EXHIBIT 4.2
EXECUTION COPY
THIRD TRUST SUPPLEMENT
THIRD TRUST SUPPLEMENT, dated as of March 16, 1998, by and among
TRANS-WORLD INSURANCE COMPANY d/b/a EDUCAID, an Arizona insurance company
("TWIC" or a "Depositor"), CLASSNOTES, INC., a Delaware corporation
("ClassNotes" or a "Depositor"), and THE YORK BANK AND TRUST COMPANY, a
Pennsylvania bank and trust company, not in its individual capacity but solely
as Eligible Lender Trustee (the "Eligible Lender Trustee") under a Trust
Agreement dated as of March 21, 1997 (as amended and supplemented from time to
time, the "Trust Agreement") relating to ClassNotes Trust 1997-I, a Pennsylvania
business trust (the "Trust").
PRELIMINARY STATEMENT
Section 11.1(d) of the Trust Agreement provides, among other things,
that without the consent of any Certificateholders but with prior notice to the
Rating Agencies and the prior written consent of the Surety Provider, the
Depositors and the Eligible Lender Trustee may enter into a Trust Supplement to
set forth the terms of an additional Class of Trust Certificates. The Trust has
duly authorized the creation of a series of Trust Certificates to be known as
the Trust's Series 1998-1 Certificates (the "Series 1998-1 Certificates"), the
Depositors have delivered the required notice to the Rating Agencies and the
Depositors and the Eligible Lender Trustee are executing and delivering this
Third Trust Supplement in order to provide for the Series 1998-1 Certificates.
Except as otherwise specified herein, or as the context may require, capitalized
terms used but not defined herein are defined in Appendix A to the Trust
Agreement, which Appendix A also contains rules as to usage that shall be
applicable herein.
ARTICLE I.
DEFINITIONS
"CLOSING DATE" means, March 17, 1998, or such other date as the
Depositors may determine.
"FAIR MARKET VALUE" means, (i) as to any Series 1998-1 Financed
Student Loan contributed by a Depositor to the Trust on the Closing Date,
106.36% of the principal balance of, plus accrued interest from the Series
1998-1 Cut-off Date to the Closing Date on, such Series 1998-1 Financed Student
Loan and (ii) as to any Series 1998-1 Financed Student Loan contributed by a
Depositor to the Trust during the Funding Period, 100% of the principal balance
of, plus accrued interest from the related Subsequent Cut-off Date to the
related Transfer Date on, such Series 1998-1 Financed Student Loan.
"FUNDING PERIOD" means, with respect to the Series 1998-1
Certificates, the period beginning on the Closing Date and ending on the first
to occur of (a) the Note Distribution Date on which the amount on deposit in the
Pre-Funding Account (after giving effect to any transfers therefrom in
connection with any Additional Fundings on or prior to such Note Distribution
Date) is less than $200,000, (b) the date on which an Event of Default or a
Pledgor Default occurs, (c) the date on which an Insolvency Event occurs with
respect to the Issuer and (d) the close of business on June 16, 1998, or such
later date as may be agreed to by the Surety Provider.
"GAIN" means, as to any Series 1998-1 Financed Student Loan, the sum
of (i) the difference, if any, between (A) the proceeds received by the Trust
upon the sale of such Series 1998-1 Financed Student Loan pursuant to Section
2.3 of the Second Supplemental Sale and Servicing Agreement and (B) the Purchase
Amount of such Series 1998-1 Financed Student Loan at the time of such sale and
(ii) amounts, if any, relating to such Series 1998-1 Financed Student Loan that
are released from the Reserve Account and available for distribution to the
Certificateholders.
"SECOND SUPPLEMENTAL SALE AND SERVICING AGREEMENT" means the Second
Supplemental Sale and Servicing Agreement dated as of March 17, 1998 among the
Issuer, the Depositors, the Eligible Lender Trustee and the Master Servicers, as
amended from time to time.
"SERIES 1998-1 CUT-OFF DATE" means February 27, 1998, or such other
date as the Depositors may determine.
"SERIES 1998-1 FINANCED STUDENT LOAN" means a Financed Student Loans
contributed by a Depositor to the Trust on either the Closing Date or during the
Funding Period.
"THIRD TRUST SUPPLEMENT" means this Third Trust Supplement, as from
time to time amended or supplemented.
ARTICLE II.
AUTHORIZATION, TERMS AND ISSUANCE
SECTION 2.1. AUTHORIZATION OF SERIES 1998-1 CERTIFICATES. In
consideration of the contribution by the Depositors of the Series 1998-1
Financed Student Loans, there is hereby authorized by the Trust, a single class
of Series 1998-1 Certificates, designated as the ClassNotes Trust 1997-I, Series
1998-1 Certificates (the "Series 1998-1 Certificates") in the aggregate
principal amount of $410,000,0000
SECTION 2.2. PURPOSE. The Series 1998-1 Financed Student Loans
contributed by the Depositors will be pledged by the Trust to the Indenture
Trustee pursuant to the terms of the Indenture.
SECTION 2.3. TERMS OF SERIES 1998-1 CERTIFICATES GENERALLY. The Series
1998-1 Certificates shall be issued in certificated, fully registered form, in
substantially the form set forth in Exhibit A hereto, with such variations,
omissions and insertions as may be required by the circumstances, as may be
required or permitted by the Trust Agreement, or be consistent with the Trust
Agreement and necessary or appropriate to conform to the rules and requirements
of any governmental authority or any usage or requirement of law with respect
thereto.
There shall only be one Series 1998-1 Certificate outstanding at any
time. The Series 1998-1 Certificates shall be dated as of the Closing Date.
SECTION 2.4. RESTRICTIONS ON TRANSFER. On the Closing Date, the Trust
shall issue the Series 1998-1 Certificates to the Depositors in exchange for the
Depositors' contribution of the Series 1998-1 Financed Student Loans.
Immediately thereafter, the Depositors shall sell the Series 1998-1 Certificates
to TMS Student Holdings, Inc. ("Holdings") pursuant to the terms of a purchase
agreement to be entered into between the Depositors and Holdings. Any attempted
transfer by Holdings of the Series 1998-1 Certificates shall be void. The Series
1998-1 Certificates issued to Holdings shall contain a legend stating "THIS
CERTIFICATE IS NONTRANSFERABLE."
SECTION 2.5. VOTING RIGHTS. The holder of the Series 1998-1
Certificates, in its capacity as such, shall have no voting rights where any
provision of the Trust Agreement or any other Basic Document permits or
authorizes holders of Certificates holding a specified percentage or amount of
the Certificate Balance to take any action or grant any approval, and for this
purpose the Series 1998-1 Certificates shall be deemed to have a Certificate
Balance equal to $0.
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS IN GENERAL.Notwithstanding anything
contained in the Trust Agreement, the Second Supplemental Sale and Servicing
Agreement or any other Basic Document to the contrary, (i) on the Closing Date,
the Trust shall distribute to Holdings, as holder of the Series 1998-1
Certificates, an amount equal to the aggregate Fair Market Value of all Series
1998-1 Financed Student Loans contributed to the Trust on the Closing Date, (ii)
during the Funding Period, on each Transfer Date the Trust shall distribute to
Holdings, as holder of the Series 1998-1 Certificates, an amount equal to the
aggregate Fair Market Value of all Series 1998-1 Financed Student Loans
contributed to the Trust on such Transfer Date, (iii) all amounts distributable
to Holdings, as holder of the Series 1998-1 Certificates, with respect to clause
(i) of the definition of Gain shall be distributed as set forth in Section 2.3
of the Second Supplemental Sale and Servicing Agreement and (iv) all amounts
distributable to Holdings, as holder of the Series 1998-1 Certificates, with
respect to clause (ii) of the definition of Gain shall be distributed as set
forth in Section 5.6(b)(F) of the Second Supplemental Sale and Servicing
Agreement.
The foregoing paragraph sets forth the exclusive means for determining
amounts required to be distributed to the holder of the Series 1998-1
Certificates. If the aggregate amount of such distributions is less than the
principal amount of the Series 1998-1 Certificates, the holder of the Series
1998-1 Certificates shall have no recourse against the Trust or otherwise.
Section 3.2. NO STATEMENT REQUIRED. Notwithstanding anything contained
in the Trust Agreement, the Second Supplemental Sale and Servicing Agreement or
any other Basic Document to the contrary, neither the Administrator, the
Eligible Lender Trustee, the Indenture Trustee, nor any other Person, shall be
required to distribute to the holder of the Series 1998-1 Certificates the
statement required by Section 5.7 of the Second Supplemental Sale and Servicing
Agreement.
ARTICLE IV
[Reserved]
ARTICLE V
MISCELLANEOUS
SECTION 5.1. AUTHORITY FOR THIS THIRD TRUST SUPPLEMENT. This Third
Trust Supplement is adopted pursuant to the provisions of the Trust Agreement.
SECTION 5.2. COUNTERPARTS. This Third Trust Supplement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
SECTION 5.3. PURCHASER'S LETTER. Notwithstanding anything set forth in
the Trust Agreement to the contrary, the Depositor shall not be required to
execute and deliver a Purchaser's Letter pursuant to Section 3.5(b) of the Trust
Agreement in connection with its acquisition of the Series 1998-1 Trust
Certificates.
SECTION 5.4. GOVERNING LAW. This Third Trust Supplement shall be
governed by and construed in accordance with the internal laws of the
Commonwealth of Pennsylvania, without giving effect to principles of conflict of
laws.
SECTION 5.5. RATIFICATION OF TRUST AGREEMENT. As supplemented by this
Third Trust Supplement, the Trust Agreement is in all respects ratified and
confirmed, and the Trust Agreement as so supplemented by this Third Trust
Supplement shall be read, taken and construed as one and the same instrument.
Each addition to the Trust Agreement contained herein is solely for purposes of
the Series 1998-1 Certificates, and shall have no effect on any other
Certificates issued pursuant to the Trust Agreement. If any term of this Third
Trust Supplement conflicts with any term of the Trust Agreement, this Third
Trust Supplement shall control for purposes of the Series 1998-1 Certificates.
SECTION 5.6. PLACE OF EXECUTION. This Third Trust Supplement shall be
deemed for all purposes executed and delivered at the Eligible Lender Trustee's
corporate trust office in York County, Pennsylvania.
SECTION 5.7. EFFECTIVENESS. This Third Trust Supplement shall become
effective upon filing with the Pennsylvania Department of State.
IN WITNESS WHEREOF, the parties hereto have caused this Third Trust
Supplement to be duly executed as of the day and year first above written.
THE YORK BANK AND TRUST COMPANY
By:/s/ RICHARD H. BASS
Name: Richard H. Bass
Title: Vice President
TRANS-WORLD INSURANCE COMPANY,
d/b/a Educaid
By:/s/ MICHAEL BENOFF
Name: Michael Benoff
Title: Senior Vice President
CONSENTED TO:
AMBAC ASSURANCE CORPORATION, CLASSNOTES, INC.
as Surety Provider
By:/s/ MICHAEL BENOFF
Name: Michael Benoff
Title: Senior Vice President
By:/s/ RICHARD MARSH
Name: Richard Marsh
Title: First Vice President
EXHIBIT A
TO THE THIRD TRUST SUPPLEMENT
FORM OF SERIES 1998-1 CERTIFICATES
[THIS SERIES 1998-1 CERTIFICATE IS NONTRANSFERABLE]1
NUMBER
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CLASSNOTES TRUST 1997-I
SERIES 1998-1 CERTIFICATES
evidencing a fractional undivided interest in the Trust, as defined
below, the property of which includes a pool of student loans
contributed to the Trust by Trans-World Insurance Company, d/b/a
Educaid and ClassNotes, Inc.
(This Trust Certificate does not represent an interest in or obligation
of the Depositor (as defined below), the Master Servicer (as defined
below), the Eligible Lender Trustee (as defined below) or any of their
respective affiliates, except to the extent described below.)
THIS CERTIFIES THAT ______________________is the registered owner of
____________________ dollars non-assessable, fully-paid, fractional undivided
interest in ClassNotes Trust 1997-I (the "Trust"), a trust formed under the laws
of the Commonwealth of Pennsylvania by Trans-World Insurance Company, d/b/a
Educaid (a "Depositor") and ClassNotes, Inc. (a "Depositor"). The Trust was
created pursuant to a Trust Agreement dated as of March 21, 1997 (as amended and
supplemented from time to time, the "Trust Agreement") between the Depositors
and The York Bank and Trust Company, a Pennsylvania bank and trust company, not
in its individual capacity but solely as eligible lender trustee on behalf of
the Trust (the "Eligible Lender Trustee"), a summary of certain of the pertinent
provisions of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them in
Appendix A to the Trust Agreement; such Appendix A also contains rules as to
usage that shall be applicable herein.
This Certificate is one of the duly authorized Certificates designated
as "Series 1998-1 Certificates" (herein called the "Series 1998-1 Certificates"
or the "Trust Certificates"). This Series 1998-1 Certificate is issued under and
is subject to the terms, provisions and conditions of the Trust Agreement and a
related Third Trust Supplement dated as of March 17, 1998 (the "Third Trust
Supplement"), to which Trust Agreement and Third Trust Supplement
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1 To be included on the Series 1998-1 Certificate issued to TMS Student
Holdings, Inc.
the holder of this Series 1998-1 Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. The property of the Trust includes a
pool of student loans (the "Financed Student Loans"), all moneys paid thereunder
on or after February 27, 1998 (or, in the case of Financed Student Loans that
constitute Additional Student Loans, on or after the respective Subsequent
Cut-off Dates), certain bank accounts and the proceeds thereof and certain other
rights under the Trust Agreement and the Sale and Servicing Agreement and all
proceeds of the foregoing.
Distributions will be made on the Series 1998-1 Certificates in the
manner set forth in the Third Trust Supplement.
It is the intent of the Depositors, the Master Servicers, the
Administrator and the Certificateholders that, solely for federal income tax
purposes, the Trust will be treated as a partnership and the Certificateholders
(including TMS Student Holdings, Inc. in its capacity as recipient of
distributions from the Reserve Account) will be treated as partners in that
partnership. TMS Student Holdings, Inc. and the other Certificateholders by
acceptance of a Trust Certificate (and the Certificate Owners by acceptance of a
beneficial interest in a Trust Certificate) or an Originators' Interest, agree
to treat, and to take no action inconsistent with the treatment of, the Trust
Certificates for such federal income tax purposes as partnership interests in
the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a
Trust Certificate or, in the case of a Certificate Owner, a beneficial interest
in a Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, will not at any time institute against
the Seller or the Trust, or join in any institution against the Seller or the
Trust, any bankruptcy, reorganization, arrangement, insolvency, receivership or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Trust Certificates, the Notes, the Trust Agreement or any of the other Basic
Documents.
Unless the certificate of authentication hereon shall have been
executed by an authorized representative of the Eligible Lender Trustee or its
authenticating agent, by manual signature, this Trust Certificate shall not
entitle the holder hereof to any benefit under the Trust Agreement, the Third
Trust Supplement or the Second Supplemental Sale and Servicing Agreement or be
valid for any purpose.
IN WITNESS WHEREOF, the Eligible Lender Trustee on behalf of the Trust
and not in its individual capacity has caused this Series 1998-1 Certificate to
be duly executed as of the date set forth below.
CLASSNOTES TRUST 1997-I
by THE YORK BANK AND
TRUST COMPANY,
not in its individual
capacity but solely as
Eligible Lender Trustee,
by
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Authorized Signatory
Date:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the
within-mentioned Trust Agreement.
THE YORK BANK AND TRUST COMPANY,
not in its individual capacity but solely
as Eligible Lender Trustee,
by
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Authorized Representative
Date:
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
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(Please print or type name and address, including postal zip code, of assignee)
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the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
_______________________________________________________ Attorney to transfer
said Trust Certificate on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated:
________________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Trust Certificate in every particular,
without alteration, enlargement or any change whatever.