AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 2000
REGISTRATION NO. 333-90439
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INSURANCE SETTLEMENTS FUNDING TRUST 2000
(ISSUER OF CERTIFICATES)
CAPITAL RESOURCE GROUP ONE, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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DELAWARE 6411 22-3705071
(State of Incorporation) (Primary Standard (I.R.S. Employee
Industrial Identification number)
Classification Code
Number)
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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)
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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
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. /x/
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.
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TABLE OF CONTENTS
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Summary..................................................... 1
Risk Factors................................................ 6
Glossary.................................................... 12
Forward-Looking Statements.................................. 12
United, Capital, 21st Services and the Trust................ 12
The Insurance Settlement Market.......................... 12
United................................................... 12
Capital Resource Group One, LLC.......................... 19
21st Services............................................ 20
The Trust................................................ 23
Financial Information.................................... 24
The Escrow Agent......................................... 24
Management Fee........................................... 24
Use of Proceeds............................................. 26
Maturity Assumptions........................................ 26
Plan of Distribution........................................ 26
Registration of Certificates............................. 28
Description of the Certificates and the Pooling and
Servicing Agreement...................................... 28
The Trust's Assets....................................... 28
The Certificates......................................... 29
Registration, Transfer and Exchange of Certificates...... 29
List of Certificateholders............................... 30
Interest Payments........................................ 31
Principal Payments....................................... 31
Assignment of Insurance Settlements to the Trust......... 31
Representatives and Warranties of Capital................ 31
Eligibility of Insurance Settlements, Selection
Procedure, Solvency.................................... 33
Covenants of Capital..................................... 34
Administration and Servicing of the Insurance
Settlements............................................ 34
Servicing Compensation and Payment of Expenses........... 35
Representations, Warranties and Covenants of the
Subservicer and Seller................................. 35
Reports and Records of the Master Servicer and
Subservicer............................................ 37
Subservicer Default...................................... 39
Appointment of Successor Servicer........................ 40
The Trustee.............................................. 41
Amendment of Pooling and Servicing Agreement............. 41
Investor Accounts and Allocation of Collections.......... 42
Priority of Payments..................................... 43
Distribution and Reports to Certificateholders........... 44
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Pay Out Events........................................... 45
Additional Rights Upon Occurrence of Certain Events...... 46
Other Matters Relating to Capital........................ 47
Other Matters Relating to the Subservicer................ 48
Termination.............................................. 50
Description of the Insurance Settlements Purchase
Agreement................................................ 51
The Insurance Settlements Purchase Agreement............. 51
Sale or Transfer of the Insurance Settlements............ 51
Representation and Warranties............................ 51
Termination.............................................. 52
Legal Aspects of the Insurance Settlements.................. 53
Sale and Transfer of the Insurance Settlements........... 53
Federal Income Tax Consequences............................. 55
Description of the Federal Income Tax Consequences....... 55
Treatment of the Certificates as Evidences of
Indebtedness of Capital................................ 55
Possible Classification of the Transaction as a
Partnership, or a Publicly-Traded Partnership or an
Association Taxable as a Corporation................... 56
Interest Income to Certificateholders.................... 57
Gain or Loss on Disposition of Certificates.............. 58
Foreign Investors........................................ 58
Backup Withholding....................................... 59
ERISA Considerations........................................ 60
Debt Interest Exception.................................. 60
Publicly-Offered Security Exception...................... 60
Exception for Insignificant Participation by Benefit Plan
Investors.............................................. 61
Transferability of Certificates............................. 62
Investment Company Act of 1940.............................. 62
Legal Matters............................................... 62
Glossary.................................................... 63
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PROSPECTUS
SUBJECT TO COMPLETION
MAXIMUM -- $150,000,000
MINIMUM -- $20,000,000
INSURANCE SETTLEMENTS FUNDING TRUST 2000, ISSUER
$46,000,000 [ ]% Asset Backed Certificates Maturing ___, 2008
$104,000,000 [ ]% Asset Backed Certificates Maturing ___, 2010
CAPITAL RESOURCE GROUP ONE, LLC, SELLER
21ST HOLDINGS, LLC, MASTER SERVICER
The insurance settlements asset backed certificates offered hereby,
evidence fractional, undivided interests in the assets of Insurance Settlements
Funding Trust 2000 among:
o Capital Resource Group One, LLC, as the originator of the trust and
assignor of an irrevocable beneficial interest in the insurance
settlements to the trust.
o The Bank of New York.
o 21st Holdings, LLC, as the master servicer.
o United Funds, LLC, as the subservicer of the insurance settlements and
seller of the insurance settlements to Capital.
The trust assets will include a portfolio of insurance settlements to be
generated by the purchase of insurance policies at a discount solely from
senior/elderly insureds, a liquidity facility, and monies due or to become due
with respect to the insurance settlements held by the trust. Prospective
investors should rely only on assets of the trust for payment of principal and
interest on the certificates. The trust currently owns no insurance settlements
or other assets.
An investment in the trust involves a high degree of risk. Prospective
investors should consider the factors set forth under "Risk Factors" on page 6.
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.
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| | | PROCEEDS TO
| | UNDERWRITING | ISSUER
| PRICE TO | DISCOUNTS AND | OR OTHER
| PUBLIC | COMMISSIONS | PERSON
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Per Certificate........................... | $5,000 | $175 | $4,875
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Total Maximum............................. | $150,000,000 | $5,250,000 | $144,750,000
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Total Minimum............................. | $20,000,000 | $700,000 | $19,300,000
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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 100% of the subscription payments will be returned to subscribers, with
interest at the rate of 4.0% per annum. 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. The
offering may be terminated even after the minimum amount of certificates are
sold. 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 Bank of New York. All checks and other
orders for the payment of money should be made to "THE BANK OF NEW YORK ESCROW
ACCOUNT FOR INSURANCE SETTLEMENTS FUNDING TRUST 2000."
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. No person, including Pryor, Counts & Co., Inc., plans to act as a
market maker for the certificates.
PRYOR, COUNTS & CO., INC.
The date of the prospectus is March __, 2000.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THEIR SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this prospectus.
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The Trust.................................... Insurance Settmenents Funding Trust 2000
will be formed pursuant to the pooling and
servicing agreement. An insurance settlement
is a cash 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. It
also generally carries with it the
obligation to make premium payments.
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, such as
United, 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
expenctancy. The gross income of entities
purchasing 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. United will purchase
the insurance settlements, sell them to
Capital and Capital will assign an irrevocable
beneficial interest in the insurance
settlements to the trust.
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The assets of the trust will include:
o an irrevocable beneficial interest in all
insurance settlements assigned to the trust
by Capital;
o monies due or to become due with respect
to the insurance settlements;
o funds or proceeds collected or to be
collected with respect to the insurance
settlements;
o funds on deposit in certain bank accounts
of the trust and funds invested in permitted
investments, including interest earned or
accrued on those funds; and
o any supporting documentation or agreements
relating to the insurance settlements. See
"United, Capital, 21st Services and the
Trust--The Trust."
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. 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.
If the minimum amount of subscriptions has
been timely received, then, with 2 days
prior notice, on the closing date, The Bank
of New York shall release to Capital funds
equal to the amount of insurance settlements
available for purchase in exchange for
certificates in the similar principal
amount. All subsequent proceeds will be
deposited into the escrow account until the
earlier of:
o such time and from time to time that
insurance settlements are available for
purchase by Capital in exchange for
certificates of equivalent amounts, less
amounts paid to the placement agent and
fees and expenses associated with the
offering;
o 12 months from the effective date of the
registration statement; or
o the date on which a total of $150,000,000
principal amount of certificates has been
issued.
The Certificates............................. Both the Tranche I and Tranche II
certificates represent beneficial undivided
interests in the trust
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only and will be paid from the same pool of
assets. They do not represent interests in
or obligations of Capital, United or any
affiliate thereof. The certificates are not
insured or guaranteed by any federal or
state governmental agency.
Capital shall have the option to purchase
the certificates at 102.50% of the
outstanding principal amount thereof after
each 5 year period, respectively. The
principal amount of each certificate will
remain fixed at its initial principal amount
until the final maturity date. The principal
amount of the Tranche I certificates will
not be due and payable 8 years from the
first closing date. The principal amount of
the Tranche II certificates will not be due
and payable until 10 years from the first
closing date.
Certificate Interest......................... Certificate interest will accrue at the rate
of [ ]% and [ ]% per annum,
respectively, from the closing date
applicable to each certificate and is
payable to the certificateholders
semi-annually.
Certificate interest payments will be funded
from collections attributable to insurance
settlements. Interest payments made on
certificates prior to any collections being
received, or if insufficient collections are
received, may be deemed to be a return of
certificateholders capital. Certificate
interest will be paid only after that
portion of the trustee's fees have been
paid. If collections attributable to
insurance settlements are insufficient to
fund the payment of the 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".
Capital...................................... Capital Resource Group One, LLC, was formed
for the limited purpose of acquiring
insurance settlements from United and
assigning them to the trust pursuant to the
pooling and servicing agreement. Capital
will be the originator of the trust.
Capital's address is 650 E. Carmel Drive,
Suite 150, Carmel, Indiana 46032. Its
telephone number is (317) 705-5555.
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Subservicer.................................. United Funds, LLC, will service the
insurance settlements pursuant to the
pooling and serving agreement and will be
the seller of the insurance settlements to
Capital.
Master Servicer.............................. 21st Services, a national insurance services
organization, an affiliate of 21st Holdings,
LLC, will perform the functions as
master servicer as described in the pooling
and servicing agreement and the master
servicer agreement.
Trustee...................................... The Bank of New York, a New York banking
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 of the certificates under the
terms of the pooling and servicing
agreement. In addition, The Bank of New York
will perform the services of escrow agent
pursuant to the escrow agreement.
Federal Income Tax Consequences.............. 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.
In the opinion of Mesirov Gelman Jaffe
Cramer & Jamieson, LLP, the certificates
will be characterized as evidences of
indebtedness of Capital for federal income
tax purposes and the trust will be
disregarded for federal income tax purposes.
See "Risk Factors--Possible Adverse Federal
Income Tax Consequences" and "Federal Income
Tax Consequences".
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.
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."
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Permitted Fees and Expenses.................. Trustee's Fee--$150,000 per annum.
Master Servicer's Fees.
o 0.1925% or 0.09625% of the principal
amount of the outstanding certificates
payable monthly.
o $23.00 per month for each active policy.
o up to $200.00 per insurance certificate.
o .30% of the Fee amount of each insurance
policy purchased by United.
Subservicer's Fee--0.3575% or 0.45375% of
the principal amount of the outstanding
certificates payable monthly.
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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.
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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.
The Trust's Performance is Dependent on United, Capital and 21st
Services. The trust shall look solely to Capital and Capital shall look solely
to United for the acquisition of insurance settlements. There can be no
assurance that United will be able to purchase a sufficient amount of 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 insurance settlements and information with respect
thereto could occur, resulting in:
o delays in payments to the certificateholders;
o the early termination of the trust; and
o 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 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. There is currently a $5 million key-man insurance policy on Mr.
LaRussa, however, there is no key-man life insurance on Messrs. Kirkman, Simon
and Walker. 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."
The Ability to Predict Life Expectancies will Affect the Trust's Financial
Results. The trust's operations and financial results are highly dependent on
the ability of United and 21st Services, to predict accurately life
expectancies. Life expectancy is a significant factor in United's determination
of the purchase price of an insurance policy. 21st Services' computer model has
had an eighty percent (80%) confidence level, which means that 80% of the
individuals with the insured's medical characterization will die within the life
expectancy estimate. However, twenty percent (20%) will live beyond the estimate
and therefore could affect the trust's financial results. See "United, Capital,
21st Services and the Trust--Yield Analysis."
Cures and Advances in Medical Treatments for Terminal Illnesses Will Reduce
the Return on and the Need for 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 in 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
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insurance policies within the estimated life expectancy of the insured. While
some individual insureds will outlive their estimated life expectancy, others
will not. 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.
Possible Shortfall in Liquidity Account. Inaccurate life expectancy
estimates could result in the depletion of the liquidity account. While
investing in a large portfolio of 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 some of its remaining
policies through a sale to one or more third parties. The sale price would take
into account the then estimated life expectancies represented by the insurance
policies plus a further discount representing a reserve to permit the purchaser
to pay premiums for a period of time after the sale. See "Use of Proceeds."
Delay in Payment and Non-Payment of Policy Proceeds Will Affect the Trust's
Profits and Distributions. 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
insured 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. 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.
There is Currently No Secondary Market for the Certificates. Investors
may not be able to sell their certificates and there is currently no secondary
market for the certificates. There can be no assurance that a secondary market
will ever develop and even if one does develop, it may not be sufficiently
liquid to allow investors to resell any of their certificates. Pryor, Counts &
Co., Inc. has advised Capital that it does not intend to act as a market maker
of the certificates.
Negative Effect of Increase in Interest Rates Will Affect the Trust's
Profitability. 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 or
the spread between the cost of the insurance settlements and the yield that it
earns on its portfolio of policies. An increase in interest rates may affect the
price the trust is willing to pay for the insurance settlements. Any substantial
increase
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in interest rates will result in either a decrease in the purchase price the
trust is willing to pay for 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--Possible Costs of and Delays
Attributable to Government Regulation Will Affect the Trust's Profitability."
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 insurance settlements from
seniors/elderly insureds. The resources and capital of the other companies,
including insurance 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. See
"United, Capital, 21st Services, and the Trust--Competition."
Possible Costs of and Delays Attributable to Government Regulation Will
Affect the Trust's Profitability. 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 in various states. Currently only two states,
Florida and Texas, regulate senior/elderly life insurance settlements.
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. See "United, Capital, 21st
Services and the Trust--Government Regulation."
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
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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 insurance settlements limit the trade in
insurance settlements to insurance companies, this is likely to have a material
adverse effect on the trust and its prospects for financial success.
The Trust Will Have Limited Assets Other Than Insurance Settlements. The
trust does not have, nor is it expected to or be permitted to have, any assets
other than insurance settlements and temporary investments. Investors,
therefore, must rely on payment of death benefits on policies beneficially owned
by the trust.
Regulation as an Investment Company May Terminate the Trust. 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. If the trust is deemed to be an investment company, it will be
deemed to be a payout event which means that the trust will terminate and
distribute its assets, which will affect its profitability. See "Investment
Company Act of 1940."
Adverse Effect of Bankruptcy or Insolvency of United May Cause Losses to
Certificateholders. United will warrant to Capital in the insurance
settlements purchase agreement between them that the sale of the 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 insurance settlements are purchased to protect
Capital's ownership interest in the 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
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 if a party to the proceeding were to assert that the sale of the
insurance settlements to Capital should be recharacterized as a pledge of such
insurance settlements to secure the borrowing of United, then delays in payments
of collections to the trust and the certificateholders could occur. In the event
a bankruptcy court were to rule in favor of any such party, then reductions in
the amount of such payments could result in losses to certificateholders. See
"Legal Aspects of the Insurance Settlements--Sale and Transfer of the Insurance
Settlements."
Adverse Effect of Bankruptcy or Insolvency of Capital May Cause Losses to
Certificateholders. Capital will warrant in the pooling and servicing
agreement that the assignment of the insurance settlements to the trust is an
irrevocable assignment of its beneficial interest in the insurance settlements
to the trust. Capital will take all actions required under the laws of each
jurisdiction in which the insurance settlements are assigned to establish the
trust's interest in the insurance settlements. Notwithstanding the foregoing, if
Capital were to become a debtor in a bankruptcy proceeding and if a party to the
proceeding were to assert that the assignment of the insurance settlements from
Capital to the trust should be recharacterized as a pledge of such insurance
settlement to secure the
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borrowing of Capital or, if a bankruptcy court were to rule in favor of any such
trustee, debtor in possession, or creditor, then losses to certificateholders
could result.
Breach of Warranties Will Not Result in Repurchase of Policies. Capital
will represent and warrant to the trust and United will represent and warrant to
Capital that the insurance settlements are valid and enforceable. However, it is
not anticipated that the trustee will make any examination of the 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 insurance settlements purchase agreement for any repurchases of policies by
United or Capital.
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 _____________, 2000 and
has no operating history. In addition, the senior/elderly insurance settlements
industry is relatively new. There can be no assurance that the senior/elderly
insurance settlements industry will remain a viable industry or that the trust
will remain competitive in the industry.
Limited Obligations of United and Capital. Neither United nor Capital has
any obligation to make any payments with respect to the certificates or the
insurance settlements.
Effective Certificate Yield Lower Than Certificate Rate. The effective
yield to certificateholders on their certificates will be below that otherwise
produced by the certificate interest 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 up until 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 insurance settlements.
Lack of or Decrease in Asset Diversification if Only the Minimum Amount is
Raised in this Offering. If only the minimum amount is raised in this
offering, there may be a lack of or decrease in asset diversification since
there may be only a few insurance settlements in the trust.
Dependence on and Concentration of Sourcing Brokers. United will purchase
policies referred by sourcing brokers and other referral sources, including 21st
Services. Some of these sourcing brokers are under a contractual agreement to
refer policies to United, however, 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.
No Rating of the Certificates Has Been Received. A rating by a rating
agency is not a condition to issuance of the certificates. Investors 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
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_____________________. If such rating has been secured it will be included in
the final prospectus or the prospectus will be updated to disclose what rating
was actually received from the rating agency and, if the requested rating is
different from the actual rating, the reasons why the rating agency declined to
give the certificates the requested rating. 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 insurance settlements; the financial stability of the insurance companies who
must pay claims used in payment of the insurance settlements; the
diversification of the pool of 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
insurance settlements; the collection 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.
No Assurance That the Certificates Will Be Rated Investment Grade. If the
certificates are rated by a rating agency, there is no assurance that such
rating will be investment grade.
Possible ERISA Prohibition. 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, 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, its regulations, or the Internal Revenue Code may have on
such benefit plan or person. See "ERISA Considerations."
Possible Adverse Federal Income Tax Consequences. 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 "Federal Income Tax Consequences".
Material Litigation Risks. An investment in the certificates involves a
certain degree of risk. The trust benefits from an insurance settlement upon the
death of an insured. Therefore, there are various emotional concerns surrounding
an investment in the certificates. Other than what is described herein, there
may be other issues such as privacy, attempts to rescind the insurance
settlements, legislation and other factors which may make the certificates
subject to litigation.
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GLOSSARY
Certain terms which are used in this prospectus are defined in the Glossary
located on page 63.
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
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 and it is estimated that the insurance settlements market will
reach $4 billion this year.
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.
UNITED
The trust will be subserviced by United Funds, LLC. United was formed in
the State of Delaware in October 1999. United has no operating history. United
has 5 employees, is minimally capitalized and is currently applying for licenses
in various states in connection with its purchase of insurance settlements.
United does not anticipate not being able to be licensed in any state in which a
license is required. After the formation of the trust, United will (a) purchase
insurance settlements for its own account and will sell and transfer those
insurance settlements to Capital pursuant to the insurance settlements purchase
agreement and (b) service those 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, age 31. Mr. LaRussa from April 1999
has been the President of Capital Resources Group, LLC, an insurance settlements
advisory
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company. From July 1997 to April 1999 he was a Vice President--Finance, with
Merrill Lynch Co., Inc. From August 1996 until June 1997 he was a computer
systems design consultant with Infinity Medical Management, a viatical
settlements company which system provided support for the tracking and
execution of premium payments, policy closing financial statements, tracking
insureds and periodic financial statement reporting and from December 1994 until
August 1996 he was an Informational Services Analyst with Merrill Lynch & Co.,
Inc. whereby he managed a team of developers that developed contingent
management and client contact computer systems. Mr. LaRussa received his
Bachelor of Arts Degree from the University of Rochester, cum laude, in 1990.
United intends to be is a nationwide specialty financial services company
that purchases insurance settlements from senior/elderly insureds. United has
and intends to continue 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 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 evaluate and
process the insurance settlements. 21st Services will also make an extensive
evaluation of such policies. United will then sell the insurance settlements,
without recourse to Capital. Capital will assign an irrevocable beneficial
interest in such insurance settlements to the trust. United expects that a
significant amount of its initial referrals will come from 21st Services. United
will pay 21st Services a fee of .30% of the face amount of each policy purchased
by United.
United's business will involve the following principal steps:
o origination of policy purchases through a nationwide referral network
that will include insurance settlements sourcing brokers;
o underwriting, which includes evaluating the terms of each policy and,
with the assistance 21st Services, estimating the life expectancy of the
insured;
o 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;
o monitoring the insured and the policy; and
o collecting the policy proceeds following the insured's death.
ORIGINATION
United will obtain information regarding potential policy purchases from a
nationwide referral network that includes sourcing brokers and community groups
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.
United has formal agreements with several referral sources, including 21st
Services, and it hopes to establish close relationships with several other
referral sources who have established market niches within the senior/elder
communities. Many referral sources
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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, based on
the face value of the policy, upon the funding of the policy and may also be
paid a back-end fee, also 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--Delay in Payment
and Non Payment of Policy Proceeds Will Affect the Trust's Profits and
Distributions."
Once a potential client contacts United, an application and consent form
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 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
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:
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o 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;
o 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
o 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 determine 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.
United does not intend to purchase policies of insureds who are not
residents of the United States or whose insurance companies are not domiciled in
the United States.
If a referral source identifies a potential client, some of the
documentation gathering described above, including 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 as per 21st
Services, the premiums estimated to be paid under the policy over the insured's
estimated life expectancy as per 21st Services, 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 seller of such policy. 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, i.e. 30 days, 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. The
monitoring forms the basis of knowing whether an insured has died. 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 audit
certain policies to ensure that they do 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 submit a copy of the death certificate to the insurance
company. United will then file the death certificate with the insurance company
and request payment of the policy proceeds. United will monitor the collection
status until the trust receives the face value of the policy. Monitoring of
collection status will be assisted by United's management information system
which will reflect the filing of the death certificates, the filing of claim
forms with the insurance companies by United, and provide for a status update
until the claims have been paid. 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
will generally occur within 30 to 55 days following the death of the insured.
However, in certain states e.g., New York actual collections may 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.
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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.
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:
o price;
o response time; and
o 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
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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. 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/elderly 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/elderly insurance settlements have, to date, been an
attractive alternative to accelerated death benefits for senior/elderly
individuals. 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/elderly 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/elderly
insurance settlement industry. As an early entrant it intends to establish 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. United also believes that the confidentiality
afforded the insureds by selling their policies to a trust will be an additional
incentive for them to do business with United rather than sell their policies to
persons who will hold the policies directly. Finally, if this offering is
successful, the proceeds from this offering will allow United to have
significant financial flexibility in such a fragmented market since it will have
access to resources which will allow it to purchase more senior/elderly
insurance settlements at deeper discounts.
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GOVERNMENT REGULATION
United will monitor the progress of new legislation and regulations in each
state in which it purchases policies. However, given the emerging nature of
senior/elderly 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 Florida and Texas have enacted
permanent statutes governing senior/elderly 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
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 regulations, that establish minimum purchase prices to be paid to the
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/elderly insurance settlement business constitutes conducting an insurance
business, some or all of these statutes may be interpreted in the future to
include senior elderly insurance settlements and to preclude United, which is
not an insurance company, from operating in those states. See "Risk
Factors--Possible Costs of and Delays Attributable to Government Regulation will
Affect the Trust's Profitability."
CAPITAL RESOURCE GROUP ONE, LLC.
Capital was formed in the State of Delaware in October, 1999. Capital was
organized for the restricted, limited purpose of forming the trust, purchasing
the insurance settlements from United, assigning the insurance settlements to
the trust, executing the certificates through the trust, 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 [$ ].
Prior to its formation, Capital had no operating history. Mr. Thomas LaRussa may
be deemed to be finder and/or promoter of Capital. Capital's sole member and
officer is Thomas LaRussa.
Capital will enter into an insurance settlements purchase agreement dated
the date of the pooling and servicing agreement between Capital, as buyer, and
United, as seller,
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containing the terms and conditions under which Capital will purchase insurance
settlements from United. Pursuant to the 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 insurance settlements and (b) take all
actions that are required under state law to establish Capital's ownership
interest in and to the insurance settlements, as more fully described in the
senior insurance settlements purchase agreement. See "Description of the
Insurance Settlements Purchase Agreement."
Pursuant to the pooling and servicing agreement, simultaneously with the
purchase of the insurance settlements from United, Capital will (a) designate
the trust as an irrevocable beneficiary of the 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 insurance settlements. See "Description of the
Certificates and the Pooling and Servicing Agreement--Assignment of Insurance
Settlements".
Diversification Requirements: Capital will covenant to structure its
purchase, acquisition and assignment of insurance settlements so that:
o at acquisition, no less than 75% of the cumulative death benefits of the
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,
o at acquisition no more than 25% of the cumulative death benefits of the
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.
o less than 10% of the outstanding cumulative death benefits of the
insurance settlements held or beneficially owned by the trust shall be
payable by any one insurance company, and
o no more than $4 million in Tranche I and $10 million in Tranche II will
be cumulative death benefits relating to any one individual.
21ST SERVICES
The trust will also engage 21st Services as master servicer, to assist it
in the identification, evaluation, monitoring and collection of the insurance
settlements. 21st Services, located in Minneapolis, Minnesota, provides high
quality medical and insurance underwriting to the insurance settlements
industry. 21st Services is nationally recognized for its experience in
evaluating and underwriting insurance settlements. 21st Services has had
significant experience in medical underwriting, insurance underwriting and post-
purchase servicing of insurance settlements to the insurance settlements
industry. 21st Services utilizes a statistically-based computer model to provide
life expectancy estimations in the newly emerging senior/elderly insurance
settlements market. Its model has had an eighty percent (80%) confidence level,
which means that 80% of the individuals with the insured's medical
characterization will die within the life expectancy estimate. 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
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receive a separate fee, payable monthly, for its diagnostic and evaluation
services. The fee will be no more than $200.00 per insurance certificate
regardless of whether United eventually purchases such policy.
Depending on the insured's medical condition and at the discretion of 21st
Services, the life expectancy review is accomplished through independent
reviewing physicians, 21st Services' 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.
The insured's medical chart will generally contain the following items
which may be furnished by the sourcing broker or requested by United:
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
obtained from an international actuarial firm. The statistical mortality data on
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 compiled 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.
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21st Services will also provide master servicer functions, such as:
o Review medical, insurance and final underwriting for proposed policies
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 Audit premium calendar database
o Prepare reports as agreed
All of the above services, except for tracking and maintaining updated
medical files on the insureds for which 21st Services will receive $23.00 per
month for each active policy, will be included in the master servicer fee.
The managers of 21st Services are:
PAUL KIRKMAN, age 36, President--21st Diagnostics, managing director of
21st Holdings, LLC, obtained his college education from Michigan State
University, and in 1995 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.
Mr. Kirkman joined 21st Services in 1998 and he 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 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. Mr. Kirkman believes that
this model is the only automated computer model in the industry.
Kirkman has approximately 5 years of life insurance settlement industry
experience.
ROBERT SIMON, age 39, President--Manna Financial, has been managing
director of 21st Holdings, LLC since February 1998. He became the controller for
ViatiCare Financial Services, 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
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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
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/elderly
insurance settlement originations network of insurance agents that has produced
a steady stream of insurance settlements. Simon 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, age 39, President--21st Underwriting and 21st Guardian,
managing director of 21st Holdings, LLC, from 1995 until 1998 was an
underwriter, Service Group Manager and Manager of Policy Purchasing for
ViatiCare, 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.
Mr. Walker joined 21st Services in 1998 and he 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 approximately 5 years of life insurance settlement industry experience.
THE TRUST
The issuer of the certificates is Insurance Settlements Funding Trust 2000,
a trust organized on , 2000. The purpose of the trust will be
to invest the proceeds of the offering in insurance settlements and thereafter
collect the death benefit proceeds associated with such insurance settlements
and distribute the proceeds to the certificateholders.
The trust will be formed in accordance with the laws of the State of
Delaware, as a business trust, and pursuant to the pooling and servicing
agreement. The originator of the trust will be Capital. The trust will be formed
for the restricted, limited purposes of
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beneficially owning the insurance settlements acquired from Capital and the
proceeds from such insurance settlements, issuing certificates and making
payments on the certificates, 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. See "Description of the
Certificates and The Pooling and Servicing Payment--The Trust's Assets." 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 all required payments to
certificateholders will be transferred to Capital. See "Description of the
Certificates and the Pooling and Servicing Agreement." The trustee of the trust
is The Bank of New York, a New York banking corporation. The trust will pay The
Bank of New York an aggregate annual fee of approximately $150,000.
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 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. If the trust is formed during the offering
period, audited financial statements of the trust will be included in the
prospectus. See "Description of The Certificates, and The Pooling and Servicing
Agreement--Reports and Records of the Master Servicer and Subservicer" and
"Distribution and Reports to Certificateholders."
THE ESCROW AGENT
The trust will retain The Bank of New York to serve as escrow agent for the
trust. As escrow agent, The Bank of New York 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
.55% of the principal amount of the certificates outstanding as determined at
the closing dates. 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. Such right shall vest at the rate
of 12.5% and 10% per year, for Tranche I and Tranche II, respectively. If either
Tranche is redeemed prior to maturity, such rights shall vest automatically. If
the master servicer is required to become the successor servicer, it will be
paid a one-time management transfer fee of $100,000 by the trust.
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 insurance settlements for purchase, negotiating the
price to be paid for insurance settlements,
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monitoring insurance settlements assigned to the trust, assuring that premiums
are paid when due and liquidating 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 collecting insurance settlements. The trust will pay all other costs and
expenses of the trust including the following:
o all routine administrative expenses of the trust, including the cost of
the preparation of the annual audit, financial and tax returns, tax
reports required for investors or the trust, cash management fees and
routine legal and accounting expenses,
o all out-of-pocket costs and expenses, if any, incurred in identifying,
evaluating, purchasing, acquiring, holding, valuing and disposing of
insurance settlements, including without limitation any financing, legal,
accounting, advisory and consulting expenses in connection therewith,
o all third-party expenses in connection with the insurance settlements or
proposed 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,
o brokerage commissions, license and registration fees and expenses,
custodial expenses and other investment costs actually incurred in
connection with the insurance settlements,
o 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,
o 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,
o license fees and associated costs of obtaining all necessary licenses
such as licenses as an 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
o expenses to the extent that such expenses are not servicing expenses,
including expenses relating to the formation of the trust and the
offering of the certificates.
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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 other fees and expenses, will
be paid to the trust to purchase insurance settlements from Capital which
Capital will acquire from United and which United will acquire from sourcing
brokers. Approximately 66 2/3% of such funds will be utilized to acquire
insurance settlements and the remaining approximately 33 1/3% will be used to
fund the liquidity account. See "Description of the Certificates and the Pooling
and Servicing Agreement--Investor Accounts and Allocation of Collateral;
Liquidity Account." 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 Bank of New York
will be entitled to retain, from any disbursements from the escrow account that
are payable to Capital for insurance settlements assigned to the trust, any
outstanding fees and/or expenses due The Bank of New York 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 after 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--Principal Payments; 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 in this
offering. Pryor, Counts & Co., Inc. has made no agreement to purchase or take
down all or part of the certificates pursuant to this offering, 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 100% of the subscription payments 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,
even after the minimum amount of certificates are sold.
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 Bank of New York. All subscriber's
checks should be made payable to "THE BANK
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OF NEW YORK ESCROW ACCOUNT FOR INSURANCE SETTLEMENTS FUNDING TRUST 2000."
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. 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 Bank of New York 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 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.
Cullasaja Capital, Ltd., a wholly owned operating unit of Chanticleer
Ventures, Ltd., of Nassau, Bahamas, will receive one-time consulting fee
equivalent to .0033 1/3% of the outstanding principal balance of the
certificates in the trust sold pursuant to this offering. The consulting fee
will be payable by United on a monthly basis against the amount owed commencing
on the month following the first closing date and continuing until the trust
termination date.
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REGISTRATION OF CERTIFICATES
The certificates will be registered by individual book-entry by the
transfer agent and registrar who shall be The Bank of New York. There currently
is no secondary market for the certificates, and there is no assurance that one
will develop.
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 insurance
settlements and originator of the trust, United as seller and subservicer of the
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 the material terms of the
pooling and servicing agreement.
THE TRUST'S ASSETS
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:
o an irrevocable beneficial interest in the insurance settlements;
o monies due or to become due thereunder;
o monies received from insurance companies in payment of the insurance
settlements;
o 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
o all right, title, and interest with respect to the insurance settlements
and any supporting documentation or agreements related to the insurance
settlements and with United under the insurance settlements purchase
agreement. See "Description of the 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. See "Investor Accounts and
Allocation of Collections." Each certificate will represent the right to receive
(a) semi-annual payments of certificate interest at the certificate rate
primarily from the liquidity account and (b) payments of certificate principal
funded from collections attributable to payments by insurance companies pursuant
to the 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.
The principal amount of the certificates will remain constant. Distribution
of interest and/or principal on the certificates on each distribution date will
be made by the trustee,
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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 insurance settlements to the trust.
The certificates, in the aggregate, will represent a 100% interest in the
trust assets. The trust will be structured so that the aggregate principal
amount of the certificates and interest payable on the certificates will not be
more than the face amount of the insurance policies and the amounts in the
liquidity account.
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,
Capital 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.
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
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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 certificate 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. 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. The
trustee, as the paying agent, shall be permitted to resign as paying agent upon
30 days written notice to Capital at which point Capital shall appoint a
successor paying agent. 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 that the paying agent 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.
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. Certificateholders holding an aggregate
amount of not less than five percent (5%) of the certificates then outstanding
may apply in writing to the trustee, that they desire to communicate with other
certificateholders with respect to their rights under the pooling and servicing
agreement or under the certificates. If such request is accompanied by 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. The list
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.
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INTEREST PAYMENTS
Certificate interest on the Tranche I and Tranche II cetificaties will
accrue at the rate of [ ]% and [ ]% per annum, respectively, and payable
to the certificateholder semi-annually. Certificate interest will accrue on a
certificate from the applicable closing date of the particular certificate.
Certificate interest payments will be funded from the liquidity account.
Certificate interest will be paid to the certificateholders after the trustee's
fees, expenses and indemnity, but before the master servicer's fee, the
successor servicer's fee and the subservicer's fee have been paid, in that order
of priority. If there are insufficient amounts in the liquidity account to pay
certificate interest, such deficit shall constitute a deficiency amount payable
on succeeding distribution dates from the liquidity account.
PRINCIPAL PAYMENTS
Principal is payable commencing on the first distribution date following
the close of business on the 8th and 10th year anniversary, respectively, of the
closing date. No payments of certificate principal will be made to
certificateholders until after 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 final
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. 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 on 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.
ASSIGNMENT OF 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 insurance settlements specifying the amount of the
insurance settlements to be assigned and the trustee shall, in turn, notify
Capital of the amount available in the escrow account to acquire 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 insurance settlements which shall
be acquired by Capital from United, as seller under the insurance settlements
purchase agreement, pursuant to the insurance settlements purchase agreement,
including all monies due or to become due with respect to the insurance
settlements and all proceeds from the insurance settlements and (b) all of
Capital's rights, remedies, powers and privileges with respect to the insurance
settlements under the insurance settlements purchase agreement.
REPRESENTATIONS AND WARRANTIES OF CAPITAL
General. Capital shall represent and warrant to the trust as of each
closing date that:
o it is a company 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
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obligations under the pooling and servicing agreement and to execute and
deliver to the trustee the certificates pursuant thereto;
o 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;
o the execution and delivery of the pooling and servicing agreement and the
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
insurance settlements purchase agreement have been duly authorized by
Capital by all necessary corporate action;
o the execution and delivery of the pooling and servicing agreement and the
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;
o the execution and delivery of the pooling and servicing agreement, the
insurance settlements purchase agreement and the certificates, the
performance of the transactions contemplated by the pooling and servicing
agreement or the insurance settlements purchase agreement and the
fulfillment of the terms thereof will not conflict with or violate any
requirements of law applicable to Capital;
o 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
instrumentality:
o asserting the invalidity of the pooling and servicing agreement, the
insurance settlements purchase agreement or the certificates,
o seeking to prevent the issuance of the certificates or the
consummation of any of the transactions contemplated by the pooling
and servicing agreement, the insurance settlements purchase agreement
or the certificates,
o 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 insurance settlements purchase agreement,
o seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of the pooling and
servicing agreement, the insurance settlements purchase agreement or
the certificates or
o seeking to affect adversely the income tax attributes of the trust;
and
o 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 insurance settlements purchase
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agreement and the certificates, the performance of the transactions
contemplated by the pooling and servicing agreement or the 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 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 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 insurance settlements each constitute a
valid assignment to the trust of all right, title and interest of Capital in, to
and under the insurance settlements being assigned to the trust, all monies due
or to become due with respect to the insurance settlements, and all proceeds of
the insurance settlements, free and clear of any lien of any person claiming
through or under Capital, all monies due or to become due with respect to the
insurance settlements and the proceeds of the insurance settlements upon
transfer of the insurance settlements to the trust, and of the pooling and
servicing agreement.
ELIGIBILITY OF INSURANCE SETTLEMENTS, SELECTION PROCEDURES, SOLVENCY
In connection with the assignment of the 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 were utilized in selecting the insurance
settlements being transferred to the trust and (b) neither Capital nor the
seller is insolvent. See "Covenants 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 insurance settlement
assigned on such date as if made on such date. In addition, these
representations and warranties shall survive the assignment of the beneficial
interests of the respective 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 the Insurance Settlements Purchase
Agreement. Capital shall also represent and warrant to the trust under the
insurance settlements purchase agreement, that it has covenanted and agreed to
comply with and perform its obligations with respect to the 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.
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COVENANTS OF CAPITAL
Capital shall covenant to the trust that:
o each insurance settlement shall be evidenced by an appropriate insurance
policy;
o except for the assignments contemplated in the pooling and servicing
agreement, Capital will not sell, pledge, assign or transfer to any other
person the insurance settlements;
o Capital agrees to tender to the subservicer for deposit in the investor
accounts all payments received by Capital with respect to the insurance
settlements as soon as practicable after receipt thereof by Capital;
o Capital will enforce the provisions of the insurance settlements purchase
agreement prohibiting the Seller from conveying, assigning, exchanging or
otherwise transferring the insurance settlements to any other person
prior to termination of the trust;
o 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
o Capital's purchase, acquisition and transfer of the insurance settlements
will be structured so that:
o at acquisition, no less than 75% of the cumulative death benefits of
the 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,
o at acquisition no more than 25% of the cumulative death benefits of
the 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,
o less than 10% of the outstanding cumulative death benefits of the
insurance settlements held or beneficially owned by the trust shall
be payable by any one insurance company, and
o no more than $4 million in Tranche I and $10 million in Tranche II
will be cumulative death benefits relating to any one individual.
ADMINISTRATION AND SERVICING OF THE INSURANCE SETTLEMENTS.
The subservicer will undertake to service and administer the insurance
settlements and to collect payments due under the 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 to execute and deliver, on behalf of the
trust for the
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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 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 insurance
settlements from the procedures, offices, or employees used by the master
servicer in connection with servicing other insurance settlements, if any;
provided, however, that subservicer is at all times required to be able to
accurately reflect the status of collections and shall maintain separate
accounts. Neither the subservicer nor the master servicer is required to
maintain fidelity bond coverage insuring against losses through wrongdoing of
its officers and employees who are involved in the servicing of the 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 insurance
settlements and shall not be entitled to any payment from Capital or the trust
other than the monthly servicing fee. The subservicer shall be entitled to an
annual fee of 0.3575% until the expiration of the offering period and 0.45375%
after the expiration of the offering period on the outstanding principal amount
of certificates, payable monthly.
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 insurance settlements and is authenticating the
certificates that:
o the subservicer is a company 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;
o it is qualified as a foreign corporation in every state where it is
required to be so qualified to service the 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
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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;
o the execution, delivery, and performance of the pooling and servicing
agreement and the insurance settlements purchase agreement, have been
duly authorized by the subservicer, and 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 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 insurance settlements purchase agreement by the
subservicer, and 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 as 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 as seller, as applicable, or any
indenture contract, agreement, mortgage, deed of trust or other
instrument to which the subservicer, or as seller, as applicable, is a
party or by which it is bound; and
o there are no proceedings or investigations pending or, to the best
knowledge of the subservicer, or as seller, as applicable, threatened
against the subservicer, or as 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 as seller, as applicable,
would materially and adversely affect the performance by the subservicer,
or as seller, as applicable, of its obligations under the pooling and
servicing agreement or the 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 insurance settlements purchase agreement. Seller shall
also make agreements with or deliver binding instructions to each
insurance company such that policy proceeds 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 are 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 at least 2 business days prior to each closing date
and, thereafter, on the first business day of each week, an officer's
certificate setting forth the amount of insurance settlements to be purchased on
the closing date as measured by the insurance settlements purchase price to be
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 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 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:
o the aggregate amount of collections processed during the preceding six
months;
o the aggregate amount of insurance settlements and the balance on deposit
in the insurance settlements account, with respect to collections
processed as of the end of the last day of the preceding six months;
o the aggregate amount, if any, of withdrawals from the liquidity account
required to be made on the next succeeding transfer date;
o the aggregate amount of funds, if any, to be deposited in the liquidity
account on the next succeeding transfer date;
o the six months certificateholders statement;
o the sum of all amounts payable to the certificateholders on the next
succeeding distribution date in respect of certificate interest and
certificate principal; and
o the interest and earnings, net of losses and investment expenses, from
the 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, 2001, an officer's
certificate stating that (1) a review of the activities of the
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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 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, will also undertake to cause certain annual
reports to be prepared by independent public accountants for the trust, which
reports will be available for inspection by the certificateholders at the
offices of the trustee during normal business hours. On or before April 15th of
each calendar year, beginning with April 15, 2001, 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 the 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, 2001, the subservicer also, at the trust's 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
or any other report described in this section 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.
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SUBSERVICER DEFAULT
Upon the occurrence of a subservicer default, 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, 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 default
by the subservicer. A default in the failure to make any required deposits or
payments, 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. After the giving of a termination notice the
master servicer will immediately become the successor servicer and shall accept
its appointment by a written assumption.
A subservicer default refers to any one of the following events which shall
occur and be continuing:
o 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
o 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 51% of the principal
amount of the certificates then outstanding; or
o the subservicer's delegation of its duties under the pooling and
servicing agreement except as permitted by the pooling and servicing
agreement; or
o 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
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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 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
o the subservicer shall:
o become insolvent,
o fail to pay its debts generally as they become due,
o voluntarily seek, consent to, or acquiesce in the benefit or benefits
of any debtor relief law, or
o 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 master servicer shall become the successor servicer.
When the master servicer becomes the successor servicer, it shall receive a
management transfer fee of $100,000. If the master servicer is legally unable to
act 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 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.
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 successor servicer shall execute and deliver all documents and
other 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.
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THE TRUSTEE
The Bank of New York 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 the
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. However, 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 which affects
the trustee's rights, duties or immunities under the pooling and servicing
agreement or otherwise. Any assignments regarding the transfer of 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
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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 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 shall be established and 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.
Insurance Settlements Account. The 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 and servicing
agreement. The insurance settlements account shall contain collections
attributable to insurance settlements.
Liquidity Account. The trustee shall also establish and maintain the
liquidity account 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 approximately 33 1/3 of
the principal amount of the certificates issued on such closing date. The
liquidity account will be funded with a minimum of approximately $6,660,000 if
$20,000,000 of certificates are sold pursuant to this offering. The maximum
amount would be approximately $49,950,000 if $150,000,000 of certificates are
sold. It is anticipated that the amount of funds in the liquidity account will
be sufficient to pay insurance premiums, however no assurance can be given. If
such amount is not sufficent the trust may be required to liquidate some
policies.
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Distribution Account. The trustee shall also establish and maintain a
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 at 3:00 p.m.,
the trustee shall withdraw all funds from the lockbox account and deposit same
in the insurance settlements account. Funds on deposit in the 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 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 as to the investment of funds on deposit
in the 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 Fidelity Fund Money Market Account. For
purposes of determining the availability of funds or the balances in the
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 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
subservicer shall instruct the trustee to withdraw on the succeeding transfer
date the amounts required to be withdrawn from the insurance settlements
account, and deposited into the distribution account. The trustee will then
withdraw from the insurance settlements account to the extent funds are
available from collections attributable to 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, expenses of the trustee and
any indemnity owing to the trustee;
(b) an amount equal to certificate interest for the six months and
certificate principal, if applicable;
(c) an amount equal to the subservicer's fee:
(d) an amount equal to the master servicer's fees or successor servicer's
fees; and
(e) an amount to fund any deficiency in the liquidity account.
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If the collections attributable to insurance settlements are less than the
amount required to be distributed from the 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 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
insurance settlements account collections attributable to insurance settlements
which have been on deposit in the 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 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 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 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.
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;
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(c) the amount of such distribution allocable to certificate interest;
(d) the amount of collections of insurance settlements processed during
the preceding six months;
(e) the 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
2001, 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 semi-annual 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 servicer 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.
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
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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 51% 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:
o become insolvent;
o fail to pay their debts generally as they become due;
o voluntarily seek, consent to, or acquiesce in the benefit or
benefits of any debtor relief law;
o 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
(g) the balance of the funds available in the liquidity account is less
than 5% of the amount of certificate principal of the certificates then
outstanding for a period of 2 consecutive months; or
(h) no person is able to act 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 upon actual knowledge of a responsible
officer or the certificateholders 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 certificateholders, 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
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proceeding is involuntary, and the petition instituting same is not dismissed
within 90 days after its filing, Capital shall on the date of such bankruptcy
event immediately cease to assign 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 (a) publish a notice in the authorized newspapers that a bankruptcy event
has occurred and that the master servicer intends to sell, dispose of or
otherwise liquidate the insurance settlements in a commercially reasonable
manner and (b) 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 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 proceeds from the sale, disposition or liquidation of the 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 managers, officers,
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.
However, this limitation on liability shall not protect Capital or any manager,
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 trust or any transactions
related thereto.
Indemnification. Further, Capital shall agree to cause the trust to
indemnify and hold harmless the 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 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. However, 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
acts, omissions or alleged acts or omissions constitute willful malfeasance, bad
faith or gross negligence by the trustee or master servicer, Capital shall not
indemnify
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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, 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 under the
pooling and servicing agreement, shall only be from assets of the trust. 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 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 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. 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 manager, 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 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'
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fees and other costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim. 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. 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. 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. 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.
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 master servicer shall be
evidenced by an opinion of counsel to such effect delivered to the trustee. No
such resignation shall become effective until United or a successor servicer
shall have assumed the responsibilities and obligations of the master servicer.
If Capital is unable within 30 days of the date of such determination to appoint
a successor servicer, Capital shall petition a court of competent jurisdiction
to appoint any established financial institution whose regular business includes
the servicing of insurance settlements or other insurance settlements similar to
the 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.
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TERMINATION
The trust shall terminate on the earlier of:
o the day designated by Capital after the final distribution date, the
inability to appoint a successor servicer or an optional repurchase
of certificates (the "final trust termination date"),
o the final distribution date after the occurrence of a pay out event,
or
o 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 insurance settlements on behalf of the trust and deposit the 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 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 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
$500,000, 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 insurance
settlements, all monies due or to become due with respect to the insurance
settlements and all proceeds from the insurance settlements and the amounts
remaining in the liquidity account.
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DESCRIPTION OF THE INSURANCE
SETTLEMENTS PURCHASE AGREEMENT
THE INSURANCE SETTLEMENTS PURCHASE AGREEMENT
The insurance settlements assigned to the trust by Capital will be acquired
by Capital from United pursuant to the insurance settlements purchase agreement
entered into between Capital, as purchaser of the insurance settlements, and
United, as seller of the insurance settlements. The trustee will provide a copy
of the insurance settlements purchase agreement to certificateholders without
charge, upon receipt of a written request therefor. Under the insurance
settlements purchase agreement, United will agree to transfer the insurance
settlements to Capital. The following summary describes the material terms of
the insurance settlements purchase agreement and is qualified in its entirety by
reference to the insurance settlements purchase agreement.
SALE OR TRANSFER OF THE INSURANCE SETTLEMENTS
United will sell, transfer, assign, and convey to Capital all its right,
title and interest in and to all of the insurance settlements being transferred
on each closing date. Upon the request of Capital, United will notify Capital of
the amount of insurance settlements available for purchase on each closing date.
The purchase price for the 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
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 insurance settlements to
Capital, United will indicate in its computer master file that the 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 insurance settlements, identified by account number
and by the total outstanding face amount on the closing date. The insurance
settlements purchase agreement shall constitute a security agreement between
United and Capital. See "Legal Aspects of the Insurance Settlements."
REPRESENTATIONS AND WARRANTIES
United will make representations and warranties to Capital as of each
closing date, that United is duly formed and in good standing and that it has
the authority to consummate the transactions contemplated by the insurance
settlements purchase agreement.
United will also represent and warrant to Capital that the insurance
settlements purchase agreement constitutes a legal, valid and binding obligation
of United, and the sale and transfer of the insurance settlements to Capital
constitute a valid sale and transfer to Capital of all right, title and interest
of United in and to the insurance settlements, and the
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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 will covenant in the insurance settlements purchase agreement that
it will perform its obligations under the agreements relating to insurance
settlements and observe all its policies and procedures relating to the
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 insurance
settlements, or the certificateholders.
United will expressly acknowledge and consent to the assignment by Capital
of an irrevocable beneficial interest in and to the 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
insurance settlements shall inure to Capital. Except for the sale and
conveyances under the insurance settlements purchase agreement, United will not
sell, pledge, assign or transfer any interest in the insurance settlements to
any other person or entity.
TERMINATION
The insurance settlements purchase agreement will continue in full force
and effect until (a) the trust terminates, or (b) United shall:
o become insolvent;
o fail to pay its debts generally as they become due;
o voluntarily seek, consent to, or acquiesce in the benefit or benefits of
any debtor relief law; or
o 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 insurance settlements to Capital and promptly give
notice of such event to Capital and to the trustee.
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LEGAL ASPECTS OF THE INSURANCE SETTLEMENTS
SALE AND TRANSFER OF THE INSURANCE SETTLEMENTS
On each closing date United will sell, transfer, assign the insurance
settlements to Capital and Capital will transfer and assign an irrevocable
beneficial interest in the 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 insurance settlements from the proceeds of such
offering. Capital will pay United the proceeds received from the trust in
consideration for the insurance settlements sold to Capital by United. On each
closing date United will indicate in its master computer file of insurance
settlements that the 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 insurance
settlements, identified by account number and by the total outstanding face
amount of such 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 policy proceeds payments to the
lockbox account which will be owned by the trust.
United will represent and warrant to Capital in the insurance settlements
purchase agreement that the sale and transfer of the 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 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 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 insurance settlements may
be characterized as an interest or claim in or under a policy of insurance.
Under the insurance settlements purchase agreement, United will (a)
represent and warrant that United has acquired the insurance settlements from
the insureds and has transferred the 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 insurance settlements other than to Capital. Under the pooling and
servicing agreement, Capital will (a) represent and warrant that Capital has
acquired the insurance settlements from United and has assigned an irrevocable
beneficial interest in the 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 insurance settlements other than to the
trust.
Capital will not engage in any activities except acquiring insurance
settlements from United, transferring an irrevocable beneficial interest in the
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
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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:
o 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,
o 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
o the sale and transfer of insurance settlements by United to Capital
constitute a valid sale and transfer and, therefore, such 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 insurance settlements from
United to Capital, and therefore from Capital to the trust, should be
recharacterized as a pledge of such 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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FEDERAL INCOME TAX CONSEQUENCES
DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a description of the material federal income tax
consequences to certificateholders. 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. We suggest that prospective investors
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. This summary of the material federal income tax
consequences is based on the written opinion of Mesirov Gelman Jaffe Cramer &
Jamieson, LLP, counsel to Capital, a copy of which is included as exhibit 8.1 to
the registration statement of which this prospectus is a part. The following
summary describes the material terms of counsel's opinion and is qualified in
its entirety by reference to that opinion. The conclusions reached in such
opinion are not binding on the courts or the IRS, and there can be no assurance
that the IRS will not assert positions contrary to the views expressed therein,
or that any such contrary position would not be sustained.
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 so that for federal, state and
local income tax purposes the certificates will constitute evidences of
indebtedness of Capital collateralized by the 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 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 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
55
<PAGE>
property. For the reasons stated in counsel's opinion, substantial incidents of
ownership of the insurance settlements have been retained by Capital. Although
the result is not without doubt, counsel has concluded that the arrangements
among Capital and the certificateholders under the pooling and servicing
agreement will be viewed in substance as a secured financing by Capital. 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.
For the reasons stated in its opinion, counsel has concluded that the form of
the arrangements among Capital and the certificateholders under the pooling and
servicing agreement should not be viewed as inconsistent with the substance of
the transaction as a secured financing by Capital. Furthermore, it is counsel's
opinion that the financial accounting treatment of the transaction is not
controlling for federal income tax purposes.
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, counsel
is nevertheless of the view that the parties would be permitted to disregard the
form of the transaction and characterize the transaction in accordance with its
substance. Based on all of the foregoing, counsel has opined that the
certificates will be characterized as evidences of indebtedness of Capital for
federal income tax purposes and not the trust and the trust will be disregarded
for federal income tax purposes.
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
insurance settlements account 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
As stated above, counsel has opined that the certificates would be
characterized as indebtedness of Capital that is secured by the insurance
settlements. 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 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 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
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<PAGE>
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
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 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.
Based upon counsel's opinion that the certificates would be characterized
as debt of Capital for federal income tax purposes, 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 that counsel's opinion that 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 will not be issued with original issue discount within the
meaning of Section 1273 of the Code. We suggest that prospective investors
consult his own tax advisor regarding the impact to him of the original issue
discount rules if the certificates are issued with original issue discount.
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.
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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 connected with the conduct of a
trade or business of the recipient in the United States and, if the foreign
person (a) is not a 10 percent shareholder or a controlled foreign corporation
to which Capital is a related person within the meaning of the Internal Revenue
Code, and (b) 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 (a) 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 (b) in the
case of an individual foreign person, (1) 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 (2) the foreign person does
not have a tax home in the United States and (3) 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 we suggest that
foreign investors consult their own tax advisors to ascertain the application of
these matters to them.
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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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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 violation 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 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. Counsel to 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 (3) 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 at the conclusion of
the offering made by this prospectus or whether the certificates will be
registered as required to be registered under the Securities Exchange
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Act of 1934. 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, trust 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 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.
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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 (a) satisfies the
diversification requirement of ERISA or other applicable law (b) is in
accordance with the benefit plan's governing instruments and (c) 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 applies to investment companies as
defined by the Act.
Section 3(c)(5)(A) and (B) 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 . . .
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 services" and ". . . making loans to manufacturers,
wholesalers and retailers of, and to prospective purchasers of, specified
merchandise, insurance, and services." 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 sales price of merchandise,
insurance or services.
The insurance settlements represent payment obligations of insurance
companies. The trust will also initially consist of no more than 33 1/3% in
permitted investments. The trust will therefore satisfy the requirements of
Section 3(c)(5) of the Act and is not an investment company subject to the Act.
LEGAL MATTERS
Certain legal and federal income tax matters relating to the certificates
will be passed upon for Capital by Mesirov Gelman Jaffe Cramer & Jamieson, LLP,
Philadelphia, Pennsylvania.
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GLOSSARY
"Amortization period" shall mean, with respect to each certificate, the
period between the closing date and the final maturity date.
"Assignment" shall mean a written assignment transferring the insurance
settlements to the trust and executed by Capital.
"Authorized newspapers" shall mean each newspaper of general circulation in
New York, or Carmel, 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.
"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,
[ ]% per annum and with respect to the Tranche II certificates, [ ]% 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.
"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.
"Determination date" shall mean the 10th day of the month immediately
succeeding the month in which the first closing date occurs and each six month
anniversary thereof, or, if any such 10th 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 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.
"Fee distribution date" shall mean the 15th day of the month after the
month in which the first closing date occurs and the 15th day of each calendar
month thereafter, or, if any such 15th day is not a business day, the next
succeeding business day.
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"Final 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.
"Investor accounts" shall mean each of the 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 0.1925% until the
expiration of the offering period and thereafter 0.09625% of the principal
amount of certificates outstanding, payable monthly in accordance with the
pooling and servicing agreement. The minimum payment will be $5,000 per month.
"Officer's certificate" shall mean a certificate signed by any officer of
Capital or the subservicer, as appropriate, and delivered to the trustee.
"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:
o obligations fully guaranteed by the United States of America;
o 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;
o 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;
o 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
o investments in a Fidelity Fund Money Market Account;
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(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 Truth 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 .55%.
"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 0.3575% until the
expiration of the offering period and thereafter 0.45375% of the principal
amount of the certificates outstanding, payable monthly in accordance with the
pooling and servicing agreement.
"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.
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================================================================================
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.............................. 1
Risk Factors......................... 6
Glossary............................. 12
Forward-Looking Statements........... 12
United, Capital, 21st Services and
the Trust.......................... 12
Use of Proceeds...................... 26
Maturity Assumptions................. 26
Plan of Distribution................. 26
Description of the Certificates and
the Pooling and Servicing
Agreement.......................... 28
Description of the Insurance
Settlements Purchase Agreement..... 51
Legal Aspects of the Insurance
Settlements........................ 53
Federal Income Tax Consequences...... 55
ERISA Considerations................. 60
Transferability of Certificates...... 62
Investment Company Act of 1940....... 62
Legal Matters........................ 62
Glossary............................. 63
</TABLE>
------------------
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 -- MAXIMUM
$20,000,000 -- MINIMUM
INSURANCE
SETTLEMENTS FUNDING
TRUST 2000
[ ]% ASSET BACKED CERTIFICATES
AND
[ ]% ASSET BACKED CERTIFICATES
CAPITAL RESOURCE GROUP ONE, LLC
21ST HOLDINGS, LLC
MASTER SERVICER OF
THE INSURANCE SETTLEMENTS
----------
PROSPECTUS
----------
PRYOR, COUNTS & CO., INC.
____________ , 2000
================================================================================
<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 (including counsel fees)....... 35,000
Legal Fees and Expenses.................................... 250,000
Printing and Engraving Expenses............................ 25,000
Blue Sky Qualification Expenses............................ 36,000
Miscellaneous........................................... 2,000
--------
* Total.............................................. $389,700
========
- ------------------
* The actual total will be filed by amendment.
ITEM 14. INDEMNIFICATION AND DIRECTORS AND OFFICERS.
Capital was formed under Delaware law. Pursuant to Section 18-108 of the
Delaware Limited Liability Company Act, a Delaware limited liability company may
indemnify and hold harmless any member or manager or other person from and
against any and all claims and demands whatsoever, subject to such standards and
restrictions, if any, as are set forth in a limited liability company operating
agreement. Capital has no such restrictions.
Articles 4 and 5 of Capital's Amended Certificate of Formation provide 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 manager or
officer of Capital in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the interests of Capital and the conduct of the
manager or officer did not constitute actual fraud, gross negligence, or willful
misconduct.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
3.1 Certificate of Formation of Registrant.
3.1A Certificate of Amendment to Certificate of Formation of
Registrant (Filed herewith).
3.2 Bylaws of Registrant. (Not Applicable)
II-1
<PAGE>
4.1a Pooling and Servicing Agreement among Registrant, the master
servicer, the subservicer and the trustee, including the
form of certificates and other exhibits thereto, defining
the rights of the certificateholders. (Filed herewith).
4.2a Form of Certificate. (Filed herewith as an exhibit to exhibit
4.1a).
5.1 Form of opinion of Mesirov Gelman Jaffe Cramer & Jamieson, LLP,
with respect to legality. (Filed herewith).
8.1 Form of opinion of Mesirov Gelman Jaffe Cramer & Jamieson, LLP,
with respect to tax matters. (Filed herewith).
10.1a Placement Agent Agreement. (Filed herewith).
10.2a Insurance Settlements Purchase Agreement. (Filed herewith).
10.3a Master Servicer Agreement. (Filed herewith).
10.4 Escrow Agreement. (Filed herewith).
10.5 Agreement between Cullasaja Capital, Ltd. and United Funds, LLC.
(Filed herewith).
24.1 Form of consent of Mesirov Gelman Jaffe Cramer & Jamieson, LLP
(included in opinion filed as Exhibit 5.1 and 8.1). (Filed
herewith).
25.1 Form T-1. (Filed herewith).
28.2 Form of Subscription Agreement. (Filed herewith).
(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;
II-2
<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.
(5) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 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 22nd day of March, 2000.
CAPITAL RESOURCE GROUP ONE, LLC
By: /s/ THOMAS J. LARUSSA
-----------------------------------
Thomas J. LaRussa
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
OFFICERS TITLE DATE
-------- ----- ----
/s/ THOMAS J. LARUSSA President March 22, 2000
- -------------------------
Thomas J. LaRussa
/s/ THOMAS J. LARUSSA Secretary March 22, 2000
- -------------------------
Thomas J. LaRussa
/s/ THOMAS J. LARUSSA Principal Financial Officer March 22, 2000
- -------------------------
Thomas J. LaRussa
MEMBERS
/s/ THOMAS J. LARUSSA Managing Member March 22, 2000
- -------------------------
Thomas J. LaRussa
II-4
EXHIBIT 3.1.A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF FORMATION
OF
CAPITAL RESOURCE GROUP ONE, LLC
********
1. The name of the limited liability company (the "Company") is Capital
Resource Group One, LLC.
2. The Certificate of Formation of the Company is hereby amended by adding
the following Paragraphs 3, 4 and 5:
3. The purpose for which the Company is organized is to originate the
Insurance Settlements Funding Trust 2000 (the "Trust") and execute and deliver
the Certificates issued by the Trust; to purchase Insurance Settlements solely
from United Funds, LLC, to transfer those Insurance Settlements to the Trust,
and to perform such other functions incidental to or necessary or convenient to
accomplish the foregoing.
The Company shall have no other purpose. The Company shall incur no debt,
except to the extent that the securities issued by the Trust constitute and/or
are treated as indebtedness of the Company. The Company shall make no contracts
or incur no liability other than those incidental to the foregoing limited
purposes, and shall not file a voluntary petition under the Bankruptcy Code of
1984, as amended, or any similar applicable state law so long as the Company is
solvent and does not reasonably foresee becoming insolvent.
4. No Manager or officer of the Company shall have any liability to the
Company or the Members for any losses sustained or liabilities incurred as a
result of any act or omission of such Manager or officer if (i) the Manager or
officer acted in good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the interests of the Company and (ii) the conduct of the
Manager or officer did not constitute actual fraud, gross negligence, or willful
misconduct.
The Company shall indemnify and hold harmless the Managers and officers of
the Company (individually, an "Indemnitee") from and against any and all losses,
claims, demands, costs, damages, liabilities, expenses of any nature (including
reasonable attorneys' fees and disbursements), judgments, fines, settlements,
and other amounts arising from any and all claims, demands, actions, suits, or
proceedings, civil, criminal, administrative, or investigative, in which an
Indemnitee may be involved, or threatened to be involved, as a party or
otherwise,
<PAGE>
arising out of or incidental to the business of the Company, regardless of
whether an Indemnitee continues to be a Manager or officer at the time any such
liability or expense is paid or incurred, if (i) the Indemnitee acted in good
faith and in a manner it or he or she reasonably believed to be in, or not
opposed to, the interests of the Company, and, with respect to any criminal
proceeding, had no reason to believe his or her conduct was unlawful and (ii)
the Indemnitee's conduct did not constitute actual fraud, gross negligence or
willful misconduct.
Expenses incurred by an Indemnitee in defending any claim, demand, action,
suit, or proceeding subject to this Paragraph 4 shall, from time to time, be
advanced by the Company prior to the final disposition of such claim, demand,
action, suit, or proceeding upon receipt by the Company of an undertaking by or
on behalf of the Indemnitee to repay such amounts if it is ultimately determined
that such person is not entitled to be indemnified as authorized in this
Paragraph 4. The indemnification provided by this Paragraph 4 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, consent of the Members, as a matter of law or equity, or otherwise,
shall continue as to an Indemnitee who has ceased to serve in such capacity and
shall inure to the benefit of the heirs, successors, assigns and administrators
of the Indemnitee. Subject to the foregoing sentence, the provisions of this
Paragraph 4 are for the benefit of the Indemnitees and shall not be deemed to
create any rights for the benefit of any other persons.
5. The debts, obligations, and liabilities of the Company, whether arising
in contract, tort, or otherwise, shall be solely the debts, obligations, and
liabilities of the Company, and no Manager shall be obligated personally for any
such debt, obligation, or liability by reason of his or her acting as a Manager
of the Company.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment as of this 22nd day of March, 2000.
CAPITAL RESOURCE GROUP ONE, LLC
By: /s/ Thomas LaRussa
-------------------------------
Thomas LaRussa, Managing Member
Exhibit 4.1a
================================================================================
INSURANCE SETTLEMENTS FUNDING TRUST 2000
[ ] Asset Backed Certificates and
[ ] 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 BANK OF NEW YORK
as Trustee
and
UNITED FUNDS, LLC
as Subservicer
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I DEFINITIONS.............................................................................................1
Section 1.1 Definitions.......................................................................................1
Section 1.2 Other Definitional Provisions.....................................................................9
ARTICLE II TRANSFER OF INSURANCE SETTLEMENTS; ISSUANCE OF CERTIFICATES............................................9
Section 2.1 Transfer of Insurance Settlements.................................................................9
Section 2.2 Acceptance by Trust..............................................................................11
Section 2.3 Representations and Warranties of Capital Relating to Capital....................................12
Section 2.4 Representations and Warranties of Capital Relating to the Agreement and the Insurance
Settlements......................................................................................13
Section 2.5 Covenants of Capital.............................................................................15
ARTICLE III ADMINISTRATION AND SERVICING OF INSURANCE SETTLEMENTS...............................................16
Section 3.1 Duties of the Master Servicer and Subservicer....................................................16
Section 3.2 Subservicing and Master Servicer Compensation....................................................17
Section 3.3 Representations, Warranties, and Covenants of the Subservicer....................................18
Section 3.4 Reports and Records for the Trustee and Capital; Bank Account Statements.........................19
Section 3.5 Subservicer's Annual Certificate.................................................................20
Section 3.6 Annual Independent Public Accountants' Subservicing Report.......................................20
ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS............................21
Section 4.1 Rights of Certificateholders.....................................................................21
Section 4.2 Establishment and Administration of Investor Accounts............................................21
Section 4.3 Collections and Distributions....................................................................22
Section 4.4 Monthly and Semi-Annual Withdrawals..............................................................23
Section 4.5 Payment of Certificate Principal.................................................................24
Section 4.6 Failure to Make a Deposit or Payment.............................................................24
Section 4.7 Payment In Accordance with the Subservicer's Reports.............................................25
ARTICLE V DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS...............................................25
Section 5.1 Distributions....................................................................................25
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...................................................................27
Section 6.3 Registration of Transfer and Exchange of Certificates............................................27
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates................................................28
Section 6.5 Persons Deemed Owners............................................................................28
Section 6.6 Appointment of Paying Agent......................................................................29
Section 6.7 Access to List of Certificateholders' Names and Addresses........................................29
Section 6.8 Authentication Agent.............................................................................30
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
Certificate of Formation.........................................................................31
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
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
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...........................................33
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...................................................................34
Section 8.6 Access to Certain Documentation and Information Regarding the Insurance Settlements.............34
Section 8.7 Delegation of Duties............................................................................34
Section 8.8 Examination of Records..........................................................................35
ARTICLE IX PAY OUT EVENTS........................................................................................35
Section 9.1 Pay Out Events..................................................................................35
Section 9.2 Additional Rights Upon the Occurrence of Certain Events.........................................36
ARTICLE X SUBSERVICER DEFAULTS...................................................................................37
Section 10.1 Subservicer Defaults............................................................................37
Section 10.2 Master Servicer 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.................................................44
Section 11.5 Trustee May Own Certificates....................................................................44
Section 11.6 Capital to Pay Trustee's Fees and Expenses......................................................44
Section 11.7 Eligibility Requirements for Trustee............................................................45
Section 11.8 Resignation or Removal of Trustee...............................................................45
Section 11.9 Successor Trustee...............................................................................45
Section 11.10 Merger or Consolidation of Trustee..............................................................46
Section 11.11 Appointment of Co-Trustee or Separate Trustee...................................................46
Section 11.12 Tax Returns.....................................................................................47
Section 11.13 Trustee May Enforce Claims Without Possession of Certificates...................................48
Section 11.14 Suits for Enforcement...........................................................................48
Section 11.15 Rights of Certificateholders to Direct Trustee..................................................48
Section 11.16 Representations and Warranties of Trustee.......................................................48
Section 11.17 Maintenance of Office or Agency.................................................................49
Section 11.18 Requests for Agreement..........................................................................49
ARTICLE XII TERMINATION..........................................................................................49
Section 12.1 Termination of Trust............................................................................49
Section 12.2 Optional Repurchase of Certificates and Final Maturity Date of Certificates.....................49
Section 12.3 Final Distributions.............................................................................50
Section 12.4 Capital's Termination Rights....................................................................51
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE XIII MISCELLANEOUS PROVISIONS............................................................................51
Section 13.1 Amendment.......................................................................................51
(e) Prior to consenting to any amendment pursuant to this Section 13.1, the Trustee shall be entitled to
receive an opinion of counsel (not at its expense) stating that the amendment is authorized and permitted
pursuant to this Agreement....................................................................................52
Section 13.2 Protection of Right, Title and Interest to Trust................................................52
Section 13.3 Limitation on Rights of Certificateholders......................................................52
Section 13.6 Severability of Provisions......................................................................54
Section 13.7 Assignment......................................................................................54
Section 13.8 Certificates Nonassessable and Fully Paid.......................................................54
Section 13.9 Further Assurances..............................................................................54
Section 13.10 No Waiver; Cumulative Remedies..................................................................54
Section 13.11 Third-Party Beneficiaries.......................................................................55
Section 13.12 Actions by Certificateholders...................................................................55
Section 13.13 Merger and Integration..........................................................................55
Section 13.14 Headings........................................................................................55
Section 13.15 Tax Treatment...................................................................................55
Section 13.16 Counterparts....................................................................................56
</TABLE>
<TABLE>
<CAPTION>
Exhibits Exhibit Number
- -------- --------------
<S> <C> <C>
1. Form of Assignment of Insurance Settlements............................................................2.1
2. Form of Closing Date Report...........................................................................3.4A
3. Form of Semi-Annual Subservicer's Certificate.........................................................3.4C
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.............................................................................10.3
</TABLE>
iv
<PAGE>
POOLING AND SERVICING AGREEMENT
POOLING AND SERVICING AGREEMENT, dated as of ____________________, 2000, by
and among CAPITAL RESOURCE GROUP ONE, LLC, a Delaware limited liability
corporation ("Capital"), as originator of INSURANCE SETTLEMENTS FUNDING TRUST
2000 (the "Trust"), 21st HOLDINGS, LLC, a Minnesota limited liability
corporation ("21st Services"), as Master Servicer, THE BANK OF NEW YORK 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
<PAGE>
the 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, [ ] percent ( %) per annum and with respect to any Certificate in Tranche II,
[ ] percent ( %) 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 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 101 Barclay
Street, 12-E, New York, New York 10286.
2
<PAGE>
"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 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
immediately succeeding the month in which the first Closing Date occurs and each
six month anniversary thereof, 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
immediately succeeding the month in which the first Closing Date occurs and each
six month anniversary thereof, 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.
"Eligible Insurance Settlement" shall mean each Insurance Settlement:
(a) which, in accordance with the representations and warranties of
the owner of the insurance policy in its agreements with United and of
United in the Insurance Settlement Purchase Agreement, was created in
compliance, in all material respects, with all Requirements of Law
applicable to the owner or the insured, United and Capital and pursuant to
sale documents which comply in all material respects with all Requirements
of Law applicable to the owner or the insured, United and Capital;
(b) with respect to which, in accordance with the representations and
warranties of the owner or the insured with United and of United in the
Insurance Settlement Purchase Agreement, all required consents, licenses,
approvals or authorizations of or registrations or declarations with any
Governmental Authority or Person, in connection with the creation of such
Insurance Settlements or the execution, delivery, and performance of the
owner or insured, United or Capital of the sale and assignment documents
creating such Insurance Settlement, have been duly obtained, effected or
given and are in full force and effect as of such date of creation of the
Insurance Settlement;
(c) as to which, at the time of the creation of such Insurance
Settlement, in accordance with the representations and warranties of the
owner or insured in its agreements with United and of United in the
Insurance Settlements Purchase Agreement, the owner or insured,
3
<PAGE>
United, Capital or the Trust had good and marketable title thereto
free and clear of all liens arising under or through the owner and/or
insured, United or Capital (other than liens permitted pursuant to Section
2.5(a));
(d) which, in accordance with the representations and warranties of
the owner and/or insured in the agreements with United and of United in the
Insurance Settlements Purchase Agreement, is the legal and binding
obligation of the Insurance Company thereon, enforceable against such
Insurance Company in accordance with its terms, except as such
enforceability may be limited by applicable 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);
(e) with respect to which, at the time of the transfer or any time
thereafter, all other representations and warranties of the owner and/or
insured in its agreements with United and of United in Section 4.1(m), (n)
and (o) of the Insurance Settlements Purchase Agreement, are true and
correct;
(f) which has not been paid.
"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
immediately succeeding 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
immediately succeeding 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.
"Final 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 Trust Termination Date" shall have the meaning specified in Section
12.1(a).
4
<PAGE>
"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.
"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.
"Insurance Settlements Account" shall have the meaning specified in Section
4.2(c).
"Insurance Settlements Purchase Agreement" shall mean the Insurance
Settlements Purchase Agreement between United, as Seller, and Capital, dated as
of the date hereof, governing the terms and conditions upon which Capital will
acquire from the Seller Insurance Settlements to be assigned to the Trust on
each Closing Date.
"Insurance Settlements Purchase Price" shall mean the amount advanced by
the Seller to the owners, which amount shall not exceed eighty percent (80%) of
the face value of each insurance policy, less any fees of Seller.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Investor Accounts" shall mean each of the 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.
5
<PAGE>
"Master Servicer's Fee" shall mean an annual fee equal to the product of
(a) point one nine two five percent (.1925%) multiplied by (b) the outstanding
principal amount of Certificates as of the first day of each month, until the
expiration of the offering period. After the expiration of the offering period,
the amount will be equal to the product of (a) point zero nine six two five
percent (.09625%) 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 five
percent (5%) 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.
"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 Fidelity Fund Money
Market Account, (b) demand deposits in the name of the Trust or the Trustee in
any
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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).
"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 having direct responsibility for the administration of this
Agreement 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.
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"Seller" shall mean United.
"Servicing Officer" shall mean any employee United the Subservicer involved
in or responsible for the administration and servicing of the 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 three five seven five percent (.3575%) multiplied by (b) the outstanding
principal amount of the Certificates as of the first day of each month, until
the expiration of the offering period. After the expiration of the offering
period the amount will be equal to the product of (a) point four five three
seven five (.45375%) 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.
"Trust" shall mean the trust created by this Agreement, the corpus of which
shall consist of the 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
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executive offices or books and records relating to the Insurance Settlements are
located) of the Insurance Settlements and such funds as from time to time are
deposited in the Lockbox Account, the 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 Insurance
Settlements under the 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 January 21, 2000.
"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 Insurance Settlements; ISSUANCE OF CERTIFICATES
Section 2.1 Transfer of 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 Insurance Settlements (stated in terms of the face value of
the Insurance Settlements and the Insurance Settlements Purchase Price for the
Insurance Settlements, as hereinafter described) specifying the aggregate amount
of the Insurance Settlements to be transferred on the next Closing Date. The
Trust shall have no obligation to purchase an amount of 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).
(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 Insurance
Settlements which the Trust has agreed to acquire under
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Section 2.1(a) and which Capital shall acquire from time to time from the Seller
pursuant to the 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 Insurance
Settlements under the Insurance Settlements Purchase Agreement. On each Closing
Date, the Trustee shall pay to Capital, from the Escrow Account the Insurance
Settlements Purchase Price for the 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 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 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 Insurance Settlements and to cause the Seller
to indicate in its computer files as required by the Insurance Settlements
Purchase Agreement that (1) Insurance Settlements have been sold to Capital in
accordance with the 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 Insurance Settlements have been sold to
Capital and its beneficial interest in such Insurance Settlements is irrevocably
assigned to the Trust, and (3) that the Subservicer is holding the Insurance
Settlements as Subservicer for the Trust, (4) to respond to third-party
inquiries that the 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 Insurance Settlements, identified by account number and by the
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 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 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 Insurance Settlements, all monies due or to
become due with respect thereto and all proceeds thereof, and all of Capital's
rights, remedies, powers and privileges under the Insurance Settlements Purchase
Agreement; therefore, this Agreement shall constitute a security agreement under
applicable law.
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(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 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 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 thirty-three and one-third percent
(331/3%) of the principal amount of the Certificates issued on such Closing
Date; which amount shall be withheld from the Insurance Settlements Purchase
Price paid to Capital for Insurance Settlements sold to Capital and transferred
to the Trust.
(h) On each Closing Date, the Trustee shall remit or cause to be remitted
from the Escrow Account into 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 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
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 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
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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 company 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
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 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
Insurance Settlements Purchase Agreement and the Certificates, the performance
of the transactions contemplated by this Agreement and the 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
Insurance Settlements Purchase Agreement and the Certificates, the performance
of the transactions contemplated by this Agreement and the Insurance Settlements
Purchase Agreement and the fulfillment of the terms hereof and thereof will not
conflict with or violate 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.
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(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 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 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 Insurance Settlements
Purchase Agreement, (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of this
Agreement, the 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 Insurance
Settlements Purchase Agreement and the Certificates, the performance of the
transactions contemplated by this Agreement or the 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 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 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 Insurance Settlements being assigned to the Trust, all monies
due or to become due with respect 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 Insurance
Settlements from United to Capital as sale,
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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 Insurance Settlements, Selection Procedures, Solvency.
Capital represents and warrants to the Trust and the Trustee as of each Closing
Date that (i) each 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 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 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 Insurance Settlements Purchase Agreement), Capital does not anticipate
becoming insolvent as a result of the transfer of the 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 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 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 Insurance Settlements. Capital hereby
represents and warrants to the Trust and the Trustee that, pursuant to the
Insurance Settlements Purchase Agreement, Seller has covenanted and agreed to
comply with and perform its obligations with respect to the 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 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 eighty percent (80%) of the face amount for any 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
Insurance Settlement transferred to the Trust or any interest therein; Capital
will immediately notify the Trustee of the existence of any Lien on any
Insurance Settlement; and Capital shall defend the right, title and interest of
the Trust in, to and under the 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 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 Insurance Settlements Account all payments received by Capital,
if any, with respect to the Insurance Settlements as soon as practicable after
receipt thereof by Capital.
(c) Nonconveyance of Insurance Settlements. Capital covenants and agrees
that it will enforce the provisions of the Insurance Settlements Purchase
Agreement prohibiting the Seller from conveying, assigning, exchanging or
otherwise transferring the 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 Insurance Settlements and Insurers. Capital
covenants to structure its purchase, acquisition and assignment of Insurance
Settlements so that, at any given time, (i) no less than seventy-five percent
(75%) of the cumulative death benefits of the 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 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) less than ten percent (10%) of the cumulative
death benefits of the 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 ($10,000,000.00) in Tranche
II will be cumulative death benefits relating to any one individual ("Eligible
Insurance Settlements").
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(f) Maintaining Corporate Formalities and Independence. Capital covenants
at all times to (i) restrict its business solely to the acquisition of Insurance
Settlements from United and the irrevocable assignment of its beneficial
interest in such Insurance Settlements to the Trust and to such other actions
which are corollary to the acquisition and assignment of the 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) Insurance Settlements Purchased from United. Capital covenants to
indicate in its records that the Insurance Settlements have been purchased by
Capital from United, to treat the transfer of the Insurance Settlements from
United to Capital, for tax and accounting purposes, as a sale, and to respond to
third-party inquiries that the Insurance Settlements have been purchased from
United.
ARTICLE III
ADMINISTRATION AND SERVICING OF 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 Insurance Settlements and shall collect the 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 Insurance Settlements and,
after the delinquency payment, if any, of any Insurance Settlement and to the
extent permitted under and in compliance with applicable law and regulations, to
commence enforcement proceedings with respect to such 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) Neither Master Servicer nor 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 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 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
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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, gross 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 grossly 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 or for the value or collectibility of
any 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 or if it becomes illegal for the Master
Servicer to continue to serve as Master Servicer it shall be entitled to
resign by giving written notice to Capital, the Trustee, and United.
Section 3.2 Subservicing and Master Servicer Compensation.
(a) 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
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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.
(b) In addition to the Master Servicer Fee, the Master Servicer shall be
entitled to a fee of no more than $200.00 per life expectency certificate and
$23.00 per insured, payable as described in Section 4.4(a).
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 Insurance Settlements to the Trust and on which
the Trustee has relied in accepting the Insurance Settlements in Trust and in
authenticating Certificates:
(a) Organization and Good Standing. The Subservicer is a company 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 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 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 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 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
Insurance Settlements Purchase Agreement by the Subservicer, and the performance
of the transactions contemplated by this Agreement and the 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 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.
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(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 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
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 Insurance
Settlements as of the end of the last Business Day of the preceding week and
(ii) the amount of Insurance Settlements to be purchased on the initial Closing
Date or the amount of Insurance Settlements purchased since the immediately
preceding Closing Date, as measured by the 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 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
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 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 Insurance
Settlements
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and the balance on deposit in the 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 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, 2001, 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,
2001, the Subservicer, at sole 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 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,
2001, the Subservicer, at the Trust's sole cost and expense, shall cause
__________ or another firm of nationally recognized independent public
accountants to furnish a report to the Trustee and 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
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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.
In the event United is no longer the Subservicer, it shall nonetheless
continue to be liable for the costs and expenses of the independent public
accountants under Section 3.6 and Master Servicer shall not be responsible for
any cost or expense of the independent public accountant under Section 3.6 even
if the Master Servicer becomes the Successor Servicer. In the event that the
Subservicer shall become insolvent or a debtor in bankruptcy, the Trust shall
pay the cost and expenses of the independent public accountants under Section
3.6 from the remaining funds in Liquidity Account.
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS 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
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 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 Bank of New York, 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 Insurance Settlements Account. The Trustee, for the benefit of the
Certificateholders, shall establish and maintain with The Bank of New York, in
the name of the Trust, a segregated account (the " 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 Insurance Settlements Account shall
contain Collections attributable to Insurance Settlements. The funds in the
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.
(c) The Liquidity Account. The Trustee, for the benefit of the
Certificateholders, shall establish and maintain with The Bank of New York in
the name of the
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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 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 Bank of New York 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 at 3:00 p.m. the Trustee shall withdraw
all funds from the Lockbox Account and deposit same in the Insurance Settlements
Account. Funds on deposit in the 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, as to the investment of funds on
deposit in the Insurance Settlements Account and Liquidity Account. If, for any
reason, Capital does not provide investment instructions to the Trustee, then
the Trustee shall invest such funds in a Fidelity Fund Money Market Account. For
purposes of determining availability of funds or balances in the 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 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 Insurance Settlements Account all
Collections not otherwise made directly to the Lockbox Account.
(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
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more frequently than once per week on the third (3rd) Business Day of the week,
the Trustee shall pay to Capital:
from the Insurance Settlements Account, an amount equal to the
Collections attributable to Insurance Settlements, which funds Capital
shall cause to be deposited into the Liquidity Account to use solely for
the purpose of making the required premium payments attributable to
Insurance Settlements pursuant to the terms of Section 2.1 to make Interest
payments and Trust expense payments. During the Acquisition Period all
Collections shall be held in the Insurance Settlements Account until
distributed pursuant to this Section 4.3(b).
(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 Insurance Settlements, which funds Capital shall
use solely for the purpose of paying insurance premiums with respect to the
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 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 Transfer Date, the
Trustee shall withdraw from the Insurance Settlements Account, to the extent
funds are available from Collections attributable to 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 and any indemnification owing to the Trustee pursuant to Section 7.4,
if any, including reasonable attorney's fees, of the Trustee, including any
amount owing to the Trustee pursuant to Section 11.6, (ii) 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, (iii) an amount equal to the Monthly
Subservicing Fees for the preceding month, together with all accrued and unpaid
Monthly Subservicing Fees, (iv) then an amount equal to Master Servicer's Fees
and documented expenses, including reasonable attorney's fees of the Master
Servicer, and (v) then an amount equal to the amount of any unpaid Deficiency
Amount (as hereinafter defined). Furthermore, on the Distribution Date or the
Fee Distribution Date, as applicable 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 (iv). If the Collections
attributable to Insurance
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Settlements are less than the amount required to be distributed from the
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 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) Transfer to the Liquidity Account. On each Transfer Date, after making
the payments required by Sections 4.4(a) and 4.5(a) the Trustee shall withdraw
from the Insurance Settlements Account all remaining funds from Collections
attributable to Insurance Settlements processed during the preceding six months
and deposit such funds in the Liquidity Account.
(c) 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 for the applicable Distribution Date during the
Amortization Period, the Trustee based solely on the written instructions of the
Subservicer shall withdraw from the Insurance Settlements Account Collections
attributable to 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 Trustee shall withdraw from the
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
Insurance Settlements Account on the final Transfer Date are less than the
principal amount of the Certificates outstanding, 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 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
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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 Fee
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). The Paying Agent shall make 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 Insurance
Settlements processed during the preceding six months;
(v) the aggregate outstanding balance of Insurance Settlements as of
the last day of the preceding month;
(vi) the amount of the Monthly Subservicing Fee for the preceding six
months;
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(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 2001, 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 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
6.1B 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
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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 Exhibits 6.1A and 6.1B, 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 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.
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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 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.
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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 Capital
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 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
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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 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) Capital agrees to pay each authenticating agent (other than the
Trustee) from time to time reasonable compensation for its services under this
Section 6.8.
(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 Insurance Settlements from
United and the irrevocable
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assignment of the beneficial interest in such 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 Insurance Settlements assigned to the Trust.
Section 7.2 Merger or Consolidation; Assumption of Capital's Obligations;
Amendment of Capital's Certificate of Formation.
(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 Insurance Settlements Purchase Agreement.
(c) Capital shall not amend Article ___ of its Certificate of Formation
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.
(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
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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 the Trust. 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 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
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(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 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
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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 the Master Servicer shall have assumed
the responsibilities and obligations of the Subservicer in accordance with
Section 10.2 hereof.
Section 8.6 Access to Certain Documentation and Information Regarding the
Insurance Settlements.
The Subservicer shall afford the Trustee access to documentation regarding
the 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 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 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,
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Section 8.8 Examination of Records.
The Subservicer shall clearly and unambiguously identify each Insurance
Settlements in its computer or other records to reflect that such 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;
(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
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ninety (90) days after its filing, or (v) become unable for any reason to assign
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 five percent (5%) of the principal amount of the Certificates then
outstanding for a period of two (2) consecutive months; and
(h) no Person is able to act 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 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), or (g), 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 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 Master Servicer intends to sell, dispose of or otherwise
liquidate the 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 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
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representing in excess of fifty-one percent (51%) of the principal amount of the
Certificates outstanding as of the date of written notice. 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 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":
(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 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
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(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 Insurance
Settlements and the proceeds thereof. After the Subservicer's receipt of such
Termination Notice, on the date that the Master Servicer 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 Master Servicer is hereby authorized and
empowered (upon the failure of the 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 Master
Servicer 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 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 Insurance Settlements
Account or the Liquidity Account or which shall thereafter be received with
respect to the Insurance Settlements and (b) in assisting the Successor
Servicer. The Subservicer shall promptly transfer and deliver its electronic
records relating to the 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 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 Master Servicer 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
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mutually agreed upon by the Subservicer and Trustee. Thereafter, the Master
Servicer shall automatically become the successor servicer (the "Successor
Servicer"). 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 Master Servicer upon the resignation or termination
of the Subservicer shall become the 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 payable by the Trust. 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 Master
Servicer 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 Master Servicer, a copy of
which the Master Servicer shall deliver to Capital and the Trustee. If such
Successor Servicer has not accepted its appointment on the date when the
Subservicer ceases to perform as Subservicer, the Master Servicer may, at its
option, petition a court of competent jurisdiction to appoint any established
financial institution whose regular business includes the servicing of insurance
settlements similar to the 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 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 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,
disbursement 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) 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
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servicing on the Insurance Settlements, and (ii) in assisting Capital. The
Successor Servicer shall promptly transfer and deliver its electronic records
relating to the 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 Insurance Settlements or 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 " Insurance Settlements Funding Trust 2000." 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 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 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 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 Insurance
Settlements under the Insurance Settlements Purchase Agreement. The Trustee
shall be The Bank of New York, or its successor in interest or any successor
trustee appointed as herein provided. The Trust's sole purpose is and shall be
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to (i) acquire an irrevocable beneficial interest in the 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 Scheduled
Trust Termination Date or the date 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 of which
a Responsible Officer of the Trustee has actual knowledge 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, provided, however,
that the Trustee shall not be responsible for the accuracy or content of any
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments furnished by Capital, the Subservicer or the Master Servicer.
(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 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
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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 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 Insurance Settlement or to impair the value of any Insurance Settlement
acquired by Capital from Seller pursuant to the 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
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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 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; provided, however, that if the payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not assured
to the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require indemnity satisfactory to the Trustee against such
costs, expense or liability as a condition to taking any such action. The
reasonable expense of every such examination shall be paid by the Subservicer
or, if paid by the Trustee, shall be repaid by the Subservicer upon demand from
the Subservicer's own funds;
(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 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;
(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 Insurance
Settlements or depositing the Collections in the Lockbox Account;
(i) Subject to the other provisions of this Agreement and without limiting
the generality of this Section 11.3, the Trustee shall have no duty (A) to see
to any recording, filing, or depositing of this Agreement or any agreement
referred to herein or any financing statement or continuation statement
evidencing a security interest, or to see to the maintenance of any such
recording or filing or depositing or to any rerecording, filing or redepositing
of any thereof, (B) to see to any insurance, (C) to see to the payment or
discharge of any tax, assessment, or other governmental charge or any lien or
encumbrance of any kind owing with respect to, assessed or levied against, any
part of the Trust other than from funds available in the Insurance Settlements
or Distribution Account, or (D) to confirm or verify the contents of any reports
or certificates of
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the Subservicer delivered to the Trustee pursuant to this Agreement believed by
the Trustee to be genuine and to have been signed or presented by the proper
party or parties.
(j) The right of the Trustee to perform any discretionary act enumerated in
this Agreement shall not be construed as a duty, and the Trustee shall not be
answerable for other than its gross negligence or willful misconduct in the
performance of such act; and
(k) The Trustee shall not be required to give any bond or surety in respect
of the execution of the Trust created hereby or the powers granted hereunder.
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 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 Insurance Settlements or deposited in or
withdrawn from the 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 Capital to Pay Trustee's Fees and Expenses.
Capital covenants and agrees to pay or cause the Trust to pay to the
Trustee from time to time, 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. Capital shall pay or cause
the Trust to 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 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 or cause the Trust
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 Capital under this
Section 11.6 shall survive the termination of the Trust and the resignation or
removal of the Trustee.
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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 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,
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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.
(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
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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 the Subservicer 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 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
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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 may 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.
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
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(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 101 Barclay Street, 12-E, New York, New York 10286. 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, the Master Servicer and the Trustee under this Agreement shall
terminate, except with respect to the duties described in Article XII, and the
Trust shall terminate 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 Insurance Settlements to bring the
Certificate Principal amount then owing to zero. The proceeds of such sale shall
be treated as Collections on the Insurance Settlements and shall be allocated
and deposited in accordance with Section 4.3(a). During such thirty (30) day
period, the Subservicer shall continue to collect Collections on the 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.
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(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,
plus all monies owing to the Trustee.
(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 remit 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 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 Insurance Settlements remaining in its possession to
Capital and Capital may take appropriate
50
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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 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 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 Insurance Settlements to the Trust executed in
accordance with the provisions hereof shall not be considered amendments to this
Agreement.
(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
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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.
(e) Prior to consenting to any amendment pursuant to this Section 13.1, the
Trustee shall be entitled to receive an opinion of counsel (not at its expense)
stating that the amendment is authorized and permitted pursuant to this
Agreement.
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 Insurance
Settlements, keeps records concerning the 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 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, 2001, 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.
(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
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<PAGE>
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 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
53
<PAGE>
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.
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
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<PAGE>
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 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
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<PAGE>
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 BANK OF NEW YORK
----------------------------------------
By:
-------------------------------------
Trustee of INSURANCE SETTLEMENTS
FUNDING TRUST 2000
Printed Name:
---------------------------
Title:
----------------------------------
56
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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:
----------------------------------
57
<PAGE>
EXHIBIT 5.2
Form of Semi-Annual Certificateholders' Statement
Under the Pooling and Servicing Agreement dated as of ________, 2000 by and
among Capital Resource Group One, LLC ("Capital"), 21st Holdings, LLC, as Master
Servicer (the "Master Servicer"), The Bank of New York, as trustee (the
"Trustee" thereunder), and United Funds, 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, 2000 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.
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 _______, 2000, 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: $------------
<PAGE>
B. Information Regarding the Performance of the Trust
1. Collections of Insurance Settlements.
The aggregate amount of Collections
attributable to Insurance Settlements
processed during the preceding six months: $------------
2. Insurance Settlements in the Trust.
The aggregate outstanding balance of
Insurance Settlements in the Trust as of the
last day of the preceding month: $------------
3. Monthly Subservicing 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: $------------
(2)
<PAGE>
(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: $------------
By:
-------------------------------
Title:
of United Funds, LLC, Subservicer
(3)
<PAGE>
EXHIBIT 6.1A
FORM OF CERTIFICATE
(Face of Certificate]
INSURANCE SETTLEMENTS FUNDING TRUST 2000
[ ]% Asset Backed Certificates
Evidencing an undivided fractional interest in a trust,
the property of which includes a portfolio
of 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 Insurance
Settlements Funding Trust 2000 (the "Trust"). The Trust has been created
pursuant to the Pooling and Servicing Agreement (the "Agreement") dated as of
____________, 2000, among CAPITAL RESOURCE GROUP ONE, LLC ("Capital"), 21ST
HOLDINGS, LLC, as the Master Servicer (the "Master Servicer"), THE BANK OF NEW
YORK, 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 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
Insurance Settlements, (iii) all of Capital's rights, remedies, powers and
privileges with respect to the Insurance Settlements under that certain
Insurance Settlements Purchase Agreement, and (iv) monies on deposit in the
Lockbox, 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
created by the Agreement shall have terminated in accordance therewith, the
Trustee shall distribute to the Certificateholders on
<PAGE>
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
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 Master
Servicer shall, subject to the (terms and conditions of the Agreement), become
the 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, 101 Barclay Street, 12-E, New York, New
York 10286. 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:
<PAGE>
CERTIFICATE OF AUTHENTICATION OF TRUSTEE
Pursuant to Article VI of the Pooling and Servicing Agreement, The Bank of
New York, as Trustee of Insurance Settlements Funding Trust 2000 (the "Trust"),
hereby causes this Certificate to be authenticated as of the ___ day ___________
of 2000 as evidenced by the manual signature of its duly authorized signatory
below.
The Bank of New York
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 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 "Insurance
Settlements Funding Trust 2000, [ ]% Asset Backed Certificates" or "Insurance
Settlements Funding Trust 2000, [ ]% 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 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 ______________, 2008, 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 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 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 _______________, 2008, the
obligations created by the Agreement and the Trust shall terminate on the last
business day in _____________________.
(2)
<PAGE>
EXHIBIT 3.4C
Form of Semi-Annual Subservicer's Certificate
Pursuant to the Pooling and Servicing Agreement dated as of __________,
2000 (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 Bank of New York, 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:
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. (a) The aggregate amount of Insurance
Settlements with respect to Collections processed as of
the end of the last day of the preceding six months is: $__________
(b) The balance on deposit in the Insurance
Settlements Account 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: $__________
1
<PAGE>
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 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 ___________________, 2000.
By: _______________________________
Title
2
<PAGE>
EXHIBIT 3.4A
Form of Closing Date Report
Pursuant to the Pooling and Servicing Agreement dated as of ___________,
2000 (the "Pooling and Servicing Agreement") by and among 21st Holdings, LLC, as
Master Servicer (the "Master Servicer"), Capital Resource Group One, LLC
("Capital"), The Bank of New York, 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 Insurance
Settlements as of the end of the last Business Day of the preceding week is
$__________.
6. The amount of Insurance Settlements to be purchased on the initial
Closing Date or the amount of Insurance Settlements purchased since the
immediately preceding Closing Date, as measured by the Insurance Settlements
Purchase Price expended therefor and by their face values, is:
$__________.
(a) Insurance Settlements Purchase Price expended:
$__________.
(b) Total Face Value: $__________.
IN WITNESS WHEREOF, the undersigned has duly executed this certificate this
____ day of _______________, 2000.
By: _______________________________
Title:
<PAGE>
EXHIBIT 2.1
FORM OF ASSIGNMENT OF INSURANCE SETTLEMENTS
ASSIGNMENT No. ____ OF INSURANCE SETTLEMENTS, dated as of _______, 2000, by
CAPITAL RESOURCE GROUP ONE, LLC, ("Capital"), to THE BANK OF NEW YORK, a state
banking association organized and existing under the laws of the State of New
York (the "Trustee") 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 ________________, 2000 (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 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 Insurance Settlements
transferred hereby, _________________, 2000.
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, an irrevocable beneficial interest of Capital in and to the 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 Insurance Settlements to the Trust.
(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
<PAGE>
computer files that Insurance Settlement transferred hereby have been
transferred to the Trustee 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 Insurance Settlement as of the Closing Date, as the
case may be, such 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 an irrevocable beneficial interest previously held by Capital and
in and to the Insurance Settlements transferred hereby and declares that it
shall maintain such interest, upon the Trust herein set forth, for the benefit
of all Certificateholders. 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 2.6 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) and 2.4(b) 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
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 BANK OF NEW YORK
as Trustee
By: _______________________________
Title: ____________________________
Acknowledged:
21st HOLDINGS, LLC
as Master Servicer
By: ___________________________________
Title: ____________________________
(3)
<PAGE>
SCHEDULE 1
LIST OF INSURANCE SETTLEMENTS
<PAGE>
EXHIBIT 3.5
Form of Annual Subservicer's Certificate
Pursuant to the Pooling and Servicing Agreement dated as of ____________,
2000 by and among Capital Resource Group One, LLC, ("Capital"), 21st Holdings,
LLC, as Master Servicer (the "Master Servicer" or "21st Services"), The Bank of
New York, as trustee (the "Trustee"), and United Funds, LLC, ("United"), as
Seller and Subservicer, the undersigned, a duly authorized representative of the
Subservicer hereby certifies that:
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 3.5 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 duly authorized pursuant to the Pooling and Servicing
Agreement to execute and deliver this Certificate to the Trustee.
5. During the preceding calendar year ended December 31, 2000 a review of
the activities of the Subservicer and its performance under the Pooling and
Servicing Agreement was made under my supervision.
6. To the best of my knowledge and based on the aforementioned review,
Subservicer has fully performed its obligations under the Pooling and Servicing
Agreement during said preceding year and no Subservicer Default has occurred or
is continuing, except as may be set forth in paragraph 7 below.
7. The following is a description of each Subservicer Default known to me
to have occurred during the year ended December 31, 2000, which sets forth in
detail: (i) the nature of each such Subservicer Default, (ii) the action taken
by the Subservicer, if any, to remedy each such Subservicer Default and (iii)
the current status of each such Subservicer Default: (If applicable, insert
"None".)
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate this
_____ day of ______________, 2001.
BY: _______________________________
Title
<PAGE>
EXHIBIT 6.1B
FORM OF CERTIFICATE
(Face of Certificate]
INSURANCE SETTLEMENTS FUNDING TRUST 2000
[ ]% Asset Backed Certificates
Evidencing an undivided fractional interest in a trust,
the property of which includes a portfolio
of 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 Insurance
Settlements Funding Trust 2000 (the "Trust"). The Trust has been created
pursuant to the Pooling and Servicing Agreement (the "Agreement") dated as of
_________, 2000, among CAPITAL RESOURCE GROUP ONE, LLC ("Capital"), 21ST
HOLDINGS, LLC, as the Master Servicer (the "Master Servicer"), THE BANK OF NEW
YORK, 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 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
Insurance Settlements, (iii) all of Capital's rights, remedies, powers and
privileges with respect to the Insurance Settlements under that certain
Insurance Settlements Purchase Agreement, and (iv) monies on deposit in the
Lockbox, 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
created by the Agreement shall have terminated in accordance therewith, the
Trustee shall distribute to the Certificateholders on
<PAGE>
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
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 Master
Servicer shall, subject to the (terms and conditions of the Agreement), become
the 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, 101 Barclay Street, 12-E, New York, New
York 10286. 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 Bank of
New York, as Trustee of Insurance Settlements Funding Trust 2000 (the "Trust"),
hereby causes this Certificate to be authenticated as of the ___ day ___________
of 2000 as evidenced by the manual signature of its duly authorized signatory
below.
The Bank of New York
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 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 "Insurance
Settlements Funding Trust 2000, [ ]% Asset Backed Certificates" or "Insurance
Settlements Funding Trust 2000, [ ]% 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 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 ______________, 2010, 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 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 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 _______________, 2010, the
obligations created by the Agreement and the Trust shall terminate on the last
business day in _____________________.
(2)
Exhibit 5.1
March __, 2000
Capital Resource Group One, LLC
650 East Carmel Drive, Suite 150
Carmel, IN 46032
Re: Insurance Settlements Funding Trust 2000
[ ]% and [ ]% Asset Backed Certificates
Registration Statement on Form S-1
File No. 333-90439
-----------------------------------------
Gentlemen:
We have acted as special counsel to Capital Resource Group One, LLC, a
Delaware limited liability company ("Capital") in connection with the offering
of up to One Hundred and Fifty Million Dollars ($150,000,000) aggregate
principal amount of _____ percent ( __% ) and _____ percent ( __% ) Asset Backed
Certificates (the "Certificates"), to be issued from time to time by Insurance
Settlements Funding Trust 2000 (the "Trust") pursuant to the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), to be entered among
United Funds, LLC ("United"), Capital, The Bank of New York, as Trustee (the
"Trustee") and 21st Holdings, LLC, as Master Servicer (the "Master Servicer").
Capitalized terms not otherwise defined herein have the meanings specified in
the Pooling and Servicing Agreement.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records,
certificates and other instruments as we have deemed necessary or appropriate
for the purposes of this opinion, including (a) the Certificates of Formation of
Capital and United and the resolutions of the Board of Managers of Capital, (b)
the Insurance Settlements Purchase Agreement to be entered into between United
and Capital (the "Insurance Settlements Purchase Agreement"), (c) the Pooling
and Servicing Agreement, (d) the certificates representing the Certificates, (e)
the Registration Statement (the "Registration Statement") on S-1 filed with the
Securities and Exchange Commission ("Commission") for registration
<PAGE>
CAPITAL RESOURCE GROUP ONE, LLC
March __, 2000
Page 2
of the Certificates under the Securities Act of 1933, as amended (the
"Securities Act"); and (f) the related Prospectus to be filed with the
Commission as a part of the Registration Statement ("Prospectus").
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the original of such copies. We have also assumed
the correctness and completeness of the statements made in the documents
submitted to us.
Our opinion is based upon the laws and documents examined as they exist as
of the date of this opinion and any modification, repeal, amendment, or
authoritative interpretation of the laws or modification or amendment to the
documents occurring subsequent to the date of this opinion may cause our opinion
to vary from that set forth below.
Based upon such examination, and relying solely upon the foregoing, subject
to the assumptions, exceptions, comments, and qualifications herein expressed
and limited in all respects to the laws of the State of Delaware and federal
law, we are of the opinion that:
1. Capital has been duly formed, validly existing, and in good standing
under the laws of the State of Delaware, has corporate power and authority to
own its property and conduct its businesses and to enter into and perform its
obligations under the Insurance Settlements Purchase Agreement and the Pooling
and Servicing Agreement. Capital has full power and authority to originate the
Trust and execute the Certificates as contemplated by the Pooling and Servicing
Agreement.
2. The Pooling and Servicing Agreement and the Insurance Settlements
Purchase Agreement have each been duly authorized by Capital and, assuming the
due authorization, execution and delivery thereof by each of the parties
thereto, the Pooling and Servicing Agreement and the Insurance Settlements
Purchase Agreement each constitute a legal, valid and binding obligation of
Capital enforceable against Capital in accordance with their terms (subject, as
to enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights generally as to
the same may relate to Capital and to general equitable principles).
<PAGE>
CAPITAL RESOURCE GROUP ONE, LLC
March __, 2000
Page 3
3. The Certificates when issued and executed in accordance with the terms
of the Pooling and Servicing Agreement will be duly authorized and, assuming due
authentication thereof by the Trustee in accordance with the Pooling and
Servicing Agreement, will be entitled to the benefits of the Pooling and
Servicing Agreement and will be enforceable in accordance with its terms and,
when sold, will be legally issued, fully paid, non-assessable (subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights generally and to general
equitable principles).
4. No consent, approval, authorization or order of, or filing with, any
court or governmental agency or body is required in connection with the
execution, delivery and performance by Capital of the Pooling and Servicing
Agreement and the Insurance Settlements Purchase Agreement or in connection with
the issuance or sale of the Certificates, except such as may be required under
state blue sky laws, and the Securities Act, and except that no Certificate can
be issued, sold, purchased, or offered for sale or purchase prior to the date
that the Registration Statement has been declared effective by the Commission.
5. Issuance and sale of the Certificates in the manner contemplated by the
Pooling and Servicing Agreement will not cause the Trust to be required to be
registered under the Investment Company Act of 1940.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the summarization of this opinion in the
Prospectus.
We are attorneys admitted to the Bar in the Commonwealth of Pennsylvania,
and we express no opinion as to the law of any jurisdiction, other than the
corporate law of the State of Delaware and federal law.
Very truly yours,
Mesirov Gelman Jaffe Cramer &
Jamieson, LLP
Exhibit 8.1
Capital Resource Group One, LLC
650 E. Carmel Drive, Suite 150
Carmel, Indiana 46032
Re: [ ] and [ ]% Asset Backed Certificates
---------------------------------------
Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the issuance of certain certificates pursuant to the Pooling and
Servicing Agreement (the "Agreement") to be entered into among Capital Resource
Group One, LLC ("Capital"), as Originator of the Insurance Settlements Funding
Trust 2000 (the "Trust"), United Funds, LLC ("United"), as Subservicer, 21st
Holdings, LLC, as Master Servicer (the "Master Servicer"), and The Bank of New
York, as Trustee ("Trustee"). Specifically, you have asked this firm whether the
certificates acquired by investors (the "Certificates") will be characterized as
indebtedness of Capital for federal income tax purposes.
In connection with your request, you have furnished us with definitive
copies of or the most recent drafts of (i) the preliminary prospectus (the
"Preliminary Prospectus") that is part of Amendment No. 3 of the Registration
Statement to be filed with the Securities Exchange Commission, (ii) the
Agreement, (iii) the Insurance Settlements Purchase Agreement to be entered into
between United and Capital, and (iv) such other documents and instruments as we
have deemed necessary or relevant (collectively referred to as the "Documents").
Our opinion is also based upon the Internal Revenue Code of 1986, as
amended (the "Code"), rules and regulations (the "Regulations") promulgated
thereunder and published judicial and administrative decisions with respect
thereto, all as of the date of this letter. Any modification, repeal, amendment
or authoritative interpretation of the Code or the Regulations or modification
or amendment to the Documents occurring subsequent to the date of this letter
may cause our opinion to vary from that set forth below. In addition, our
opinion is not binding on the courts or the Internal Revenue Service ("IRS") and
there can be no assurance that positions contrary to those stated in our opinion
would not be taken by the IRS or that any such contrary position would not be
sustained by a court of law. No tax ruling will be requested with respect to the
transaction discussed herein.
The opinion set forth herein qualified by the discussion that appears in
the section of the Preliminary Prospectus entitled "Federal Income Tax
Consequences," which section is incorporated by reference in this letter as if
fully copied herein. We believe that the discussion
<PAGE>
set forth in such section, and the opinion set forth herein, fully and fairly
address all the material federal tax issues with respect to the transaction
discussed herein.
The terms used herein, unless otherwise defined herein, shall have the
definitions as set forth in the Preliminary Prospectus.
Description of Transaction
Capital was formed in Delaware in 1999 and is an affiliate of United.
Capital was organized for the restricted, limited purpose of forming the Trust,
purchasing the Insurance Settlements from United, transferring an irrevocable
beneficial interest in the Insurance Settlements to the Trust, and for
incidental or necessary purposes related to the foregoing. In connection with
the issuance of the Certificates, United will sell the Insurance Settlements to
Capital and Capital will transfer an irrevocable beneficial interest in the
Insurance Settlements to the Trust.
Pursuant to the Pooling and Servicing Agreement, Capital will transfer an
irrevocable beneficial interest in the Insurance Settlements to the Trust in
exchange for the proceeds obtained from the offering of the Certificates.
Capital will pay to United the funds received from the Trust in consideration
for the transfer of the Insurance Settlements to Capital. The Certificates will
be executed by Capital and authenticated by the Trustee.
Interest will accrue on the Certificates at a fixed rate and will be
payable semi-annually. Certificate Principal shall be due and payable no later
than the Final Maturity Date. Prepayments of Certificate Principal will be made
in the event of the occurrence of a Pay Out Event. Any assets remaining in the
Trust after all interest and principal payments will be the property of Capital.
Collections on the Insurance Settlements will be allocated to the Insurance
Settlements Account. The amount advanced to United will not exceed eighty
percent (80%) of the face amount of the Insurance Policy.
Collections represent face amount attributable to an Insurance Policy after
an insured has died. Collections will be distributed from the Insurance
Settlements Account in the following order of priority: Trustee's Fees and
expenses; Certificate Interest and Certificate Principal, if applicable; the
Subservicer's Fee; Master Servicer's Fees; and amounts payable to
Certificateholders for Deficiency Amounts of Certificate Interest. If
Collections are insufficient to pay the foregoing, the Trustee will withdraw
funds from the Liquidity Account to cover any deficiency, to the extent such
funds are available. If the amount in the Liquidity Account is insufficient to
cover Certificate Interest, the amount of such unpaid deficiency (referred to as
the "Deficiency Amount") will be payable in later months from Collections then
collected.
All interest and other earnings on the Lockbox Account, Liquidity Account
and Insurance Settlements Account will accrue for the benefit of the
Certificateholders.
(2)
<PAGE>
The facts set forth in the Registration Statement as of the date hereof are
incorporated herein and have been specifically relied on as a basis for this
opinion.
Based on and subject to the foregoing and subject to the analysis set forth
below, this firm is of the opinion that, for federal income tax purposes,
Capital is properly treated as the owner of the Insurance Settlements and the
Certificates will be characterized as evidences of indebtedness of Capital
secured by the Insurance Settlements.
Federal Income Tax Characterization
of Certificates as Debt of Capital
For federal income tax purposes, a transaction will generally be governed
by the economic substance of the transaction, rather than the form. See, e.g.,
Helvering v. Lazarus & Co., 308 U.S. 252 (1939); Rev. Rul 61-181, 1961-2 C.B.
21. Whether a transfer of property is, in economic substance, a secured loan or
a sale depends on whether the transferor has retained "substantial incidents of
ownership" with respect to the property. See, Town and County Food Co., Inc. v.
Commissioner, 51 T.C. 1049 (1969), acq. 1969-2 C.B. XXV. As discussed below, the
courts and the IRS have identified several factors to determine which party to
the transaction possesses the substantial incidents of ownership. See, United
States Surgical Steel Co. v. Commissioner, 54 T.C. 1215 (1970), acq. 1971-2 C.B.
3; Town and Country Food Co., Inc., supra, G.C.M. 39584 (Dec. 3, 1986).
1. Risk of Loss
One of the primary factors utilized by the courts and the IRS is which
party to the transaction bears the risk of loss with respect to the transferred
assets. Illinois Power Co. v. Commissioner, 87 T.C. 1417 (1986). This factor
requires an analysis of whether Capital or the Certificateholders possess the
risk of loss in the event of a default of the Insurance Settlements.
Pursuant to the Pooling and Servicing Agreement, after all interest and
principal payments have been made to Certificateholders, all assets remaining in
the Trust will be the property of Capital. To the extent that funds from the
Insurance Settlements Account and Liquidity Account will be used to pay
principal and interest, the amount of residual assets available for distribution
to Capital will be reduced. Of course, the possibility exists that interest and
principal payments could exceed the amount of the two above-described sources
(i.e., Insurance Settlements Account and the Liquidity Account) available to
protect the Certificateholders from any loss. However, these two sources have
been determined to be in such amounts that the Certificateholders are protected
from much of the risk of loss from a default on the Insurance Settlements.
Therefore, the risk of loss on a default of the Insurance Settlements lies
principally with Capital, rather than the Certificateholders.
The Certificateholders have certain other protections from any risk of
loss. Certificate Interest will be funded from Collections attributable to
Insurance Settlements. Except for Trustee's Fees, Certificate Interest has
priority to any amounts that accumulate in the Insurance Settlements Account.
The Trustee's Fees are anticipated to be a minor amount in comparison to the
anticipated accumulations in the Insurance Settlements Account. This factor
mitigates
(3)
<PAGE>
against any potential risk of loss to the Certificateholders with
respect to the Insurance Settlements.
In addition, funds in the Liquidity Account will be available as
additional security to offset any deficiency in the distribution of Certificate
Interest. The Liquidity Account will initially be funded with a portion of the
offering proceeds equal to thirty-three percent (33%) of the principal amount of
the outstanding Certificates. Thus, the Liquidity Account provides additional
security and further mitigates against any risk of loss to the
Certificateholders. In fact, in the event funds are drawn out of the Liquidity
Account to cover a deficiency in priority distributions from Insurance
Settlements, to the extent such funds are later replenished, these funds will
reduce the amount of assets payable to Capital, thereby imposing the risk of
loss on Capital.
In summary, based on the factors and relevant authority discussed above, as
between Capital and the Certificateholders, Capital bears the risk of loss with
respect to a default in the Insurance Settlements.
2. Opportunity for Gain
Another factor emphasized by the court and the IRS rulings in determining
whether a transaction is properly classified as a secured loan or a sale is
which of the parties has the opportunity to realize gain from an appreciation in
the transferred assets. United Surgical Steel Co., supra, Town and Country Food
Co., supra, G.C.M. 39584 (Dec. 3, 1986).
The rate of return to the Certificateholders is fixed at the time the
Certificates are issued. The Certificateholders are entitled to this fixed
interest and a return of the Certificate Principal. In General Counsel
Memorandum 39584 (Dec. 3, 1986), the IRS noted that an interest charge is a
reflection of the time value of money and is not in the nature of a profit on
the transaction.
Capital, on the other hand, retains the opportunity to realize any gains on
the transaction. Capital is entitled to the residual amount of assets, which are
the funds and Insurance Settlements remaining in the Insurance Settlements
Account and Liquidity Account after payment of Certificate Interest and various
other fees and charges. In addition, the value of the Insurance Settlements may
also increase if there death benefits are paid earlier than anticipated. This
value would also potentially be realized by Capital by increasing the residual
amount of assets remaining in the Trust.
In summary, the Certificate Interest is a factor of the time value of money
for the use of the Certificateholder's money and is not in the nature of profits
or gains. The real economic gains from the transaction would be attributable to
the residual Insurance Settlements and funds that are anticipated to accumulate.
These gains will be realized by Capital and are a further indication that the
transaction should be classified as a secured loan arrangement.
(4)
<PAGE>
3. Other Factors
A number of other factors have been utilized by the courts and the IRS in
determining whether a transaction is in substance a secured loan or a sale. The
terms of the collateral and the debt obligation are often examined in purported
loan transactions. Differences in the principal amounts, payment terms, and
maturity dates is a factor indicating a true debt arrangement. See, Town and
Country Food Co., supra.
The face amount of the irrevocable beneficial interest in Insurance
Settlements that are transferred to the Trust by Capital will be substantially
greater than the principal amount of the Certificates. The payment terms on the
Insurance Settlements and the Certificates are also different. Payments on the
Insurance Settlements will be received continuously throughout the term of the
Certificates, whereas Certificate Principal will generally not be paid until the
Final Maturity Dates. Finally, the Certificates will accrue interest at a stated
rate whereas interest will not accrue on the Insurance Settlements. These
differences in the terms of the Insurance Settlements and Certificates are a
factor indicating a loan arrangement between Capital and the Certificateholders.
The courts have also examined transactions to determine which party has the
right to possession and control of the transferred property. If the transferor
retains these rights, this is a factor indicating a loan transaction. The
Subservicer will retain possession of all records relating to the Insurance
Settlements for the benefit of Capital and Capital will retain title to the
Insurance Policies. In addition, the Subservicer will collect payments on the
Insurance Settlements. Furthermore, the Subservicer will perform all other
servicing requirements with respect to the Insurance Settlements. The
Subservicer will bear the costs and expenses related to these duties and will be
paid an annual fee. These facts lend additional support to the characterization
of the transaction as a financing arrangement.
The Subservicer is obligated to prepare and submit records to be inspected
by the Trustee that set forth the total collections processed by the Subservicer
and the aggregate amount of Insurance Settlements. This type of inspection right
is a right commonly found in a secured financing transaction.
In summary, Capital bears the risk of loss and retains the opportunity to
realize any gains on the transaction. The other factors discussed above lend
additional support to the characterization of the transaction as a secured
financing arrangement. Based on the application of these factors to the proposed
transaction, this firm is of the opinion that the Certificates would be
characterized as a secured loan between Capital and the Certificateholders.
Substance over Form
The federal income tax consequences of the Certificates as evidences of
indebtedness of Capital depends on the substance of the transaction determined
from an analysis of the facts and circumstances as related in the documentation
effecting the transaction, the intent of the parties and the retention or
shifting of the burdens and benefits of ownership. If the form and substance of
a transaction are consistent, and the parties to the transaction treat them
consistently, the
(5)
<PAGE>
characterization would generally be unequivocal and conclusive for federal
income tax purposes. If the form and substance of a transaction differ in
material respects, an issue arises as to whether the taxpayer or the government
may seek to disregard the form of the transaction and rely upon the substance of
the transaction in order to sustain the proposed characterization for federal
income tax purposes.
In the opinion of this firm, the Certificates are in substance
evidences of indebtedness of Capital and the form of the transaction should not
be viewed as inconsistent with that characterization in any material respect.
The Pooling and Servicing Agreement, the Preliminary Prospectus and the
Certificates clearly state the intention of Capital and the Certificateholders
that the Certificates will be treated as indebtedness of Capital for federal,
state and local income and business tax purposes.
The Pooling and Servicing Agreement provides that Capital will transfer an
irrevocable beneficial interest in the Insurance Settlements to the Trust. The
transfer of beneficial interest to collateral securing a loan is a common
characteristic of transactions utilizing secured financing. See, e.g., Helvering
v. Lazarus & Co., 308 U.S. 252 (1939). Therefore, the transfer of the beneficial
interest from Capital to the Trust is consistent with the parties
characterization of the transaction as secured financing.
The obligation of the Certificateholders is in the form of a trust
certificate rather than a promissory note. However, an examination of the rights
conferred by the Certificates reveals that the Certificates are in reality a
debt instrument. The Certificateholder is only entitled to a return of principal
and stated interest as is characteristic with a debt obligation. Although the
Certificates state that they represent an undivided interest in the Trust, the
Certificateholders do not benefit from any enhancement in the value of assets of
the Trust. Under facts that are analogous to the present situation, the IRS has
recognized that trust certificates were in reality a debt obligation. Rev. Rul.
61-181, 1961-2 C.B. 21. Thus, the form of the Certificates is consistent with
the characterization of the Certificates as a debt obligation of Capital.
Capital will report the transaction for financial accounting purposes as a
sale of the Insurance Settlements, as opposed to a secured financing
arrangement. However, the United States Supreme Court has recognized that
different concerns and objectives are involved with respect to financial
accounting and the income tax laws and that the two may produce different
results from the same transaction. See, Thor Power Tool Co. v. Commissioner, 439
U.S. 522 (1979); Frank Lyon Co. v. United States, 435 U.S. 561 (1978). In Frank
Lyon, the Supreme Court stated that "the characterization of a transaction for
financial accounting purposes . . . and for tax purposes . . . need not
necessarily be the same." 435 U.S. at 577. Thus, treatment of the transaction as
a sale for financial accounting purposes is not necessarily inconsistent with
treatment as a financing transaction for federal income tax purposes.
Although the factors discussed above relating to the form of the
transaction could initially be viewed as inconsistent with debt treatment, a
closer examination reveals that the form should not be viewed as conflicting
with the characterization of the substance of the transaction as secured
financing arrangement. However, even if a determination were made that the form
was
(6)
<PAGE>
inconsistent with the substance of the transaction, the substance should
nevertheless control the characterization for federal income tax purposes.
It is a general principal of federal income tax law that a transaction will
be governed by the economic substance rather than the form. Gregory v.
Helvering, 293 U.S. 465 (1935). If the substance and the form of a transaction
are inconsistent, courts will usually disregard the form and characterize the
transaction according to its substance. Moreover, some courts have permitted
parties to treat a transaction in accordance with its economic substance in
instances where a different form is utilized for non-tax purposes. Helvering v.
Lazarus & Co., 308 U.S. 252 (1939); Gatlin v. Commissioner, 34 B.T.A. 50 (1936).
See also, Rev. Rul. 61-81, 1961-2 C.B. 21.
In Commissioner v. Danielson, 378 F.2d 771 (3rd Cir. 1967) the court held
that the parties were bound by the form of the transaction and could not
introduce evidence that the economic substance was inconsistent with such form.
Danielson dealt with a stock purchase contract that allocated a portion of the
purchase price to a covenant not to compete. The court refused to allow the
taxpayer to disregard the contract allocation. The court was concerned with the
competing tax consideration between the parties to the contract and the fact
that the IRS would be forced to litigate against both parties if one party were
allowed to disregard the contract terms. However, subsequent court decisions
have refused to follow the Danielson case in situations where there are no
competing tax considerations between the parties to the transaction. See, e.g.,
Comdisco, Inc. v. United States, 756 F.2d 569 (7th Cir. 1985); Cubic Corporation
v. United States, 74-2 USTC 9667 (S.D. Cal. 1974), aff'd, 541 F.2d 829 (9th
Cir. 1976).
In the event that the form of transaction contemplated by the Pooling
and Servicing Agreement was viewed as inconsistent with the underlying economic
substance, the Danielson decision should not bind the parties to such form. The
parties to the transaction do not have the competing tax considerations that
prompted the holding in Danielson. Furthermore, the parties to the Pooling and
Servicing Agreement have expressly agreed to treat the transaction as a secured
financing arrangement. Where the form of a transaction is ambiguous, several
courts have held Danielson is inapplicable and that the characterization of the
transaction for federal income tax purposes should be determined on the basis of
the economic substance of the transaction as determined by review of all of the
facts and circumstances and not just the labels used by the parties. See, Elrod
v. Commissioner, 87 T.C. 1046, 1064-70 (1986); Smith v. Commissioner, 82 T.C.
705, 713-16 (1984). Therefore, economic substance should control the
characterization for federal income tax purposes and Danielson should not apply
to cause the form to govern the characterization of the transaction.
In summary, the form of the transaction for federal income tax purposes
should not be viewed as inconsistent with the economic substance of the
transaction as a secured financing arrangement. However, even if the substance
and form of the transaction were determined to be inconsistent, the economic
substance should control the characterization issue. As discussed above, the
economic substance of the transaction is a secured financing arrangement by
Capital.
(7)
<PAGE>
Characterization of the Trust
If the transaction contemplated by the Pooling and Servicing Agreement is
properly characterized as a secured financing arrangement between Capital and
the Certificateholders, then the Trust can be disregarded for federal income tax
purposes. In analogous situations involving debt transactions utilizing
certificates in trust, the IRS has disregarded the trust and viewed the
transaction as a security arrangement. See, Rev. Rul. 76-265, 1976-2 C.B. 448;
Rev. Rul. 61-181, 1961-2 C.B. 21. See also, Treas. Regs.ss.1.61-13(b).
Under the present facts, the responsibilities of the Trustee under the
Agreement are largely ministerial, except in certain default situations. These
responsibilities include (i) authentication of the Certificates under the
Agreement, (ii) issuing the Certificates and applying the proceeds, and (iii)
overseeing the retirement of the Certificates. By analogy to the deed of trust
situation, the Trustee can be viewed as a mere agent of the Certificateholders
in which Capital has transferred an irrevocable beneficial interest to the
Insurance Settlements to the Trustee/Agent to serve as security for the
Certificates.
Based on the application of the rationale of the revenue rulings cited
above to the facts in the present situation, it is the opinion of this firm that
the Trust would be disregarded for federal income tax purposes.
* * * * * *
(8)
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the use of this firm's name under the caption
"Federal Income Tax Consequences" in the Preliminary Prospectus included in the
Registration Statement, and to the summarization of this opinion in the
Preliminary Prospectus.
Very truly yours,
Mesirov, Gelman, Jaffe, Cramer &
Jamieson, LLP
(9)
Exhibit 10.1a
____________, 2000
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, an affiliate of Capital ("United"), and Pryor, Counts & Co., Inc.
(the "Placement Agent") with respect to the offering of up to $150,000,000
principal amount of [ %] and [ %] Insurance Settlements Assets Backed
Certificates (the "Certificates") to be issued by the Insurance Settlements
Funding Trust 2000 (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 ____________, 2000 (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 ____________, 2001 (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
<PAGE>
Agent agrees to 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 Bank of New York (the
"Escrow Agent") pursuant to an Escrow Agreement dated ____________, 2000, (the
"Escrow Agreement"). All subscriber's checks shall be made payable to "THE BANK
OF NEW YORK ESCROW ACCOUNT FOR INSURANCE SETTLEMENTS FUNDING TRUST 2000" 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 company
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 company
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 be 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 the rights of creditors, or
by general principles of
(4)
<PAGE>
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
(5)
<PAGE>
Placement Agent may reasonably request; provided 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,
regulation, or order that would have a
(7)
<PAGE>
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
(9)
<PAGE>
action. A person who controls the Placement 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 in connection with, and any
amount paid
(10)
<PAGE>
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
(11)
<PAGE>
under this 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
(14)
<PAGE>
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:
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Name:
------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
CAPITAL RESOURCE GROUP ONE, LLC
By:
-------------------------------------
Name:
------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
UNITED FUNDS, LLC
By:
-------------------------------------
Name:
------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
(15)
Exhibit 10.2a
INSURANCE SETTLEMENTS PURCHASE AGREEMENT
INSURANCE SETTLEMENTS PURCHASE AGREEMENT (the "Agreement"), dated as of
____________, 2000, by UNITED FUNDS, LLC, a Delaware limited liability company
(the "Seller") and CAPITAL RESOURCE GROUP ONE, LLC, a Delaware limited liability
company (the "Buyer").
WITNESSETH:
WHEREAS, Seller, Buyer, 21st Holdings, LLC, as Master Servicer, and the
Bank of New York as Trustee, have entered into that certain Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
___________, 2000, pursuant to which Buyer has agreed to assign certain
Insurance Settlements to the Insurance Settlements Funding Trust 2000 (the
"Trust");
WHEREAS, Buyer, to fulfill its obligation under the Pooling and Servicing
Agreement, desires to purchase, assign and transfer Insurance Settlements from
Seller from time to time;
WHEREAS, Seller desires to sell and convey 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 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
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 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 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 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 Insurance Settlements, all proceeds of and from the
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 Insurance Settlements; and Buyer hereby agrees to acquire such Insurance
Settlements from Seller on each Closing Date, without recourse.
(b) Seller agrees to sell and convey to Buyer only Eligible Insurance
Settlements.
(c) Seller and Buyer intend that this transaction is a sale and, at the
time 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 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 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 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 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 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 Insurance Settlements, identified by account number
and by the 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 Insurance Settlements. Whenever during the term
of this Agreement, Seller has Insurance Settlements available for purchase,
Seller shall notify Buyer in writing that Insurance Settlements are available
for purchase, stating the face amount of the Insurance Settlements and the
Insurance Settlements Purchase Price for the Insurance Settlements. Buyer shall
then immediately notify Seller in writing of the amount of Insurance Settlements
that Buyer will purchase, designating a date for the consummation of the
transfer of the 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 Insurance Settlements Purchase Price for the Insurance Settlements being
acquired on such date in cash or other immediately available funds, provided
that, one each Closing Date, Buyer shall withhold 33 1/3% of such Purchase Price
which shall be deposited into the Liquidity Account.
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 company 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
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 qualify,
nor to register, as a foreign corporation in any
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<PAGE>
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 property 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 Insurance Settlements. As of each Closing Date Seller
has (i) indicated in its computer master file of Insurance Settlements that
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 Insurance Settlements,
identified by account number and by the face amount of the insurance policy as
of such Closing Date, as the case may
4
<PAGE>
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 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 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 Pooling and
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 of 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 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 Insurance Settlements to Buyer as a sale,
for tax and accounting purposes.
(l) Eligibility of Insurance Settlements. Seller hereby represents and
warrants to Buyer as of each Closing Date that (i) each Insurance Settlement
being sold and conveyed to Buyer is an Eligible Insurance Settlement (ii) each
such 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 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 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 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
Insurance Settlements being sold and conveyed to Buyer.
(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 Insurance
5
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Settlements to Buyer, and the 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 Insurance Settlements. Seller
covenants to structure its purchase, acquisition, sale and conveyance of
Insurance Settlements so that at any given time (i) at acquisition no less than
seventy-five percent (75%) of the cumulative death benefits of the 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) at acquisition
no more than twenty-five percent (25%) of the cumulative death benefits of the
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) less than ten percent (10%)
of the cumulative death benefits of the 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 us a company 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 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,
6
<PAGE>
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 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 Insurance Settlements. Seller shall comply with and
perform its obligations under the agreements relating to the 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 for Seller to
maintain its business on a competitive basis based on Seller's good faith
assessment of the nature of
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<PAGE>
competition in its business, Seller shall not pay more than eighty percent (80%)
of the face amount of the insurance policy, for the purchase of the Insurance
Settlements.
(c) Security Interests. Except for the security interest granted hereunder
to protect Buyer's interest in the 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 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 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 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 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 Pooling and 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 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 this Section 5.1(g) shall be considered to have been
relied upon by
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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 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 Insurance
Settlements Account, all payments received by Seller, if any, with respect to
the 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 Insurance
Settlements purchased by Buyer 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 the Insurance Settlements.
(l) Sale. Seller covenants that, upon each transfer of Insurance
Settlements, it will indicate in its records that (i) the Insurance Settlements
have been sold to Buyer and (ii) for tax and accounting purposes, the transfer
of the Insurance Settlements constitutes a sale to Buyer. Seller will respond to
any third party inquiries regarding such 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 Pooling and
Servicing Agreement or in enforcing the rights of the Certificateholders, and
except as required by law or under the Pooling and 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 notice of any disclosure made pursuant to this Section
5.2, to the extent reasonably practicable.
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ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions Precedent to Buyer's Obligations. The obligations of
Buyer to purchase any 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 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 way reasonably request.
Section 6.2 Conditions Precedent to Seller's Obligations. The obligations
of Seller to sell, assign, convey and transfer the 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 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
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.
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<PAGE>
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 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 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 opinion 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
DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
11
<PAGE>
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 8.5 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
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 privilege 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.
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,
12
<PAGE>
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 LaRussa, President
UNITED FUNDS, LLC
By:
-------------------------------------
Thomas LaRussa, President
Attachments:
Schedule
Exhibit "A" Conveyance
13
<PAGE>
EXHIBIT "A"
FORM OF CONVEYANCE
CONVEYANCE NO. ___ OF INSURANCE SETTLEMENTS, dated as of _______________,
2000, 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 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. Insurance Settlements
Purchase Agreement, dated as of ____________, 2000 (hereinafter referred to, as
such agreement may from time to time be amended, supplemented or otherwise
modified, as the "Insurance Settlements Purchase Agreement"); and
WHEREAS, the Buyer, the Seller, 21st Holdings, LLC as Master Servicer, and
the Bank of New York as Trustee are parties to that certain Pooling and
Servicing Agreement (the "Pooling And Servicing Agreement") dated as of
____________, 2000 pursuant to which the Buyer has agreed to transfer certain
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 Insurance Settlements
conveyed hereby, _____________, 2000.
2. Conveyance of 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 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 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 Insurance Settlements arising from the sale and transfer of the
Insurance Settlements, from Seller to Buyer, and the transfer of such Insurance
Settlements from Buyer to the Trust.
(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 Insurance Settlements Purchase Agreement on or prior to the date of this
Conveyance, that Insurance
<PAGE>
Settlements conveyed hereby have been sold by Seller to Buyer in accordance with
the Insurance Settlements Purchase Agreement and transferred by Buyer to the
Trust for the benefit of the Certificateholders.
3. Delivery of List of 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 Insurance Settlements
being conveyed hereby as of the Closing Date, such 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 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
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 4
and the Amendment of the Insurance Settlements Purchase Agreement set forth in
Section 6 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 Insurance Settlements Purchase Agreement have
been met and that all representations and warranties of Seller contained in the
Insurance Settlements Purchase Agreement are true and correct.
(b) The sale by Seller set forth in Section 2 and the Amendment of the
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
Insurance Settlements Purchase Agreement are true and correct;
(ii) Payment of the purchase price by Buyer in the accordance with the
provisions of Section 3 of 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 an form and substance to Seller, and Seller shall have
received from buyer copies of all documents (including, without limitation,
records of company proceedings) relevant to the transactions herein
contemplated as Seller may reasonably have requested.
6. Amendment of the Insurance Settlements Purchase Agreement. The Insurance
Settlements Purchase Agreement is hereby amended to provide that all references
therein to the "Insurance Settlements Purchase Agreement", to "this Agreement",
and "herein"
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<PAGE>
shall be deemed from and after the Closing Date to be a dual reference to the
Insurance Settlements Purchase Agreement as supplemented by this Conveyance.
Except, as expressly amended hereby, representations, warranties, terms,
covenants, and conditions of the 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 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
MASTER SERVICER AGREEMENT
Exhibit 10.3a
MASTER SERVICER AGREEMENT (this "Agreement"), dated as of ___________,
2000, between 21ST HOLDINGS, LLC, a national insurance services organization
("21st Services"), as Master Servicer, CAPITAL RESOURCE GROUP ONE, LLC
("Capital"), as originator of the Trust, UNITED FUNDS, LLC ("United") as
Subservicer, and THE BANK OF NEW YORK, 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 Insurance Settlements now owned and held or hereafter acquired by the
Insurance Settlements Funding Trust 2000 (the "Trust") and as further defined in
the Pooling and Servicing Agreement (collectively, the "Insurance Settlements").
WHEREAS, 21st Services has agreed and is willing to be the Master Servicer
of the Insurance Settlements, subject to the terms and conditions contained
herein and in the Pooling and Servicing Agreement.
1
<PAGE>
WHEREAS, subsequent to the termination of the Subservicer under the Pooling
and Servicing Agreement, 21st Services shall automatically be 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) 21st Services hereby agrees to act as the Master Servicer of the
Insurance Settlements.
(b) 21st Services shall perform all the duties and obligations of
Master Servicer under the Pooling and Servicing Agreement.
2
<PAGE>
(c) 21st Services shall continue to act as Master Servicer until such
time as it shall succeed to the appointment to serve as Successor Servicer
under the terms of this Agreement and the Pooling and Servicing Agreement.
(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 or if it shall become illegal for 21st Services
to continue to act as Master Servicer, 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. In addition, Capital shall grant to 21st Services a right
entitling 21st Services 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. Such right shall
vest at the rate of 12.5% and 10% per year for Tranche I and Tranche II,
respectively. If either Tranche is redeemed prior to maturity, such rights
shall vest automatically.
(f) United will pay 21st Services a fee of .30% of the face amount of
each policy purchased by United.
(g) The Subservicer shall provide 21st Services the Closing Date
Reports, the Subservicer's Semi-Annual Certificate, and the Subservicer's
Annual Certificate as
3
<PAGE>
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 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.
(h) The Subservicer shall provide 21st Services a copy of the computer
software used by the Subservicer in servicing the Insurance Settlements,
and 21st Services shall maintain such software.
(i) The Subservicer shall provide the Trustee on each Closing Date all
data relating to the Insurance Settlements transferred from Capital to the
Trust, and 21st Services shall maintain such data, such that the records of
21st Services will accurately reflect the transactions involving the
Insurance Settlements and accurately match the data available on the
Subservicer's computer and in the Subservicer's possession.
(j) The Subservicer shall provide 21st Services 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.
(k) 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
4
<PAGE>
Subservicer. The term "Lockbox Bank" refers to the Bank of New York, or any
successor bank holding the Lockbox Account.
(l) 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 if 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
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 have no responsibility or liability for any
acts or omissions of the Subservicer with respect to servicing the
Insurance Settlements.
(m) 21st Services will also perform such duties as described in
Schedule I attached hereto.
3. Acceptance of Appointment and Other Matters Relating to the Successor
Servicer.
(a) Upon 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, 21st Services will automatically
become the Successor Servicer and 21st Services shall accept such
appointment.
5
<PAGE>
(b) Upon its appointment, 21st Services, as the Successor Servicer,
shall service and administer the 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. 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 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 in addition to its
fees as Master Servicer and shall also be entitled to a one-time transfer
of management fee of $100,000 to be paid by the Trust.
6
<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 Pooling 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. This Agreement and all authority and power granted to
21st Services, as Master Servicer or 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 Delaware law, 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 S. 8th Street, Minneapolis, MN 55402, Attention: Mr. Robert
Simon, (b) in the case of either Capital or United, 650 E. Carmel Drive, Suite
150, Carmel, Indiana, Attention: Thomas J. LaRussa, and (c) in the case of
Trustee, Corporate Trust Department, The Bank of New York, 101 Barclay
7
<PAGE>
Street, 12-E, New York, New York 10286, Attention: Mauro Palladino, 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 Agreements 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
(and 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 enure 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 provisions
hereof.
8
<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:
----------------------------------
9
<PAGE>
CAPITAL RESOURCE GROUP ONE, LLC
By:
-------------------------------------
Title:
----------------------------------
TRUSTEE:
THE BANK OF NEW YORK
By:
-------------------------------------
Title:
----------------------------------
10
<PAGE>
SCHEDULE I
Duties of Master Servicer
o Review medical, insurance and final underwriting for proposed policies
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 Audit premium calendar database
o Prepare reports as agreed
11
EXHIBIT 10.4
THE
BANK OF
NEW YORK
- -------------------------------------------------------------------------------
ESCROW AGREEMENT
between
CAPITAL RESOURCE GROUP ONE, LLC ("CAPITAL"),
PRYOR COUNTS & CO., INC. ("PLACEMENT AGENT")
and
THE BANK OF NEW YORK
Dated as of _______________________, 2000
ACCOUNT NUMBER(S)____________________________
SHORT TITLE OF ACCOUNT_______________________________
as of April 30, 1997
- -------------------------------------------------------------------------------
<PAGE>
ESCROW AGREEMENT made this _____ day of ____________________ 2000 by and
between THE BANK OF NEW YORK ("Escrow Agent") and the undersigned (collectively
the "Depositors" and individually the "Depositor").
Depositors and Escrow Agent hereby agree that, in consideration of the mutual
promises and covenants contained herein, Escrow Agent shall hold in escrow and
shall distribute Escrow Property (as defined herein) in accordance with and
subject to the following Instructions and Terms and Conditions:
I. INSTRUCTIONS:
1. ESCROW PROPERTY
The property and/or funds deposited or to be deposited with Escrow Agent by
Depositors shall be as follows:
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 [ ] and [ ] Asset
Backed Certificates (the "Certificates") representing fractional undivided
interests in Insurance Settlements Funding Trust 2000 (the "Trust")
originated by Capital, which Certificates will be issued in minimum
denominations 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").
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 BANK OF NEW YORK ESCROW ACCOUNT FOR INSURANCE SETTLEMENTS FUNDING
TRUST 2000". Any Checks received that are made payable to a party other
than "THE BANK OF NEW YORK ESCROW ACCOUNT FOR INSURANCE SETTLEMENTS FUNDING
TRUST 2000" shall be returned to the Placement Agent.
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 monies so deposited in the Escrow Account are
hereinafter referred to as the "Escrow Amount".
<PAGE>
The foregoing property and/or funds, plus all interest, dividends and other
distributions and payments thereon (collectively the "Distributions")
received by Escrow Agent, less any property and/or funds distributed or
paid in accordance with this Escrow Agreement, are collectively referred to
herein as "Escrow Property."
2. INVESTMENT OF ESCROW PROPERTY (Depositors are to select one of the
following options, initial the option selected and, if "(b)" is selected,
insert the appropriate information.)
(a) Escrow Agent shall have no obligation to pay interest on or to invest
or reinvest any Escrow Property deposited or received hereunder.
(b) Escrow Agent shall invest or reinvest Escrow Property, without
distinction between principal and income, in accordance with the
following:
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.
Escrow Agent shall have no liability for any loss arising from or
related to any such investment other than in accordance with paragraph
4 of the Terms and Conditions.
3. DISTRIBUTION OF ESCROW PROPERTY
Escrow Agent is directed to hold and distribute the Escrow Property in the
following manner:
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
(2)
<PAGE>
(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.
4. 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 ($150,000,000)
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 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 Account 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 Account in the event a Check has been
returned unpaid and there are not sufficient funds in the Escrow Account to
pay
(3)
<PAGE>
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.
5. 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 4.
6. 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,
(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;
(4)
<PAGE>
(c) deliver to the Bank of New York, as trustee (the "Trustee") of
the Trust created pursuant to the Pooling and Servicing Agreement
dated as of ________, 2000, 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 6,
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
6. 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.
7. ADDRESSES
Notices, instructions and other communications shall be sent to Escrow
Agent, Corporate Trust Department, 101 Barclay Street - 12E Floor, New
York, New York 10286, and to Depositors as follows:
Capital Resource Group One, LLC Pryor Counts & Co, Inc.
650 E. Carmel Drive 1515 Market Street
Suite 150 Suite 819
Carmel, Indiana 46032 Philadelphia, Pennsylvania 19103
Attention: Thomas J. LaRussa Attention:
(5)
<PAGE>
8. DISTRIBUTION OF ESCROW PROPERTY UPON TERMINATION
Upon termination of this Escrow Agreement, Escrow Property then held
hereunder shall be distributed as follows:
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.
9. COMPENSATION
(a) At the time of execution of this Escrow Agreement, Depositors shall
pay Escrow Agent an acceptance fee of $_________. In addition,
Depositors shall pay Escrow Agent an annual fee of $__________,
payable upon execution of this Agreement and thereafter on each
anniversary date of this Agreement.
(b) Depositors shall pay an investment transaction fee of $____________
for each purchase or sale of a security made by Escrow Agent
hereunder.
(c) Depositors shall be responsible for and shall reimburse Escrow Agent
upon demand for all expenses, disbursements and advances incurred or
made by Escrow Agent in connection with this Agreement.
(d) The Escrow Agent's fees are described in Exhibit B attached hereto and
made part hereof.
(6)
<PAGE>
II. TERMS AND CONDITIONS:
1. The duties, responsibilities and obligations of Escrow Agent shall be
limited to those expressly set forth herein and no duties, responsibilities
or obligations shall be inferred or implied. Escrow Agent shall not be
subject to, nor required to comply with, any other agreement between or
among any or all of the Depositors or to which any Depositor is a party,
even though reference thereto may be made herein, or to comply with any
direction or instruction (other than those contained herein or delivered in
accordance with this Escrow Agreement) from any Depositor or any entity
acting on its behalf. Escrow Agent shall not be required to, and shall not,
expend or risk any of its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder.
2. This Agreement is for the exclusive benefit of the parties hereto and their
respective successors hereunder, and shall not be deemed to give, either
express or implied, any legal or equitable right, remedy, or claim to any
other entity or person whatsoever.
3. If at any time Escrow Agent is served with any judicial or administrative
order, judgment, decree, writ or other form of judicial or administrative
process which in any way affects Escrow Property (including but not limited
to orders of attachment or garnishment or other forms of levies or
injunctions or stays relating to the transfer of Escrow Property), Escrow
Agent is authorized to comply therewith in any manner as it or its legal
counsel of its own choosing deems appropriate; and if Escrow Agent complies
with any such judicial or administrative order, judgment, decree, writ or
other form of judicial or administrative process, Escrow Agent shall not be
liable to any of the parties hereto or to any other person or entity even
though such order, judgment, decree, writ or process may be subsequently
modified or vacated or otherwise determined to have been without legal
force or effect.
4. (a) Escrow Agent shall not be liable for any action taken or omitted or for
any loss or injury resulting from its actions or its performance or lack of
performance of its duties hereunder in the absence of gross negligence or
willful misconduct on its part. In no event shall Escrow Agent be liable
(i) for acting in accordance with or relying upon any instruction, notice,
demand, certificate or document from any Depositor or any entity acting on
behalf of any Depositor, (ii) for any consequential, punitive or special
damages, (iii) for the acts or omissions of its nominees, correspondents,
designees, subagents or subcustodians, or (iv) for an amount in excess of
the value of the Escrow Property, valued as of the date of deposit.
(b) If any fees, expenses or costs incurred by, or any obligations owed to,
Escrow Agent hereunder are not promptly paid when due, Escrow Agent may
reimburse itself therefor from the Escrow Property and may sell, convey or
otherwise dispose of any Escrow Property for such purpose.
(c) As security for the due and punctual performance of any and all of
Depositors' obligations to Escrow Agent hereunder, now or hereafter
arising, Depositors, individually
(7)
<PAGE>
and collectively, hereby pledge, assign and grant to Escrow Agent a
continuing security interest in, and a lien on, the Escrow Property and all
Distributions thereon or additions thereto (whether such additions are the
result of deposits by Depositors or the investment of Escrow Property). The
security interest of Escrow Agent shall at all times be valid, perfected
and enforceable by Escrow Agent against Depositors and all third parties in
accordance with the terms of this Escrow Agreement.
(d) Escrow Agent may consult with legal counsel at the expense of the
Depositors as to any matter relating to this Escrow Agreement, and Escrow
Agent shall not incur any liability in acting in good faith in accordance
with any advice from such counsel.
(e) Escrow Agent shall not incur any liability for not performing any act
or fulfilling any duty, obligation or responsibility hereunder by reason of
any occurrence beyond the control of Escrow Agent (including but not
limited to any act or provision of any present or future law or regulation
or governmental authority, any act of God or war, or the unavailability of
the Federal Reserve Bank wire or telex or other wire or communication
facility).
5. Unless otherwise specifically set forth herein, Escrow Agent shall proceed
as soon as practicable to collect any Checks or other collection items at
any time deposited hereunder. All such collections shall be subject to
Escrow Agent's usual collection practices or terms regarding items received
by Escrow Agent for deposit or collection. Escrow Agent shall not be
required, or have any duty, to notify anyone of any payment or maturity
under the terms of any instrument deposited hereunder, nor to take any
legal action to enforce payment of any Check, note or security deposited
hereunder or to exercise any right or privilege which may be afforded to
the holder of any such security.
6. Escrow Agent shall provide to Depositors monthly statements identifying
transactions, transfers or holdings of Escrow Property and each such
statement shall be deemed to be correct and final upon receipt thereof by
the Depositors unless Escrow Agent is notified in writing to the contrary
within thirty (30) business days of the date of such statement.
7. Escrow Agent shall not be responsible in any respect for the form,
execution, validity, value or genuineness of documents or securities
deposited hereunder, or for any description therein, or for the identity,
authority or rights of persons executing or delivering or purporting to
execute or deliver any such document, security or endorsement.
8. Notices, instructions or other communications shall be in writing and shall
be given to the address set forth in the "Addresses" provision herein (or
to such other address as may be substituted therefor by written
notification to Escrow Agent or Depositors). Notices to Escrow Agent shall
be deemed to be given when actually received by Escrow Agent's Corporate
Trust Department. Escrow Agent is authorized to comply with and rely upon
any notices, instructions or other communications believed by it to have
been sent or given by Depositors or by a person or persons authorized by
Depositors. Whenever
(8)
<PAGE>
under the terms hereof the time for giving a notice or performing an act
falls upon a Saturday, Sunday, or banking holiday, such time shall be
extended to the next day on which Escrow Agent is open for business.
9. Depositors, jointly and severally, shall be liable for and shall reimburse
and indemnify Escrow Agent and hold Escrow Agent harmless from and against
any and all claims, losses, liabilities, costs, damages or expenses
(including reasonable attorneys' fees and expenses) (collectively,
"Losses") arising from or in connection with or related to this Escrow
Agreement or being Escrow Agent hereunder (including but not limited to
Losses incurred by Escrow Agent in connection with its successful defense,
in whole or in part, of any claim of gross negligence or willful misconduct
on its part), provided, however, that nothing contained herein shall
require Escrow Agent to be indemnified for Losses caused by its gross
negligence or willful misconduct.
10. (a) Depositors may remove Escrow Agent at any time by giving to Escrow
Agent thirty (30) calendar days' prior notice in writing signed by all
Depositors. Escrow Agent may resign at any time by giving to Depositors
fifteen (15) calendar days' prior written notice thereof.
(b) Within ten (10) calendar days after giving the foregoing notice of
removal to Escrow Agent or receiving the foregoing notice of resignation
from Escrow Agent, all Depositors shall jointly agree on and appoint a
successor Escrow Agent. If a successor Escrow Agent has not accepted such
appointment by the end of such 10-day period, Escrow Agent may, in its sole
discretion, deliver the Escrow Property to any of the Depositors at the
address provided herein or may apply to a court of competent jurisdiction
for the appointment of a successor Escrow Agent or for other appropriate
relief. The costs and expenses (including reasonable attorneys' fees and
expenses) incurred by Escrow Agent in connection with such proceeding shall
be paid by, and be deemed a joint and several obligation of, the
Depositors.
(c) Upon receipt of the identity of the successor Escrow Agent, Escrow
Agent shall either deliver the Escrow Property then held hereunder to the
successor Escrow Agent, less Escrow Agent's fees, costs and expenses or
other obligations owed to Escrow Agent, or hold such Escrow Property (or
any portion thereof), pending distribution, until all such fees, costs and
expenses or other obligations are paid.
(d) Upon delivery of the Escrow Property to successor Escrow Agent, Escrow
Agent shall have no further duties, responsibilities or obligations
hereunder.
11. (a) In the event of any ambiguity or uncertainty hereunder or in any
notice, instruction or other communication received by Escrow Agent
hereunder, Escrow Agent shall refrain from taking any action other than
retain possession of the Escrow Property, unless Escrow Agent receives
written instructions, signed by all Depositors, which eliminates such
ambiguity or uncertainty.
(9)
<PAGE>
(b) In the event of any dispute between or conflicting claims by or among
the Depositors and/or any other person or entity with respect to any Escrow
Property, Escrow Agent shall refuse to comply with any and all claims,
demands or instructions with respect to such Escrow Property so long as
such dispute or conflict shall continue, and Escrow Agent shall not be or
become liable in any way to the Depositors for failure or refusal to comply
with such conflicting claims, demands or instructions. Escrow Agent shall
be entitled to refuse to act until, either (i) such conflicting or adverse
claims or demands shall have been determined by a final order, judgment or
decree of a court of competent jurisdiction, which order, judgment or
decree is not subject to appeal, or settled by agreement between the
conflicting parties as evidenced in a writing satisfactory to Escrow Agent
or (ii) Escrow Agent shall have received security or an indemnity
satisfactory to it sufficient to hold it harmless from and against any and
all Losses which it may incur by reason of so acting. Escrow Agent may, in
addition, elect to commence an interpleader action or seek other judicial
relief or orders as it may deem necessary. The costs and expenses
(including reasonable attorneys' fees and expenses) incurred in connection
with such proceeding shall be paid by, and shall be deemed a joint and
several obligation of, the Depositors.
12. This Agreement shall be interpreted, construed, enforced and administered
in accordance with the internal substantive laws (and not the choice of law
rules) of the State of New York. Each of the Depositors hereby submits to
the personal jurisdiction of and each agrees that all proceedings relating
hereto shall be brought in courts located within the City and State of New
York or elsewhere as Escrow Agent may select. Each of the Depositors hereby
waives the right to trial by jury and to assert counterclaims in any such
proceedings. To the extent that in any jurisdiction any Depositor may be
entitled to claim, for itself or its assets, immunity from suit, execution,
attachment (whether before or after judgment) or other legal process, each
hereby irrevocably agrees not to claim, and hereby waives, such immunity.
Each Depositor waives personal service of process and consents to service
of process by certified or registered mail, return receipt requested,
directed to it at the address last specified for notices hereunder, and
such service shall be deemed completed ten (10) calendar days after the
same is so mailed.
13. Except as otherwise permitted herein, this Escrow Agreement may be modified
only by a written amendment signed by all the parties hereto, and no waiver
of any provision hereof shall be effective unless expressed in a writing
signed by the party to be charged.
14. The rights and remedies conferred upon the parties hereto shall be
cumulative, and the exercise or waiver of any such right or remedy shall
not preclude or inhibit the exercise of any additional rights or remedies.
The waiver of any right or remedy hereunder shall not preclude the
subsequent exercise of such right or remedy.
15. Each Depositor hereby represents and warrants (a) that this Escrow
Agreement has been duly authorized, executed and delivered on its behalf
and constitutes its legal, valid and
(10)
<PAGE>
binding obligation and (b) that the execution, delivery and performance of
this Escrow Agreement by Depositor do not and will not violate any
applicable law or regulation.
16. The invalidity, illegality or unenforceability of any provision of this
Agreement shall in no way affect the validity, legality or enforceability
of any other provision; and if any provision is held to be enforceable as a
matter of law, the other provisions shall not be affected thereby and shall
remain in full force and effect.
17. This Agreement shall constitute the entire agreement of the parties with
respect to the subject matter and supersedes all prior oral or written
agreements in regard thereto.
18. This Agreement shall terminate upon the distribution of all Escrow Property
from the Account. The provisions of these Terms and Conditions shall
survive termination of this Escrow Agreement and/or the resignation or
removal of the Escrow Agent.
19. No printed or other material in any language, including prospectuses,
notices, reports, and promotional material which mentions "The Bank of New
York" by name or the rights, powers, or duties of the Escrow Agent under
this Agreement shall be issued by any other parties hereto, or on such
party's behalf, without the prior written consent of Escrow Agent.
20. The headings contained in this Agreement are for convenience of reference
only and shall have no effect on the interpretation or operation hereof.
21. This Escrow Agreement may be executed by each of the parties hereto in any
number of counterparts, each of which counterpart, when so executed and
delivered, shall be deemed to be an original and all such counterparts
shall together constitute one and the same agreement.
22. The Escrow Agent does not have any interest in the Escrowed Property
deposited hereunder but is serving as escrow holder only and having only
possession thereof. Capital shall pay or reimburse the Escrow Agent upon
request for any transfer taxes or other taxes relating to the Escrowed
Property incurred in connection herewith and shall indemnify and hold
harmless the Escrow Agent any amounts that it is obligated to pay in the
way of such taxes. Any payments of income from this Escrow Account shall be
subject to withholding regulations then in force with respect to United
States taxes. The parties hereto will provide the Escrow Agent with
appropriate W-9 forms for tax I.D., number certifications, or W-8 forms for
non-resident alien certifications. It is understood that the Escrow Agent
shall be responsible for income reporting only with respect to income
earned on investment of funds which are a part of the Escrowed Property and
is
(11)
<PAGE>
not responsible for any other reporting. This paragraph and paragraph (9)
shall survive notwithstanding any termination of this Escrow Agreement or
the resignation of the Escrow Agent.
IN WITNESS WHEREOF, each of the parties has caused this Escrow Agreement to
be executed by a duly authorized officer as of the day and year first written
above.
CAPITAL RESOURCE GROUP ONE, LLC PRYOR, COUNTS & CO., INC.
_______________________________ _________________________________
[Name of Depositor] [Name of Depositor]
By: ___________________________ _________________________________
Name: Name:
Title: Title:
THE BANK OF NEW YORK, as Escrow Agent
By: ___________________________
Name:
Title:
(12)
<PAGE>
EXHIBIT A
____________, 2000
Mr./Ms. ______________________
Corporate Trust Department
The Bank of New York
101 Barclay Street
12 E Floor
New York, New York 10286
Dear Mr./Ms. ________________:
Reference is made to that certain Escrow Agreement dated effective as of
____________, 2000 (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 6(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 Bank of New York
for deposit in the Liquidity Account is $_______________.
<PAGE>
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: ____________________________________
<PAGE>
APPENDIX I
TO
CAPITAL'S NOTICE OF ACCEPTANCE
Dated: ___________________, 2000
<PAGE>
APPENDIX II
TO
CAPITAL'S NOTICE OF ACCEPTANCE
Dated: ___________________, 2000
<PAGE>
APPENDIX III
TO
CAPITAL'S NOTICE OF ACCEPTANCE
Dated: ___________________, 2000
EXHIBIT B
TO
ESCROW AGREEMENT
THE BANK OF NEW YORK ESCROW AGENT FEE SCHEDULE
-------------------- ------------ ------------
Exhibit 10.5
February 24, 2000
Mr. Thomas J. LaRussa
United Funds, LLC
650 E. Carmel Drive
Suite 150
Carmel, IN 46032
Dear Mr. LaRussa:
This letter sets forth the terms and conditions under which United Funds,
LLC (the "Company") hereby agrees to compensate Cullasaja Capital, Ltd.("CCL")
for its services as a financial advisor in connection with the creation of a
Trust capable of issuing asset backed certificates (the "Transaction") to
institutional and other investors.
For the purposes of this Agreement, Trust Certificates shall mean
securities representing beneficial or legal interests in a pool of insurance
settlements and certain other assets (the "Trust Assets") which will be
originated or purchased by the Company and deposited into one or more trusts
(the "Trusts"). For the purposes of this Agreement only, the Company shall mean
United Funds, LLC, its successors and assigns.
1. Financial Advisory and Consulting Services.
CCL has performed financial advisory services in connection with the
structuring of the Trusts.
2. Financial Advisory and Consulting Services Fee.
In consideration for the services rendered by CCL hereunder, the Company
hereby agrees to pay to CCL, through the term hereof, in connection with
<PAGE>
Insurance Settlements Funding Trust 2000 (the "2000 Trust") a one-time fee of
.0033 1/3% of the principal amount of Trust Certificates of the 2000 Trust sold
pursuant to the public offering of Trust Certificates for the 2000 Trust,
payable in installments on a monthly basis against the amount owed, at the rate
of .0033 1/3% of the Trust Certificates sold by the Trust in the previous month,
on the fifth (5th) business day of each succeeding month, during the offering
period of the Trust Certificates. Such fee is solely the responsibility of the
Company and shall be paid solely to CCL.
3. Additional Financial Advisory and Consulting Services Fee.
In consideration for the services rendered by CCL hereunder, the Company
hereby agrees to pay to CCL, through the term hereof, in connection with the
Trusts, other than the 2000 Trust, a one-time fee equal to .0025% of the
principal amount of Trust Certificates of the Trusts sold pursuant to the public
offering of Trust Certificates for such Trusts, up to an aggregate of
$300,000,000 principal amount of Trust Certificates of such Trusts, payable as
described in paragraph 2 above. Such additional fee shall be paid by the Company
with respect to any public offering of Trust Certificates, up to an aggregate of
$300,000,000 principal amount, by Pryor, Counts & Co., Inc.
4. Late Charge.
If any payment to be made hereunder is not paid within fifteen days
after the date due, the Company shall immediately pay to CCL a late charge of
one percent (1%) per month on the entire amount due on that date.
(2)
<PAGE>
5. Representations and Warranties.
The Company acknowledges that CCL does not assume responsibility for the
accuracy or completeness of any information provided in any public offering of
Trust Certificates by the Company and that CCL will rely upon such information
without independent verification of the accuracy or completeness of such
information or independent evaluation of any of the assets or liabilities of the
Company or Trust Assets. CCL acknowledges that the Company has made no
independent investigation of CCL and the Company assumes no responsibility in
connection with CCL other than its obligation to pay the above described fees.
In addition, Pryor, Counts & Co., Inc. and Capital Resource Group One, LLC have
made no independent investigation of CCL and Pryor, Counts & Co., Inc. and
Capital Resource Group One, LLC have assumed no responsibility in connection
with CCL other than agreeing as to the Company's obligation to pay the fees
required to be paid pursuant to paragraph 3 above.
6. Termination.
This agreement shall terminate upon the later of (i) the termination of
the 2000 Trust, or (ii) the inability of Pryor, Counts & Co. Inc. to sell the
Trust Certificates for the 2000 Trust upon terms and conditions reasonably
satisfactory to the Company, or (iii) the termination of any subsequent Trusts
which include Trust Assets originated or purchased by the Company whose Trust
Certificates are publicly offered.
7. Miscellaneous.
This Agreement embodies the entire agreement and understanding of the
parties hereto and supersedes all prior agreements and understandings, written
or oral,
(3)
<PAGE>
relating to the subject matter hereof, and may not be discharged, except in
writing, signed by the party against whom such modification, waiver or discharge
is sought to be enforced. All rights and obligations hereunder shall be binding
upon and applicable to any successor to the assets and/or business of the
Company, whether by merger, consolidation, transfer of all or substantially all
of such assets, or otherwise. Neither the Company or CCL may assign its rights
and obligations without the prior written approval of the other party.
Each of CCL and the Company represents and warrants that this letter
Agreement has in all respects been duly authorized, executed and delivered by
and on behalf of itself.
All rights and obligations in connection herewith shall be interpreted,
construed, and enforced in accordance with and governed by the applicable laws
of the State of Delaware. If any provision of this Agreement shall be determined
to be invalid or unenforceable in any respect, such determination shall not
affect such provisions, which shall remain in full force and effect.
This Agreement supersedes any and all previously existing agreements
relating to the subjects referred to in this Agreement.
(4)
<PAGE>
Please confirm that the foregoing accurately reflects your
understanding by signing the enclosed copy of this letter and returning it to
the undersigned.
Very truly yours,
CULLASAJA CAPITAL, LTD.
By: /s/ Paul D. Jacobs, Chairman
THE FOREGOING IS ACCEPTED
AND AGREED TO AS OF THE DATE ABOVE.
UNITED FUNDS, LLC
By: /s/ Thomas J. LaRussa
---------------------
Thomas J. LaRussa
AGREED
PRYOR, COUNTS & CO., INC.
By: /s/ Malcolm Pryor
-----------------
AGREED
CAPITAL RESOURCE GROUP ONE, LLC
By: /s/ Thomas J. LaRussa
---------------------
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
THE BANK OF NEW YORK
New York 13-5160382
--------------------------- -------------------
(State of incorporation if (I.R.S. employer
not a U.S. national bank) identification no.)
One Wall Street, New York, NY 10286
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
CAPITAL RESOURCE GROUP ONE, LLC
650 E. Carmel Drive
Suite 150
Carmel, Indiana 46032
Delaware 22-370571
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
[%] Asset Backed Certificates Maturing _________________________, 2008
[%] Asset Backed Certificates Maturing _________________________, 2010
<PAGE>
1. General information. Furnish the following information as to the Trustee
(a) Name and address of each examining or supervising authority to
which it is subject.
Name Address
- ---- -------
Superintendent of Banks of the State 2 Rector Street, NY.,
New York, NY NY 10006, and Albany 12203
Federal Reserve Bank of New York 33 Liberty Plaza, NY, NY 10045
Federal Deposit Insurance Corporation Washington, DC 20429
New York Clearing House Association New York, NY 10005
(b) Whether it is authorized to exercise corporate trust power.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17CFR
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit I to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-29637).
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019).
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee Bank of New York a [state form of organization], organized and
existing under the laws of the United States, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the city of New York and State of New
York, on the _____ day of March 2000.
The Bank of New York
BY:
------------------------------
MAURO PALLADINO
VICE PRESIDENT
Exhibit 28.2
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT IS EXECUTED AND DELIVERED BY THE UNDERSIGNED
INVESTOR TO CAPITAL RESOURCE GROUP ONE, LLC (THE "OFFEROR" OR "CAPITAL") IN
CONNECTION WITH THE OFFER AND SALE (HEREINAFTER REFERED TO AS THE "OFFERING") BY
THE OFFEROR OF AN AGGREGATE OF UP TO $150,000,000 INSURANCE SETTLEMENTS ASSET
BACKED CERTIFICATES EVIDENCING FRACTIONAL, UNDIVIDED INTERESTS IN CERTAIN ASSETS
OF INSURANCE SETTLEMENTS FUNDING TRUST 2000 (THE "TRUST"), CREATED PURSUANT TO
THE POOLING AND SERVICING AGREEMENT, ENTERED INTO ON _________, 2000, AMONG
CAPITAL, THE BANK OF NEW YORK, AS THE TRUSTEE OF THE TRUST (THE "TRUSTEE"), 21ST
HOLDINGS, LLC, AS THE MASTER SERVICER (THE "MASTER SERVICER") AND UNITED FUND,
LLC, AS THE SUBSERVICER OF THE INSURANCE SETTLEMENTS ("UNITED" OR "SUBSERVICER")
(THE "POOLING AND SERVICING AGREEMENT") ON THE TERMS AND CONDITIONS SET FORTH
HEREIN, IN THE POOLING AND SERVICING AGREEMENT, AND IN THE PROSPECTUS DATED
_____________, 2000 (THE "PROSPECTUS").
1. Subscription; Delivery of Funds. Subject to acceptance of this
Subscription Agreement by the Offeror on or before completion or termination of
the Offering, the undersigned hereby subscribes for and agrees to purchase
______ Certificates issuable in the minimum denomination of $5,000 and integral
multiples of $1,000 in excess thereof upon the terms and conditions set forth
herein and in the Prospectus and herewith tenders in cash or by check payable to
the Bank of New York (the "Escrow Agent") the sum of $________ (the
"Subscription Payment"), being the full purchase price for the Certificates
subscribed hereby. The minimum subscription is for one (1) Certificate or
$5,000.
2. Execution and Delivery of Subscription Agreement. The undersigned
herewith delivers to the Offeror executed counterparts of the signature page to
this Subscription Agreement. It is understood and agreed that, in the event that
this Subscription Agreement is accepted by the Offeror, it shall be dated as of
the date of acceptance by the Offeror.
3. Subscription Payment and Documents. Prior to completion or termination
of the Offering, the Subscription Payment will be held by the Escrow Agent in a
segregated, interest bearing account established by the Offeror for such purpose
with the Bank of New York, and the Subscription Agreement will be held in trust
by the Escrow Agent for the benefit of the undersigned. In the event that this
Subscription Agreement has not been accepted or is rejected by the Offeror prior
to completion or termination of the Offering or the Offeror has not received
completed and executed Subscription Agreements for the purchase of at least
$20,000,000 no later than one hundred twenty (120) days from the effective date
of the Registration Statement, the Subscription Payment will be returned
promptly by the Offeror to the undersigned, with interest, without deduction,
and without further obligation.
<PAGE>
4. Termination Date; Termination of Offering. Unless earlier completed or
terminated as provided herein and in the Prospectus, the Offering will remain
open for twelve (12 months from the effective date of the Registration Statement
(the "Termination Date"). The Offering may be terminated by the Offeror in the
event that completed and executed Subscription Agreements to purchase a minimum
of $150,000,000 principal amount of the Certificates have been accepted by the
Offeror before the Termination Date.
5. Irrevocable Offer to Purchase. Execution and delivery of this
Subscription Agreement by the undersigned, together with the Subscription
Payment, shall constitute an irrevocable offer to purchase the number of
Certificates indicated herein. The undersigned may not cancel, terminate, or
revoke this Subscription Agreement.
6. Acceptance or Rejection of Subscription. This Subscription Agreement may
be accepted or rejected by the Offeror, in whole or in part, at the Offeror's
sole and absolute discretion. Acceptance by the Offeror shall be indicated by
the execution hereof by any duly authorized agent of the Offeror. The
undersigned will be notified promptly of the acceptance or rejection of this
Subscription Agreement by the Offeror.
7. Representations and Warranties. The undersigned hereby represents and
warrants to the Offeror as follows:
7.1. Financial Ability of Investor. The undersigned (a) has the
financial ability to bear the economic risk of his investment in the
Certificates (including the possible loss of the entire amount thereof), (b) has
adequate means for providing for his current and future needs and personal
contingencies notwithstanding (i) the undersigned's investment in the
Certificates, (ii) the unavailability of any tax, financial or other benefits
from the undersigned's investment in or ownership of the Certificates, or (iii)
the complete loss of the undersigned's entire investment in the Certificates,
and (c) has no need for liquidity with respect to his investment in the
Certificates.
7.2. Investor Sophistication. The undersigned has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Certificates and has obtained
sufficient information from the Offeror to enable him to evaluate the risks of
an investment in the Certificates.
7.3. Representations Not Conflicting. Neither the Offeror nor any person
acting on behalf of the Offeror has made any statement, assertion,
representation, warranty or other communication to the undersigned that was
contrary to any provision of the Prospectus.
(2)
<PAGE>
7.4. Receipt of Prospectus and Other Information. The undersigned:
(a) has been furnished with the Prospectus and any documents which
have been made available upon request, has carefully read the Prospectus and has
evaluated and understands the risks of an investment in the Certificates, and,
except as indicated in subsections (b) and (c), has relied solely upon the
information contained in the Prospectus;
(b) has been provided an opportunity to obtain any additional
information concerning the Offering, to the extent the Offeror or its authorized
representatives possess the same or could acquire it without unreasonable effort
or expense; and
(c) has had the opportunity to ask questions of, and receive answers
from, the Offeror or its authorized representatives concerning the terms and
conditions of the Offering and other matters pertaining to an investment in the
Certificates and, to the extent the Offeror or its authorized representatives
possess the same or could acquire it without unreasonable effort or expense, to
obtain such additional information as the undersigned considers necessary to
verify the accuracy of the information contained in the Prospectus or that which
was otherwise provided in order for him to evaluate the merits or risks of an
investment in the Certificates, and has not been furnished any other offering
literature or prospectus except as mentioned herein or in the Prospectus.
7.5. Suitability of Investment.
(a) The undersigned has determined that the Certificates are a
suitable investment for him and that, at this time, he is able to bear a
complete loss of his investment in the Certificates.
(b) THE TEXAS STATE SECURITIES BOARD HAS IMPOSED A SUITABILITY
STANDARD OF $65,000 ANNUAL INCOME AND $65,000 NET WORTH OR $225,000 NET WORTH
(EXCLUSIVE OF HOME FURNISHINGS AND AUTOMOBILES).
(c) THE CALIFORNIA CORPORATIONS COMMISSIONER HAS IMPOSED A
SUITABILITY STANDARD OF $45,000 ANNUAL INCOME AND $45,000 NET WORTH OR $150,000
NET WORTH (EXCLUSIVE OF HOME FURNISHINGS AND AUTOMOBILES).
7.6. Independent Investment Decision. In making a decision to invest in
the Certificates, the undersigned has relied solely upon independent
investigations made by him and in not relying on the Offeror or its authorized
representatives or any references in the Prospectus to any legal opinion with
respect to tax or other economic considerations involved in an investment in the
Certificates.
7.7. Authority. The execution, delivery, and performance of this
Subscription Agreement have been duly authorized by the undersigned. The
execution and delivery of this Subscription Agreement and the purchase of the
Certificates does not conflict with or breach any
(3)
<PAGE>
provision organizational documents of the undersigned or any law, ruling,
regulation, statute, or agreement to which it is subject.
7.8. Residency. I am a bona fide resident of the State of ____________.
8. Investor Awareness. The undersigned hereby acknowledges his
understanding and awareness that:
8.1. Operating History. The Offeror has no financial or operating
history.
8.2. Speculative investment. The Certificates are a speculative
investment which involve a high degree of risk of the loss of the total amount
of any investment therein.
8.3. No Assurance of Benefits. No assurance has been or can be made that
any tax or financial benefits will result from an investment in the
Certificates.
8.4. Certificates Not Approved or Disapproved by Securities
Administrator.
8.5. Lack of Public Market. No public market for the Certificates
currently exists or is likely to develop, and, thus, the undersigned will need
to bear the economic risk of his investment for an indefinite period of time and
may not be able to liquidate his investment readily in case of an emergency.
8.6. Tax Benefits May be Lost. Federal and state income tax benefits, if
any, available to the undersigned as a result of his investment in the
Certificates may be lost through changes to, or in the interpretation of,
existing laws and regulations.
8.7. Certificates Not Obligation of Subservicer or Capital. THE
CERTIFICATES REPRESENT BENEFICIAL UNDIVIDED INTERESTS IN THE TRUST ONLY AND DO
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE SUBSERVICER OR ANY
AFFILIATE THEREOF EXCEPT TO THE EXTENT DESCRIBED HEREIN. THE CERTIFICATES ARE
NOT INSURED OR GUARANTEED BY ANY FEDERAL OR STATE GOVERNMENTAL AGENCY.
9. Governing law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
10. Headings. The headings of the sections of this Subscription Agreement
are for reference only and shall not limit or otherwise affect the
interpretation or effect of any term or provision.
11. Binding Agreement. Except as expressly set forth to the contrary, this
Subscription Agreement shall be binding upon and inure the benefit of the heirs,
executors, administrators, legal representatives, successors and permitted
assigns of the parties.
12. Indemnification. The undersigned acknowledges his the representations,
warranties and covenants set understanding forth herein and that the Offeror
relied upon such
(4)
<PAGE>
representations covenants and warranties and the undersigned agrees to indemnify
the Offeror its agents, and employees, and each of them, from and against any
and all loss, liability, claim, damage, and expense (including, but not limited
to, any and all expenses reasonably incurred in investigations, preparing or
defending against any litigation commenced or threatened or any claim
whatsoever) arising out of or based upon any false representation or breach or
failure by the undersigned to comply with any covenant or agreement made by the
undersigned herein or in any other document furnished by the undersigned to any
of the foregoing in connection with the undersigned's investment in the
Certificates.
13. Rights Not Waived. Notwithstanding anything contained herein to the
contrary, no representation, warranty, acknowledgment or agreement made herein
by the undersigned shall in any manner be deemed to constitute a waiver of any
rights granted to the undersigned under federal or state securities laws.
14. Survival of Terms. All representations, warranties, acknowledgments and
agreements contained herein, the indemnification contained, in paragraph 12
shall survive (a) changes in the transactions, documents and instruments
described in the Prospectus (b) the acceptance of this Subscription Agreement,
and (c) the death, disability, incompetency, termination, bankruptcy, insolvency
or dissolution of the undersigned.
(5)
<PAGE>
15. Please issue ________ Certificate(s) in the name(s) of _______________
__________________________________ and ________________________________, as
[e.g, joint tenants, tenants in common, or husband and wife]
IN WITNESS WHEREOF, I have executed this Subscription Agreement this ____
day of _________________, 2000.
-----------------------------------
Signature of Investor
-----------------------------------
Name (Please type or print)
-----------------------------------
Signature of Spouse or Co-owner if
funds are to be invested as joint
tenants by the entirety or
community property.
-----------------------------------
Name (Please type or print)
RECEIPT OF BROKER/DEALER
Receipt of $________________ in full payment of the above Subscription
Agreement is acknowledged on this ___ day of _______________________, 2000.
BROKER/DEALER
Name:
-----------------------------
By:
-----------------------------
Title:
-----------------------------
(6)
