in the Lockbox
Account.
Section 11.4 Trustee Not Liable for Recitals in Certificates.
The Trustee assumes no responsibility for the correctness of the
recitals contained herein and in the Certificates (other than the recitals,
if any, in the certificate of authentication on the Certificates). 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 Senior Insurance Settlement or
related document. The Trustee shall not be accountable for Capital's use or
application of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to Capital in
respect of the Senior Insurance Settlements or deposited in or withdrawn from
the Senior Insurance Settlements Account or the Liquidity Account by the
Paying Agent.
Section 11.5 Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates with the same rights as it would have if it were
not the Trustee.
Section 11.6 Trust to Pay Trustee's Fees and Expenses.
Capital covenants and agrees to pay to the Trustee from time to time
out of the funds in the Trust and the Trustee shall be entitled to receive,
compensation (which shall not be limited by any provision of law concerning the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the Trust hereby created and in the exercise and performance
of any of the Trustee's powers and duties hereunder. Subject to Section 8.4, the
Trust shall pay or reimburse the Trustee upon its request (without reimbursement
from any Investor Account except as otherwise provided in this Section 11.6) for
all expenses, disbursements and advances incurred or made by the Trustee in
accordance with this Agreement or any agreement made in connection herewith or
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in any way relating to or arising out of the creation of this Trust or the
transactions related thereto (including the reasonable fees and expenses of
its agents and counsel); provided, however, Capital shall have no obligation
to pay or reimburse the Trustee for any expense, disbursement or advance
relating to or arising out of the Trustee's willful misfeasance, bad faith or
gross negligence. If Capital fails or refuses to pay such amounts, the
Trustee shall be entitled to withdraw from the Investor Accounts any amount
to which it is entitled hereunder, including any interest earned under
Section 4.2(a) or (b). The obligations of the Trust under this Section 11.6
shall survive the termination of the Trust and the resignation or removal of
the Trustee.
Section 11.7 Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a Person organized and doing
business under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least Ten Million and No/100 Dollars
($10,000,000.00) and subject to supervision or examination by federal or
state authority. If such Person 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 11.7 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 published report
of condition. If at any time the Trustee ceases to be eligible in accordance
with the provisions of this Section 11.7, the Trustee shall resign
immediately in the manner and with the effect specified in Section 11.8.
Section 11.8 Resignation or Removal of Trustee.
(a) The Trustee may resign at any time and be discharged from the Trust
hereby created by giving written notice thereof to Capital and the
Subservicer. Upon receiving the Trustee's notice of resignation, Capital
shall promptly appoint a successor trustee 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 within thirty (30) days after the
Trustee gives its 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 (i) the Trustee ceases to be eligible in accordance
with Section 11.7 and fails to resign after written request therefor by
Capital, or (ii) the Trustee is legally unable to act or is adjudged a
bankrupt or insolvent, or (iii) a receiver of the Trustee or of its property
shall be appointed, or (iv) 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 Capital may, but shall not
be required to, remove the Trustee and promptly appoint a successor trustee
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 a
successor trustee pursuant to any of the provisions of this Section 11.8
shall not become effective until acceptance of appointment by the successor
trustee as provided in Section 11.9. Any liability of the Trustee arising
hereunder shall survive such appointment of a successor trustee; provided,
however, the
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Trustee which has resigned or been removed shall not, be liable for the
liabilities of the successor trustee.
Section 11.9 Successor Trustee.
(a) Any successor trustee appointed as provided in Section 11.8 hereof
shall execute, acknowledge and deliver to Capital 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. Upon, receipt of any and all amounts owing to the Trustee hereunder,
the predecessor Trustee shall deliver to the successor trustee all documents
and statements held by it hereunder, and Capital and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for full and certain 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 11.9 unless at that time such successor trustee is eligible under the
provisions of Section 11.7.
(c) Upon acceptance of appointment, such successor trustee shall notify
all Certificateholders of its succession hereunder.
Section 11.10 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 the corporate trust business of the Trustee shall be the
successor of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 11.7 hereof, without the execution
or filing of any paper of any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
Section 11.11 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding anything to the contrary contained herein, for the
purpose of meeting the legal requirements of any jurisdiction in which any
part of the Trust may 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, and to vest in such Person or Persons, in such
capacity and for the benefit of the Certificateholders, such title to the
Trust, or any part thereof, and, subject to the other provisions of this
Section 11.11, 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 11.7, and no notice to Certificateholders of
the appointment of any co-trustee or separate trustee shall be required under
Section 11.9 hereof.
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(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 if, under any laws of any jurisdiction in which any particular
act or acts are to be performed (whether as Trustee hereunder or as successor
to the Subservicer hereunder), the Trustee shall be deemed incompetent or
unqualified to perform such act or acts, then in such event such rights,
powers, duties and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be 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 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 is 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 Capital and to the Subservicer.
(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 to
this Agreement on behalf and in the name of the Trustee, if any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law,
without the necessity of the appointment of a new or successor trustee.
Section 11.12 Tax Returns.
In the event the Trust shall be required to file tax returns, the
Subservicer, as soon as practicable after it is made aware of such
requirement, shall prepare or cause to be prepared such tax returns, and the
Trustee is authorized hereunder to sign any required tax returns and, to the
extent reasonably possible, shall file such returns at least ten (10) days
before the mandatory filing date for such returns; provided, however, the
Trustee shall not be required to sign any tax
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returns which it believes to be inaccurate or incomplete. The Subservicer shall
prepare or shall cause to be prepared all tax information for distribution to
the Certificateholders to the extent required by law and shall deliver
such information to the Trustee at least five (5) days prior to the mandatory
distribution date. In no event shall the Trustee or the Subservicer be liable
for any liabilities, costs or expenses of the Trust or the Certificateholders
arising under any tax law, including without limitation federal, state or
local income or excise taxes or any other tax imposed on or measured by
income (or any interest or penalty with respect thereto or arising from a
failure to comply therewith). Nothing in this Section 11.12 shall be
construed as inconsistent with the characterization of the Certificates as
indebtedness of Capital, as set forth in Section 3.7, for purposes of
federal, state and local income or franchise taxes and any other tax imposed
or measured by income.
Section 11.13 Trustee May Enforce Claims Without Possession of
Certificates.
The Trustee may prosecute and enforce all rights of action and claims
under this Agreement or the Certificates without the possession or production
of any of the Certificates, and the Trustee shall bring any proceeding in its
own name as Trustee. After provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, any recovery of judgment shall be for the ratable benefit of the
Certificateholders in respect of which the Trustee obtained such judgment.
Section 11.14 Suits for Enforcement.
Subject to Section 10.1, if a Subservicer Default shall occur and be
continuing, the Trustee may, in its discretion, proceed to protect and
enforce its rights and the rights of the Certificateholders under this
Agreement by a 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 in aid of the execution of any power granted in this
Agreement 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 the
Certificateholders.
Section 11.15 Rights of Certificateholders to Direct Trustee.
Holders of Certificates representing not less than fifty-one percent
(51%) of the principal amount of the Certificates then outstanding shall have
the right to direct the time, method, and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee; provided, however, subject to Section 11.2, the
Trustee shall have the right to decline to follow any such direction if the
Trustee upon advice of counsel determines that it may not lawfully take the
action so directed, that the proceedings so directed are illegal or may
involve it in personal liability (unless indemnified to Trustee's
satisfaction) or unduly prejudice the rights of Certificateholders not
parties to such direction; and provided further, 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.
Section 11.16 Representations and Warranties of Trustee.
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The Trustee represents and warrants that:
(a) The Trustee is a New York corporation and in good standing under the
laws of the State of New York;
(b) The Trustee has full power, authority and right to execute, deliver
and perform this Agreement and has taken all necessary action to authorize
its execution, delivery and performance of this Agreement; and
(c) This Agreement has been duly executed and delivered by the Trustee.
Section 11.17 Maintenance of Office or Agency.
The Trustee shall maintain at its expense in the City of New York, NY,
an office or offices or agency or agencies for service of notices and demands
to or upon the Trustee with respect to the Certificates and this Agreement.
The Trustee initially appoints the Corporate Trust Office as its office,
which is located at 450 W. 33rd Street, 15th Floor, New York, New York 10001.
This office shall be the Transfer Agent's office for so long as the Trustee
serves as the Transfer Agent and Registrar. The Trustee shall give prompt
written notice to the Subservicer and to Certificateholders of any change in
the location of the Certificate register or any such office or agency.
Section 11.18 Requests for Agreement.
Any Certificateholder may obtain a copy of this Agreement at the expense
of Capital by written request to the Trustee addressed to the Corporate Trust
Office.
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust.
(a) The respective duties, obligations and responsibilities of Capital,
the Subservicer and the Trustee under this Agreement shall terminate, except
with respect to the duties described in Article XII, upon the earlier of (i)
the day designated by Capital, if any, after the final Distribution Date as
set forth in Section 10.2 or Section 12.2 ("Final Trust Termination Date"),
(ii) the final Distribution Date after the occurrence of a Pay Out Event
under Section 9.1, or (iii) subject to Section 12.1(b) below, the Scheduled
Trust Termination Date.
(b) If, on the Transfer Date in the month immediately preceding the
month in which the Scheduled Trust Termination Date occurs after giving
effect to all withdrawals, deposits and payments to occur on such date and
the payment of Certificate Principal on the related Distribution Date
pursuant to Section 4.5, the Certificate Principal would exceed zero, the
Subservicer shall sell within thirty (30) days of such Transfer Date enough
Senior Insurance Settlements to bring the Certificate Principal amount then
owing to zero. The proceeds of such sale shall be treated as Collections on
the Senior Insurance Settlements and shall be allocated
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and deposited in accordance with Section 4.3(a). During such thirty (30)
day period, the Subservicer shall continue to collect Collections on the
Senior Insurance Settlements and allocate and deposit such payments in
accordance with the provisions of Section 4.3(a).
Section 12.2 Optional Repurchase of Certificates and Final Maturity Date
of Certificates.
(a) At any time after five (5) years from the Closing Date of Tranche I
and Tranche II, respectively, Capital shall have the option to purchase all
outstanding Certificates by depositing into the Distribution Account, on the
Transfer Date preceding the Distribution Date immediately following the five
(5) years after the respective Closing Date, an amount equal to the
Certificate Principal together with the amount of interest accrued thereon at
the applicable Certificate Rate as of the and of the month preceding the
Distribution Date for such repurchase less amounts on deposit on such date in
the Investor Accounts.
(b) All Certificate Principal shall be due and payable no later than
the Final Maturity Date, together with all Certificate Interest accrued and
unpaid as of the end of the month preceding the final Distribution Date as
described in Section 12.3.
(c) The Paying Agent shall pay to the Certificateholders the amounts
pursuant to Sections 12.2(a) and 12.2(b) in the manner provided in Section
12.3.
Section 12.3 Final Distributions.
(a) The Subservicer shall give written notice to the Trustee at least
two (2) days' prior to the dates described in Section 12.1, and, upon
receipt, the Trustee shall give written notice (the "Trustee's Termination
Notice") to the Certificateholders, the Paying Agent and the Transfer Agent
and Registrar of any termination of the Trust, specifying the Distribution
Date upon which the Certificateholders may present and surrender their
Certificates for payment of the final distribution and cancellation of the
Certificates, not later than the fifth (5th) day of the month of such final
distribution specifying (i) the Distribution Date (which shall be the
Distribution Date in the month in which the deposit is made pursuant to
Section 12.1 or 12.2(a) for final payment of the Certificates upon
presentation and surrender of the Certificates at the office or offices
designated in such notice, (ii) the amount of any such final payment, and
(iii) the inapplicability of the Record Date otherwise applicable to such
Distribution Date, payments being made only upon presentation and surrender
of the Certificates at the office or offices designated in such notice. The
Subservicer's notice of termination of the Trust shall include an Officer's
Certificate setting forth the information specified in Section 3.5 for the
period during the then current calendar year through the date of the
Subservicer's notice.
(b) Notwithstanding the termination of the Trust all funds on deposit in
the Distribution Account, in the case of a termination of the Trust pursuant
to Section 12.1, shall continue to be held in trust for the benefit of the
Certificateholders, and the Paying Agent or the Trustee shall pay such funds
to the appropriate Certificateholders upon presentation and surrender of
their Certificates. In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six (6) months after the
date specified in the Trustee's
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Termination Notice, the Trustee shall give a second written notice to the
remaining Certificateholders to surrender their Certificates for cancellation
and receive their respective final distributions. If within one (1) year
after the date of second notice all the Certificates shall not have been
surrendered for cancellation, the Trustee shall transfer all remaining funds
and any Senior Insurance Settlements remaining in its possession to Capital
and Capital may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of
the funds transferred to Capital and held for the benefit of such
Certificateholders. Upon such transfer, the Trustee shall have no further
obligations or liabilities hereunder.
(c) On the Final Distribution Date, the Trustee shall pay to Capital all
funds in the Liquidity Account not required to be used or held for the
payment of Trustee's Fees, Master Servicer's Fees, Certificate Interest, and
Certificate Principal, and the Trustee shall execute any document or
instrument required for Capital's withdrawal of the funds in the Liquidity
Account for the benefit of Capital.
Section 12.4 Capital's Termination Rights.
Upon the termination of the Trust pursuant to Section 12.1, the Trustee
shall return to Capital (without recourse, representation or warranty) all
right, title and interest of the Trust in, to and under the Senior Insurance
Settlements and all monies due or to become due with respect thereto
(including all accrued interest), except for amounts held by the Trustee
pursuant to Section 12.3(b), and all amounts remaining in the Liquidity
Account after payment of full amounts due an the Certificates and due the
Trustee. Upon payment of its fees and expenses, the Trustee shall execute and
deliver such instruments of transfer, in each case without recourse, as
Capital shall reasonably request to vest in Capital all the Trust's right,
title and interest in the Senior Insurance Settlements.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment.
(a) The parties hereto may amend this Agreement from time to time
without the consent of any of the Certificateholders to cure any ambiguity,
to correct or supplement any provisions which may be inconsistent with any
other provisions, or to add any other provisions not inconsistent with the
existing provisions of this Agreement and relating to matters or questions
arising under this Agreement, upon the condition that no such amendment
action shall adversely affect in any material respect the interests of the
Certificateholders, as evidenced by an Opinion of Counsel. The Trustee may,
but shall not be obligated to, enter into any amendment of this Agreement
which affects the Trustee's rights, duties or immunities under this Agreement
or otherwise. Any Assignments regarding the transfer of Senior Insurance
Settlements to the Trust executed in accordance with the provisions hereof
shall not be considered amendments to this Agreement.
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(b) The parties hereto may amend this Agreement from time to time with
the consent of the Holders of Certificates representing not less than
sixty-six and two-thirds percent (66-2/3%) of the principal amount of the
Certificates then outstanding, for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of this Agreement
or modifying in any manner the rights of the Certificateholders; provided,
however, no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, required distributions with respect to any Certificate
without the consent of the Holder of the Certificate or (ii) reduce the
aforesaid percentage required to consent to any such amendment, without the
consent of each Certificateholder.
(c) Promptly after the execution of any such amendment or consent the
Trustee shall furnish written notification of the substance of such amendment
to each Certificateholder.
(d) The consent of Certificateholders to the particular form of any
proposed amendment shall not be necessary, but such consent shall be
sufficient if it approves the substance of the amendment. The manner of
obtaining such consents and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable
requirements as the Trustee may prescribe.
Section 13.2 Protection of Right, Title and Interest to Trust.
(a) The Subservicer shall clause this Agreement, all amendments hereto
and any other necessary documents covering the Certificateholders' and the
Trustee's right, title and interest to the Trust promptly to be recorded,
registered and filed, and at all times to be kept recorded, registered and
filed, all in such manner and in such places as required by law fully to
preserve and protect such rights, titles and interests. The Subservicer shall
immediately deliver to the Trustee file-stamped copies of, or filing receipts
for, any document recorded, registered or filed as provided above. Capital
shall cooperate fully with the Subservicer in connection with the obligations
set forth above and will execute any and all documents reasonably required to
fulfill the intent of this Section 13.2(a).
(b) Capital and the Subservicer will each give the Trustee prompt
written notice of any relocation of any office from which it services Senior
Insurance Settlements, keeps records concerning the Senior Insurance
Settlements, or maintains its principal executive office. Capital and the
Subservicer will each at all times maintain within the United States of
America each office from which it services Senior Insurance Settlements and
its principal executive office.
(c) The Subservicer will deliver to the Trustee (i) upon the execution
and delivery of each amendment of Articles I, II, III or IV of this Agreement
other than an amendment pursuant to Section 13.1(a), an Opinion of Counsel
substantially in the form of Exhibit 13.2A, and (ii) on or before April 15th
of each year, beginning with April 15, 2000, an Opinion of Counsel, dated as
of a date during the preceding ninety (90) day period, substantially in the
form of Exhibit 13.2B.
Section 13.3 Limitation on Rights of Certificateholders.
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(a) The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the Trust, nor shall such death or incapacity
entitle such Certificateholder's 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, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except as set
forth in Section 13.1) or in any manner otherwise control the operation and
management of the Trust or the obligations of the parties hereto. Nothing set
forth in this Agreement or contained in the terms of the Certificates shall
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association. No Certificateholder shall have any
liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given to the Trustee, and unless the
Holders of Certificates representing not less than fifty-one percent (51%) of
the principal amount of the Certificates then outstanding shall have made,
written request upon the Trustee to institute such action, suit or proceeding
in its own name as Trustee hereunder and shall have offered to the Trustee
such indemnity as it may require against the costs, expenses and liabilities
to be incurred therein or thereby, and the Trustee, for sixty (60) days after
its receipt of such notice, request and offer of indemnity, shall have
neglected or 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 Certificateholder shall have the right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the
Certificateholders with respect to the Certificates, or to obtain or seek to
obtain priority over or preference to any other such Certificateholder, or to
enforce any right under this Agreement, except in the manner herein provided
and for the equal, ratable and common benefit of all Certificateholders. For
the protection and enforcement of the provisions of this Section 13.3, each
and every Certificateholder and the Trustee shall be entitled to such relief
as can be given either at law or in equity.
Section 13.4 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 13.5 Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given upon receipt if personally
delivered to the addresses set forth
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herein or upon deposit in the mail by certified mail, return receipt
requested, to (a) in the case of Capital, 650 E. Carmel Drive, Suite 150,
Carmel, Indiana 46032, (b) in the case of the Subservicer, 650 E. Carmel
Drive, Suite 150, Carmel, Indiana 46032, (c) in the case of the Trustee, to
the Corporate Trust Office, (d) in the case of the Seller, to 650 E. Carmel
Drive, Suite 150, Carmel, Indiana 46032, Attention: Thomas J. LaRussa, and
(e) in the case of the Master Servicer, 21st Holdings, LLC, IDS Center, Suite
1650, 80 S. 8th Street, Minneapolis, MN 55402, Attention: Robert Simon; or,
as to each party, at such other address as shall be designated by such party
in a written notice to each other party. Any notice required or permitted to
be mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Certificateholder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given upon deposit in the
mail, whether or not the Certificateholder receives such notice.
Section 13.6 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall for any reason whatsoever be held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions
of this Agreement or of the Certificates or rights of the Certificateholders
thereof.
Section 13.7 Assignment.
Notwithstanding anything to the contrary contained herein, except as
provided in Section 8.2, this Agreement may not be assigned by the
Subservicer without the prior consent of Holders of Certificates representing
not less than sixty-six and two-thirds percent (66-2/3%) of the Certificate
Principal.
Section 13.8 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 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 Sections 2.7 and 6.2 are and shall be deemed fully paid for by
the Certificateholders (but no representations shall be deemed to have been
made by the Trustee that they have been fully paid).
Section 13.9 Further Assurances.
Capital and the Subservicer agree to do and perform, from time to time,
any and all acts and to execute any and all further instruments required or
reasonably requested by the Trustee more fully to effect the purposes of this
Agreement.
53
<PAGE>
Section 13.10 No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising by the Trustee or the
Certificateholders of any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
Section 13.11 Third-Party Beneficiaries.
This Agreement will inure to the benefit of and be binding upon the
parties hereto, the Certificateholders and their respective successors and
permitted assigns. Except as otherwise provided in this Article XIII and
Section 8.4, no other person will have any right or obligation hereunder.
Section 13.12 Actions by Certificateholders.
(a) Wherever in this Agreement a provision is made that an action may be
taken or a notice, demand or instruction given by Certificateholders, such
action, notice or instruction may be taken or given by any Certificateholder,
unless such provision requires a specific percentage of Certificateholders.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind such Certificateholder
and every subsequent Holder of such 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, Capital or the
Subservicer in reliance thereon, whether or not notation of such action is
made upon such Certificate.
Section 13.13 Merger and Integration.
Except as specifically stated otherwise herein, this Agreement and the
agreements executed pursuant hereto set forth the entire understanding of the
parties with respect 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 13.14 Headings.
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
Section 13.15 Tax Treatment.
Capital has structured this Agreement and the Certificates to facilitate
a secured, credit-enhanced financing on favorable terms with the intention
that the Certificates will constitute
54
<PAGE>
indebtedness of Capital for federal income and state and local tax
purposes; and Capital and each Certificateholder by acceptance of its
Certificate agrees to recognize and report the Certificates as indebtedness
of Capital for purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income, and to report all
receipts and payments relating thereto in a manner that is consistent with
such characterization.
Section 13.16 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.
IN WITNESS WHEREOF, Capital, United, 21st Services and the Trustee have
caused this Agreement to be duly executed by their respective officers as of
the day and first year above written.
CAPITAL:
CAPITAL RESOURCE GROUP ONE, LLC, a
Delaware corporation
By:
---------------------------------------
Printed Name:
-----------------------------
Title:
------------------------------------
TRUSTEE:
THE CHASE MANHATTAN BANK
-------------------------------------------
By:
---------------------------------------
Trustee of SENIOR INSURANCE
SETTLEMENTS FUNDING TRUST 1999
55
<PAGE>
Printed Name:
-----------------------------
Title:
------------------------------------
MASTER SERVICER:
21ST HOLDINGS, LLC, a national insurance
services organization
By:
---------------------------------------
Printed Name:
-----------------------------
Title:
------------------------------------
SUBSERVICER/SELLER:
UNITED FUNDS, LLC, a Delaware corporation
By:
---------------------------------------
Printed Name:
-----------------------------
Title:
------------------------------------
56
<PAGE>
EXHIBIT 2.1
FORM OF ASSIGNMENT OF SENIOR INSURANCE SETTLEMENTS
ASSIGNMENT No. ____ OF SENIOR INSURANCE SETTLEMENTS, dated as of _______,
19__, by CAPITAL RESOURCE GROUP ONE, LLC, ("Capital"), to THE CHASE MANHATTAN
BANK, a state banking association organized and existing under the laws of the
State of New York (the "Trustee") as Trustee for the Trust pursuant to the
Pooling and Servicing Agreement referred to below.
W I T N E S S E T H:
WHEREAS, Capital and the Trustee are parties to the Pooling
and Servicing Agreement, dated as of ________________, 1999 (hereinafter as such
agreement may have been, or may from time to time be, amended, supplemented or
otherwise modified, the "Pooling and Servicing Agreement");
WHEREAS, pursuant to the Pooling and Servicing Agreement, Capital wishes to
transfer Senior Insurance Settlements to the Trustee as part of the corpus of
the Trust (as each such term is defined in the Pooling and Servicing Agreement);
and
WHEREAS, the Trustee is willing to accept such transfer subject to the
terms and conditions hereof;
NOW, THEREFORE, Capital and the Trustee hereby agree as follows:
1. Defined Terms. All capitalized terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when used
herein, unless otherwise defined herein.
"Closing Date" shall mean, with respect to the Senior Insurance Settlements
transferred hereby, _________________, 19__.
2. Transfer of Senior Insurance Settlements.
(a) Capital hereby transfers, assigns and sets-over to the Trust for the
benefit of the Certificateholders, without recourse, on and after the Closing
Date, all right, title and beneficial interest of Capital in and to the
Senior Insurance Settlements, all monies due or to become due with respect
thereto and all proceeds thereof.
(b) In connection with such transfer, Capital agrees to file, if
necessary, any instrument meeting the requirements of applicable state law in
such manner and in such jurisdictions as are necessary to perfect the
transfer of such Senior Insurance Settlements to the Trust.
<PAGE>
(c) In connection with such transfer, capital further agrees, at its own
expense, on or prior to the date of this Assignment, to indicate or to cause
to be indicated in its computer files that Senior Insurance Settlement
transferred hereby have been transferred to the Trust pursuant to this
Assignment for the benefit of the Certificateholders.
3. Delivery of List of Senior Insurance Settlements. Capital does hereby
deliver herewith a computer file, hard copy or microfiche list containing a
true and complete list of each Senior Insurance Settlement as of the Closing
Date, as the case may be, such Senior Insurance Settlements being identified
by account number. Such list is marked as Schedule 1 to this Assignment and
the Pooling and Servicing Agreement.
4. Accepting by Trustee. Subject to the satisfaction of the conditions set
forth in Section 5, the Trustee hereby acknowledges its acceptance on behalf of
the Trust of all right, title and beneficial interest previously held by Capital
and in and to the Senior Insurance Settlements transferred hereby. The Trustee
further acknowledges that, prior to or simultaneously with the execution and
delivery of this Assignment, Capital delivered to the Trustee the computer file,
hard copy or microfiche list described in Section 3 of this Assignment.
5. Conditions Precedent. The acceptance of the Trustee set forth in
Section 4 and the amendment of the Pooling and Servicing Agreement set forth
in Section 6 is subject to the condition that Capital shall have delivered to
the Trustee a certificate of a Vice President or more senior officer,
certifying that all applicable requirements of Section 2.1 and 2.5 of the
Pooling and Servicing Agreement have been met and all representations and
warranties of Capital set forth in Sections 2.3, 2.4(a), 2.4(b), 2.4(d) and
2.4(e) of the Pooling and Servicing Agreement are true and correct.
6. Amendment of the Pooling and Servicing Agreement. The Pooling and
Servicing Agreement is hereby amended by providing that all reference to the
"Pooling and Servicing Agreement," to "this Agreement" and "herein" shall be
deemed from and after the Closing Date to be a dual reference to the Pooling
and Servicing Agreement as supplemented by this Agreement. Except as
expressly amended hereby, all of the representations, warranties, terms,
covenants and conditions of the Pooling and Servicing Agreement shall remain
unamended and shall continue to be, and shall remain, in full force and
effect in accordance with its terms and except as expressly provided herein
shall not constitute or be deemed to constitute a waiver of compliance with
or consent to non-compliance with any term or provision of the Pooling and
Servicing Agreement.
(2)
<PAGE>
7. Counterparts. This Assignment may be executed in any number of
counterparts all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned have caused this Assignment of
Senior Insurance Settlements to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.
CAPITAL RESOURCE GROUP ONE, LLC
as Transferor
By:
----------------------------------
Title:
---------------------------
THE CHASE MANHATTAN BANK
as Trustee
By:
----------------------------------
Title:
---------------------------
Acknowledged:
21st HOLDINGS, LLC
as Master Servicer
By:
----------------------------------
Title:
---------------------------
<PAGE>
SCHEDULE 1
LIST OF SENIOR INSURANCE SETTLEMENTS
<PAGE>
EXHIBIT 3.4A
Form of Closing Date Report
Pursuant to the Pooling and Servicing Agreement dated as of ___________,
1999 (the "Pooling and Servicing Agreement") by and among 21st Holdings, LLC, as
Master Servicer (the "Master Servicer"), Capital Resource Group One, LLC
("Capital"), The Chase Manhattan Bank, as trustee (the "Trustee"), and United
Funds, LLC ("United"), as Subservicer, the undersigned, a duly authorized
representative of the Subservicer, hereby certifies as follows:
1. Capitalized terms used in this Certificate have their respective
meanings set forth in the Pooling and Servicing Agreement.
2. This Certificate is delivered pursuant to Section 3.4(a) of the Pooling
and Servicing Agreement.
3. Pursuant to the Pooling and Servicing Agreement, the undersigned is duly
authorized to execute and to deliver this Officer's Certificate to the Trustee
and Capital.
4. United is the Subservicer appointed to perform the obligations of the
Subservicer under the Pooling and Servicing Agreement.
5. The aggregate amount of Collections attributable to Senior Insurance
Settlements as of the end of the last Business Day of the preceding week is
$______________________.
6. The amount of Senior Insurance Settlements to be purchased on the
initial Closing Date or the amount of Senior Insurance Settlements purchased
since the immediately preceding Closing Date, as measured by the Senior
Insurance Settlements Purchase Price expended therefor and by their face values,
is: $ ______________.
(a) Senior Insurance Settlements Purchase Price expended:
$_______________.
(b) Total Face Value: $ _____________.
IN WITNESS WHEREOF, the undersigned has duly executed this certificate this
____ day of _______________, 1999.
By: ______________________
Title:
<PAGE>
EXHIBIT 3.4C
Form of Semi-Annual Subservicer's Certificate
Pursuant to the Pooling and Servicing Agreement dated as of December ___,
1999 (the "Pooling and Servicing Agreement") by and among Capital Resource Group
One, LLC ("Capital"), 21st Holdings, LLC, as Master Servicer (the "Master
Servicer" or "21st Services"), The Chase Manhattan Bank, as trustee (the
"Trustee"), and United Funds, LLC ("United"), as the Subservicer, the
undersigned, a duly authorized representative of the Subservicer, does hereby
certify as follows:
<TABLE>
<S> <C>
1. Capitalized terms used in this Certificate have their respective
meanings set forth in the Pooling and Servicing Agreement.
2. This Certificate is delivered pursuant to Section 3.4(c) of the
Pooling and Servicing Agreement.
3. United is the Subservicer appointed to perform the obligations of
the Subservicer under the Pooling and Servicing Agreement.
4. The undersigned is a Servicing Officer.
5. The aggregate amount of Collections processed during the preceding
six months is: $ ___________
6. The aggregate amount of Senior Insurance Settlements balance on
deposit in the Senior Insurance Settlements Account with respect to
Collections processed as of the end of the last day of the preceding
six months is: $ ___________
7. The aggregate amount, if any, of withdrawals from the Liquidity
Account required to be made on the next succeeding Transfer Date is: $ ___________
8. The aggregate amount of funds, if any, to be deposited in the
Liquidity Account on the next succeeding Transfer Date is: $ ___________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9. Attached hereto is a true and correct copy of the statement
required by Section 5.2 of the Pooling and Servicing Agreement.
10. The sum of all amounts payable to Certificateholders on the next
succeeding Distribution Date with respect to Certificates is:
Certificate Principal $ ___________
Certificate Interest $ ___________
Deficiency Amount $ ___________
11. The interest and earnings from the Senior Insurance Settlements
Account and Liquidity Account (net of losses and investment expenses
related to the Permitted Investments in which the funds in such accounts
were invested) for the preceding six months is: $ ___________
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
certificate this ____ day of ___________________, 199__.
By: _________________________
Title
</TABLE>
(2)
<PAGE>
EXHIBIT 4.4
FORM OF MONTHLY PAYMENT INSTRUCTIONS
AND NOTIFICATION TO THE TRUSTEE
The undersigned, a duly authorized representative of UNITED FUNDS, LLC
("United"), as Subservicer, pursuant to the Pooling and Servicing Agreement
dated as of December ___, 1999 (the "Pooling and Servicing Agreement") by and
among CAPITAL RESOURCE GROUP ONE, LLC ("Capital"), 21ST HOLDINGS, LLC, as Master
Servicer (the "Master Servicer"), THE CHASE MANHATTAN BANK, as Trustee (the
"Trustee"), and United, does hereby certify as follows:
(A) Capitalized terms used in this certificate have the meanings specified
in the Pooling and Servicing Agreement; provided, that the "Preceding Six-Month
Period" shall mean the Six-Month Period immediately preceding the calendar month
in which this Certificate is delivered. References herein to certain sections
and subsections are references to the respective sections, and subsections of
the Pooling and Servicing Agreement. This certificate is delivered pursuant to
Section 4.4 of the Pooling and Servicing Agreement.
(B) United is the Subservicer under the Pooling and Servicing Agreement.
(C) The undersigned is a Servicing officer.
(D) The date of this notice is a Fee Determination Date under the Pooling
and Servicing Agreement.
I. INSTRUCTIONS TO MAKE WITHDRAWALS
Pursuant to Section 4.4, the Subservicer does hereby instruct the Trustee
(i) to make withdrawals from the Senior Insurance Settlements Account to the
extent funds are available from the Collections attributable to Senior Insurance
Settlements processed during the preceding month and (a) deposit in the
Distribution Account on ______________________, 199_ being the succeeding
Transfer Date under the Pooling and Servicing Agreement, plus the amounts from
the Liquidity Account, in an aggregate amount as set forth below with respect to
the following amounts and (b) deposit into the Liquidity Account, and (ii) to
apply the proceeds of such withdrawals in accordance with Sections 4.4 and 4.5
as follows:
<TABLE>
<S> <C> <C> <C>
A. Pursuant to subsection 4.4.(a):
(1)a. Trustee's Fees $_____________
b. Expenses of the Trustee, including reasonable
attorney's fees, which have been supported by bills,
invoices, receipts and other appropriate
documentation presented to Capital and Subservicer $_____________
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
(2)a. Master Servicer's Fees $_____________
b. Expenses of the Master Servicer, including reasonable
attorney's fees, which have been supported by bills,
invoices, receipts and other appropriate
documentation presented to Capital and Subservicer $____________
c. Successor Servicer's Fees, if any $____________
(3) Interest calculated at the Certificate Rate for the
Preceding Six-Month Period on the outstanding
principal amount of the Certificates determined on
the first day of such Preceding
Six-Month Period $____________
(4) Previously unpaid Deficiency Amounts to be paid
as per this Certificate $____________
B. Pursuant to subsection 4.4(b):
(5)a. Monthly Subservicing Fee $____________
b. Accrued Unpaid Monthly Subservicing Fee $____________
c. Successor Servicer Fee, if any $____________
C. Pursuant to subsection 4.4(c):
(6)a. Funds to be transferred to the Liquidity Account $____________
Total $____________
</TABLE>
II. WITHDRAWALS TO BE MADE FROM THE LIQUIDITY ACCOUNT
Pursuant to Section 4.4(a), the Trustee shall withdraw from the Liquidity
Account in an aggregate amount as set forth below with respect of the following
<PAGE>
amounts and shall apply on _______________, the immediately succeeding Transfer
Date, the proceeds of such withdrawal, pursuant to the provisions of Section
4.4.(a):
<TABLE>
<S> <C> <C> <C>
A. Pursuant to subsection 4.4(a):
(1) Trustee's Fees and Trustee's expenses remaining
unpaid from the Collections attributable to Senior
Insurance Settlements from the Preceding
Six-Month Period $____________
(2) Standby Servicer's Fees (or Successor Servicer's
Fees, if any) remaining unpaid from the Collections
attributable to Senior Insurance Settlements from the
Preceding Six-Month Period $____________
(3) Interest at the Certificate Rate for the
Preceding Six-Month Period on the outstanding
principal amount of the Certificates, determined
on the first day of such month, to be paid on
the immediately succeeding Transfer Date but
which remains unpaid from the Collections
attributable to Senior Insurance Settlements
from the Preceding Six-Month Period $____________
(4) Previously unpaid Deficiency Amounts to be paid on
the immediately succeeding Transfer Date but which
remains unpaid from the Collections attributable to
Senior Insurance Settlements from the Six-Month
Period $____________
Total $____________
</TABLE>
III. ACCRUED AND UNPAID, AND DEFICIENT AMOUNTS
After giving effect to the withdrawals to be made in accordance with this
Certificate, the following amounts will be accrued and unpaid wish respect to
all Monthly Periods preceding the current calendar month:
<PAGE>
<TABLE>
<S> <C> <C> <C>
(A) Subsection 4.4(a):
The aggregate amount of all Deficiency Amounts $____________
(B) Subsection 4.4(b):
The accrued and unpaid Monthly Servicing Fee $____________
(C) Subsection 4.4(c):
The amount deposited into the Liquidity Account $____________
Total $____________
</TABLE>
IN WITNESS WHEREOF, the undersigned has duly executed this certificate this
__ day of __________________, 19___.
UNITED FUNDS, LLC
By: _________________________________
Title: _____________________________
<PAGE>
EXHIBIT 5.2
Form of Semi-Annual Certificateholders' Statement
Under the Pooling and Servicing Agreement dated as of December __, 1999 by
and among Capital Resource Group One, LLC ("Capital"), 21st Holdings, LLC, as
Master Servicer (the "Master Servicer"), The Chase Manhattan Bank, as trustee
(the "Trustee" thereunder), and United Fund, LLC ("Seller" and "Subservicer"
thereunder), the Subservicer is required to prepare, on each Distribution Date,
a Semi-Annual Certificateholders' Statement which shall contain certain
information regarding current distributions to Certificateholders and the
performance of the Trust during the previous six months, as more fully described
in Section 5.2 of the Pooling and Servicing Agreement. The information which is
required to be prepared with respect to the distributions of Certificate
Interest and Certificate Principal and with respect to the performance of the
Trust during the six months ended December 31, 1999 is set forth below. As
indicated, certain of the information is presented on the basis of an original
principal amount of One Thousand and No/100 Dollars ($1,000.00) per Certificate.
As further indicated, certain other information is presented based on the
aggregate amounts for the Trust as a whole. Capitalized terms used in this
Certificate have their respective meanings set forth in the Pooling and
Servicing Agreement.
<TABLE>
<S> <C> <C> <C>
A. Information Regarding the Current Semi-Annual Distribution (Stated on the
Basis of $1,000 Original Principal Amount Per Certificate).
1. The total amount of the distribution to Certificateholders
on _______, 1999, on the basis of an original principal amount
of One Thousand and No/100 Dollars ($1,000.00) per Certificate $____________
2. The amount of the distribution set forth in paragraph 1
above allocable to Certificate Principal on the basis of an
original principal amount of One Thousand and No/100 Dollars
($1,000.00) per Certificate: $____________
3. The amount of the distribution set forth in paragraph 1
allocable to Certificate Interest on the basis of an original
principal amount of One Thousand and No/100 Dollars
($1,000.00) per Certificate: $____________
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
B. Information Regarding the Performance of the Trust
1. Collections of Senior Insurance Settlements.
The aggregate amount of Collections attributable
to Senior Insurance Settlements processed during
the preceding six months: $___________
2. Senior Insurance Settlements in the Trust.
The aggregate outstanding balance of Senior Insurance
Settlements in the Trust as of the last day of the
preceding six months: $___________
3. Monthly Servicing Fee.
The amount of the Monthly Subservicing Fee payable by the
Trust to the Subservicer for the preceding six months: $___________
4. Liquidity Account.
(a) The aggregate amount of funds deposited in the
Liquidity Account as of the current Distribution
Date: $___________
(b) The Minimum Liquidity Account Amount as of the
current Distribution Date after giving effect to any
payment of Certificate Interest and
Certificate Principal: $___________
5. Trustee.
(a) The amount of Trustee's Fee for the preceding
six months: $___________
</TABLE>
(2)
<PAGE>
<TABLE>
<S> <C> <C> <C>
(b) The expenses of the Trustee for the preceding
six months: $___________
6. Master Servicer.
The amount of Master Servicer's Fee for the preceding
six months: $___________
</TABLE>
By: _________________________
Title:
of United Funds, LLC, Subservicer
(3)
<PAGE>
EXHIBIT 6.1A
FORM OF CERTIFICATE
(Face of Certificate]
SENIOR INSURANCE SETTLEMENTS FUNDING TRUST 1999
9% Asset Backed Certificates
Evidencing an undivided fractional interest in a trust,
the property of which includes a portfolio
of senior insurance settlements
CAPITAL RESOURCE GROUP ONE, LLC
a Delaware limited liability company
(This Certificate does not represent an interest in or
obligation of Capital Resource Group One, LLC
or any affiliate thereof)
$_________________
No. _____________ Principal Certificate Amount
This certifies that ______________________________ is the registered owner
of a nonassessable, fully paid, fractional undivided interest in the Senior
Insurance Settlements Funding Trust 1999 (the "Trust"). The Trust has been
created pursuant to the Pooling and Servicing Agreement (the "Agreement") dated
as of December ___, 1999, among CAPITAL RESOURCE GROUP ONE, LLC ("Capital"),
21ST HOLDINGS, LLC, as the Master Servicer (the "Master Servicer"), THE CHASE
MANHATTAN BANK, as the trustee (the "Trustee") of the Trust and UNITED FUNDS,
LLC, a Delaware limited liability company (the "Subservicer"). The assets of the
Trust consist of (i) a pool of Senior Insurance Settlements which shall consist
of amounts payable by insurance companies upon the death of the insured and
related documentation and files, (ii) monies due or to become due with respect
to the Senior Insurance Settlements, (iii) all of Capital's rights, remedies,
powers and privileges with respect to the Senior Insurance Settlements under
that certain Senior Insurance Settlements Purchase Agreement, and (iv) monies on
deposit in the Lockbox, Senior Insurance Settlements, Distribution and Liquidity
Accounts of the Trust.
To the extent not defined herein, capitalized terms used herein have the
meanings assigned thereto in the Agreement. This Certificate is issued under and
is subject to the terms, provisions and conditions of the Agreement, to which
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound.
Subject to the terms and conditions of the Agreement (including the
availability of funds for semi-annual distributions), and until the obligations
<PAGE>
created by the Agreement shall have terminated in accordance therewith, the
Trustee shall distribute to the Certificateholders on the fifteenth (15th) day
of each six month period (beginning the month after the month in which the first
Closing Date occurs) or, if such fifteenth (15th) day is not a Business Day, the
next succeeding Business Day (the "Distribution Date"), commencing on
____________ 15, 2000, to the person in whose name this Certificate is
registered at the close of business on the last Business Day of the month
immediately preceding the month of such distribution (the "Record Date"), the
Certificate Interest and Certificate Principal (each as determined in accordance
with the Agreement), but only from funds distributed from the Senior Insurance
Settlements Account and, if necessary, from the Liquidity Account on such
Distribution Date.
If a Subservicer Default has occurred and is continuing with respect to the
Subservicer, either the Trustee or Holders of Certificates representing in
excess of fifty-one percent (51%) of the principal amount of the Certificates
then outstanding, by notice in writing to the Subservicer, may terminate all of
the rights and obligations of the Subservicer. Upon such termination, the
Trustee shall, subject to the ( terms and conditions of the Agreement), appoint
a Successor Servicer.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, procedures and duties evidenced hereby. Copies of the
Agreement and all amendments thereto will be provided to any Certificateholder
free of charge to the Certificateholder upon a written request to the Trustee,
at its principal Corporate Trust Office, 450 W. 33rd Street, 15th Floor, New
York, New York 10001. Reference is also hereby made to the reverse of this
Certificate.
IN WITNESS WHEREOF, Capital has caused this Certificate to be duly executed
as of the date of its authentication as set forth below.
CAPITAL RESOURCE GROUP ONE, LLC
By: ________________________________
[Seal] Title:
Attest:
By: ________________________
Title:
(2)
<PAGE>
CERTIFICATE OF AUTHENTICATION OF TRUSTEE
Pursuant to Article VI of the Pooling and Servicing Agreement, The Chase
Manhattan Bank, as Trustee of Senior Insurance Settlements Funding Trust 1999
(the "Trust"), hereby causes this Certificate to be authenticated as of the ___
day ___________ of 1999 as evidenced by the manual signature of its duly
authorized signatory below.
The Chase Manhattan Bank
as the Trustee
By: ________________________________
As Authenticating Agent
for the Trustee
By: ________________________________
Authorized Officer
<PAGE>
[Reverse of Certificate]
It is the intent of Capital and the Certificateholders that for federal and
state income and franchise tax purposes only, the Certificates will constitute
evidence of indebtedness of Capital. Capital and the Certificateholder, by the
acceptance of this Certificate, agree to treat this Certificate for federal and
state income and franchise tax purposes as indebtedness of Capital secured by
the Senior Insurance Settlements and other assets held in the Trust.
To the extent not defined herein, the capitalized terms used herein have
the meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Certificateholder by virtue of the
acceptance hereof, assents and by which the Certificateholder is bound.
This Certificate is one of a series of Certificates entitled "Senior
Insurance Settlements Funding Trust 1999, 9.0% Asset Backed Certificates" or
"Senior Insurance Settlements Funding Trust 1999, 9.25% Asset Backed
Certificates" (the "Certificates"), each of which represents a fractional
undivided interest in the Trust including the right to receive the Collections
and other amounts at the times and in the amounts specified in the Agreement to
be deposited in the Investor Accounts or paid to the Certificateholders. The
aggregate interest represented by the Certificates in the Senior Insurance
Settlements in the Trust shall at any time equal one hundred percent (100%).
During the Acquisition Period, which begins on the date of issuance of this
Certificate, and the Amortization Period, Certificate interest at the rate
specified above will be distributed on the fifteenth (15th) day of each calendar
six-month period with respect to interest accrued during the preceding six
months, commencing in the month following the month of issuance of this
Certificate, or if such fifteenth (15th) day is not a Business Day, on the next
succeeding Business Day (a "Distribution Date") to the Certificateholder of
record as of the last Business Day of the month preceding the related
Distribution Date (the "Record Date"). After the Final Maturity Date, which is
scheduled to begin on ______________, 200_, except in certain limited
circumstances as forth in the Agreement, Certificate Principal, in accordance
with the Agreement, collected by the Subservicer will be distributed to the
Certificateholder on the Distribution Date following the Final Maturity Date.
The amount to be distributed on each Distribution Date to the holder of
this Certificate will be equal to the pro rata share evidenced by this
Certificate of amounts on deposit in the Senior Insurance Settlements Account as
are payable to the Certificateholders an such Distribution Date. Distributions
with respect to this Certificate will be made by the Trustee by check mailed to
the address of the Certificateholder of record appearing in the Certificate
Register (except for the final distribution with respect to this Certificate)
without the presentation or surrender of this Certificate or the making of any
notation thereon.
<PAGE>
This Certificate does not represent an obligation of, or an interest in,
Capital or the Subservicer. This Certificate is limited in right of payment to
certain Collections respecting the Senior Insurance Settlements, all as more
specifically set forth hereinabove and in the Agreement.
The Agreement permits, with certain exceptions, the amendment thereof and
the modification of the rights and obligations of Capital, the Subservicer and
the rights of Certificateholder under the Agreement at any time by the Master
Servicer, Subservicer, Capital and the Trustee in certain cases without the
consent of the Certificateholders and in all other cases with the consent of the
Holders of Certificates representing not less than sixty-six and two-thirds
percent (66-2/3%) of the principal amount of Certificates then outstanding;
provided, however, that no such amendment shall (a) reduce in any manner the
amount of, or delay the timing of distributions which are required to be made on
any Certificate or (b) reduce the aforesaid percentage required to consent to
any such amendment, without the consent of each Certificateholder then of
record. Any such amendment and any such consent by this Certificateholder shall
be conclusive and binding on such Certificateholder and upon all future Holders
of this Certificate and of any Certificate issued in exchange hereof or in lieu
hereof whether or not notation thereof is made upon this Certificate.
The transfer of this Certificate shall be registered in the Certificate
Register upon surrender of this Certificate for registration of transfer at any
office or agency maintained by the Trustee (who shall also act as the Transfer
Agent and Registrar) accompanied by a written instrument of transfer in a form
satisfactory to the Trustee, duly executed by the Certificateholder or such
Certificateholder's attorney duly authorized in writing, and thereupon one or
more new Certificates of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations therein set
forth, Certificates are exchangeable for new Certificates evidencing like
aggregate principal amounts, as requested by the Certificateholders surrendering
such Certificates. No service charge may be imposed for any such exchange to the
Certificateholder, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with such exchange.
The Trustee and any of its agents may treat the person in whose name this
Certificate is registered as the owner of this Certificate for all purposes, and
neither the Trust, Trustee, nor any agent of any of them shall be affected by
notice to the contrary except in certain circumstances described in the
Agreement.
Subject to certain conditions in the Agreement, if the principal of the
Certificates has not been paid in full prior to _______________, 200_, the
obligations created by the Agreement and the Trust shall terminate on the last
business day in _____________________.
<PAGE>
EXHIBIT 6.1B
FORM OF CERTIFICATE
(Face of Certificate]
SENIOR INSURANCE SETTLEMENTS FUNDING TRUST 1999
9.25% Asset Backed Certificates
Evidencing an undivided fractional interest in a trust,
the property of which includes a portfolio
of senior insurance settlements
CAPITAL RESOURCE GROUP ONE, LLC
a Delaware limited liability company
(This Certificate does not represent an interest in or
obligation of Capital Resource Group One, LLC
or any affiliate thereof)
$________________
No. _____________ Principal Certificate Amount
This certifies that ______________________________ is the registered owner
of a nonassessable, fully paid, fractional undivided interest in the Senior
Insurance Settlements Funding Trust 1999 (the "Trust"). The Trust has been
created pursuant to the Pooling and Servicing Agreement (the "Agreement") dated
as of December ___, 1999, among CAPITAL RESOURCE GROUP ONE, LLC ("Capital"),
21ST HOLDINGS, LLC, as the Master Servicer (the "Master Servicer"), THE CHASE
MANHATTAN BANK, as the trustee (the "Trustee") of the Trust and UNITED FUNDS,
LLC, a Delaware limited liability company (the "Subservicer"). The assets of the
Trust consist of (i) a pool of Senior Insurance Settlements which shall consist
of amounts payable by insurance companies upon the death of the insured and
related documentation and files, (ii) monies due or to become due with respect
to the Senior Insurance Settlements, (iii) all of Capital's rights, remedies,
powers and privileges with respect to the Senior Insurance Settlements under
that certain Senior Insurance Settlements Purchase Agreement, and (iv) monies on
deposit in the Lockbox, Senior Insurance Settlements, Distribution and Liquidity
Accounts of the Trust.
To the extent not defined herein, capitalized terms used herein have the
meanings assigned thereto in the Agreement. This Certificate is issued under and
is subject to the terms, provisions and conditions of the Agreement, to which
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound.
Subject to the terms and conditions of the Agreement (including the
availability of funds for semi-annual distributions), and until the obligations
<PAGE>
created by the Agreement shall have terminated in accordance therewith, the
Trustee shall distribute to the Certificateholders on the fifteenth (15th) day
of each six month period (beginning the month after the month in which the first
Closing Date occurs) or, if such fifteenth (15th) day is not a Business Day, the
next succeeding Business Day (the "Distribution Date"), commencing on
____________ 15, 2000, to the person in whose name this Certificate is
registered at the close of business on the last Business Day of the month
immediately preceding the month of such distribution (the "Record Date"), the
Certificate Interest and Certificate Principal (each as determined in accordance
with the Agreement), but only from funds distributed from the Senior Insurance
Settlements Account and, if necessary, from the Liquidity Account on such
Distribution Date.
If a Subservicer Default has occurred and is continuing with respect to the
Subservicer, either the Trustee or Holders of Certificates representing in
excess of fifty-one percent (51%) of the principal amount of the Certificates
then outstanding, by notice in writing to the Subservicer, may terminate all of
the rights and obligations of the Subservicer. Upon such termination, the
Trustee shall, subject to the (terms and conditions of the Agreement), appoint
a Successor Servicer.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, procedures and duties evidenced hereby. Copies of the
Agreement and all amendments thereto will be provided to any Certificateholder
free of charge to the Certificateholder upon a written request to the Trustee,
at its principal Corporate Trust Office, 450 W. 33rd Street, 15th Floor, New
York, New York 10001. Reference is also hereby made to the reverse of this
Certificate.
IN WITNESS WHEREOF, Capital has caused this Certificate to be duly executed
as of the date of its authentication as set forth below.
CAPITAL RESOURCE GROUP ONE, LLC
By: ________________________________
[Seal] Title:
Attest:
By: ________________________
Title:
(2)
<PAGE>
CERTIFICATE OF AUTHENTICATION OF TRUSTEE
Pursuant to Article VI of the Pooling and Servicing Agreement, The Chase
Manhattan Bank, as Trustee of Senior Insurance Settlements Funding Trust 1999
(the "Trust"), hereby causes this Certificate to be authenticated as of the ___
day ___________ of 1999 as evidenced by the manual signature of its duly
authorized signatory below.
The Chase Manhattan Bank
as the Trustee
By: ________________________________
As Authenticating Agent
for the Trustee
By: ________________________________
Authorized Officer
<PAGE>
[Reverse of Certificate]
It is the intent of Capital and the Certificateholders that for federal and
state income and franchise tax purposes only, the Certificates will constitute
evidence of indebtedness of Capital. Capital and the Certificateholder, by the
acceptance of this Certificate, agree to treat this Certificate for federal and
state income and franchise tax purposes as indebtedness of Capital secured by
the Senior Insurance Settlements and other assets held in the Trust.
To the extent not defined herein, the capitalized terms used herein have
the meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Certificateholder by virtue of the
acceptance hereof, assents and by which the Certificateholder is bound.
This Certificate is one of a series of Certificates entitled "Senior
Insurance Settlements Funding Trust 1999, 9.0% Asset Backed Certificates" or
"Senior Insurance Settlements Funding Trust 1999, 9.25% Asset Backed
Certificates" (the "Certificates"), each of which represents a fractional
undivided interest in the Trust including the right to receive the Collections
and other amounts at the times and in the amounts specified in the Agreement to
be deposited in the Investor Accounts or paid to the Certificateholders. The
aggregate interest represented by the Certificates in the Senior Insurance
Settlements in the Trust shall at any time equal one hundred percent (100%).
During the Acquisition Period, which begins on the date of issuance of this
Certificate, and the Amortization Period, Certificate interest at the rate
specified above will be distributed on the fifteenth (15th) day of each calendar
six-month period with respect to interest accrued during the preceding six
months, commencing in the month following the month of issuance of this
Certificate, or if such fifteenth (15th) day is not a Business Day, on the next
succeeding Business Day (a "Distribution Date") to the Certificateholder of
record as of the last Business Day of the month preceding the related
Distribution Date (the "Record Date"). After the Final Maturity Date, which is
scheduled to begin on ______________, 200_, except in certain limited
circumstances as forth in the Agreement, Certificate Principal, in accordance
with the Agreement, collected by the Subservicer will be distributed to the
Certificateholder on the Distribution Date following the Final Maturity Date.
The amount to be distributed on each Distribution Date to the holder of
this Certificate will be equal to the pro rata share evidenced by this
Certificate of amounts on deposit in the Senior Insurance Settlements Account as
are payable to the Certificateholders an such Distribution Date. Distributions
with respect to this Certificate will be made by the Trustee by check mailed to
the address of the Certificateholder of record appearing in the Certificate
Register (except for the final distribution with respect to this Certificate)
without the presentation or surrender of this Certificate or the making of any
notation thereon.
<PAGE>
This Certificate does not represent an obligation of, or an interest in,
Capital or the Subservicer. This Certificate is limited in right of payment to
certain Collections respecting the Senior Insurance Settlements, all as more
specifically set forth hereinabove and in the Agreement.
The Agreement permits, with certain exceptions, the amendment thereof and
the modification of the rights and obligations of Capital, the Subservicer and
the rights of Certificateholder under the Agreement at any time by the Master
Servicer, Subservicer, Capital and the Trustee in certain cases without the
consent of the Certificateholders and in all other cases with the consent of the
Holders of Certificates representing not less than sixty-six and two-thirds
percent (66-2/3%) of the principal amount of Certificates then outstanding;
provided, however, that no such amendment shall (a) reduce in any manner the
amount of, or delay the timing of distributions which are required to be made on
any Certificate or (b) reduce the aforesaid percentage required to consent to
any such amendment, without the consent of each Certificateholder then of
record. Any such amendment and any such consent by this Certificateholder shall
be conclusive and binding on such Certificateholder and upon all future Holders
of this Certificate and of any Certificate issued in exchange hereof or in lieu
hereof whether or not notation thereof is made upon this Certificate.
The transfer of this Certificate shall be registered in the Certificate
Register upon surrender of this Certificate for registration of transfer at any
office or agency maintained by the Trustee (who shall also act as the Transfer
Agent and Registrar) accompanied by a written instrument of transfer in a form
satisfactory to the Trustee, duly executed by the Certificateholder or such
Certificateholder's attorney duly authorized in writing, and thereupon one or
more new Certificates of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations therein set
forth, Certificates are exchangeable for new Certificates evidencing like
aggregate principal amounts, as requested by the Certificateholders surrendering
such Certificates. No service charge may be imposed for any such exchange to the
Certificateholder, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with such exchange.
The Trustee and any of its agents may treat the person in whose name this
Certificate is registered as the owner of this Certificate for all purposes, and
neither the Trust, Trustee, nor any agent of any of them shall be affected by
notice to the contrary except in certain circumstances described in the
Agreement.
Subject to certain conditions in the Agreement, if the principal of the
Certificates has not been paid in full prior to _______________, 200_, the
obligations created by the Agreement and the Trust shall terminate on the last
business day in _____________________.
(2)
Exhibit 10.1
December ___, 1999
Capital Resource Group One, LLC
650 E. Carmel Drive
Suite 150
Carmel, Indiana 46032
Gentlemen:
This letter is to set forth the understanding among Capital Resource Group
One, LLC, originator of the Trust, as hereinafter defined ("Capital"), United
Funds, LLC, the sole shareholder of the Capital ("United"), and Pryor, Counts &
Co., Inc. (the "Placement Agent") with respect to the offering of up to
$150,000,000 principal amount of 9.0% and 9.25% Senior Insurance Settlements
Assets Backed Certificates (the "Certificates") to be issued by the Senior
Insurance Settlements Funding Trust 1999 (the "Trust"). Capital has engaged the
Placement Agent to represent Capital as agent for the purpose of selling the
Certificates pursuant to a Prospectus dated December ___, 1999 (the
"Prospectus"), upon the terms set forth below:
1. Employment of the Placement Agent.
(a) Subject to the terms and conditions hereinafter set forth, Capital
hereby retains the Placement Agent as its agent, commencing on the date
hereof, until December ___, 2000 (the "Offering Period"), for the purpose
of offering and selling up to $150,000,000 principal amount of Certificates
as provided in this Agreement and in the Registration Statement and
Prospectus on a best-efforts basis. Although the Placement Agent agrees to
<PAGE>
use its best effort to sell such principal amount of Certificates as
Capital's agent, it is expressly understood and agreed that the Placement
Agent will not purchase any of the Certificates.
(b) As compensation for the services rendered by the Placement Agent
hereunder, Capital shall pay the Placement Agent a fee equal to three and
one-half percent (3.5%) of the principal amount of subscriptions for the
Certificates obtained by the Placement Agent (the "Placement Agent's Fee").
In addition, Capital will grant to the Placement Agent a right entitling
the Placement Agent to receive up to 2.75% and 10% of the assets,
respectively, if any, remaining in Tranche I and Tranche II of the Trust,
respectively, after all interest and principal payments have been made to
Certificateholders.
(c) All funds received from subscribers for Certificates shall be
deposited into an escrow account established by Capital with The Chase
Manhattan Bank (the "Escrow Agent") pursuant to an Escrow Agreement dated
December ___, 1999, (the "Escrow Agreement"). All subscriber's checks shall
be made payable to "THE CHASE MANHATTAN BANK ESCROW ACCOUNT FOR SENIOR
INSURANCE SETTLEMENTS FUNDING TRUST 1999" and upon receipt by the Placement
Agent and/or other participating broker/dealers, will be transmitted
directly to the Escrow Agent by noon of the following business day. Capital
shall direct the Escrow Agent, pursuant to the Escrow Agreement, to remit
to the Placement Agent, the Placement Agent's Fee due to the Placement
Agent at each Closing Date (as hereinafter defined).
(2)
<PAGE>
(d) If subscriptions for at least $20,000,000 face amount of
Certificates are not paid to Capital during the first ninety (90) days of
the Offering Period (subject to Capital's option to extend that period for
thirty (30) days), Capital shall direct the Escrow Agent, pursuant to the
Escrow Agreement, to promptly refund in full to the subscribers all funds
deposited with the Escrow Agent pursuant to the Escrow Agreement, with
interest thereon. In such event, neither party hereto shall have any
liability to the other hereunder.
(e) The closing of the sale of the Certificates placed by the
Placement Agent shall take place in one or more partial closings, the last
date or dates on which each such closing occurs being herein called a
Closing Date. Certificates, registered in such names as shall be provided
for in the agreements signed and delivered to the Placement Agent by the
subscribers for the Certificates, shall be delivered to the Placement Agent
at each closing. Capital shall permit the Placement Agent to examine and
package such Certificates for delivery at least one (1) full business day
prior to each Closing Date.
(f) It is understood and agreed that Capital, in its sole discretion,
may terminate the offering of the Certificates at any time.
2. Representations and Warranties of Capital.
Capital represents and warrants to the Placement Agent as follows:
(a) Capital has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware with the corporate
power and authority to own its properties and conduct its business as
described in the Prospectus and Registration Statement.
(3)
<PAGE>
(b) United has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware with the corporate
power and authority to own its properties and conduct its business as
described in the Prospectus and Registration Statement.
(c) The Registration Statement and Prospectus, and any amendments of
supplements thereto, as of the date hereof, and at all subsequent times
through the termination of the offering (as defined in the Registration
Statement and Prospectus), shall in all material respects conform to all
applicable provisions of the Securities Act of 1933, as amended (the
"Act"), the rules and regulations promulgated thereunder (the "Rules and
Regulations"), and the state securities laws of each jurisdiction in which
an offeree resides (the "State Acts"), and shall not contain any untrue
statement of material fact or omit to state any material fact required to b
stated therein or necessary to make the statements therein not misleading.
As used in this Agreement, "Registration Statement" refers to and means the
Registration Statement on Form S-1 (File No. 333-90439) with respect to the
Certificates and all amendments thereto; "Prospectus" refers to and means
the Prospectus included in the Registration Statement before it is declared
effective by the Securities and Exchange Commission.
(d) This Agreement is a legal, valid, and binding obligation of
Capital and United, enforceable against Capital and United in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, and other laws affecting
(4)
<PAGE>
the rights of creditors, or by general principles of equity and except as
rights to indemnity and contribution hereunder may be limited by applicable
law.
(e) Except as disclosed in the Registration Statement and Prospectus,
Capital has no knowledge of any existing violation by Capital or United of
any federal or state law, statutes, ordinance, regulation, or order that
would have material adverse effect on the ability of Capital to conduct the
offering of the Certificates or the ability of Capital or United to perform
its obligations under this Agreement.
3. Covenants of Capital.
Capital covenants with the Placement Agent as follows:
(a) To make no amendment or supplement to the Registration Statement
or Prospectus of which the Placement Agent has not been furnished with a
copy prior to the use thereof, or to which the Placement Agent shall
reasonably object in writing; to advise the Placement Agent promptly of the
issuance of any stop order or any similar order by the Securities and
Exchange Commission or state securities commission or agency or the
suspension of the qualification of the Certificates for sale in any state.
(b) To furnish to the Placement Agent without charge copies of the
Registration Statement and Prospectus, including all exhibits thereto, and
all amendments and supplements to any such documents, in each case as soon
a available and in such reasonable quantities as the Placement Agent may
from time to time request.
(c) To take all necessary action, and furnish to whomever the
Placement Agent may direct such proper information as may lawfully be
required to qualify the Certificates for offering and sale under such of
the State Acts which the Placement Agent may reasonably request; provided
(5)
<PAGE>
however, that Capital shall not be required in connection therewith, as a
condition thereof, to qualify as a foreign corporation in any jurisdiction,
or subject itself to taxation as doing business in any such jurisdiction.
(d) If any event shall have occurred as a result of which the
Registration Statement or Prospectus, as then amended or supplemented,
would include any untrue statement of a material fact, or omit to state any
material fact necessary in order to make the statements therein not
misleading, Capital shall immediately notify the Placement Agent of such
event, shall promptly prepare a supplement or amendment to the Registration
Statement and Prospectus which will correct such statement or omission, and
shall furnish the Placement Agent without charge as many copies of such
supplement or amendment as the Placement Agent may from time to time
reasonably request.
4. Expenses.
Capital shall pay all costs and expenses incident to the performance
of the obligations of Capital hereunder, including the fees and expenses of
Capital's counsel, the cost and expenses incident to the preparation and
duplication of the Registration Statement and Prospectus as amended or
supplemented, and the costs incurred in connection with the qualification
of the offer and sale of the Certificates under the State Acts or the
securing of exemptions from such qualification.
5. Representations and Warranties of the Placement Agent.
The Placement Agent hereby represents and warrants that:
(6)
<PAGE>
(a) The Placement Agent is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and registered as a
broker/dealer with the Securities and Exchange Commission, and has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of New York with the corporate power and
authority to own its properties and conduct is business.
(b) The Placement Agent will, in connection with the offer and sale of
the Certificates and in the performance of its duties and obligations under
this Agreement, comply with the applicable requirements of the Act, the
Securities Exchange Act of 1934, the State Acts of states in which the
Certificates are offered and sold, the rules and regulations of the NASD,
and any applicable rules and regulations issued under said Acts,
regulations and laws.
(c) The undersigned has the power and authority to execute and deliver
this Agreement; and when so executed and delivered shall be a legal, valid
and binding obligation of the Placement Agent, enforceable against the
Placement Agent in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization, and
other laws affecting the rights of creditors, or by general principles of
equity and except as rights to indemnify and contribution hereunder may be
limited by applicable law.
(d) Except as disclosed in the Registration Statement and Prospectus,
the Placement Agent has no knowledge of any existing violation by the
Placement Agent of any federal or state law, statute, ordinance,
(7)
<PAGE>
regulation, or order that would have a material adverse effect on the
ability of the Placement Agent to conduct the offering of the Certificates
or the ability of the Placement Agent to perform its obligations under this
Agreement.
6. Conditions to the Obligations of the Placement Agent.
The Placement Agent's obligations as provided herein shall be subject,
in the Placement Agent's reasonable discretion, to the accuracy of the
representations, warranties, and covenants of Capital herein contained as
of the date hereof and as of each Closing Date, to the performance by
Capital and United of their respective obligations hereunder to be
performed, and to the following additional conditions:
(a) All proceedings and related matters in connection with the
organization of the Trust and the authorization of the issue, sale and
delivery of the Certificates shall be reasonably satisfactory to the
Placement Agent, and the Placement Agent shall have been furnished with
such papers and information as it may reasonably have requested in this
connection.
(b) During the offering term, no order suspending the sale of the
Certificates and no proceedings for that purpose shall have been
instituted, or to Capital or United's knowledge, shall be contemplated.
(c) Capital shall furnish the Placement Agent, an opinion of Capital's
counsel, satisfactory to the Placement Agent, setting forth the manner in
which the offer and sale of the Certificates may be made under the State
Acts.
(8)
<PAGE>
7. Indemnification.
(a) Capital and United, jointly and severally, shall indemnify and
hold harmless the Placement Agent and each person, if any, who controls the
Placement Agent within the meaning of the Act, an each of their respective
officers, directors, employees, agents, successors and assigns,
(individually, an "Indemnitee," and collectively, the "Indemnitees")
against any all losses, claims, damages, liabilities, costs, and expenses
(including but not limited to reasonable attorneys' and expert's fees and
all expenses reasonably incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claim) to which
each Indemnitee may become subject, under the Act or otherwise, insofar as
such losses, claims, damages, liabilities, costs, and expenses (including
but not limited to reasonable attorneys' and expert's fees and all expenses
reasonably incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim), or actions in respect
thereto, arise, directly or indirectly, out of or are based upon any breach
of this Agreement by Capital, any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement and
Prospectus, or any amendment or supplement thereto, any omission or alleged
omission in the Registration Statement or Prospectus of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or the representation by the Placement Agent of Capital in
selling the Certificates. Capital and United shall reimburse each
Indemnitee for any legal or other expenses incurred by such Indemnitee in
connection with investigating or defending any such loss, claim, damages,
liability, cost, expense or action. A person who controls the Placement
(9)
<PAGE>
Agent shall be covered by the indemnity agreement in this Section 7(a) for
all such losses, claims, damages, liabilities, and expenses, irrespective
of whether they are based on Section 15 of the Act. This indemnity
agreement shall be in addition to any liability which the Capital or United
may otherwise have.
(b) Promptly after receipt by an Indemnitee under this Section 7 of
notice of the commencement of any action, such Indemnitee shall, if a claim
in respect thereof is to be made against an indemnifying party under this
Section 7, notify the indemnifying part of the commencement thereof; but
the omission to so notify the indemnifying party shall not relieve it from
any liability under this Section 7. In case any such action is brought
against any Indemnitee, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, assume the defense thereof,
with counsel who shall be to the reasonable satisfaction of such Indemnitee
of it elects to assume the defense thereof, the indemnifying party shall
not be liable to such Indemnitee under this Section 7 for any legal or
other expenses subsequently incurred by such Indemnitee in connection with
the defense thereof other than reasonable costs of investigation.
(c) If the indemnification of an Indemnitee under Paragraph 7(a) is
for any reason held to be unavailable from Capital or United, the Placement
Agent shall contribute to the aggregate losses, claims, damages and
liabilities (including any investigation, legal and other expenses incurred
(10)
<PAGE>
in connection with, and any amount paid in settlement of, any action, suit
or proceeding or any claim asserted , but after deducting any contribution
received by Capital or United from persons other than the Placement Agent,
Capital or United who may also be liable for contribution, Capital and
United hereby agree to seek contribution from such persons) to which
Capital or United and the Placement Agent may be subject in such proportion
that the Placement Agent's Fee bears to the gross proceeds from the sale of
the Certificates and Capital and United shall be responsible for the
balance; provided, however, that (i) in no case shall the Placement Agent
be responsible for any amount in excess of the Placement Agent's Fee and
(ii) 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. For purpose
of this Subparagraph (c), each Indemnitee, if any, who controls the
Placement Agent, within the meaning of the Act shall have the same rights
to contribution as such Placement Agent; and each person, if any, who
controls Capital or United within the meaning of the Act, each officer of
Capital and United, and each director of Capital and United shall have the
same rights to contribution as Capital and United, subject in each case to
clause (i) and (ii) of this Subparagraph (c). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit, or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this
Subparagraph (c), notify such party or parties from whom contribution may
be sought, but the omission to so notify such part or parties shall not
relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have hereunder or otherwise than under this
(11)
<PAGE>
Subparagraph (c). No party shall be liable for contribution with respect to
any action or claim settled without its consent.
8. Effective Date and Termination.
This Agreement shall be effective upon execution hereof.
Until the Final Closing Date, and subject to the further provisions
hereof, this Agreement may be terminated by the Placement Agent at is
option by giving notice to Capital and to its counsel if (a) Capital
materially fails to fulfill it obligations hereunder; or (b) the Placement
Agent learns of any material misrepresentations made by Capital herein.
9. Representations and Indemnities to Survive Delivery.
The respective indemnities, agreements, representations, warranties,
covenants, and other statements of Capital, United and the Placement Agent
set forth in or made pursuant to this Agreement, shall remain in full force
and effect, regardless of any investigation made by or on behalf of the
Placement Agent, Capital, United or any controlling person of any of the
Placement Agent or Capital or United, and shall survive closing, delivery
of, and payment for the Certificates.
10. Effect of Termination of Agreement.
If this Agreement shall be terminated pursuant to the provisions of
Subparagraph 1(d) or (f), Paragraph 6 or Paragraph 8 hereof, Capital and
United shall then be under no liability to the Placement Agent, except for
sales of Certificates already placed by the Placement Agent and the
expenses, if applicable, referred to in Paragraph 4 hereof and the
indemnities and rights of contribution provided for in Paragraph 7 hereof,
(12)
<PAGE>
and the Placement Agent shall have no liability to Capital or United,
except for the right of contribution contained in Paragraph 7 hereof.
11. Notices.
All statements, requests, notices, and agreements hereunder shall be
in writing, or by telegraph if promptly confirmed in writing, and, if to
the Placement Agent, shall be sufficient in all respects if delivered or
sent by registered or certified mail, return receipt requested, postage
prepaid, to the Placement Agent at Pryor, Counts & Co., Inc., 1515 Market
Street, Suite 819, Philadelphia, Pennsylvania 19103, and, if to Capital,
shall be sufficient in all respects if delivered or sent by registered or
certified mail, return receipt requested, postage prepaid in care of
Capital at 650 E. Carmel Drive, Suite 150, Carmel, Indiana 46032, or in
each case to such other address as the person to be notified may have
requested in writing.
12. Successors.
This Agreement shall be binding upon and insure solely to the benefit
of the Placement Agent and Capital and United, and, to the extent provided
in Paragraph 8, the Indemnitees and the controlling persons, officers and
directors of Capital and United, and their respective heirs, successors,
representatives, and assigns, and no other person shall acquire or have any
right under or by virtue of this Agreement. No purchaser of any of the
Certificates shall be construed a successor, representative, or assign by
reason merely of such purchase.
(13)
<PAGE>
13. Applicable Law.
This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Pennsylvania and to the extent that it may
involve any United States statute, with the laws of the United States.
14. Entire Agreement.
This Agreement constitutes the entire agreement between the parties
and no amendment, change, modification, or alteration of this Agreement
shall be valid until it is in writing and signed by the parties hereto.
If the foregoing sets forth your understanding with respect to the
agreement between Capital and the Placement Agent, please sign all three
copies of this letter in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between us.
Sincerely,
PRYOR, COUNTS & CO., INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Date: ______________________________________
CAPITAL RESOURCE GROUP ONE, LLC
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Date: ______________________________________
(14)
<PAGE>
UNITED FUNDS, LLC
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Date: ______________________________________
(15)
Exhibit 10.2
SENIOR INSURANCE SETTLEMENTS PURCHASE AGREEMENT
SENIOR INSURANCE SETTLEMENTS PURCHASE AGREEMENT (the "Agreement"), dated as
of December ___, 1999, by UNITED FUNDS, LLC, a Delaware limited liability
company (the "Seller") and CAPITAL RESOURCES GROUP ONE, LLC, a Delaware limited
liability company (the "Buyer").
W I T N E S S E T H:
WHEREAS, Seller, Buyer, 21st Holdings, LLC, as Master Servicer, and The
Chase Manhattan Bank as Trustee, have entered into that certain Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
December __, 1999, pursuant to which Buyer has agreed to assign certain Senior
Insurance Settlements to the Senior Insurance Settlements Funding Trust 1999
(the "Trust");
WHEREAS, Buyer, to fulfill its obligation under the Pooling and Servicing
Agreement, desires to purchase, assign and transfer Senior Insurance Settlements
from Seller from time to time;
WHEREAS, Seller desires to sell and convey Senior Insurance Settlements to
Buyer from time to time upon the terms and conditions hereinafter set forth;
WHEREAS, Seller and Buyer anticipate that Buyer will irrevocably assign its
beneficial interests in the Senior Insurance Settlements purchased hereunder to
the Trust and that the Trust will issue Certificates pursuant to the terms of
the Pooling and Servicing Agreement in connection with such transfer of the
Senior Insurance Settlements to the Trust;
WHEREAS, Seller and Buyer anticipate that Buyer will assign to the Trustee
all Buyer's rights, remedies, powers and privileges under this Agreement, and
Seller agrees that all covenants and agreements made by Seller herein with
respect to the Senior Insurance Settlements shall also be for the benefit of the
Trustee and all Certificateholders; and
WHEREAS, these recitals are incorporated in and made a part of this
Agreement.
NOW THEREFORE, for and in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Seller and Buyer do hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. All capitalized terms not otherwise defined in
this Agreement shall have the meanings given such terms in the Pooling and
Servicing Agreement.
ARTICLE II
PURCHASE AND CONVEYANCE OF SENIOR INSURANCE SETTLEMENTS
Section 2.1 Purchase.
(a) Subject to the terms and conditions hereinafter set forth, Seller
hereby agrees that on each Closing Date Seller shall sell and convey and hereby
does sell and convey to Buyer all Seller's right, title and interest in, to and
under the Senior Insurance Settlements which the Buyer shall acquire from time
to time from the Seller pursuant to Section 2.2 below, all monies due or to
become due with respect to the Senior Insurance Settlements all proceeds of and
from the Senior Insurance Settlements, and all of Seller's, rights, remedies,
powers and privileges under Seller' s Agreements with the insureds for the sale
and purchase of Senior Insurance Settlements; and Buyer hereby agrees to acquire
such Senior Insurance Settlements from Seller on each Closing Date, without
recourse.
(b) Seller agrees to sell and convey to Buyer only Eligible Senior
Insurance Settlements.
(c) Seller and Buyer intend that this transaction is a sale and, at the
time Senior Insurance Settlements are sold and conveyed to Buyer, Seller shall
be deemed, in the event a court should rule that the sale to Buyer was not a
true sale but a financing arrangement, to grant, and does hereby grant to Buyer
a security interest in all of Seller's right, title and interests in, to and
under such Senior Insurance Settlements, all monies due or to become due with
respect thereto and all proceeds thereof; therefore, this Agreement shall also
constitute a security agreement under applicable law. In connection with each
sale and, conveyance of Senior Insurance Settlements to Buyer, Seller agrees, at
its own expense on each Closing Date, to execute and deliver to Buyer such other
instruments with respect to the Senior Insurance Settlements being sold and
conveyed to Buyer, which meet the requirements of applicable state law and which
Buyer shall file in the appropriate records in such jurisdictions as are
necessary to perfect the security interest granted to Buyer hereunder.
(d) In connection with each sale and conveyance of Senior Insurance
Settlements to Buyer, Seller shall, at its own expense on or prior to each
Closing Date, (1) indicate in its computer master file that Senior Insurance
Settlements have been sold to Buyer in accordance with this Agreement and
transferred to the Trust pursuant to the Pooling and
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Servicing Agreement for the benefit of the Certificateholders, (2) deliver to
Buyer, the Trustee, and Master Servicer a computer file, computer printout, or
microfiche list in a form readable by Buyer and Trustee, containing a true and
complete list of all such Senior Insurance Settlements, identified by account
number and by the Senior Insurance Settlements balance as of each such Closing
Date, (3) deliver to Buyer a written conveyance in substantially the form of
Exhibit A hereto (the "Conveyance") and (4) deliver to Buyer an Officer's
Certificate of Seller confirming the truth and correctness of the
representations and warranties set forth in Section 4.1. Upon Buyer's written
request from time to time, Seller shall use its best efforts to provide to Buyer
a copy of the cover page of the insurance policy pertaining to a Senior
Insurance Settlement.
Section 2.2 Acquisition of Senior Insurance Settlements. Whenever during
the term of this Agreement Seller has Senior Insurance Settlements available for
purchase, Seller shall notify Buyer in writing that Senior Insurance Settlements
are available for purchase, stating the face amount of the Senior Insurance
Settlements and the Senior Insurance Settlements Purchase Price for the Senior
Insurance Settlements. Buyer shall then immediately notify Seller in writing of
the amount of Senior Insurance Settlements that Buyer will purchase, designating
a date for the consummation of the transfer of the Senior Insurance Settlements,
which date shall be the Closing Date.
ARTICLE III
CONSIDERATION AND PAYMENT
Section 3.1 Purchase Price. On each Closing Date Buyer shall pay to Seller
the Senior Insurance Settlements Purchase Price for the Senior Insurance
Settlements being acquired on such date in cash or other immediately available
funds, provided that, on each Closing Date, Buyer shall withhold __% of the
face amount of such Senior Insurance Settlement which shall be deposited into
the Liquidity Account and which shall be paid to Seller, upon the termination of
the Senior Insurance Settlements Purchase Agreement, pursuant to the Pooling and
Servicing Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Seller's Representations and Warranties. Seller hereby
represents and warrants to, and agrees with, Buyer as of each Closing Date that:
(a) Organization and Good Standing. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware and has full corporate power, authority and right to own
its properties owned and such business is presently conducted and to
execute, deliver and perform its obligations under this Agreement. Seller
is duly qualified to do business and is in good standing in each state of
the United States where the nature of its business requires it to be so
qualified.
(b) Due Qualification. Seller is duly qualified to do business and is
in good standing in each state of the United States where the nature of its
business requires it to be so qualified. Seller is neither required to
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qualify, nor to register, as a foreign corporation in any state other than
those states in which it has so qualified in order to conduct its business
and has obtained all necessary licenses and approvals required under
applicable federal and state law.
(c) Due Authorization. The execution and delivery of this Agreement,
any Conveyance, the Pooling and Servicing Agreement or any other document
or instrument delivered pursuant hereto or thereto (collectively, the
"Conveyance Documents") and the consummation of the transactions provided
for in this Agreement or any other Conveyance Document have been duly
authorized by all necessary corporate action by Seller.
(d) No Conflict. The execution and delivery of the Conveyance
Documents, the performance of the transactions contemplated by the
Conveyance Documents and the fulfillment of the terms of the Conveyance
Documents will not conflict with, result in any breach of any of the
material terms and provisions of, or constitute (with or without notice or
lapse of time or both) a material default under, any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which Seller is a
party or by which it or any of its properties are bound.
(e) No Violation. The execution and delivery of the Conveyance
Documents, the performance of the transactions contemplated by the
Conveyance Documents and the fulfillment of the terms of the Conveyance
Documents will not conflict with or violate any material Requirements of
Law applicable to Seller. Seller is not in violation of any applicable law
and has paid all taxes properly levied against it.
(f) No Proceeding. There are no proceedings or investigations pending
or, to the best knowledge of Seller, threatened against Seller before any
Governmental Authority (i) asserting the invalidity of the Conveyance
Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by the Conveyance Documents, (iii) seeking any
determination or ruling that, in the reasonable judgment of Seller, would
materially and adversely affect Seller's performance of its obligations
under the Conveyance Documents or (iv) seeking any determination or ruling
that would materially and adversely affect the validity or enforceability
of the Conveyance Documents.
(g) All Consents Required. All approvals, authorizations, licenses,
consents, orders or other action of any Person or of any Governmental
Authority or Persons required in connection with the execution and delivery
of the Conveyance Documents, the performance of the transactions
contemplated by the Conveyance Documents and the fulfillment of the terms
of the Conveyance Documents have been obtained.
(h) Identification of Senior Insurance Settlements. As of each Closing
Date Seller has (i) indicated in its computer master file of Senior
Insurance Settlements that Senior Insurance Settlements have been sold to
Buyer in accordance with this Agreement and transferred to the Trust
pursuant to the Pooling and Servicing Agreement for the benefit of the
Certificateholders, (ii) delivered to Buyer and to the Trustee and Master
Servicer a computer file, computer printout, or microfiche list, in a form
readable by Buyer and by the Trustee and Master Servicer, containing a true
and complete list of all such Senior Insurance Settlements, identified by
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account number and by the face amount of the insurance policy as of such
Closing Date, as the case may be, and (iii) delivered to Buyer an Officer's
Certificate of Seller confirming the truth and correctness of the
representations and warranties set forth in this Section 4.1.
(i) Existing Financing Statements. There is not a financing statement
or similar statement or instrument of registration under the law of any
jurisdiction now on file or registered in any public office covering any
interest of any kind in the Senior Insurance Settlements, or intended so to
be, and Seller will not execute or authorize there to be on file in any
public office any financing statement or similar statement or instrument of
registration under the laws of any jurisdiction relating to the Senior
Insurance Settlements, except any assignments to be filed in respect of and
covering and security or other interest of Buyer or the Trustee pursuant to
this Agreement or the Servicing Agreement.
(j) Binding Obligation. The Conveyance Documents constitute legal,
valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as such enforceability may be limited
by Debtor Relief Laws and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in
equity).
(k) Valid Conveyance. As of each Closing Date, the Conveyance
Documents constitute a valid sale, assignment, and conveyance to Buyer of
all right, title, and interest of Seller in, to and under the Senior
Insurance Settlements, all monies due or to become due with respect thereto
and all proceeds thereof and Buyer will hold such property free and clear
of any Lien of any Person claiming through or under Seller, except for
Liens permitted under Section 5.1(c) and Seller shall treat the transfer of
the Senior Insurance Settlements to Capital as a sale, for tax and
accounting purposes.
(l) Eligibility of Senior Insurance Settlements. Seller hereby
represents and warrants to Buyer as of each Closing Date that (i) each
Senior Insurance Settlement being sold and conveyed to Buyer is an Eligible
Senior Insurance Settlements (ii) each such Senior Insurance Settlements
being sold and conveyed to Buyer is free and clear of any Lien of any
Person claiming through or under Seller and is in compliance, in all
material respects, with all Requirements of Law applicable to Seller and
(iii) with respect to each such Senior Insurance Settlements, all consents,
licenses, approvals or authorizations of or registrations or declarations
with any Governmental Authority or Person required to be obtained, effected
or given by Seller in connection with the sale and conveyance of such
Senior Insurance Settlements to Buyer have been duly obtained, effected or
given and are in full force and effect, and Seller does not know of any
fact that will cause the Senior Insurance Settlements not to be paid.
(m) Selection Procedures. No selection procedure believed by Seller to
be materially adverse to the interests of Buyer or its successors and
assigns or in violation of Section 4.1(g) below were utilized by Seller in
selecting the Senior Insurance Settlements being sold and conveyed to
Buyer.
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(n) Insolvency. Seller is not insolvent as of the Closing Date, as the
case may be, does not anticipate becoming insolvent as a result of the
transfer of the Senior Insurance Settlements to Buyer, and the Senior
Insurance Settlements are not being transferred for an antecedent debt.
(o) Bankruptcy Proceeding. Seller has not filed a voluntary proceeding
under the federal bankruptcy laws and has no knowledge of the filing of an
involuntary proceeding against Seller under such laws.
(p) Outstanding Principal Balance of Senior Insurance Settlements.
Seller covenants to structure its purchase, acquisition, sale and
conveyance of Senior Insurance Settlements so that at any given time (i) no
less than seventy-five percent (75%) of the cumulative death benefits of
the Senior Insurance Settlements held or beneficially owned by the Trust
shall be payable by Insurance Companies with a rating by A.M. Best of, "A"
or better, or its equivalent of other nationally recognized rating
agencies, (ii) no more than twenty-five percent (25%) of the cumulative
death benefits of the Senior Insurance Settlements held or beneficially
owned by the Trust shall be payable by Insurance Companies with a rating by
A.M. Best of "B+" or the equivalent by other nationally recognized rating
agencies, (iii) at any time after Fifty Million Dollars ($50,000,000.00) of
Senior Insurance Settlements have been assigned to the Trust, no more than
ten percent (10%) of the cumulative death benefits of the Senior Insurance
Settlements in the Trust shall be payable by a single Insurance Company,
and (iv) no more than Four Million Dollars ($4,000,000) in Tranche I and
Ten Million Dollars ($10,000,000) in Tranche II will be cumulative death
benefits relating to any one individual.
Section 4.2. Representations and Warranties of Buyer. As of each Closing
Date, Buyer hereby represents and warrants to, and agrees with, Seller that:
(a) Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power, authority and right to own
its properties and to conduct its business as such properties are presently
owned and such business is presently conducted and to execute, deliver, and
perform its obligations under the Conveyance Documents.
(b) Due Qualification. Buyer is duly qualified to do business and is
in good standing in each state of the United States where the nature of its
business requires it to be so qualified. Buyer is neither required to
qualify, nor to register, as a foreign corporation in any state other than
these states in which it has so qualified in order to conduct its business
and has obtained all necessary licenses and approvals required under
applicable federal and state law.
(c) Due Authorization. The execution and delivery of the Conveyance
Documents and the consummation of the transactions provided for in the
Conveyance Documents have been duly authorized by Buyer by all necessary
corporate actions.
(d) No Conflict. The execution and delivery of the Conveyance
Documents, the performance of the transactions contemplated by the
Conveyance Documents and the fulfillment o the terms of the Conveyance
Documents will not conflict with, result in any breach of any of the
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material terms and provisions of, or constitute (with or without notice or
lapse of time or both) a material default under, any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which Buyer is a
party or by which it or any of its properties are bound.
(e) No Violation. The execution and delivery of the Conveyance
Documents, the performance of the transactions contemplated by the
Conveyance Documents and the fulfillment of the terms of the Conveyance
Documents will not conflict with or violate any Requirements of Law
applicable to Buyer.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of Buyer, threatened against Buyer, before any
Governmental Authority (i) asserting, the invalidity of the Conveyance
Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by the Conveyance Documents, (iii) seeking any
determination or ruling that, in the reasonable judgment of Buyer, would
materially and adversely affect Buyer's performance of its obligations
under the Conveyance Documents or (iv) seeking any determination or ruling
that would materially and adversely affect the validity or enforceability
of the Conveyance Documents.
(g) All Consents Required. All approvals, authorizations, licenses,
consents, orders or other actions of any Person or of any Governmental
Authority or Person required in connection with the execution and delivery
of the Conveyance Documents, the performance of the transactions
contemplated by the Conveyance Documents and the fulfillment of the terms
of the Conveyance Documents have been obtained.
The representations and warranties set forth in this Article IV shall
survive the sale and conveyance of the Senior Insurance Settlements to Buyer and
termination of the rights and obligations of the Buyer and Seller under this
Agreement. Upon discovery by Buyer or Seller of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others.
ARTICLE V
COVENANTS OF SELLER AND BUYER
Section 5.1 Seller's Covenants. In addition to the other covenants
contained herein, Seller hereby covenants, and agrees with Buyer as follows:
(a) Obligations Under Senior Insurance Settlements. Seller shall
comply with and perform its obligations under the agreements relating to
the Senior Insurance Settlements, except insofar as any failure so to
comply or conform would not materially and adversely affect the rights of
the Trust and the Certificateholders under the Pooling and Servicing
Agreement or the Certificates.
(b) Fees or Discounts. Except as otherwise required by any
Requirements of Law or as is deemed by the Seller to be necessary in order
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for Seller to maintain its business on a competitive basis based on
Seller's good faith assessment of the nature of competition in its
business, Seller shall not pay more than an amount agreed upon by Seller
and Buyer as to the discount from the face amount of the Senior Insurance
Settlements, for the purchase of the Senior Insurance Settlements.
(c) Security Interests. Except for the security interest granted
hereunder to protect Buyer's interest in the Senior Insurance Settlements,
Seller will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Senior
Insurance Settlement or any interest therein; Seller will immediately
notify Buyer and the Trustee of the existence of any Lien on any Senior
Insurance Settlement; and Seller will defend the right, title and interest
of Buyer and its successors and assigns in, to and under the Senior
Insurance Settlements against all claims of third parties claiming through
or under Seller; provided, however, that nothing in this Section 5.1(c)
shall prevent or be deemed to prohibit Seller from suffering to exist upon
any of the Senior Insurance Settlements any Liens for state, municipal or
other local taxes if such taxes shall not at the time be due and payable or
if Seller shall concurrently be contesting the validity thereof in good
faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto.
(d) Location of Books and Records. Seller shall keep copies of
originals or duplicates of all documents evidencing all Senior Insurance
Settlements at, and only at, the locations specified on Schedule 2 hereto,
and Seller will not relocate such offices, its chief executive office or
such documents or related records and books unless Seller shall have given
to Buyer not less than fifteen days written notice of its intention to do
so, clearly describing the new location. Seller shall at all times maintain
each office in which it maintains records with respect to Senior Insurance
Settlements and its chief executive office, within the United States of
America. Additionally, Seller shall identify each Senior Insurance
Settlement in its computer and/or other records to reflect that such Senior
Insurance Settlement has been sold to Buyer and transferred by Buyer to the
Trust pursuant to the Pooling and Servicing Agreement.
(e) Servicing Agreement. On or before the initial Closing Date, Seller
shall enter into the Servicing Agreement.
(f) Further Assurances. Seller will make, execute or endorse,
acknowledge, and file or deliver to Buyer from time to time such schedules,
confirmatory assignments, conveyances, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and
take such further steps relating to the Senior Insurance Settlements and
other rights covered by this Agreement, as Buyer may require or reasonably
request.
(g) Indemnification. Seller agrees to indemnify, defend and hold Buyer
harmless from and against any and all loss, liability, damage, judgment,
claim, deficiency or expense (including interest, penalties, reasonable
attorneys' fees and amounts paid in settlement) to which Buyer may become
subject insofar as such loss, liability, damages, judgment, claim,
deficiency or expense arises out of or is based upon a breach by Seller of
its representations and warranties contained in Section 4.1 or any
information certified in any Schedule delivered by Seller hereunder being
untrue in any material respect at any time. The obligations of Seller under
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this Section 5.1(g) shall be considered to have been relied upon by Buyer
and shall survive the execution, delivery and performance of this Agreement
regardless of any investigation made by Buyer or on its behalf.
(h) Municipal and Local Taxes. Seller shall be responsible for
collecting all state, local and municipal taxes associated with the Senior
Insurance Settlements, if any, and for remitting the same to the
appropriate Govermental Authority, together with all tax returns, reports
or affidavits required by such Governmental Authority in connection
therewith.
(i) Delivery of Collections. Seller shall deposit or tender to the
Subservicer for deposit if Seller is not the Subservicer, in the Senior
Insurance Settlements Account, all payments received by Seller, if any,
with respect to the Senior Insurance Settlements as soon as practicable
after receipt thereof by Seller.
(j) Power of Attorney. Seller shall exercise its Power of Attorney, if
any, granted by the insureds for the benefit of the Trust with respect to
Senior Insurance Settlements purchased by Capital and transferred to the
Trust.
(k) Filings. Seller shall at its expense perform all actions and
execute all documents to evidence, perfect maintain and enforce the title
of Buyer and the Trust in Senior Insurance Settlements.
(l) Sale. Seller covenants that, upon each transfer of Senior
Insurance Settlements, it will indicate in its records that (i) the Senior
Insurance Settlements have been sold to Buyer and (ii) for tax and
accounting purposes, the transfer of the Senior Insurance Settlements
constitutes a sale to Buyer. Seller will respond to any third party
inquiries regarding such Senior Insurance Settlements that they have been
sold to Buyer and transferred to the Trust.
(m) Maintaining Corporate Formalities and Independence. Seller
covenants at all times to maintain separate bank accounts, tax
identification numbers, financial and corporate records and the like from
that of the Buyer; to conduct independent board of directors meetings to
authorize corporate actions; to pay, its own expenses; and to otherwise
observe all corporate formalities.
Section 5.2 Buyer Covenants Regarding Nondisclosure; Inspection. Buyer
hereby covenants and agrees with Seller (and agrees to cause the Trustee) not to
disclose to any Person any of the account numbers or other information contained
in the computer files or microfiche lists delivered to Buyer (or to Trustee if
Buyer so directs) pursuant to the terms of this Agreement, except as is required
in connection with the performance of the Trustee's duties under the Servicing
Agreement or in enforcing the rights of the Certificateholders, and except as
required by law or under the Servicing Agreement upon appointment of a Successor
Servicer. Buyer agrees (and shall cause the Trustee) to take such measures as
shall be reasonably requested by Seller to protect and maintain the security and
confidentiality of such information, and in connection therewith shall allow
Seller upon written notice from time to time to inspect Buyer's applicable
security and confidentiality arrangements during normal business hours. Buyer
shall (and shall cause the Trustee) to give Seller five (5) days prior written
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notice of any disclosure made pursuant to this Section 5.2, to the extent
reasonably practicable.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions Precedent to Buyer's Obligations. The obligations of
Buyer to purchase any Senior Insurance Settlements on each Closing Date shall be
subject to the satisfaction of the following conditions:
(a) All representations and warranties of Seller contained in this
Agreement shall be true and correct on each Closing Date with the same
effect, as though such representations and warranties had been made on such
date;
(b) All information concerning the Senior Insurance Settlements
provided or to be provided to Buyer shall be true and correct in all
material respects as of each Closing Date;
(c) On each Closing Date, Seller shall have executed and delivered a
Conveyance;
(d) On or before each Closing Date, Seller shall have substantially
performed Seller's obligations under this Agreement;
(e) On or before the initial Closing Date, Seller, Buyer, Master
Servicer, and the Trustee shall have entered into the Pooling and Servicing
Agreement; and
(f) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to Buyer, and Buyer shall have received
from Seller copies of all documents (including, without limitation, records
of all corporate proceedings) relevant to the transactions herein
contemplated as Buyer may reasonably request.
Section 6.2 Conditions Precedent to Seller's Obligations. The obligations
of Seller to sell, assign, convey and transfer the Senior Insurance Settlements
on each Closing Date shall be subject to the satisfaction of the following
conditions:
(a) All representatives and warranties of Buyer contained in this
Agreement shall be true and correct with the same effect as though such
representations and warranties had been made on such date;
(b) Buyer shall pay the Senior Insurance Settlements Purchase Price in
accordance with Article III hereof; and
(c) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to Seller, and Seller shall have
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received from Buyer copies of all documents (including, without limitation,
records of corporate proceedings) relevant to the transactions herein
contemplated as Seller may reasonably request.
ARTICLE VII
TERM & TERMINATION
Section 7.1 Term. This Agreement shall commence as of the date of
execution and delivery hereof and shall continue in full force and effect until
(a) the Trust terminates, or (b) Seller shall (i) become insolvent, (ii), fails
to pay its debts as they become due; (iii) voluntarily seek, consent to, or
acquiesce in the benefit or benefits of any Debtor Relief Law, (iv) become a
party to (or be made the subject of) any proceeding provided for by any Debtor
Relief Law, other than as a creditor or claimant, and, in the event such
proceeding is involuntary, the petition instituting same is not dismissed within
nine (90) days after its filing; provided, however, that Buyer shall have no
duty to continue to purchase Senior Insurance Settlements from and after the
filing of an involuntary petition but prior to dismissal; or (v) Seller becomes
unable for any reason to convey Senior Insurance Settlements in accordance with
the provisions of this Agreement or the Pooling and Servicing Agreement.
Section 7.2 Effect of Termination. No termination nor rejection or failure
to assume the executory obligations of this Agreement in the bankruptcy of
Seller or Buyer shall be deemed to impair or affect the obligations, including,
without limitation, pretermination breaches of representations and warranties by
Seller or Buyer.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Amendment. This Agreement, any Conveyance, any other document
or instrument delivered pursuant hereto or thereto, and the rights and
obligations of the parties hereunder may not be changed orally, but only by an
instrument in writing signed by Buyer and Seller. This Agreement and any other
Conveyance Documents may be amended from time to time by Buyer and Seller to
correct or supplement any provisions herein which may be inconsistent with any
other provisions herein or to add any other provisions with respect to matters
or questions arising under this Agreement or any other Conveyance Documents
which shall not be inconsistent with the provisions of this Agreement or any
other Conveyance Documents; provided, however, that such actions shall not (as
evidenced by an option of counsel) adversely affect in any material respect the
interests of the Trustee, unless the Trustee shall consent thereto. Any
Conveyance executed in accordance with the provisions hereof shall not be
considered amendments to this Agreement.
Section 8.2 GOVERNING LAW. THIS AGREEMENT AND THE OTHER CONVEYANCE
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
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OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 8.3 Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by registered mail, return receipt requested, to (a) in
the case of Seller, 650 E. Carmel Drive, Suite 150, Carmel, Indiana 46032, (b)
in the case of Buyer, 650 E. Carmel Drive, Suite 150, Carmel, Indiana 46032; or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party.
Section 8.4 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement or any other
Conveyance Document shall for any reason whatsoever be held invalid, then such
covenants, agreement, provisions or terms shall be deemed the remaining
covenants, agreements, provisions, or terms of this Agreement or any other
Conveyance Document and shall in no way affect the validity or enforceability of
the other provisions of this Agreement or of any other Conveyance Document.
Section 8.9 Assignment. Notwithstanding anything to the contrary contained
herein, other than Buyer's assignment of its rights, title, and interest in, to,
and under this Agreement to the Trustee for the benefit of the
Certificateholders as contemplated by the Pooling and Servicing Agreement,
neither this Agreement nor any other Conveyance Documents may be assigned by the
parties hereto.
Section 8.6 Further Assurances. Buyer and Seller agree to do and perform,
from time to time, any and all acts and to execute any and all further
instruments required or reasonably requested by the other party more fully to
effect the purpose of this Agreement and the other Conveyance Documents,
including without limitation, the execution of any documents relating to the
Senior Insurance Settlements for filing under the provisions of the UCC or other
law of any applicable jurisdiction.
Section 8.7 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of Buyer or Seller, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
Section 8.8 Counterparts. This Agreement and all other Conveyance Documents
may be executed in two (2) 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 8.9 Binding Effect; Third-Party Beneficiaries. This Agreement and
the other Conveyance Documents will inure to the benefit of and be binding upon
the parties hereto, the Trustee, and their respective successors and permitted
assigns.
12
<PAGE>
Section 8.10 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement and the other Conveyance Documents set forth
the entire understanding of the parties relating to the subject matter, hereof,
and all prior understandings, written or oral, are superseded by this Agreement,
and the other Conveyance Documents. This Agreement and the other Conveyance
Documents may not be modified, amended, waived or supplemented except as
provided herein.
Section 8.11 Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
Section 8.12 Schedules and Exhibits. The schedules and exhibits attached
and referred to herein shall constitute a part of this Agreement and are
incorporated into this Agreement for all purposes.
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be duly
executed by their respective officers as of the day and year first above
written.
EFFECTIVE as of the day and date set forth above.
CAPITAL RESOURCE GROUP ONE, LLC
By:
-------------------------------------
Thomas LaRusso, President
UNITED FUNDS, LLC
By:
-------------------------------------
Title
Attachments:
Schedule
Exhibit "A" Conveyance
13
<PAGE>
EXHIBIT "A"
FORM OF CONVEYANCE
CONVEYANCE NO. ___ OF SENIOR INSURANCE SETTLEMENTS, dated as of
_______________, 1999, by UNITED FUNDS, LLC, a Delaware limited liability
company ("Seller"), and CAPITAL RESOURCE GROUP ONE, LLC, a Delaware limited
liability company ("Buyer") pursuant to the Senior Insurance Settlements
Purchase Agreement referred to below.
W I T N E S S E T H:
WHEREAS, Buyer and Seller are parties to the Senior Insurance Settlements
Purchase Agreement, dated as of December ___, 1999 (hereinafter referred to, as
such agreement may from time to time be amended, supplemented or otherwise
modified, as the "Senior Insurance Settlements Purchase Agreement"); and
WHEREAS, the Buyer, the Seller, 21st Holdings, LLC as Master Servicer, and
The Chase Manhattan Bank as Trustee are parties to that certain Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") dated as of December
___, 1999 pursuant to which the Buyer has agreed to transfer certain Senior
Insurance Settlements to the Trust created by the Pooling and Servicing
Agreement on each Closing Date as such capitalized terms, are defined,
NOW THEREFORE, Seller and Buyer hereby agree as follows:
1. Defined Terms. Capitalized terms not specifically defined in this
Conveyance which are defined in the Pooling and Servicing Agreement shall have
the same meaning when used as when used in the Pooling and Servicing Agreement.
"Closing Date" shall mean, with respect to the Senior Insurance Settlements
conveyed hereby, _____________, 1999.
2. Conveyance of Senior Insurance Settlements. (a) For value received,
Seller does hereby sell, transfer, convey, assign, and set-over to Buyer,
without recourse, on and after the Closing Date, all right, title and interest
of Seller in, to and under the Senior Insurance Settlements, all monies due or
to become due with respect thereto and all proceeds thereof,
(b) In connection with such conveyance, Seller agrees to record and
file at its own expense, with respect to the Senior Insurance Settlements
being conveyed hereby such documents meeting the requirements of applicable
state law in such manner and such jurisdiction as are necessary to perfect
Buyer's and the Trust's interest in the Senior Insurance Settlements
arising from the sale and transfer of the Senior Insurance Settlements,
from Seller to Buyer, and the transfer of such Senior Insurance Settlements
from Buyer to the Trust.
<PAGE>
(c) In connection with such conveyance, Seller further agrees, at its own
expense, to indicate in its computer printout or microfiche list as required by
the Senior Insurance Settlements Purchase Agreement on or prior to the date of
this Conveyance, that Senior Insurance Settlements conveyed hereby have been
sold by Seller to Buyer in accordance with the Senior Insurance Settlements
Purchase Agreement and transferred by Buyer to the Trust for the benefit of the
Certificateholders.
3. Delivery of List of Senior Insurance Settlements. Seller does hereby
agree to deliver to Buyer (and the Trustee and Master Servicer) a computer
printout or microfiche list containing a true and complete list of all Senior
Insurance Settlements being conveyed hereby as of the Closing Date, such Senior
Insurance Settlements being identified by account number and the total face
amount. Such list shall be marked as Schedule 1 to this Conveyance and is hereby
incorporated into and made a part of this Conveyance and the Senior Insurance
Settlements Purchase Agreement.
4. Acceptance by Buyer. Buyer hereby acknowledges its acceptance of all
right, title and interest previously held by Seller in, to and under the Senior
Insurance Settlements sold and conveyed hereby. Buyer further acknowledges that
prior to or simultaneously with the execution and delivery of this Conveyance,
Seller delivered to Buyer or to the Trustee computer printout or microfiche list
described in Section 3 of this Conveyance.
5. Conditions Precedent. (a) The acceptance of Buyer set forth in Section A
and the Amendment of the Senior Insurance Settlements Purchase Agreement set
forth in are subject to the satisfaction by Seller, on or prior to the Closing
Date, of the condition precedent that Seller shall have delivered to Buyer a
certificate of a Vice President or more senior officer that all applicable
requirements of Article II of the Senior Insurance Settlements Purchase
Agreement have been met and that all representations and warranties of Seller
contained in the Senior Insurance Settlements Purchase Agreement are true and
correct.
(b) The sale by Seller set forth in Section 2 and the amendment of the
Senior Insurance Settlements Purchase Agreement set forth in Section 6
hereinbelow are subject to the satisfaction by Buyer, on or prior to the
Closing Date, of the following conditions precedent:
(i) All representations and warranties of Buyer contained in the
Senior Insurance Settlements Purchase Agreement are true and correct;
(ii) Payment of the purchase price by Buyer in accordance
with the provisions of Section 3 of Senior Insurance Settlements
Purchase Agreement; and
(iii) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Conveyance shall
be satisfactory in form and substance to Seller, and Seller shall
have. received from Buyer copies of all documents (including, without
limitation, records of corporation proceedings) relevant to the
2
<PAGE>
transactions herein contemplated as Seller may reasonably have
requested.
6. Amendment of the Senior Insurance Settlements Purchase Agreement. The
Senior Insurance Settlements Purchase Agreement is hereby amended to provide
that all references therein to the "Senior Insurance Settlements Purchase
Agreement", to "this Agreement", and "herein" shall be deemed from and after the
Closing Date to be a dual reference to the Senior Insurance Settlements Purchase
Agreement as supplemented by this Conveyance. Except, as expressly amended
hereby, representations, warranties, terms, covenants, and conditions of the
Senior Insurance Settlements Purchase Agreement shall remain unamended and shall
continue to be, and shall remain, in full force and effect in accordance with
its terms, and except as expressly provided herein shall not constitute or, be
deemed to constitute a waiver, compliance with or a consent to noncompliance
with any term, or provision of the Senior Insurance Settlements Purchase
Agreement.
7. Counterparts. This Conveyance may be executed in two (2) 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.
IN WITNESS WHEREOF, the undersigned have caused this Conveyance to be duly
executed and delivered by their respective duly authorized officers on the day
and year first above written.
SELLER
UNITED FUNDS, LLC, a Delaware limited
liability company
By:
-------------------------------------
Title
BUYER
CAPITAL RESOURCE GROUP ONE, LLC,
a Delaware limited liability company
By:
-------------------------------------
Title:
3
EXHIBIT 10.3
MASTER SERVICER AGREEMENT
MASTER SERVICER AGREEMENT (this "Agreement"), dated as of December ___,
1999, between 21st HOLDINGS, LLC, ("21st Services"), as Master Servicer, CAPITAL
RESOURCE GROUP ONE, LLC ("Capital"), UNITED FUNDS, LLC ("UNITED"), as
Subservicer, and THE CHASE MANHATTAN BANK, as Trustee (the "Trustee").
W I T N E S S E T H
WHEREAS, pursuant to that certain Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement"), dated as of the date hereof, among Capital,
United, 21st Services and the Trustee, United agreed to act as the Subservicer
of all Senior Insurance Settlements now beneficially owned and held or hereafter
acquired by the Senior Insurance Settlements Funding Trust 1999 (the "Trust")
and as further defined in the Pooling and Servicing Agreement (collectively, the
"Senior Insurance Settlements").
WHEREAS, the Trustee has requested 21st Services to be the Master Servicer
and 21st Services is willing to be the Master Servicer of the Senior Insurance
Settlements, subject to the terms and conditions contained herein and in the
Pooling and Servicing Agreement.
WHEREAS, subsequent to the termination of the Subservicer under the Pooling
and Servicing Agreement the Trustee intends to appoint 21st Services as
Successor Servicer and 21st Services is willing, subject to the terms and
conditions contained herein and in the Pooling and Servicing Agreement, to
accept said appointment as Successor Servicer.
NOW THEREFORE, the Trustee, Capital, United and 21st Services agree as
follows:
1. Defined Terms. (a) Unless otherwise defined herein, the terms which are
defined in the Pooling and Servicing Agreement are used herein as so defined.
(b) 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.
2. Acceptance of Appointment and Other Matters Relating to the Master
Servicer.
(a) Trustee hereby appoints 21st Services as the Master Servicer of
the Senior Insurance Settlements and 21st Services hereby accepts the
appointment.
(b) 21st Services shall perform all the duties and obligations of
Master Servicer under the Pooling and Servicing Agreement.
(c) 21st Services shall continue to act as Master Servicer until such
time as it shall accept an appointment to serve as Successor Servicer under
the terms of this Agreement and the Pooling and Servicing Agreement.
<PAGE>
(d) 21st Services shall not resign as Master Servicer during the term
of the Pooling and Servicing Agreement, provided that if the Master
Servicer fails to receive its fees and expenses for a period of at least 90
days after they become due it shall be entitled to resign by giving written
notice to United and the Trustee.
(e) 21st Services shall be entitled to a fee for its services and
reimbursement for its expenses as provided in the Pooling and Servicing
Agreement. 21st Services shall also be entitled to additional fees for life
expectancy analysis, tracking of insureds and claim filing, which fees
shall be paid in addition to and in accordance with the monthly Master
Servicer's Fee schedule in the Pooling and Servicing Agreement.
(f) 21st Services shall perform all services in Exhibit A attached
hereto.
(g) 21st Services shall also receive an underwriting/closing fee from
Capital on each Closing Date of .3% of each insurance policy's face value
of the Senior Insurance Settlements purchased by Capital.
(h) Capital shall grant to 21st Services a right entitling 21st
Services to receive five (5%) percent of the Trust's assets remaining in
Tranche I and Tranche II of the Trust, respectively, after all interest and
principal payments have been made to Certificateholders.
(i) The Subservicer shall provide 21st Services with the Closing Date
Reports, the Subservicer's Semi-Annual Certificate, and the Subservicer's
Annual Certificate as provided in Sections 3.4(a), 3.4(c) and 3.5 of the
Pooling and Servicing Agreement. Such reports shall accurately reflect the
transactions involving the Senior Insurance Settlements, and 21st Services
shall maintain such reports such that at any time 21st Services can
properly perform the duties of the Subservicer in the event it is appointed
as a Successor Servicer.
(j) The Subservicer shall provide 21st Services a copy of the computer
software used by the Subservicer in servicing the Senior Insurance
Settlements, and 21st Services shall maintain such software.
(k) The Subservicer shall provide 21st Services on each Closing Date
all data relating to the Senior Insurance Settlements transferred from
Capital to the Trust, and 21st Services shall maintain such data, such that
at all times the records of 21st Services will accurately reflect the
transactions involving the Senior Insurance Settlements and accurately
match the data available on the Subservicer's computer and in the
Subservicer's possession.
(l) The Subservicer shall provide 21st Services with true copies of
the Daily and Weekly Reports provided for in Section 3.4(b) of the Pooling
and Servicing Agreement, and 21st Services shall generate reports of its
accounts accurately reflecting the information provided by Subservicer in
the Daily and Weekly Reports.
(m) The Subservicer shall make arrangements with the Lockbox Bank
under which 21st Services shall receive a copy of each lockbox remittance
report and all other statements relating to the Lockbox Account at the same
time such items are provided to the Subservicer. The term "Lockbox Bank"
refers to The Chase Manhattan Bank or any successor bank holding the
Lockbox Account.
(2)
<PAGE>
(n) 21st Services shall be entitled to assume that the information
contained in the reports and data received by it hereunder and under the
Pooling and Servicing Agreement is true and correct. 21st Services shall be
fully protected in relying upon such reports and data without any
independent investigation or audit to prove the facts stated therein. 21st
Services shall have no duty to monitor, investigate, or audit any records
or activities of the Subservicer with respect to the servicing of the
Senior Insurance Settlements other than to obtain and maintain the reports
and data it receives pursuant to this Agreement and the Pooling and
Servicing Agreement. 21st Services shall not have responsibility or
liability for any acts or omissions of the Subservicer with respect to
servicing the Senior Insurance Settlements.
3. Acceptance of Appointment and Other Matters Relating to the Successor
Servicer.
(a) Upon the termination of the Subservicer, pursuant to Sections 10.1
and 10.2 of the Pooling and Servicing Agreement, and for so long as this
Agreement is in full force and effect, the Trustee will promptly appoint
21st Services as the Successor Servicer and 21st Services shall accept such
appointment. In accordance with such acceptance, 21st Services shall be
entitled to a one-time transfer of management fee in the amount of
$100,000.
(b) Upon its appointment, 21st Services, as the Successor Servicer,
shall service and administer the Senior Insurance Settlements pursuant to
the terms and conditions of the Pooling and Servicing Agreement and subject
to the rights, remedies, and protections set forth in this Agreement.
(c) 21st Services, as the Successor Servicer, shall be the successor
in all respects to the Subservicer with respect to servicing functions
under the Pooling and Servicing Agreement, shall be bound by the terms and
conditions of the Pooling and Servicing Agreement, and shall be subject to
all the responsibilities, duties and liabilities relating thereto placed on
the Subservicer by the terms and provisions thereof, and all references in
the Pooling and Servicing Agreement to the Subservicer in its capacity as
Subservicer shall be deemed to refer to the Successor Servicer except that
(i) the references to the Subservicer in Sections 3.6 and 8.4 of the
Pooling and Servicing Agreement shall continue to refer to United and (ii)
the Subservicer's expenses in Section 3.2 of the Pooling and Servicing
Agreement shall not include the reasonable fees of and disbursements to
independent accountants, which shall continue to be the expense of United.
21st Services, as the Successor Servicer, shall be authorized to delegate
any of its duties as Successor Servicer to United or a third party on and
after the date of any transfer of the servicing pursuant to Section 10.2 of
the Pooling and Servicing Agreement.
(d) In connection with such appointment and assumption, 21st Services,
as the Successor Servicer, shall be entitled to the same compensation,
indemnification, and reimbursement of expenses provided for the Subservicer
under Section 3.2 of the Pooling and Servicing Agreement.
(e) In the event the Master Servicer becomes the Successor Services,
its duties shall be limited to taking over the existing Senior Insurance
Settlements then being serviced by the Subservicer and performing the
duties of the Subservicer with respect to such Senior Insurance Settlements
during the Amortization Period.
(3)
<PAGE>
4. Limitation on Liability and Protections of the Successor Servicer.
(a) The liability of 21st Services, as the Successor Servicer, shall
be limited as set forth in the Polling and Servicing Agreement and in this
Agreement.
(b) The Master Servicer shall be entitled to all of the rights,
remedies, and protections in carrying out its duties and responsibilities
as Master Servicer or Successor Servicer as set forth in the Pooling and
Servicing Agreement and in this Agreement.
5. Termination Date. All authority and power granted to 21st Services as
the Successor Servicer, under this Agreement shall automatically cease and
terminate upon termination of the Pooling and Servicing Agreement in accordance
with its terms.
6. Governing Law. This Agreement and the rights and obligations of the
parties under this Agreement shall be governed by New York, without giving
effect to its conflict of laws provisions.
7. Notices. All demands, notices and communications hereunder shall be in
writing and shall be sent to (a) in the case of the 21st Services, IDS Center,
Suite 1650, 80 South 8th Street, Minneapolis, MN 55402, Attention: Mr. Robert
Simon, and (b) in the case of Trustee, Corporate Trust Department, The Chase
Manhattan Bank, 450 W. 33rd Street, 15th Floor, New York, NY 10001, Attention:
____________, or as to each party, at such other address as shall be designated
by such party in a written notice to each other party.
8. Severability of Provisions. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall for any reason be held
invalid, then such covenants, agreements, provisions, or terms shall be deemed
severable from the remaining covenants, agreements, provisions, or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Master Servicer Agreement.
9. Counterparts. This Agreement may be executed in two or more counterparts
(any by different parties on separate counterparts), each of which shall be an
original and all of which together shall constitute one and the same instrument.
10. Third-Party Beneficiaries. This Agreement will inure to the benefit of
and be binding upon the parties hereto, and their respective successors and
permitted assigns. Except as otherwise provided in this Agreement, no other
person will have any right or obligation hereunder.
11. Amendment. This Agreement may not be modified, amended, waived, or
supplemented except in writing executed by the parties hereto.
12. Headings. The headings herein are for purpose of reference only and
shall not otherwise affect the meaning or interpretation of any provision
hereof.
(4)
<PAGE>
13. Pooling and Servicing Agreement Controls. In the event any provisions
of this Agreement shall be inconsistent with any provisions of the Pooling and
Servicing Agreement, the provisions of the Pooling and Servicing Agreement shall
control
IN WITNESS WHEREOF, 21st Services, Capital, United, and the Trustee have
caused this Master Servicer Agreement to be duly executed by their respective
authorized officers as of the date first above written.
MASTER SERVICER:
21ST HOLDINGS, LLC
By: ________________________________________
Title: _____________________________________
SUBSERVICER:
UNITED FUNDS, LLC
By: ________________________________________
Title: _____________________________________
CAPITAL RESOURCE GROUP ONE, LLC
By: ________________________________________
Title: _____________________________________
TRUSTEE:
THE CHASE MANHATTAN BANK
By: ________________________________________
Title: _____________________________________
(5)
<PAGE>
SCHEDULE I
List of Senior Insurance Settlements
<PAGE>
EXHIBIT A
Duties of Master Servicer
Exhibit 10.4
ESCROW AGREEMENT
THIS AGREEMENT is made and entered into as of ________________, 1999, among
THE CHASE MANHATTAN BANK, a New York corporation, with corporate trust offices
at 450 W. 33rd Street, 15th Floor, New York, New York 10001 (the "Escrow
Agent"), CAPITAL RESOURCE GROUP ONE, LLC, a Delaware limited liability company
("Capital"), and PRYOR, COUNTS & CO., INC., a New York corporation (the
"Placement Agent").
WHEREAS, Capital proposes to offer for sale to investors through the
Placement Agent and other selected broker-dealers on a "best efforts basis" One
Hundred and Fifty Million Dollars ($150,000,000) principal amount of 9.0% and
9.25% Asset Backed Certificates (the "Certificates") representing fractional
undivided interests in Senior Insurance Settlements Funding Trust 1999 (the
"Trust") originated by Capital, which Certificates will be issued in minimum
denomination of Five Thousand and No/100 Dollars ($5,000.00) and integral
multiplies of One Thousand and No/100 Dollars ($1,000.00) in excess thereof (the
"Offering").
WHEREAS, Capital, the Escrow Agent and the Placement Agent desire to
establish an escrow account into which the payments received from the persons
desiring to purchase Certificates will be deposited;
NOW, THEREFORE, in consideration of the premises and the covenants herein
contained, it is hereby agreed as follows:
1. Capital and the Placement Agent hereby appoint and designate The Chase
Manhattan Bank, as Escrow Agent for the purposes herein set forth, and The Chase
Manhattan Bank does hereby accept such appointment.
2. The parties hereto hereby establish an interest bearing escrow account
with the Escrow Agent, which escrow account shall be entitled "Capital Resource
Group One Escrow Account" (the "Escrow Account"). The Placement Agent shall
instruct subscribers to make, and the Escrow Agent shall only be required to
accept for deposit, checks, bank drafts or money orders for the subscription
price for the Certificates (the "Checks") payable to the order of "THE CHASE
MANHATTAN BANK ESCROW ACCOUNT FOR SENIOR INSURANCE SETTLEMENTS FUNDING TRUST
1999". Any Checks received that are made payable to a party other than "THE
CHASE MANHATTAN BANK ESCROW ACCOUNT FOR SENIOR INSURANCE SETTLEMENTS FUNDING
TRUST 1999" shall be returned to the Placement Agent.
3. Until the occurrence of a Termination Date (as hereinafter defined) the
Placement Agent agrees that it shall promptly deliver to the Escrow Agent all
monies, received from subscribers for the payment of the Certificates to the
Escrow Agent for deposit in the Escrow Account, together with a written account
of each sale, which account shall set forth, among other things, the
subscriber's name and address, the principal amount of the Certificates
purchased, the amount paid therefor, tax identification number and whether the
consideration received was in the form of a check, draft, or money order. All
<PAGE>
monies so deposited in the Escrow Account are hereinafter referred to as the
"Escrow Amount".
4. The Offering shall begin with the commencement of the Offering and shall
terminate upon the earlier to occur of the following dates (each such date being
a "Termination Date"):
(a) the date upon which the Escrow Agent has received written notice
from Capital that subscriptions for One Hundred and Fifty Million and
No/100 Dollars ($150,000,000) principal amount of Certificates have been
received and accepted by Capital;
(b) Twelve (12) months from the effective date of the Registration
Statement filed with the Securities and Exchange Commission with respect to
the offering (the "Registration Statement"); or
(c) the date upon which a determination is made by Capital to
terminate the offering prior to the sale of Twenty Million and No/100
Dollars ($20,000,000) principal amount of Certificates (the "Minimum
Amount"). Such determination shall be evidenced in a written instrument
delivered to the Escrow Agent.
Capital shall notify the Escrow Agent of the effective date of the
Registration Statement in writing within five (5) business days of said
effective date.
5. The Escrow Agent is hereby authorized to forward each check for
collection and deposit the proceeds in the Escrow Account. The Escrow Agent
shall not be responsible or accountable for the proceeds of a Check until such
proceeds are received by the Escrow Agent as Collected Funds. For purposes of
this Agreement, the term "Collected Funds" shall mean all funds received by the
Escrow Agent which have cleared normal banking channels and are in the form of
cash. The Escrow Agent shall be under no duty or responsibility to enforce
collection of any Checks delivered to the Escrow Agent hereunder except that it
agrees to once again forward for collection any Check which has been returned
unpaid if requested to do so by the Placement Agent. The Escrow Agent is
authorized and permitted to receive Checks in the aggregate in excess of One
Hundred and Fifty Million and No/100 Dollars ($150,000,000) until it has
received written notice from Capital that subscriptions for One Hundred and
Fifty Million Dollars ($5,000,000) principal amount of Certificates have been
received and accepted by Capital.
The Escrow Agent shall promptly notify the Placement Agent of any Check
returned unpaid to the Escrow Agent whereupon the Placement Agent shall instruct
the Escrow Agent to either once again forward such Check for collection or
return such Check to the Placement Agent. If the Placement Agent instructs the
Escrow Agent to return such Check to the Placement Agent or if such Check has
been returned unpaid twice, the Escrow Agent shall return such Check to the
Placement Agent and the Placement Agent shall immediately reimburse the Escrow
2
<PAGE>
Agent for any costs and expenses incurred by the Escrow Agent as a result of
such returned Check.
In the event Capital has received the distribution of funds from a
subscription it has accepted and the Check representing such subscription is
subsequently returned unpaid, the Escrow Agent shall promptly notify the
Placement Agent of such non-payment whereupon the Placement Agent shall instruct
the Escrow Agent to either (i) once again forward such Check for collection or
(ii) return such Check to the Placement Agent and further instruct the Escrow
Agent in writing that such subscription is void and not accepted. In such event,
the Escrow Agent may debit the Escrow Account in the amount of such Check if the
Escrow Account has such funds available or, if funds are not available to debit
the Escrow Account in the amount of such Check, Capital and the Placement Agent
shall immediately reimburse the Escrow Agent for the amount of the uncollectible
funds so distributed. If at the termination of the Escrow Agreement the Escrow
Account has been debited to reimburse the Escrow Agent in the event a Check has
been returned unpaid and there are not sufficient funds in the Escrow Account to
pay back rejected subscriptions or to pay to Capital the amount of the
subscriptions accepted, Capital and the Placement Agent shall immediately pay to
the Escrow Agent an amount equal to the insufficiency of funds in the Escrow
Account in order to permit the Escrow Agent to pay back the rejected
subscriptions or to pay to Capital the amount of the subscriptions accepted.
The obligation of Capital and the Placement Agent to reimburse the Escrow
Agent for any uncollected funds or Checks shall survive the termination of the
Escrow Agreement.
If Capital rejects any subscription for which Capital has forwarded the
Check to the Escrow Agent, Capital shall deliver written notice to the Escrow
Agent of such rejection and if the Escrow Agent has already collected funds, the
Escrow Agent shall promptly issue a refund check to the rejected subscriber in
the amount of such funds collected from such subscriber. If Capital rejects any
subscription for which the Escrow Agent has not yet collected funds but has
submitted the subscriber's Check for collection, the Escrow Agent shall promptly
issue a check in the amount of the subscriber's Check to the rejected subscriber
after the Escrow Agent has cleared such funds. If the Escrow Agent has not yet
submitted a rejected subscriber's Check for collection, the Escrow Agent shall
promptly remit the subscriber's Check directly to the subscriber.
6. If, before the Minimum Amount has been reached, the Escrow Agent shall
have received written notice from Capital to release from the Escrow Account and
deliver to a particular subscriber his funds, the Escrow Agent shall forward to
such subscriber such funds in accordance with Section 5.
7. After Checks for the Minimum Amount have been deposited into the Escrow
Account and proceeds from such Checks have been received by the Escrow Agent as
Collected Funds, and upon receipt by the Escrow Agent of:
(i) notice from Capital in the form of Exhibit "A" attached hereto and
made a part hereof (the "Capital's Notice of Acceptance") the Escrow Agent
shall, from funds available therefor in the Escrow Account,
3
<PAGE>
(a) deliver to Capital by certified or official bank check or a
wire transfer or bank transfer at the direction of Capital payable in
immediately available funds an amount equal to the amount set forth in
Paragraph 8 of Capital's Notice of Acceptance as set forth therein;
(b) deliver to the Placement Agent by certified or official bank
check or a wire transfer or bank transfer at the direction of Capital
and the Placement Agent payable in immediately available funds an
amount equal to that set forth in Paragraph 6 of Capital's Notice of
Acceptance;
(c) deliver to The Chase Manhattan Bank, as trustee (the
"Trustee") of the Trust created pursuant to the Pooling and Servicing
Agreement dated as of ________, 1999, among the Trustee, Capital,
United Funds, LLC, and 21st Holdings, LLC (the "Pooling and Servicing
Agreement) by certified or official bank check or a wire transfer or
bank transfer at the direction of Capital and the Trustee payable in
immediately available funds an amount equal to that set forth in
Paragraph 7 of Capital's Notice of Acceptance for deposit in the
Liquidity Account (as defined in the Pooling and Servicing Agreement);
and
(d) deliver to each subscriber (if any) identified in Paragraph 2
or Paragraph 3 of Capital's Notice of Acceptance as having had his
subscription agreement rejected in whole or in part by Capital such
subscriber's original Check or an amount equal to the amount set forth
opposite such subscriber's name on Appendices II and III,
respectively, to Capital's Notice of Acceptance.
Prior to the receipt of the Minimum Amount pursuant to this Section 7,
Capital is aware and understands that Capital is not entitled to any funds
deposited into the Escrow Account, and no amounts deposited in the Escrow
Account prior to receipt of the Minimum Amount shall become the property of
Capital or any other entity, or be subject to the debts of Capital or any other
entity. After the Minimum Amount has been received, Capital may from time to
time continue to deposit Checks and draw down the funds in the manner set forth
in this Section 7. If funds remain in the Escrow Account after the occurrence of
a Termination Date and the Minimum Amount has been reached, the Escrow Agent has
the right to disburse such funds to Capital.
8. If (a) a determination is made by Capital to terminate the Offering
prior to the sale of the Minimum Amount, (b) the Minimum Amount has not been
received and collected by the Escrow Agent on or before the expiration of ninety
(90) days (subject to Capital's option to extend that period for thirty (30)
days) from the effective date of the Registration Statement, (c) the Minimum
Amount has been received but for whatever reason Capital and the Placement Agent
have not directed the Escrow Agent to disburse all or any part of the Escrow
Amount, or (d) funds deposited in the Escrow Account after the Minimum Account
has been reached have not been disbursed to Capital for a period of ninety (90)
days, the Escrow Agent shall promptly return to each subscriber such
subscriber's collected subscription funds.
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9. This Agreement shall become effective as of the date hereof, and shall
continue in force until the delivery of all funds held by the Escrow Agent
hereunder in accordance with Section 7 and 8 hereof and the occurrence of the
fifteenth (15th) day after the Termination Date.
10. Contemporaneously with the execution hereof, Capital shall pay to
Escrow Agent a base annual administration fee of Twenty-Five Thousand and No/100
Dollars ($25,000.00), which administration fee shall be deemed fully earned
immediately, regardless of the actual length of time during which this Agreement
is effective. In addition, Capital agrees to pay to Escrow Agent its customary
fees for the services rendered by it pursuant to the provisions of this
Agreement and will reimburse Escrow Agent for its reasonable expenses, including
reasonable attorney's fees, incurred in connection with the performance by it of
such services. The Escrow Agent's reasonable attorney's fees for time actually
spent, not exceeding ________ Thousand and No/100 Dollars ($_________) shall be
paid upon execution of this Agreement. Escrow Agent's current fee schedule is
attached hereto as Exhibit "B" (but such fees may be adjusted from time to time,
in which case Capital agrees to pay the adjusted fees). Notwithstanding anything
to the contrary contained in any other provision of this Agreement or any
instructions to the contrary from Capital, the Escrow Agent shall be entitled to
retain from any disbursements, other than those made under Sections 5, 6 and 8,
requested by Capital hereunder any outstanding fees and/or expenses due to it
hereunder and which have not been paid by Capital.
11. The Escrow Agent may invest the Escrow Amount only in such accounts or
investments as Capital may specify by written notice. Capital may only specify
investments in (i) bank accounts, (ii) bank money-market accounts, or (iii)
short-term securities issued or guaranteed by the U.S. Government. Any such
investments shall be made one (1) business day after the Escrow Agent has actual
knowledge that the funds received by the Escrow Agent have become collected
funds. Interest earned from such investment of the Escrow Amount shall be paid
to Capital or the subscriber, as the case may be, upon termination of this
Agreement, subject to any charges set forth in Section 10.
12. The Escrow Agent shall have no responsibility except for the
safekeeping and delivery of the amounts deposited in the Escrow Account in
accordance with this Agreement. No implied covenants or obligations on the part
of the Escrow Agent shall be read into this Agreement. The Escrow Agent shall
not be liable for any action taken, suffered or omitted to be done under this
Agreement or in connection with the amounts deposited in the Escrow Account,
except as a result of the Escrow Agent's gross negligence or willful misconduct.
The Escrow Agent is not a party to nor is it bound by, nor need it give
consideration to the terms or provisions of, even though it may have knowledge
of, (i) any agreement or undertaking by, between or among Capital and any other
party, except this Agreement, (ii) any agreement or undertaking that may be
evidenced by this Agreement, or (iii) any other agreements that may now or in
the future be deposited with the Escrow Agent in connection with this Agreement.
The Escrow Agent is not a party to, is not responsible for, and makes no
representations with respect to the offer, sale and distribution of the
Certificates. Capital and the Placement Agent covenant that they will not
commence any action against the Escrow Agent at law, in equity, or otherwise as
a result of any action taken or thing done by the Escrow Agent pursuant to this
Agreement, or for any disbursement made as authorized herein as a result of the
failure of Capital or the Placement
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Agent to give the notice within the times herein described. The Escrow Agent has
no duty to determine or inquire into any happening or occurrence or of any
performance or failure of performance of Capital or the Placement Agent or of
any other party with respect to agreements or arrangements with any other party.
If any questions, dispute or disagreement arises among one or more of the
parties hereto and/or any other party with respect to the funds deposited in
Escrow Account, the proper interpretation of this Agreement, the duties of the
Escrow Agent hereunder or the rights of the parties to this Escrow Agreement,
the Escrow Agent shall not be required to act and shall not be held liable for
refusal to act until the question or dispute is settled, and the Escrow Agent
has the absolute right at its discretion to do either or both of the following:
(a) withhold and/or stop all further performance under this Agreement
until the Escrow Agent is satisfied, by receipt of a written document in
form and substance satisfactory to the Escrow Agent and executed and
binding upon all interested parties hereto (who may include the
subscribers), that the question, dispute, or disagreement has been
resolved; or
(b) file a suit in interpleader and obtain by final judgment, rendered
by a court of competent jurisdiction, an order binding all parties
interested in the matter. In any such suit, the Escrow Agent shall be
entitled to recover from Capital and the Placement Agent, jointly and
severally, its reasonable attorneys' fees and costs.
The Escrow Agent shall never be required to post a bond in connection with
any services hereunder. The Escrow Agent may consult with counsel of its own
choice and shall have full and complete authorization and protection for any
action taken or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
13. The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction, or request
furnished to it hereunder and believed by it to be genuine and to have been
signed or presented by the proper party or parties and to take statements made
therein as authorized and correct without any affirmative duty of investigation.
14. The Escrow Agent may resign by giving Capital and the Placement Agent
ten (10) days written notice of such resignation. During such ten (10) day
period Capital shall appoint a successor Escrow Agent. After the expiration of
such ten (10) day period and until a successor Escrow Agent named and accepts
its appointment, the Escrow Agent shall have no duty except to hold the Escrow
Amount uninvested and the Escrow Agent may file such appropriate proceeding to
have a court appoint a successor Escrow Agent.
15. Capital and the Placement Agent, jointly and severally, hereby agree to
indemnify the Escrow Agent for, and to hold it harmless against, any loss,
liability, or expense (including all legal expenses described in Section 12 or
incurred in enforcing any of the provisions of this Agreement or otherwise in
connection herewith) incurred without gross negligence or willful misconduct
(and Capital and the Placement Agent shall indemnify the Escrow Agent for such
losses, liabilities or expenses incurred with ordinary negligence) on the part
of the Escrow Agent, arising out of or in connection with its entering into this
Agreement and carrying out its duties hereunder, including the costs and
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expenses of defending itself against any claim of liability in the premises.
This covenant shall survive the termination of this Agreement.
The costs and expenses incurred in enforcing this right of indemnification shall
be paid by the Capital. Anything to the contrary notwithstanding, in no event
shall the Escrow Agent be liable for special, punitive, indirect, consequential
or incidental loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Escrow Agent has been advised of the likelihood of
such loss or damage.
16. All payments and deliveries required to be made by the Escrow Agent to
Capital, the Placement Agent or the subscribers hereunder shall be made in
accordance with the provisions of Sections 7 and 8 hereof, and all payments and
deliveries so made shall be valid and effective to discharge the liability of
the Escrow Agent with respect thereto. Upon disbursement of all of the funds in
the Escrow Account in accordance with Sections 6, 7, 8, 11 and 14 hereof, the
Escrow Agent's responsibilities under this Agreement shall terminate. The Escrow
Agent shall have no liability under any circumstances with respect to the
application of the proceeds of any delivery of funds made by it.
17. The Chase Manhattan Bank agrees that Capital and the Placement Agent
may, by mutual written notice (setting forth the name and address of a
substitute Escrow Agent which shall be a national banking association) at any
time, given at least ten (10) days prior to the effective date of such
termination, remove The Chase Manhattan Bank, as Escrow Agent hereunder. Upon
receipt of such notice, The Chase Manhattan Bank shall forthwith, upon being
paid the compensation due to it hereunder, deliver to the national banking
association named in such notice all amounts on deposit in the Escrow Account
whereupon the responsibility of The Chase Manhattan Bank under this Agreement
shall terminate.
18. Any notice, authorization, request or demand required or permitted to
be given hereunder shall be in writing. The Escrow Agent shall be deemed to have
delivered and given notice or other item required to be delivered under this
Agreement upon the deposit thereof by the Escrow Agent in the U.S. Mail by
registered or certified mail postage prepaid or sent by Federal Express, next
day delivery, or by facsimile transmission and addressed as follows:
If to Capital:
Capital Resource Group One, LLC
c/o Thomas J. LaRussa
650 E. Carmel Drive, Suite 150
Carmel, Indiana 46032
Facsimile No. (317) 705-5558
If to the Placement Agent:
Pryor, Counts & Co., Inc.
1515 Market Street, Suite 819
Philadelphia, PA 19103
Facsimile No. (215) 496-9109
If to a subscriber:
to the address set forth in the cover letter(s)
referenced in Section 3 hereof
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Any notice, instruction or other item to the Escrow Agent shall be deemed
to have been given only when received by the Escrow Agent. Such notice may be
given by any accepted means of communication including but not limited to in
person, by telegram. or by U.S. Mail or sent by Federal Express, next day
delivery, or by facsimile transmission at its principal offices or at the
following address:
Corporate Trust Department
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: CMFS
Facsimile No. (212) 946-2797
A United States Post Office registered or certified mail receipt showing
delivery as aforesaid or receipt from Federal Express showing delivery aforesaid
shall be conclusive evidence of the date and fact of delivery. Any party hereto
may change the address to which notices are to be delivered by giving to the
other parties not less than ten (10) days written notice thereof.
19. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their representative heirs, executors, administrators,
personal representatives, successors and assigns.
20. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
21. This Agreement has been executed and delivered in, and shall be
construed and enforced in accordance with, the laws of the State of New York.
22. This instrument evidences the entire agreement between the Escrow
Agent, Capital and the Placement Agent, and represents a merger of all preceding
agreements between the parties hereto pertaining to the subject matter hereof.
23. The Escrow Agent shall not be bound by any modification, amendment,
termination (except as provided in Section 8), cancellation, rescission or
supersession of this Agreement unless the same shall be in writing and signed by
all of the other parties hereto and, if
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its duties as the Escrow Agent hereunder are affected thereby, unless it shall
have given prior written consent thereto except as provided in Section 17.
IN WITNESS WHEREOF, the undersigned have caused this Escrow Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and year first above written.
THE CHASE MANHATTAN BANK CAPITAL RESOURCE GROUP ONE,
a New York corporation LLC
By: ______________________________ By: _______________________________
Thomas J. LaRussa
Trust Officer President
PRYOR, COUNTS & CO., INC.
By:______________________________
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EXHIBIT A
December ___, 1999
Mr./Ms. ______________________
Corporate Trust Department
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Dear Mr./Ms. ________________:
Reference is made to that certain Escrow Agreement dated effective as of
December ___, 1999 (the "Agreement") by and between you, Pryor, Counts & Co.,
Inc. and the undersigned. This letter is the "Capital's Notice of Acceptance"
referenced in Section 7(i) of the Agreement. All terms used herein shall have
the same meaning as defined in the Agreement.
1. The identity of those subscribers whose subscription agreements
have been accepted in whole by Capital and the amount of the check of each
such subscriber which was delivered to you are set forth in Appendix I
attached hereto and made a part hereof.
2. The name and address of each subscriber whose subscription
agreement was totally rejected by Capital and the amount of the Check of
such subscriber which was delivered to you, which amount is to be returned
to the subscriber, are set forth in Appendix II attached hereto and made a
part hereof.
3. The name and address of each subscriber whose subscription
agreement was accepted in part by Capital and the amount of the Check of
such subscriber which was delivered to you, and the amount to be returned
to each subscriber is set forth in Appendix III attached hereto and made a
part hereof.
4. The aggregate dollar amount of the Checks deposited in the Escrow
Account is $____________.
5. The aggregate dollar amount of interest earned and collected to
date from investments of the Collected Funds is $_______________.
6. The aggregate dollar amount to be delivered to Pryor, Counts & Co.,
Inc. is $_______________.
7. The aggregate dollar amount to be delivered to The Chase Manhattan
Bank for deposit in the Liquidity Account is $_______________.
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8. The aggregate dollar amount of the funds deposited in the Escrow
Account to be delivered to Capital is $____________.
9. Payment should be made in the following manner (if by wire transfer
specify wire instructions, if by bank transfer specify bank and account
number).
TO CAPITAL BY ____________________________.
TO THE PLACEMENT AGENT BY ___________________.
Each amount set forth herein is correctly stated.
Very truly yours,
CAPITAL RESOURCE GROUP ONE, LLC
By: ___________________________________
Its: ____________________________________
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APPENDIX I
TO
CAPITAL'S NOTICE OF ACCEPTANCE
Dated: ___________________, 1999
<PAGE>
APPENDIX II
TO
CAPITAL'S NOTICE OF ACCEPTANCE
Dated: ___________________, 1999
<PAGE>
APPENDIX III
TO
CAPITAL'S NOTICE OF ACCEPTANCE
Dated: ___________________, 1999
<PAGE>
EXHIBIT B
TO
ESCROW AGREEMENT
THE CHASE MANHATTAN BANK ESCROW AGENT FEE SCHEDULE
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