1
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED
UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND HAVE BEEN
FILED SEPARATELY WITH THE SECURITES AND EXCHANGE COMMISSION
========================================
FEDERAL-MOGUL FUNDING CORPORATION
Seller
FEDERAL-MOGUL CORPORATION
Servicer
and
THE CHASE MANHATTAN BANK
Trustee
----------------------------------------
SERIES 1997-1 SUPPLEMENT
Dated as of February 1, 1997
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of February 1, 1997
---------------------------------------
FEDERAL-MOGUL TRADE RECEIVABLES MASTER TRUST
FLOATING RATE TRADE-RECEIVABLES BACKED CERTIFICATES,
SERIES 1997-1, CLASS A
TRADE-RECEIVABLES BACKED CERTIFICATES
SERIES 1997-1, CLASS B
========================================
2
TABLE OF CONTENTS
Page
----
ARTICLE I
Creation of the Series 1997-1 Certificates
SECTION 1.01. Designation . . . . . . . . . . . . . . . . . 1
ARTICLE II
Definitions
SECTION 2.01. Definitions . . . . . . . . . . . . . . . . . 2
ARTICLE III
Servicing Fee
SECTION 3.01. Servicing Compensation . . . . . . . . . . . 16
ARTICLE IV
Rights of Series 1997-1 Certificateholders and
Allocation and Application of Collections
SECTION 4.01. Allocations; Payments to Seller . . . . . . . 17
SECTION 4.02. Monthly Interest. . . . . . . . . . . . . . . 19
SECTION 4.03. Determination of Monthly Principal. . . . . . 20
SECTION 4.04 Establishment of Series Accounts. . . . . . . 20
SECTION 4.05 Application of Series 1997-1 Collections
and Investment Proceeds . . . . . . . . . . 22
SECTION 4.06 Distributions to Series 1997-1
Certificateholders . . . . . . . . . . . . 22
SECTION 4.07 Payment of Optional Repayment Amount. . . . . 22
ARTICLE V
Distributions and Reports to
Series 1997-1 Certificateholders
SECTION 5.01. Distributions . . . . . . . . . . . . . . . . 23
SECTION 5.02. Reports and Statements to Series 1997-1
Certificateholders. . . . . . . . . . . . . 26
SECTION 5.03. Quarterly Servicer's Certificate. . . . . . . 27
SECTION 5.04 Weekly Report and Distribution. . . . . . . . 27
ARTICLE VI
Additional Early Amortization Events
SECTION 6.01 Additional Early Amortization Events. . . . . 29
i
3
ARTICLE VII
Additional Covenants
SECTION 7.01. Covenants of the Servicer . . . . . . . . . . 31
SECTION 7.02. Confidentiality . . . . . . . . . . . . . . . 32
SECTION 7.03. Receivables Purchase Agreement. . . . . . . . 33
SECTION 7.04. Pooling and Servicing Agreement . . . . . . . 34
SECTION 7.05 Inspection Rights . . . . . . . . . . . . . . 36
SECTION 7.06 Final Payment with respect to Series
1997-1 Certificates . . . . . . . . . . . . 36
SECTION 7.07 Covenants of the Seller . . . . . . . . . . . 36
SECTION 7.08 Credit Policies . . . . . . . . . . . . . . . 36
SECTION 7.09 New Series Issued . . . . . . . . . . . . . . 39
ARTICLE VIII
Termination
SECTION 8.01. Optional Repurchase . . . . . . . . . . . . . 39
ARTICLE IX
Final Distributions
SECTION 9.01. Sale of Certificateholders, Interest
Pursuant to Section 2.03 of the Agreement;
Distributions Pursuant to Section 2.03 or
12.02(c) of the Agreement . . . . . . . . . 41
SECTION 9.02. Distribution of Proceeds of Sale,
Disposition or Liquidation of the
Receivables Pursuant to Section 9.02 of
the Agreement . . . . . . . . . . . . . . . 41
ARTICLE X
Miscellaneous Provisions
SECTION 10.01. Ratification of Agreement . . . . . . . . . . 43
SECTION 10.02. Counterparts . . . . . . . . . . . . . . . . 43
SECTION 10.03. Governing Law . . . . . . . . . . . . . . . . 43
SECTION 10.04. The Trustee . . . . . . . . . . . . . . . . . 43
SECTION 10.05. Amendment . . . . . . . . . . . . . . . . . . 43
SECTION 10.06. The Certificates. . . . . . . . . . . . . . . 43
SECTION 10.07. Indemnities by the Servicer . . . . . . . . . 44
SECTION 10.08. Net Pool Balance/Required Participation
Amount. . . . . . . . . . . . . . . . . . . 45
ii
4
EXHIBITS
Exhibit A-1 Form of Face of Class A Certificate
Exhibit A-2 form of Face of Class B Certificate
Exhibit B Form of Distribution Date Statement for the
Trustee
Exhibit C Form of Rule 144A Investment Letter
Exhibit D Form of Non-Rule 144A Investment Letter
Exhibit E Form of Quarterly Servicer's Certificate
Exhibit F Credit Policies
Schedule I Information regarding Series 1997-1 Trustee's
Account
iii
5
SERIES 1997-1 SUPPLEMENT dated as of February 1, 1997
(the "Series Supplement"), among FEDERAL-MOGUL FUNDING
CORPORATION, a Michigan corporation, as Seller, FEDERAL-MOGUL
CORPORATION, a Michigan corporation, as Servicer, and THE CHASE
MANHATTAN BANK, a New York banking corporation, as Trustee.
Pursuant to Section 6.03 of the Amended and Restated
Pooling and Servicing Agreement, dated as of February 1, 1997
(as amended and supplemented, the "Agreement"), among the Seller,
the Servicer and the Trustee, the Seller may from time to time
direct the Trustee to issue, on behalf of the Trust, one or more
new Series of Investor Certificates representing fractional
undivided interests in the Trust. The Principal Terms of any new
Series are to be set forth in a Supplement to the Agreement.
Pursuant to this Series Supplement, the Seller shall
create a new Series of Investor Certificates and specify the
Principal Terms thereof.
ARTICLE I
Creation of the Series 1997-1 Certificates
SECTION 1.01. Designation. (a) There is hereby
created a Series of Investor Certificates to be issued pursuant
to the Agreement and this Series Supplement to be known as the
"Floating Rate Trade Receivables Asset Backed Certificates,
Series 1997-1, Class A" and "Trade Receivables Asset Backed
Certificates, Series 1997-1, Class B."
(b) In the event that any term or provision contained
herein shall conflict with or be inconsistent with any term or
provision contained in the Agreement, with respect to the Series
of Investor Certificates created hereby, the terms and provisions
of this Series Supplement shall govern.
(c) The parties hereto intend that to the extent that
the payment of all amounts due to be paid to the Holders of the
Series 1992-1 Certificates (as defined herein) and Series 1993-1
Certificates (as defined herein) are held in escrow and paid in
accordance with the terms of the Escrow Deposit Agreement, the
Invested Amount of the Series 1992-1 Certificates and the Series
1993-1 Certificates shall each be zero and all Collections
received by the Trustee shall be allocated and applied solely in
accordance with the terms of this Series Supplement.
6
ARTICLE II
Definitions
SECTION 2.01. Definitions. (a) Whenever used in this
Series Supplement the following words and phrases shall have the
following meanings.
"Additional Early Amortization Event" shall have the meaning
specified in Section 6.01.
"Administration Fee" shall have the meaning specified in the
Fee Letter.
"Agent" shall mean, with respect to Series 1997-1, the
Program Agent.
"Aggregate Reserves" shall equal, as of any Determination
Date, the product of (a) the Aggregate Reserve Percentage and (b)
Available Receivables.
"Aggregate Reserve Percentage" shall mean, as of any
Determination Date, the sum of (a) the Loss Reserve Percentage,
(b) the Floating Dilution Reserve Percentage, (c) the
Discount/Fees Reserve Percentage and (d) the Servicing Reserve
Percentage.
"Amortization Commencement Date" shall occur on the earliest
of the following events: (a) 364 days from the Closing Date,
(b) five Business Days after written notice from Federal-Mogul to
the Program Agent and the Trustee of the intent to commence the
Amortization Period and (c) the occurrence of an Early
Amortization Event.
"Amortization Period" shall mean the period beginning on the
Amortization Commencement Date and ending upon the earliest to
occur of (a) the payment in full of the Invested Amount, all
Class A Monthly Interest and all other Class A Additional
Interest and all other amounts owed to Certificateholders
hereunder and under any other Transaction Document, (b) the Early
Amortization Commencement Date or (c) the Termination Date.
"Available Collections" shall have the meaning set forth in
Section 4.01(b).
"Available Receivables" shall equal, as of any Determination
Date, the excess of the Net Receivables Balance over the
Contractual Dilution Balance.
7
"Breakage Costs" shall mean (a) with respect to Falcon and
for each Collection Period during which the Class A Invested
Amount is reduced, the amount, if any, by which (i) the
additional interest at the Class A Certificate Rate (calculated
without taking into account any Breakage Costs), which would have
accrued on that portion of the Class A Invested Amount that was
reduced, through the last day of such Collection Period exceeds
(ii) the income received by Falcon from investing the proceeds of
such reductions of Class A Invested Amount; or (b) with respect
to a Liquidity Provider and for each Collection Period during
which the Class A Invested Amount is reduced, the amount, if any,
by which (i) the additional interest at the Class A Certificate
Rate (calculated without taking into account any Breakage Costs),
which would have accrued on that portion of the Class A Invested
Amount that was reduced or its pro rata portion thereof, through
the last day of the period for which the LIBO Rate has been set
exceeds (ii) the income received by such Liquidity Provider from
investing the proceeds of such reductions of Class A Invested
Amount, or its pro rata portion of such Class A Invested Amount.
"Canadian Receivables" shall mean Receivables which are
payable in Canadian Dollars and generated from sales to Obligors
located in Canada.
"Certificate Purchase Agreement" shall mean the agreement,
dated February 28, 1997, by and among the Seller, Falcon, the
Program Agent and the Liquidity Providers named therein.
"Class" shall mean either the Class A Certificates or the
Class B Certificates, as applicable.
"Class A Additional Interest" shall have the meaning
specified in Section 4.02(a).
"Class A Certificate" shall mean any one of the Series 1997-1
Class A Certificates executed and authenticated by the Trustee,
substantially in the form attached as Exhibit A-1.
"Class A Certificateholders' Interest" shall mean that
portion of the Certificateholder's Interest evidenced by the
Class A Certificate.
"Class A Certificate Rate" shall mean the CP Rate, LIBO Rate
or Base Rate, each as defined in the Certificate Purchase
Agreement.
"Class A Controlled Amortization Amount" shall mean an
amount equal to the Class A Invested Amount as of the last day of
the Revolving Period divided by three.
8
"Class A Interest Shortfall" shall have the meaning
specified in Section 4.02(a).
"Class A Invested Amount" shall mean, when used with respect
to any date, an amount equal to (a) $0 plus (b) the aggregate
amount of the Purchase of the Class A Certificates on the Closing
Date plus (c) the aggregate amount of Increases made under any
Class A Certificate after the Closing Date minus (d) the
aggregate amount of the Class A Monthly Principal, any Optional
Repayment Amount, any Coverage Amount and any Escrow Account
Amount received and distributed to Class A Certificateholders in
reduction of the Class A Invested Amount from time to time on or
prior to such date; provided, however, that the Class A Invested
Amount shall not be reduced by any amount of Series 1997-1
Collections so received and distributed if at any time such
distribution of such amount of Series 1997-1 Collections is
rescinded or must be returned for any reason; and provided,
further, that on any date of determination, the Class A Invested
Amount shall not exceed the Class A Purchase Limit.
"Class A Monthly Interest" shall have the meaning specified
in Section 4.02.
"Class A Monthly Principal" shall have the meaning specified
in Section 4.03(a).
"Class A Purchase Limit" shall mean, on any date of
determination, $100,000,000 as such amount may be reduced
pursuant to Section 2.04 of the Certificate Purchase Agreement.
"Class B Certificate" shall mean any one of the Series 1997-1
Class B Certificates executed and authenticated by the Trustee,
substantially in the form attached as Exhibit A-2.
"Class B Certificateholders' Interest" shall mean that
portion of the Certificateholders Interest evidenced by the Class
B Certificate.
"Class B Certificate Rate" shall be 0%.
"Class B Invested Amount" shall mean, when used with respect
to any date, an amount equal to the Pool Balance minus the Class
A Invested Amount.
"Class B Monthly Principal" shall have the meaning specified
in Section 4.03(b).
"Closing Date" shall mean February 28, 1997.
9
"Collections" shall have the meaning designated in the
Agreement; provided, however, that for the purposes of this
Series Supplement, and as long as no allocations of Collections
need to be made among Series, no distinction will be made between
Discount Collections and Principal Collections.
"Confidential Information" shall mean, in relation to any
Person, any written information delivered or made available by or
on behalf of Federal-Mogul (or its Affiliates or subsidiaries) or
the Seller to such Person in connection with or pursuant to this
Agreement or the transactions contemplated hereby which is
proprietary in nature and clearly marked or identified in writing
as being confidential information, other than information (i)
which was publicly known, or otherwise known to such Person, at
the time of disclosure (except pursuant to disclosure in
connection with this Agreement), (ii) which subsequently becomes
publicly known through no act or omission by such Person, or
(iii) which otherwise becomes known to such Person other than
through disclosure by Federal-Mogul or the Seller.
"Contractual Dilution Balance" shall mean, as of any
Determination Date, the sum of (a) 2% of North American
Aftermarket sales during the immediately preceding Collection
Period, (b) the greater of (i) the accrual for obsolescence and
(ii) two times the aggregate amount of Credit Memos issued during
such Collection Period due to obsolescence, (c) 1.5 times the
aggregate amount of Credit Memos issued during such Collection
Period due to stock lifts and (d) the total rebates and
adjustments currently owed to Obligors as of the end of such
Collection Period (as reflected in the Customer Program Balances
in the books and records of the Servicer).
"Coverage Amount" shall mean, as of any Determination Date,
the deficiency, if any, in an amount equal to (a) the Class A
Invested Amount as of such Determination Date minus the Funding
Adjustment determined as of such Determination Date minus (b) the
Primary Funding determined as of such Determination Date.
"CP Note" shall mean any commercial paper note issued by
Falcon.
"Credit Memo" shall mean any credit memo relating to (a) the
North American Aftermarket obsolescence, (b) the North American
Aftermarket stock lifts, (d) the North American Aftermarket core
deposits, (e) the North American Aftermarket billing adjustments,
(f) the North American Aftermarket customer accommodation
returns, (g) the North American Aftermarket other and (h)
Original Equipment Manufacturers.
"Delinquency Ratio" shall mean, as of any Determination
Date, the percentage equivalent of a fraction, the numerator of
10
which is the aggregate amount of Receivables as of the last
Business Day of the immediately preceding Collection Period that
are 61 or more days past due and the denominator of which is the
Pool Balance as of such Business Day.
"Determination Date" shall mean the fifteenth day of each
month, or if such day is not a Business Day, the next succeeding
Business Day.
"Dilution Horizon Ratio" or "DHR" shall mean, for any
Determination Date, a fraction, the numerator of which is the sum
of the aggregate amounts of all new Receivables generated during
the two immediately preceding Collection Periods and the
denominator of which is the Available Receivables as of such
Determination Date.
"Dilution Ratio" shall mean, as of any Determination Date,
the percentage equivalent of a fraction, the numerator of which
is all non-cash reductions to the Pool Balance, not related to
the credit-worthiness of the Obligor, including, but not limited
to, the aggregate amount of Credit Memos issued during the
immediately preceding Collection Period, adjustments related to
2/10 discounts made during the immediately preceding Collection
Period, and other adjustments made during the immediately
preceding Collection Period and the denominator of which is the
Pool Balance as of such Business Day.
"Discount/Fees Reserve Percentage" shall mean, as of any
Determination Date:
the greater of (i) 1% and 2 x TD/365 x [PL x AF + (H.15 + 50
bps + PF) x IA] + accrued and unpaid interest/fees
Available Receivables
where,
PL = Class A Purchase Limit
AF = 27.5 bps
H.15 = 30 day H.15 rate, as of the last day of the
preceding Collection Period, on an interest-
bearing basis
PF = 15 bps
IA = Class A Invested Amount as of the last day of
the second immediately preceding Collection
Period
TD = Turnover Days
11
"Discount Rate" shall mean zero.
"Distribution Date" shall be the twentieth day of each month
or, if such day is not a Business Day, the next succeeding
Business Day.
"Early Amortization Commencement Date" shall mean the date
on which an Early Amortization Event is deemed to have occurred.
"Early Amortization Event" shall mean any Early Amortization
Event specified in Section 9.01 of the Agreement, together with
any Additional Early Amortization Event specified in Section 6.01
of this Series Supplement.
"Early Amortization Period" shall mean the period from and
including the Early Amortization Commencement Date to and
including the earlier of (a) the date of the final distribution
to Investor Certificateholders of this Series and (b) the
Termination Date.
"Eligible Receivables" shall mean each Receivable which
meets the following characteristics:
(i) the obligation is denominated and payable in U.S.
dollars in the United States, or, if a Canadian Receivable, is
denominated and payable in Canadian dollars; or is related to an
Original Equipment Manufacturer export and is denominated in U.S.
dollars;
(ii) the related Obligor is a resident of the United States
or Canada or is an Original Equipment Manufacturer;
(iii) the related Obligor is not an Affiliate of any of the
parties hereto;
(iv) the contract terms of the Receivables call for payment
within 90 days of original billing date, except for up to 3% of
the Pool Balance which may have terms that call for payment
within 91 to 180 days of original billing date, and except that
any Receivables purchased on or before the Closing Date may have
contract terms that call for payment on or before December 31,
1997, subject to the preceding 3% limitation;
(v) the Receivable is not more than 90 days past due;
(vi) the purchase of the Receivable is a "current
transaction" within Section 3(a)(3) of the Securities Act;
12
(vii) the Receivable is an "account" under Section 9-106 of
the Uniform Commercial Code;
(viii) the Receivable is a legal, valid and binding
obligation of the related Obligor;
(ix) the terms of the contract for the Receivable do not
require the consent of the Obligor to sell or assign such
Receivable;
(x) the Program Agent has not notified the Seller that the
Receivable is not acceptable;
(xi) the Receivable was generated in the ordinary course of
business of the Receivables Seller;
(xii) the Receivable satisfies all applicable requirements
of the credit and collection policies of the Receivables Sellers
and the Seller;
(xiii) There are no offset arrangements with the related
Obligor;
(xiv) the contract for the Receivable represents all or a
part of the sales price of merchandise, insurance and services
within the meaning of the Investment Company Act, Section
3(c)(5);
provided, however, if, as of any Determination Date, the
aggregate amount of Receivables for an Obligor represent 2.00% or
more of the Pool Balance and 30.00% or more of such Receivables
are 91 days or more past due, all Receivables relating to such
Obligor shall not constitute "Eligible Receivables" for purposes
of the Agreement and this Series Supplement.
"Escrow Account" shall mean the escrow account established
pursuant to the Escrow Deposit Agreement.
"Escrow Deposit Agreement" shall mean the escrow deposit
agreement, dated February 28, 1997, by and among the Seller,
Federal-Mogul Corporation, the Trustee, The Chase Manhattan Bank,
as Escrow Agent and The Chase Manhattan Bank, in its individual
capacity.
"Escrow Account Amount" shall mean the amount, if any,
transferred to the Series 1997-1 Trustee's Account from the
Escrow Account pursuant to paragraph 9 of the Escrow Deposit
Agreement.
"Expected Floating Dilution Ratio" or "EFD" shall mean, as
of any Determination Date, the average of the Floating Dilution
Ratios for the twelve immediately preceding Collection Periods.
13
"Falcon" shall mean Falcon Asset Securitization Corporation,
a corporation organized and existing under the laws of the State
of Delaware, and any successor or assignee of Falcon and that is
a receivables investment company which in the ordinary course of
its business issues commercial paper or other securities to fund
its acquisition and maintenance of receivables.
"Fee Letter" shall mean that certain letter agreement dated
as of the date hereof between the Seller, Falcon and the Program
Agent, as it may be amended or modified and in effect from time
to time.
"Floating Dilution Ratio" shall mean, as of any
Determination Date, the percentage equivalent of a fraction, the
numerator of which shall be the Floating Dilution determined as
of such Determination Date and the denominator of which shall be
the aggregate amount of new Receivables transferred to the Trust
during the second immediately preceding Collection Period.
"Floating Dilution" shall mean, as of any Determination
Date, the aggregate amount of Credit Memos issued during the
immediately preceding Collection Period relating to the (i) North
American Aftermarket core deposits, (ii) the North American
Aftermarket billing adjustments, (iii) the North American
Aftermarket customer accommodation returns, (iv) the North
American Aftermarket other and (v) Original Equipment
Manufacturers.
"Floating Dilution Reserve Percentage" or "FDRP" shall
equal, as of any Determination Date:
the greater of (a) 15% and
(b) 1.75 X EFD X DHR + [ (FDS - EFD) x FDS ]
EFD
where,
FDR = Floating Dilution Ratio
EFD = Expected Floating Dilution Ratio
FDS = Floating Dilution Spike Ratio
DHR = Dilution Horizon Ratio
"Floating Dilution Spike Ratio" or "FDS" shall mean, as of
any Determination Date, the highest average of the Floating
Dilution Ratio for any two consecutive Collection Periods that
occurred during the twelve immediately preceding Collection
Periods.
14
"Funding Adjustment" shall mean, (a) as of the Determination
Dates occurring in March 1997, April 1997 and May 1997, an amount
equal to the lesser of (w) $25,000,000, (x) an amount equal to
$95,400,000 minus Primary Funding determined as of the applicable
Determination Date, and (y) the Contractual Dilution Balance
determined as of the applicable Determination Date, and (b) as of
any Determination Date occurring after the month of May 1997, $0.
"Guaranty" shall mean any guaranty by any Person of
Indebtedness or other obligations of any other Person that is not
a consolidated subsidiary of such Person or any assurance with
respect to the financial condition of any other Person that is
not a consolidated subsidiary of such Person (including, without
limitation, any purchase or repurchase agreement, any indemnity
or any keep-well, take-or-pay, through-put or other arrangement
having the effect of assuring or holding harmless any third
Person against loss with respect to any Indebtedness or other
obligation of such other Person) except endorsements of
negotiable instruments for collection in the ordinary course of
business.
"Increase" shall mean the amount of each increase in the
Class A Invested Amount funded by CP Notes or the Liquidity
Providers and paid to the Seller by the Program Agent pursuant to
the terms of the Certificate Purchase Agreement.
"Indebtedness" shall mean any (a) indebtedness for borrowed
money or for the deferred purchase price of property or services,
(b) obligations under leases which, in accordance with generally
accepted accounting principles, are to be recorded as capital
leases, (c) obligations which are evidenced by notes, acceptances
or other instruments, (d) net liabilities under interest rate
swap, foreign currency swap, commodity swap, exchange or cap
agreements and (e) obligations, whether or not assumed, secured
by Liens or payable out of proceeds or production from property
now or hereafter owned or acquired; provided, however, that the
term "Indebtedness" shall not include short-term obligations
payable to suppliers incurred in the ordinary course of business.
"Initial Class A Invested Amount" shall equal $95,400,000.
"Interest Period" shall mean, with respect to any
Distribution Date, the period from and including the Distribution
Date immediately preceding such Distribution Date (or, in the
case of the first Distribution Date, from and including the
Closing Date) to but excluding such Distribution Date.
15
"Invested Amount" shall mean, when used with respect to any
date, the sum of the Class A Invested Amount and the Class B
Invested Amount.
"Investment Proceeds" shall mean, with respect to any
Determination Date, all interest and other investment earnings
(net of losses and investment expenses) on funds on deposit in
the Series 1997-1 Trustee's Account, together with an amount
equal to all interest and other investment earnings on funds held
in the Collection Account.
"LIBO Rate" is the rate specified in the Certificate
Purchase Agreement.
"Liquidity Providers" shall mean the banks and financial
institutions defined in the Certificate Purchase Agreement.
"Loss Reserve Percentage" shall mean, as of any
Determination Date, the greater of (a) 5% and (b) 3 times the
Loss-to-Liquidation Ratio.
"Loss-to-Liquidation Ratio" shall mean, as of any
Determination Date, a fraction, the numerator of which equals the
sum of (a) the aggregate of Receivables that were 61 to 90 days
past due as of the last day of the immediately preceding
Collection Period and (b) the excess, if any, of (i) the
aggregate amount of placed accounts balance during the
immediately preceding Collection Period over (ii) the aggregate
amount of placed accounts balance during the second immediately
preceding Collection Period, and the denominator of which is
Collections received during the immediately preceding Collection
Period.
"Minimum Enhancement Amount" shall mean, as of any
Determination Date, an amount equal to the greater of (i) an
amount equal to the product of (w) the Aggregate Reserve
Percentage as of such Determination Date and (x) a fraction the
numerator of which is equal to the Class A Invested Amount as of
such Determination Date minus the Funding Adjustment as of such
Determination Date and the denominator of which is 1 minus such
Aggregate Reserve Percentage plus (y) the Contractual Dilution as
of such Determination Date and (ii) $5,000,000.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.01.
"Net Receivables Balance" shall equal, as of any
Determination Date, (a) the aggregate outstanding balance of all
Eligible Receivables minus (b) the Overconcentration Amount at
such time.
16
"Obligor Overconcentration" shall mean, as of any
Determination Date, the excess of (a) the aggregate of all
amounts of Eligible Receivables owned by the Trust and generated
under accounts receivable with any one Obligor or type of
Receivable as of the last day of the Collection Period
immediately preceding such Determination Date over (b) 2% of the
Eligible Receivables on the last day of such immediately
preceding Collection Period; provided, that the Obligor
Overconcentration with respect to the following Obligors or types
of Receivables, shall be the applicable amount described in
clause (a) in excess of the following percentages respectively,
of the Eligible Receivables on the last day of such immediately
preceding Collection Period:
Obligor/Receivable Type Percentage
Chrysler 4%
Ford 7%
General Motors 7%
Genuine Parts 4%
Caterpillar 3%
Canadian Receivables 6%
OEM Export Receivables 5%
"Optional Repayment Amount" shall mean with respect to any
Distribution Date, the amount, if any, of Series 1997-1
Collections which the Seller directs the Trustee to deposit into
the Series 1997-1 Trustee's Account pursuant to Section 4.07 for
distribution on such Distribution Date in reduction of the Class
A Invested Amount.
"Other Fees" shall have the meaning specified in the Fee
Letter.
"Overconcentration Amount" shall mean, as of any
Determination Date, the sum of the Obligor Overconcentrations on
such date.
"Primary Funding" shall mean, as of any Determination Date,
an amount equal to the Available Receivables determined as of
such Determination Date minus the Aggregate Reserves determined
as of such Determination Date.
17
"Prior Series Deficiency" shall have the meaning specified
in Section 4.01(c).
"Program Agent" shall mean The First National Bank of
Chicago and its successors , in its capacity as agent for Falcon
and the Liquidity Providers.
"Program Fee" shall have the meaning specified in the Fee
Letter.
"Purchase" shall mean, with respect to the Class A
Certificates, the amount of the initial purchase of the Class A
Certificates paid to the Seller by the Program Agent pursuant to
the terms of the Certificate Purchase Agreement.
"Purchaser" shall have the meaning assigned to such term in
the Certificate Purchase Agreement.
"Reassignment Amount" shall mean, with respect to any
Distribution Date, after giving effect to any deposits and
distributions otherwise to be made on such Distribution Date, the
sum of (i) the Invested Amount on such Distribution Date, (ii)
the Class A Monthly Interest relating to such Distribution Date
and any Class A Monthly Interest previously due and unpaid, (iii)
the Class A Additional Interest, if any, for such Distribution
Date and any Class A Additional Interest previously due and
unpaid and (iv) the amount of any accrued and unpaid Program
Fees, Administration Fees, Other Fees and Breakage Costs.
"Receivables Seller" shall mean one of the Sellers listed in
the Receivables Purchase Agreements.
"Related Documents" shall mean the Transaction Documents.
"Repurchase Price" shall have the meaning specified in
Section 8.01.
"Revolving Period" shall mean the period beginning at the
close of business on the Business Day immediately preceding
February 28, 1997 and ending on the earlier of (a) the last day
of the Collection Period ending on the Business Day immediately
preceding the Amortization Commencement Date, and (b) the
Business Day immediately preceding the Early Amortization
Commencement Date; provided, however, that, if any Early
Amortization Period ends as described in the definition thereof,
the Revolving Period will recommence as of the close of business
on the day such Early Amortization Period ends.
18
"Series 1992-1 Certificates" shall mean the Investor
Certificates issued pursuant to the Agreement and the Series
1992-1 Supplement.
"Series 1992-1 Supplement" shall mean the Series 1992-1
Supplement to the Agreement, dated as of June 1, 1992, among the
Seller, the Servicer and the Trustee.
"Series 1993-1 Certificates" shall mean the Investor
Certificates issued pursuant to the Agreement and the Series
1993-1 Supplement.
"Series 1993-1 Supplement" shall mean the Series 1993-1
Supplement to the Agreement, dated as of March 1, 1993, among the
Seller, the Servicer and the Trustee.
"Series 1997-1" shall mean the Series of Investor
Certificates, the terms of which are specified in this Series
Supplement.
"Series 1997-1 Certificateholders" shall mean the Holders of
Series 1997-1 Certificates.
"Series 1997-1 Certificateholders' Interest" shall mean that
portion of the Certificateholders' Interest evidenced by the
Series 1997-1 Certificates.
"Series 1997-1 Certificates" shall mean any one of the Class
A Certificates and Class B Certificates executed and
authenticated by the Trustee, substantially in the form of
Exhibits A-1 and A-2.
"Series 1997-1 Collections" shall have the meaning specified
in Section 4.01(a).
"Series 1997-1 Trustee's Account" shall have the meaning
specified in Section 4.04(a).
"Servicing Fee Rate" shall mean, with respect to Series
1997-1, 0.50% per annum.
"Servicing Reserve Percentage" shall mean, as of any
Determination Date, the percentage of equivalent of a fraction,
the numerator of which shall be an amount equal to the product of
(i) the Servicing Fee Rate, (ii) the Pool Balance as of the last
day of the immediately preceding Collection Period, (iii) 2,
(iv) Turnover Days divided by 365, and the denominator of which
shall be the Available Receivables determined as of such
Determination Date.
19
"Subsidiary" shall mean, at any particular time, any Person
which could be included as a consolidated subsidiary of Federal-Mogul
in the financial statements prepared and filed with
Federal-Mogul's annual reports on Form 10-K under the Securities
Exchange Act of 1934, as amended, if such financial statements
were prepared at, and as of, such time. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries"
in this Series Supplement shall refer to a Subsidiary or
Subsidiaries of Federal-Mogul.
"Termination Date" shall mean February 28, 2000, which is
the date on which the last payment of principal and interest on
the Series 1997-1 Certificates will be due and payable.
"Termination Proceeds" shall mean any termination proceeds
arising out of a sale of Receivables (or interests therein)
pursuant to Section 12.02(c) of the Agreement with respect to
Series 1997-1.
"Transaction Documents" shall mean the Fee Letter, the
Agreement, this Series Supplement, the Class A Certificates, the
Receivable Purchase Agreement, the Escrow Deposit Agreement and
the Certificate Purchase Agreement.
"Turnover Days" shall mean, as of any Determination Date, an
amount equal to the Pool Balance as of the last day of the
immediately preceding Collection Period divided by Collections
relating to the immediately preceding Collection Period times 30.
"Undivided Fractional Interest" shall mean the undivided
fractional interest in the Class A or Class B Invested Amount, as
applicable, evidenced by a Class A or Class B Certificate, the
numerator being the principal amount of such Class A or Class B
Certificate at the time of determination and the denominator
being the Class A or Class B Invested Amount at such time.
(b) All capitalized terms used herein and not otherwise
defined herein have the meanings ascribed to them in the
Agreement. Each capitalized term defined herein shall relate
only to the Series 1997-1 Certificates and no other Series of
Certificates issued by the Trust. The definitions in Section
2.01 are applicable to the singular as well as the plural forms
of such terms and to the masculine as well as to the feminine and
neuter genders of such terms.
(c) The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Series Supplement shall refer
to this Series Supplement as a whole and not to any particular
provision of this Series Supplement; references to any Article,
Section or Exhibit are references to Articles, Sections and
Exhibits in or to this Series Supplement unless otherwise
specified; and the term "including" means "including without
limitation".
20
(d) As used in this Agreement and in any certificate or
other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Agreement or in any such
certificate or other document, and accounting terms partly
defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting
terms in this Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other
document shall control.
ARTICLE III
Servicing Fee
SECTION 3.01 Servicing Compensation. The monthly
servicing fee (the "Monthly Servicing Fee") shall be payable to
the Servicer, either (a) through withdrawals from Collections as
provided in Section 4.03(b) of the Agreement or (b) shall be
payable in arrears, on each Distribution Date in respect of any
Collection Period (or portion thereof) occurring prior to the
earlier of the first Distribution Date following the Termination
Date and the first Distribution Date on which the Invested Amount
is zero. The Monthly Servicing Fee shall be an amount equal to
the product of (a) the Servicing Fee Rate and (b) the Pool
Balance and (c) a fraction, the numerator of which is the actual
number of days in the preceding Collection Period and the
denominator of which is 360; provided, however, that with respect
to the first Distribution Date, the Monthly Servicing Fee shall
be equal to $67,160.00. The Monthly Servicing Fee shall be
payable to the Servicer solely to the extent amounts are
available for distribution in accordance with the terms of this
Series Supplement.
21
ARTICLE IV
Rights of Series 1997-1 Certificateholders and
Allocation and Application of Collections
SECTION 4.01 Allocations; Payments to Seller.
(a) So long as no amounts are allocable to the Series 1992-1 or
the Series 1993-1 Certificates, as hereinafter described, all
Collections, Adjustment Payments, any payment by the Seller
pursuant to Section 2.03 of the Agreement, any Transfer Deposit
Amount, any Insolvency Proceeds, any Termination Proceeds and any
other amount received in connection with the Receivables by any
party or Person (collectively, the "Series 1997-1 Collections")
shall be allocated to the Series 1997-1 Certificates.
(b) The Servicer shall (a) instruct the Trustee and the
Trustee shall withdraw from the Collection Account and pay to the
Seller on the dates set forth below the following amounts and
(b) on each Distribution Date notify the Trustee of the
applicable Class A Certificate Rate for the next succeeding
Distribution Date; provided, that in so instructing the Trustee,
the Servicer shall satisfy itself that funds on deposit in the
Collection Account following any such payments will be sufficient
to pay the Class A Monthly Interest, the Class B Monthly
Interest, Class A Additional Interest, Optional Repayment Amount,
Coverage Amount, Escrow Account Amount and Class A Monthly
Principal on the next succeeding Distribution Date:
(i) On each Deposit Date with respect to the Revolving
Period, the Servicer shall instruct the Trustee in writing to
withdraw from the Collection Account and pay to the Seller
certain amounts on deposit in the Collection Account ("Available
Collections"); provided, however, that no Early Amortization
Event has occurred and no event or condition has occurred that
with notice or the lapse of time or both would constitute an
Early Amortization Event; provided, further, that in so
instructing the Trustee, the Servicer shall satisfy itself that
funds on deposit in the Collection Account following any such
payment of Available Collections to the Seller will be sufficient
to pay, on the next succeeding Distribution Date, the sum of (a)
Class A Monthly Interest, any Class A Monthly Interest previously
due but not paid and any Class A Additional Interest and (b) all
accrued and unpaid fees, as specified in the Fee Letter, that are
due on such Distribution Date; provided, further, if the report
delivered pursuant to paragraphs 5 and 11 of the Escrow Deposit
Agreement indicates that there will be a Prior Series Deficiency
on such succeeding Distribution Date, Available Collections in an
amount up to the full amount of such Prior Series Deficiency
shall be retained in the Collection Account to pay the Prior
Series Deficiency. During the Revolving Period, funds on deposit
22
in the Collection Account following payments of Available
Collections to the Seller should include the amounts, if any,
specified in Section 5.01(a)(i), Breakage Costs, and amounts
specified in Section 5.01(iii)(A) and (B) and during the
Amortization Period, the amounts specified in Sections
5.01(b)(i), 5.01(b)(ii), 5.01(b)(iii)(B), 5.01(b)(iv) and
5.01(b)(v). On each Deposit Date on which Available Collections
are paid to the Seller, the Seller shall be deemed to have
represented and warranted to the Trustee and the Class A
Certificateholders that no Early Amortization Event has occurred
and no condition or event has occurred that with notice or the
lapse of time or both would constitute an Early Amortization
Event.
(ii) On each Transfer Date, the Seller may use Available
Collections to purchase Receivables pursuant to the Receivables
Purchase Agreement. In connection with any such purchase of
Receivables on a Transfer Date, the Seller is hereby deemed to
represent to the Trust and the Trustee that:
(A) No Early Amortization Event has occurred and no event
or condition has occurred that with notice or the lapse of time
or both would constitute an Early Amortization Event.
(B) With respect to the Receivables purchased, the
representations and warranties set forth in Section 2.04 of the
Agreement are true and correct as of such Transfer Date.
(iii) In allocating and distributing Collections on any
Deposit Date pursuant to this Section 4.01(b), the Trustee
conclusively may rely on the information and direction received
from the Servicer delivered to it by the Servicer, and the
Trustee shall not under any circumstance be required or obligated
to verify the information set forth therein or to make inquiry of
the Servicer as to the continued accuracy thereof.
(c) On any Distribution Date, if amounts due to the Holders
of the Series 1992-1 Certificates and Holders of the Series 1993-1
Certificates pursuant to the Series 1992-1 Supplement and the
Series 1993-1 Supplement, respectively, exceed the amounts on
deposit in the Escrow Account and available for distribution (a
"Prior Series Deficiency"), the Trustee shall, prior to making
any payments pursuant to Article V, withdraw funds from the
Series 1997-1 Trustee's Account up to the amount of such Prior
Series Deficiency and apply such amounts to the payment of such
Prior Series Deficiency in the manner provided in the Series
1992-1 Supplement or Series 1993-1 Supplement, as applicable. If
on any Distribution Date, amounts on deposit in the Series 1997-1
Trustee's Account are not sufficient to reduce any Prior Series
Deficiency to zero, all such amounts will be allocated, first, to
23
pay in full all outstanding amounts then owed to the Holders of
the Series 1992-1 Certificates and Holders of the Series 1993-1
Certificates for all amounts due and owing under the Series 1992-1
Supplement and Series 1993-1 Supplement, respectively, and then
shall be paid to the Holders of the Series 1997-1 Certificates as
provided in Section 5.01 herein.
(d) If, on any Distribution Date, there are no funds
available in the Escrow Account to pay amounts then due and owing
to the Holders of the Series 1992-1 and Holders of the Series
1993-1 Certificates, all amounts on deposit in the Series 1997-1
Trustee's Account will be allocated, first, to pay in full all
outstanding amounts then owed to the Holders of the Series 1992-1
Certificates and the Holders of the Series 1993-1 Certificates
for all amounts due and owing under the Series 1992-1 Supplement
and Series 1993-1 Supplement, respectively, and then shall be
paid to the Series 1997-1 Certificateholders as provided in
Section 5.01 herein.
(e) Notwithstanding any provision in this Series Supplement
or the Agreement to the contrary, upon the occurrence of an Early
Amortization Event or any event or condition that with notice or
the lapse of time or both would constitute an Early Amortization
Event and provided that all amounts due to the Holders of the
Series 1992-1 Certificates and the Series 1993-1 Certificates
have been paid in full in accordance with the terms of the Series
1992-1 Supplement and the Series 1993-1 Supplement, respectively,
upon written notice delivered by the Program Agent to the Seller,
the Servicer and the Trustee, the Program Agent, and not the
Servicer, shall be authorized to direct the Trustee to make
withdrawals and payments from the Collection Account and the
Series 1997 Trustee's Account and to give directions to the
Trustee to invest funds in Eligible Investments.
SECTION 4.02. Monthly Interest. The amount of monthly
interest ("Class A Monthly Interest") with respect to the Class A
Certificates on any Distribution Date shall be an amount
determined by the Program Agent in accordance with the
Certificate Purchase Agreement and the Program Agent shall give
notice thereof to the Seller and the Servicer at least two
Business Days prior to the related Determination Date.
On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Class A
Interest Shortfall"), of (x) the aggregate Class A Monthly
Interest for the Interest Period applicable to such Distribution
Date over (y) the amount that will be available in the Series
1997-1 Trustee's Account on such Distribution Date in respect
thereof pursuant to this Series Supplement. If, on any
Distribution Date there exists a Class A Interest Shortfall, then
24
an additional amount ("Class A Additional Interest") determined
by the Program Agent in accordance with the Certificate Purchase
Agreement shall be payable as provided herein with respect to the
Class A Certificates on each Distribution Date following such
Distribution Date to and including the Distribution Date on which
such Class A Interest Shortfall is paid or deposited in the
Series 1997-1 Trustee's Account. Notwithstanding anything to the
contrary herein, the Servicer shall instruct the Trustee to pay
Class A Additional Interest to Class A Certificateholders only to
the extent permitted by applicable law.
SECTION 4.03. Determination of Monthly Principal. (a) The
amount of monthly principal ("Class A Monthly Principal")
distributable with respect to the Class A Certificates on each
Distribution Date (i) with respect to the Revolving Period shall
be equal to 0, (ii) with respect to an Early Amortization Period
shall be equal to the Class A Invested Amount with respect to
such Distribution Date; and (iii) with respect to the Controlled
Amortization Period, Class A Monthly Principal shall be an amount
equal to the Class A Controlled Distribution Amount for such
Distribution Date; provided, however, that Class A Monthly
Principal shall not exceed the outstanding principal balance of
the Class A Certificates.
(b) The amount of monthly principal ("Class B Monthly
Principal") distributable with respect to the Class B
Certificates on each Distribution Date, (i) with respect to the
Revolving Period shall be equal to 0 and (ii) beginning with the
Distribution Date on which the Class A Invested Amount is paid in
full with respect to the Amortization Period or an Early
Amortization Period, shall be equal to all amounts on deposit in
the Series 1997-1 Trustee's Account with respect to such
Distribution Date.
SECTION 4.04. Establishment of Series Accounts. (a) The
Servicer, for the benefit of the Series 1997-1 Certificateholders,
shall establish and maintain an Eligible Deposit Account
in the name of the Trustee, on behalf of the Trust (the "Series
1997-1 Trustee's Account"), which shall be identified as the
"Series 1997-1 Trustee's Account for the Federal-Mogul Trade
Receivables Master Trust, Series 1997-1" and shall bear a
designation clearly indicating that the funds deposited therein
are held for the benefit of the Series 1997-1 Certificateholders.
The Series 1997-1 Trustee's Account initially shall be
established as a segregated trust account at The Chase Manhattan
Bank.
(b) At the direction of the Servicer (which may be a
standing direction), funds on deposit in the Series 1997-1
Trustee's Account shall be invested by the Trustee in Eligible
25
Investments selected by the Servicer. All such Eligible
Investments shall be held by the Trustee for the benefit of the
Series 1997-1 Certificateholders. On each Distribution Date, all
interest and other investment earnings (net of losses and investment
expenses) on funds on deposit in the Series 1997-1 Trustee's
Account shall be applied as set forth in Section 4.05 of this
Series Supplement. Funds on deposit in the Series 1997-1
Trustee's Account shall be invested at the written direction of
the Servicer in Eligible Investments that will mature so that
such funds will be available on or before the close of business
on the Business Day next preceding the following Distribution
Date. Funds deposited in the Series 1997-1 Trustee's Account on
a Business Day which immediately precedes a Distribution Date
upon the maturity of any Eligible Investments are not required to
be invested overnight.
(c) (i) The Trustee shall possess all right, title and
interest in and to all funds on deposit from time to time in, and
all Eligible Investments credited to, the Series 1997-1 Trustee's
Account and in all proceeds thereof. The Series 1997-1 Trustee's
Account shall be under the sole dominion and control of the
Trustee for the benefit of the Series 1997-1 Certificateholders.
If, at any time, the Series 1997-1 Trustee's Account is held by
an institution other than an Eligible Institution, the Trustee
(or the Servicer, at the direction of the Trustee and on its
behalf) shall within 10 Business Days establish a new Series
1997-1 Trustee's Account meeting the conditions specified in
paragraph (a) above, as applicable, and shall transfer any cash
and/or any investments to such new Series 1997-1 Trustee's
Account. Neither the Seller, the Servicer nor any Person or
entity claiming by, through or under the Seller, the Servicer or
any such Person or entity shall have any right, title or interest
in, or any right to withdraw any amount from, the Series 1997-1
Trustee's Account, except as expressly provided herein.
Schedule I attached hereto identifies the Series 1997-1 Trustee's
Account by setting forth the account number of such account, the
account designation of such account and the name and location of
the institution with which such account has been established. If
a substitute Series 1997-1 Trustee's Account is established
pursuant to this Section 4.04, the party establishing such
substitute Series 1997-1 Trustee's Account shall promptly provide
to the Servicer or the Trustee, as applicable, an amended
Schedule I, setting forth the relevant information for such
substitute Series 1997-1 Trustee's Account.
(ii) Notwithstanding anything herein to the contrary,
the Servicer shall have the power, revocable by the Trustee at
the direction of Investor Certificateholders evidencing more than
50% of the aggregate principal amount of the Holders of the
Series 1997-1 Certificates, to instruct the Trustee to make
26
withdrawals and payments from the Series 1997-1 Trustee's Account
for the purposes of carrying out the Servicer's or Trustee's
duties hereunder.
(d) Any request by the Servicer to invest funds on deposit
in the Series 1997-1 Trustee's Account shall be in writing, or by
telephone, confirmed promptly in writing, and shall certify that
the requested investment is an Eligible Investment which matures
at or prior to the time required hereby.
(e) The Trustee is hereby authorized, unless otherwise
directed by the Servicer, to effect transactions in Eligible
Investments through a capital markets affiliate of the Trustee.
SECTION 4.05. Application of Series 1997-1 Collections and
Investment Proceeds. The Servicer shall instruct the Trustee by
a Distribution Date Statement delivered to the Trustee, on each
Determination Date, to withdraw from the Collection Account an
amount equal to the amount to be distributed on the next
Distribution Date pursuant to Section 5.01 with respect to such
Distribution Date and deposit such amount into the Series 1997-1
Trustee's Account.
SECTION 4.06. Distributions to Series 1997-1
Certificateholders. (a) The Servicer shall instruct the Trustee
in writing, together with each Distribution Date Statement
delivered to the Trustee, to distribute from the Series 1997-1
Trustee's Account on each Distribution Date all amounts on
deposit in the Series 1997-1 Trustee's Account pursuant to
Section 5.01.
(b) The distributions to be made pursuant to this Section
are subject to the provisions of Sections 2.03, 9.02 and 12.02 of
the Agreement and Sections 9.01 and 9.02 of this Series
Supplement.
SECTION 4.07. Payment of Optional Repayment Amount.
At least five Business Days prior to any Distribution Date
during the Revolving Period, the Seller may direct the Trustee to
use funds on deposit in the Series 1997-1 Trustee's Account,
after payment of amounts due pursuant to Sections 5.01(a)(i)
through 5.01 (a)(iii)(A) on such Distribution Date, as an
Optional Repayment Amount. The Seller shall provide the Program
Agent with ten Business Days prior written notice of the payment
of any Optional Repayment Amount on a Distribution Date;
provided, however, if the Series 1992-1 Certificates or the
Series 1993-1 Certificates are outstanding, the Seller may not
direct the Trustee to make an Optional Repayment Amount pursuant
to this Section 4.07.
27
ARTICLE V
Distributions and Reports to
Series 1997-1 Certificateholders
SECTION 5.01. Distributions. (a) During the Revolving
Period, on the Distribution Date with respect to each Collection
Period, the Trustee shall distribute the funds on deposit in the
Series 1997-1 Trustee's Account (including amounts deposited
pursuant to Section 4.07 and Section 8.01) on such Distribution
Date, in the following order of priority, in accordance with the
Distribution Date Statement delivered pursuant to Section
5.02(a):
(i) to the Servicer (if the Servicer is other
than Federal-Mogul) the accrued and unpaid Monthly Servicing Fee
and any Service Transfer expenses incurred by a Successor
Servicer which have not been paid by Federal-Mogul as the initial
Servicer;
(ii) to the Class A Certificateholders, ratably in
accordance with their respective Undivided Fractional Interests:
(A) for payment of accrued and unpaid Program
Fees, Administration Fees and Other Fees other than Breakage
Costs;
(B) for payment of the Class A Monthly Interest,
any Class A Monthly Interest previously due but not paid and any
Class A Additional Interest; and
(C) for payment of accrued and unpaid Breakage
Costs;
provided, however, if remaining funds on deposit in the
Series 1997-1 Trustee's Account are not sufficient to fund all
amounts due pursuant to clauses (a)(ii) (A), (B) and (C), the
Class A Certificateholders shall apply such remaining funds pro
rata to the amounts due pursuant to clauses (a)(ii)(A), (B) and
(C);
(iii) to the Class A Certificateholders:
(A) for the payment of the Escrow Account Amount,
if any, and the Coverage Amount, if any, and such amount shall be
applied to reduce the Class A Invested Amount;
(B) If the Class A Invested Amount is greater than
the Class A Purchase Limit on such Distribution Date, remaining
funds in the Series 1997-1 Trustee's Account shall be applied to
reduce the Class A Invested Amount until the Class A Invested
Amount equals the Class A Purchase Limit; and
28
(C) If the Seller elects to make an Optional
Repayment pursuant to Section 4.07, the Optional Repayment Amount
deposited to the Series 1997-1 Trustee's Account shall be applied
to reduce the Class A Invested Amount.
(iv) so long as Federal-Mogul is the Servicer, any
remaining available funds up to the accrued and unpaid Monthly
Servicing Fee to Federal-Mogul; and
(v) the remainder to the Class B
Certificateholders.
(b) On each Distribution Date during the Amortization
Period, the Trustee shall distribute the funds on deposit in the
Series 1997-1 Trustee's Account on such Distribution Date, in the
following order of priority, in accordance with the Distribution
Date Statement delivered pursuant to Section 5.02(a):
(i) to the Class A Certificateholders any enforcement
expenses due to the Class A Certificateholders;
(ii) to the Servicer (if the Servicer is other than
Federal-Mogul) the accrued and unpaid Monthly Servicing Fee and
Service Transfer expenses incurred by a Successor Servicer which
have not been paid by the initial Servicer;
(iii) to the Class A Certificateholders ratably in
accordance with their respective Undivided Fractional Interests:
(A) for payment of the Class A Monthly Interest,
any Class A Monthly Interest previously due but not paid and any
Class A Additional Interest;
(B) for payment of accrued and unpaid Breakage
Costs;
provided, however, if remaining funds on deposit
in the Series 1997-1 Trustee's Account are not sufficient to fund
all amounts due pursuant to clauses (b)(iii) (A) and (B), the
Class A Certificateholders shall apply such remaining funds pro
rata to the amounts due pursuant to clauses to clauses
(b)(iii)(A) and (B);
(iv) to the Class A Certificateholders for the
payment of the Coverage Amount, if any, and such amount shall be
applied to reduce the Class A Invested Amount;
(v) to the Class A Certificateholders, ratably
in accordance with their respective Undivided Fractional
Interests, the Class A Controlled Amortization Amount in
reduction of the Class A Invested Amount and any other amounts
due the Class A Certificateholders under the Transaction
Documents;
29
(vi) to the Class A Certificateholders for
payment of accrued and unpaid Program Fees, Administration Fees
and Other Fees (other than Breakage Costs);
(vii) so long as Federal-Mogul is the Servicer,
any remaining available funds up to the accrued and unpaid
Monthly Servicing Fee to Federal-Mogul; and
(viii) the remainder to the Class B
Certificateholder.
(c) On each Distribution Date during an Early Amortization
Period and on the Distribution Dates referred to in Sections
9.01(b) and 9.02(a) hereof the Trustee shall distribute the funds
on deposit in the Series 1997-1 Trustee's Account on such
Distribution Date in the following order of priority in
accordance with the Distribution Date Statement delivered
pursuant to Section 5.02(a):
(i) to the Servicer (if the Servicer is other
than Federal-Mogul) the accrued and unpaid Monthly Servicing Fee
and any Service Transfer expenses incurred by a Successor
Servicer which have not been paid by Federal-Mogul as the initial
Servicer;
(ii) to the Class A Certificateholders any
enforcement expenses due to the Class A Certificateholders;
(iii) to the Class A Certificateholders, ratably
in accordance with their respective Undivided Fractional
Interests
(A) for payment of accrued and unpaid Purchaser
Fees, Administration Fees and Other Fees other than Breakage
Costs,
(B) for payment of Class A Monthly Interest, any
Class A Monthly Interest previously due but not paid and any
Class A Additional Interest; and
(C) for payment of accrued and unpaid Breakage
Costs;
30
If remaining funds on deposit in the Series 1997-1
Trustee's Account are not sufficient to fund all amounts due
pursuant to clauses (c)(iii)(A), (B) and (C), the remaining funds
shall be distributed to the Class A Certificateholders and the
Class A Certificateholders shall apply such funds pro rata to the
amounts due pursuant to clauses (c)(iii)(A), (B) and (C);
(iv) to the reduction of the Class A Invested
Amount until such Class A Invested Amount has been reduced to
zero; and
(v) the remainder, to the Class B
Certificateholder until such Class B Invested Amount has been
reduced to zero.
Upon payment in full to all of the Series 1997-1
Certificateholders of the Invested Amount, all accrued and unpaid
interest thereon and all other amounts due the Series 1997-1
Certificateholders under the Transaction Documents, payment in
full to the Servicer of the Monthly Servicing Fee, and provided
that no amounts are then due and unpaid to the Holders of any
other outstanding Series, all amounts remaining on deposit in the
Series 1997-1 Trustee's Account shall be distributed by the
Trustee to the Holder of the Class B Certificate, and all
amounts, if any, remaining in the Collection Account shall be
distributed by the Trustee to the Holder of the Class B
Certificate; provided, however, that if at any time after the
payment that would have otherwise resulted in such payment in
full, such payment is rescinded or must otherwise be returned for
any reason, effective upon such rescission or return such payment
in full shall automatically be deemed, as between the Series
1997-1 Certificateholders and the Class B Certificateholder,
never to have occurred, and the Class B Certificateholder shall
be required, to the extent it received any amounts under this
Section 5.01, to remit to the Trustee an amount equal to the
rescinded or returned payment.
(d) Except as provided in Section 12.02 of the Agreement
with respect to a final distribution, distributions to Series
1997-1 Certificateholders hereunder shall be made by check mailed
to each Series 1997-1 Certificateholder at such Certificateholder's
address appearing in the Certificate Register without
presentation or surrender of any Series 1997-1 Certificate or the
making of any notation thereon; provided, however, that
distributions will be made by wire transfer of immediately
available funds to the account of the Certificateholder entitled
thereto at a bank or other entity located in the United States of
America having appropriate facilities therefor if such
Certificateholder shall have so notified the Trustee in writing
by the Record Date immediately prior to such Distribution Date
and is the registered owner of Certificates in the initial
aggregate principal amount equal to or in excess of $2,000,000.
31
SECTION 5.02. Reports and Statements to Series 1997-1
Certificateholders. (a) On or prior to the Determination Date,
the Servicer will provide to the Trustee a Distribution Date
Statement substantially in the form of Exhibit B and on each
Distribution Date the Trustee shall forward to each Series 1997-1
Certificateholder the statement substantially in the form of
Exhibit B prepared by the Servicer setting forth certain
information relating to the Trust and the Series 1997-1
Certificates.
(b) A copy of each statement provided pursuant to paragraph
(a) will be made available for inspection at the Corporate Trust
Office.
(c) On or before January 31 of each calendar year,
beginning with January 31, 1998, the Servicer shall provide to
the Trustee and the Trustee shall forward or cause to be
forwarded to each Person who at any time during the preceding
calendar year was a Certificateholder, a statement prepared by
the Servicer containing the information which is required to be
contained in the Determination Date Statements provided to
Certificateholders pursuant to Section 3.05(b) of the Agreement,
aggregated for such calendar year or the applicable portion
thereof during which such Person was a Certificateholder,
together with other information as is required to be provided
under the Internal Revenue Code and such other customary
information as is necessary to enable the Certificateholders to
prepare their tax returns. The obligation of the Servicer to
provide such other information and such other customary
information shall be deemed to have been satisfied to the extent
that information substantially comparable to such other
information and such other customary information shall be
provided by the Trustee pursuant to any requirements of the
Internal Revenue Code as from time to time in effect.
SECTION 5.03. Quarterly Servicer's Certificate. The
Servicer shall deliver to the Program Agent on or prior to the
Determination Date occurring in the month immediately succeeding
each of the first three calendar quarters of each year, an
Officers' Certificate substantially in the form of Exhibit E
stating that (a) a review of the activities of the Servicer
during the preceding calendar quarter and of its performance
under the Agreement and this Series Supplement was made under the
supervision of the officer signing such certificate and (b) to
the best of such officer's knowledge, based on such review, the
Servicer has performed in all material respects its obligations
under the Agreement and this Series Supplement throughout such
quarter, or, if there has been a material default in the
performance of any such obligation, specifying each such default
known to such officer and the nature and status thereof.
32
SECTION 5.04. Weekly Report and Distribution.
Notwithstanding any other provisions in the Agreement or this
Series Supplement, upon the occurrence of an Early Amortization
Event, the Program Agent, at its sole option, may provide a
written notice to the Seller, the Servicer and the Trustee to the
effect that the Servicer shall deliver a weekly report (the
"Weekly Report") and distributions shall be made to the Class A
Certificateholders on a weekly basis, in each case, as described
below; provided, however, this Section 5.04 shall not apply if
the Series 1992-1 Certificates or the Series 1993-1 Certificates
are outstanding. Upon receipt of such notice, on Friday of each
week, or if such day is not a Business Day, the next succeeding
Business Day, the Servicer shall deliver the Weekly Report to the
Trustee and the Program Agent. Each Weekly Report shall provide
the following information: (i) the aggregate Collections
deposited in the Collection Account during the current week, or
the preceding week, as applicable, (ii) the aggregate amount of
Receivables as of the date of the Weekly Report, and (iii) the
amount to be distributed on the second Business Day immediately
succeeding the date of such report (the "Weekly Distribution
Date") for each line item in Section 5.01(c). On each Weekly
Distribution Date the Trustee, in accordance with the Weekly
Report delivered by the Servicer, shall make a distribution to
the Class A Certificateholders pursuant to Section 5.01(c). The
amounts to be distributed on each Weekly Distribution Date shall
be a pro rata portion of the amounts specified in the Transaction
Documents based upon the actual number of days in the preceding
week and a 30-day month.
33
ARTICLE VI
Amortization Events
SECTION 6.01. Additional Early Amortization Events. The
occurrence of any of the following events (each, an "Additional
Early Amortization Event") and the expiration of any applicable
grace period shall, immediately upon the occurrence thereof
without notice or other action on the part of the Trustee or the
Series 1997-1 Certificateholders, be deemed to be an Early
Amortization Event solely with respect to Series 1997-1:
(a) failure on the part of the Seller or the Servicer to
make any transfer, deposit or payment required by the terms of
the Agreement, this Series Supplement, the Certificate Purchase
Agreement or any Receivables Purchase Agreement or to give notice
to the Trustee to make such transfer, deposit or payment on or
before the date such payment or deposit is due;
(b) failure on the part of the Seller or the Servicer to
observe or perform in any respect any material terms, covenants
or agreements of the Seller or the Servicer under the Agreement,
this Series Supplement, any Receivables Purchase Agreement, the
Certificate Purchase Agreement or the Escrow Deposit Agreement,
which failure continues unremedied for a period of ten Business
Days after the earlier of (x) the date on which the Seller or the
Servicer, as applicable, becomes aware of such failure and (y)
the date on which written notice of such failure, requiring the
same to be remedied, shall have been received by the Seller or
the Servicer, as applicable;
(c) any representation, warranty, certification or
statement made by the Seller or the Servicer in the Agreement,
this Series Supplement, any Receivables Purchase Agreement, the
Certificate Purchase Agreement or the Escrow Deposit Agreement or
which is contained in any Distribution Date Statement,
certificate, document or financial or other statement furnished
at any time under any of the foregoing agreements shall prove to
have been incorrect in any material respect when made or deemed
made and which continues for a period of 10 days;
(d) [Confidential Treatment Requested];
(e) [Confidential Treatment Requested];
(f) [Confidential Treatment Requested];
34
(g) the Coverage Amount, if any, or the Escrow Account
Amount, if any, relating to any Distribution Date is not paid to
the Class A Certificateholders on the applicable Distribution
Date;
(h) the Class A Monthly Principal during the Amortization
Period is not paid to the Class A Certificateholders on the
applicable Distribution Date;
(i) if on any Distribution Date either (A) a Prior Series
Deficiency exists pursuant to Section 4.01(c) hereof or (B) if
there are no funds available in the Escrow Account to pay amounts
then due and owing to the Series 1992-1 Certificates and Series
1993-1 Certificates as described in Section 4.01(d);
(j) [Confidential Treatment Requested];
(k) for so long as the Funding Adjustment is equal to an
amount greater than zero, the Servicer, for so long as Federal-Mogul
is the Servicer, or any of its Subsidiaries shall
(i) default in any payment or payments of principal or interest
in an aggregate amount of more than $5,000,000 (or its equivalent
in another currency) at any one time on any Indebtedness or in
the payment of any Guaranty, beyond the period of grace (not to
exceed 30 days), if any, provided in the instrument or agreement
under which such Indebtedness or Guaranty was created; or
(ii) default in the observance or performance of any other
agreement or condition relating to any Indebtedness the principal
amount of which exceeds $5,000,000 or any Guaranty guarantying
Indebtedness the principal amount of which exceeds $5,000,000 or
contained in any instrument or agreement evidencing, securing or
relating to any such Indebtedness or Guaranty, beyond any
applicable period of grace (not to exceed 30 days), or any other
event shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the holder
or holders of such Indebtedness or beneficiary or beneficiaries
of such Guaranty (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due
prior to its stated maturity or such Guaranty to become payable.
35
ARTICLE VII
Additional Covenants
SECTION 7.01. Covenants of the Servicer. The Servicer
hereby covenants that, until the earlier of the termination of
the Amortization Period or the Early Amortization Period:
(a) The Servicer will furnish the report required pursuant
to Section 5.02.
(b) The Servicer will furnish to the Program Agent, for the
benefit of the Class A Certificateholders and the Liquidity
Providers, all other periodic reports, opinions and statements
required to be delivered pursuant to the Agreement.
(c) Financial Reporting. The Servicer, for so long as
Federal-Mogul is the Servicer, shall maintain, for itself and
each of its Subsidiaries, a system of accounting established and
administered in accordance with generally accepted accounting
principles, and furnish to the Program Agent:
(i) Annual Reporting. Within 95 days after the
close of each fiscal year of the Servicer an audit report not
qualified for anything under the control of the Servicer,
certified by independent public accountants acceptable to the
Program Agent (which until the Program Agent notifies the
Servicer in writing to the contrary may be Ernst & Young llp,
public accounts), prepared in accordance with generally accepted
accounting principles on a consolidated basis for the Servicer
and its Subsidiaries including consolidated balance sheets as of
the end of such period, and related profit and loss and
reconciliation of the surplus statements.
(ii) Quarterly Reporting. Within 50 days after
the close of the first three quarterly periods of each fiscal
year of the Servicer, for the Servicer and its Subsidiaries,
consolidated unaudited balance sheets as at the close of each
such period and consolidated profit and loss and reconciliation
of surplus statements for the period beginning from the beginning
of such fiscal year to the end of such quarter.
(ii) Securities and Exchange Commission Filings.
Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular
reports which the Servicer or any of its Subsidiaries files with
the Securities and Exchange Commission.
36
(d) Notices. The Servicer shall promptly notify the
Program Agent and the Trustee in writing of any of the following
immediately upon learning of the occurrence thereof, describing
the same, and if applicable, the steps being taken with respect
thereto; (i) the occurrence of each Servicer Default, or any
event or condition with notice or the lapse of time or both would
constitute a Servicer Default, by a statement of the corporate
comptroller or senior financial officer of the Servicer, and
(ii) the entry of any judgment or decree against the Servicer or
any of its Subsidiaries if the aggregate amount of all judgments
and decrees therein outstanding against the Servicer exceeds
$1,000,000.
SECTION 7.02. Confidentiality. The Seller, Federal-Mogul,
the Trustee, and the Series 1997-1 Certificateholders agree to
use their best efforts, and shall cause their agents or
representatives to use their best efforts, to hold in confidence
all Confidential Information; provided that nothing herein shall
prevent the Trustee or any Series 1997-1 Certificateholder from
delivering copies of any financial statements and other documents
constituting Confidential Information, or disclosing any other
Confidential Information, to (i) such Series 1997-1
Certificateholder's, Falcon's or any Liquidity Provider's
directors, officers, employees, agents, accountants, professional
consultants and enhancement providers, (ii) any other Series
1997-1 Certificateholder, (iii) Falcon, any Liquidity Provider,
Enhancement Provider or any Person to which such Series 1997-1
Certificateholder offers to sell or assign or sells or assigns
such Series 1997-1 Certificate or any part thereof or any rights
associated therewith, provided that Falcon, such Liquidity
Provider, Enhancement Provider or Person shall have agreed to
hold in confidence all Confidential Information, (iv) any federal
or state regulatory authority having jurisdiction over such
Series 1997-1 Certificateholder, Falcon or any Liquidity
Provider, (v) the National Association of Insurance Commissioners
or any similar organization or any nationally recognized rating
agency that requires access to such Series 1997-1
Certificateholder's investment portfolio, Falcon's investment
portfolio and any Liquidity Provider's investment portfolio, or
(vi) any other Person to which such delivery or disclosure may be
necessary or appropriate (a) in compliance with any law, rule,
regulation or order applicable to such Series 1997-1
Certificateholder, Falcon or any Liquidity Provider, (b) in
response to any subpoena or other legal process or (c) in
connection with any litigation to which such Series 1997-1
Certificateholder, Falcon or any Liquidity Provider is a party or
(vii) if any Early Amortization Event has occurred and is
continuing, to the extent such Series 1997-1 Certificateholder
may reasonably determine that such delivery and disclosure is
necessary or appropriate in the enforcement or for the protection
of the rights and remedies under the Series 1997-1 Certificates,
this Series Supplement or the Agreement. The Trustee and the
37
Series 1997-1 Certificateholders agree to allow the Seller to
inspect their security and confidentiality arrangements from time
to time during normal business hours. The Trustee and the Series
1997-1 Certificateholders shall provide written notice to the
Seller whenever any such disclosure is made. The Trustee and the
Series 1997-1 Certificateholders shall use their best efforts to
provide the Seller with five day's advance notice of any
disclosure pursuant to clause (vi) of this Section 7.02.
SECTION 7.03. Receivables Purchase Agreement. (a) The
Seller agrees to provide the Program Agent with copies of the
following documents:
(i) the Seller shall promptly provide the
Program Agent with a copy of the written notice specified in
Section 2.02 and 2.03(b) of each Receivables Purchase Agreement;
(ii) the Seller shall promptly provide the
Program Agent with a copy of the written notice specified in
Section 2.03(c) of each Receivables Purchase Agreement;
(iii) the Seller shall promptly provide the
Program Agent with a copy of the Officer's Certificate and the
Opinion of Counsel specified in Section 5.01(b) of each
Receivables Purchase Agreement;
(iv) the Seller shall promptly provide the
Program Agent with a copy of the written notice specified in the
penultimate sentence of Article VI of each Receivables Purchase
Agreement;
(v) the Seller shall promptly provide the Program
Agent with a copy of the Opinion of Counsel specified in Section
7.01(a) and 7.01(b) of each Receivables Purchase Agreement;
(vi) the Seller shall promptly give the Program
Agent the notice specified in Section 7.02(b) of each Receivables
Purchase Agreement and shall promptly deliver to the Program
Agent copies of stamped receipt financing statements or
amendments, as applicable, specified in such Section 7.02(b); and
(vii) the Seller shall promptly provide the
Program Agent with a copy of the written notice specified in
Section 7.02(c) of each Receivables Purchase Agreement and shall
promptly deliver to the Program Agent copies of the stamped
receipt financing statements or amendments, as applicable,
specified in such Section 7.02(c).
(b) the Seller shall not amend any Receivables
Purchase Agreement without the prior written consent of the
Program Agent.
38
(c) The Seller shall not (i) cancel or terminate any
Receivables Purchase Agreement or consent to or accept any
cancellation or termination thereof, (ii) give any consent,
waiver or approval under any Receivables Purchase Agreement,
(iii) waive any default under or breach of any Receivables
Purchase Agreement or (iv) take any other action under any
Receivables Purchase Agreement not required by the terms thereof,
in each case, to the extent that it would impair the value of any
Trust Asset or adversely affect the rights or interests of the
Seller thereunder without the prior written consent of the
Program Agent.
(d) In connection with an amendment to any Receivables
Purchase Agreement pursuant to Section 7.01(a) or 7.01(b) of each
Receivables Purchase Agreement, the Seller shall promptly provide
a copy of such amendment to the Program Agent.
(e) The Trustee shall not consent to a Receivables
Seller's assignment of its rights under any Receivables Purchase
Agreement pursuant to Section 7.08 thereof without the prior
written consent of the Program Agent.
(f) The Seller shall not enter into any new
Receivables Purchase Agreement on or after the Closing Date
without the prior written consent of the Program Agent.
SECTION 7.04. Pooling and Servicing Agreement. (a) The
Seller agrees to promptly provide the Program Agent with the
following information and copies of the following documents (all
references to Sections in this Section 7.04 refer to Sections in
Agreement):
(i) notice of Liens as specified to Section
2.05(c);
(ii) the Termination Notice specified in Section
2.07(b)(i);
(iii) the Officer's Certificate specified in
Section 6.03(c)(i);
(iv) the written notice specified in the first
sentence of Section 9.02(a);
(v) the Opinion of Counsel specified in Sections
11.01(g), 13.01(a), 13.01(b) and 13.01(g); and
(vi) copies of stamped receipt financing
statements or amendments, as applicable, that have been filed
pursuant to Section 13.02(b) and 13.02(c).
39
(b) The Servicer agrees to promptly provide the
Program Agent with copies of the following documents;
(i) the Distribution Date Statement specified in
Section 3.04(a) for each Distribution Date;
(ii) the Officer's Certificate and Opinion of
Counsel specified in Section 8.02(b);
(iii) the Opinion of Counsel specified in Section
8.05; and
(iv) copies of stamped receipt financing
statements or amendments, as applicable, that have been filed
pursuant to Section 13.02(b) and 13.02(c).
(c) The Trustee agrees to promptly provide the Program
Agent with copies of the following documents:
(i) the written notice specified in Section
2.04(c), 3.03(b), 3.03(c), 9.01(c), 9.01(d), 10.01(b) and
10.01(c); and
(ii) the Termination Notice specified in Section
10.01.
(d) The following actions shall not be taken by the
Seller, the Servicer or the Trustee, as applicable, without the
prior written consent of the Program Agent:
(i) engage in any activity specified in Section
2.05(e)(vi);
(ii) terminate the sale to the Trust of
Receivables relating to any Obligor pursuant to Section 2.07;
(iii) take any of the action specified under
Section 2.05(f) through 2.05(j);
(iv) delegate the duties of the Servicer pursuant
to Section 3.01(a);
(v) surrender the FMFC Certificate in exchange
for a Supplemental Certificate pursuant to Section 6.03(c);
(vi) delegate the duties of the Servicer pursuant
to Section 8.07;
40
(vii) enter into an intercreditor agreement
pursuant to Section 11.01(g); and
(viii) enter into any amendments pursuant to
Section 13.01(a) or 13.01(b).
(e) The Trustee shall promptly provide the Program
Agent with a copy of any amendment entered into pursuant to
Section 13.01(a) or 13.01(b).
(f) For so long as Federal-Mogul is acting in its
capacity as Servicer, the Servicer shall provide the Program
Agent and the Trustee, promptly after the same are available,
copies of all proxy statements, financial statements and reports
as the Servicer shall send or make available generally to any of
its public security holders, and copies of all regular and period
reports and of all registration statements which the Servicer may
file with the Securities and Exchange Commission or with any
securities exchange.
SECTION 7.05. Inspection Rights. Each of the Seller and
the Servicer shall provide the Program Agent, and any of its
agents and representatives, with access to (x) any books,
records, files and documents (including, without limitation,
computer tapes and discs) relating to the Receivables Purchase
Agreement, the Receivables and the servicing of the Receivables
and the Program Agent and such representatives and agents shall
be permitted to make copies of and abstracts from the foregoing
and (y) the officers, directors and auditors of the Seller and
Servicer, as applicable, to discuss the business and operations
of the Seller and the Servicer, as applicable, relating to the
Receivables Purchase Agreement and the Receivables and the
Seller's and Servicer's, as applicable, performance under this
Series Supplement and the Agreement, but only (i) upon reasonable
request, (ii) during normal business hours, (iii) subject to the
Seller's or the Servicer's normal security and confidentiality
procedures and (iv) at reasonably accessible offices designated
by the Seller or the Servicer.
SECTION 7.06. Final Payment with respect to Series 1997-1
Certificates. Notwithstanding any provisions in this Series
Supplement or the Agreement to the contrary, the Class A
Certificateholders that are the Program Agent, insurance
companies or institutional investors shall not be required to
present and surrender their Class A Certificates prior to
receiving final payments on such Certificates; provided, however,
that by acceptance of such final payment, the Class A
Certificateholders shall be deemed to represent, warrant and
covenant to the Seller, the Trustee and the Trust that it has not
transferred, sold or assigned, and shall not transfer, sell or
assign, such Class A Certificate or any interest therein to
another Person and that it shall deliver such Certificate to the
Trustee upon the request of the Trustee or the Seller.
41
SECTION 7.07. Covenants of the Seller. The Seller hereby
covenants that:
(a) Preservation of Corporate Existence. The Seller
shall preserve and maintain its corporate existence other than as
permitted in the Agreement, rights, franchises and privileges in
the jurisdiction of its formation, and qualify and remain
qualified in good standing as a foreign corporation in each
jurisdiction where the failure to maintain such qualification
would materially adversely affect (i) the interests of the
Trustee or of the Series 1997-1 Certificateholders hereunder or
in the Trust Assets, (ii) the collectibility of the Receivables
or (iii) the ability of the Seller to perform its obligations
hereunder or under any Receivables Purchase Agreement in any
material respect.
(b) Keeping of Records and Books of Account. The
Seller shall (i) keep proper books of record and accounts, which
shall be maintained or caused to be maintained by the Seller, and
in which full correct entries shall be made of all financial
transactions and the assets and business of the Seller in
accordance with generally accepted accounting principles
consistently applied, and (ii) maintain and implement
administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing the
Receivables in the event of the destruction of the originals
thereof) and keep and maintain all documents, books, records and
other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new
Receivable and all Collections on Receivables and the monthly
identification of adjustments to each existing Receivable). The
Seller shall give the Program Agent notice of any material change
in the administrative and operating procedures referred to in the
preceding sentence.
(c) Payment of Taxes, Etc. The Seller shall pay
promptly when due all taxes, assessments and governmental charges
or levies imposed upon it or any Trust Asset, or in respect of
its income or profits therefrom, and any and all claims of any
kind (including, without limitation, claims for labor, materials
and supplies), except that no such amount need be paid if (i)
such nonpayment is not reasonably likely to subject the Trustee,
the Trust or any Series 1997-1 Certificateholder to civil or
criminal penalty or liability or involve any material risk of the
sale, forfeiture or loss of any of the property, rights or
42
interests covered hereunder or under any Receivables Purchase
Agreement, (ii) the charge or levy is being contested in good
faith and by proper proceedings and (iii) the obligation to pay
such amount is adequately reserved against in accordance with and
to the extent required by generally accepted accounting
principles.
(d) Reporting Requirements. The Seller shall furnish
to the Trustee and the Program Agent:
(i) as soon as possible and in any event (A)
within two Business Days after becoming aware of the occurrence
of each Early Amortization Event, and each event which, with the
giving of notice or lapse of time or both, would constitute an
Early Amortization Event, the statement of the chief
administrative and credit officer of the Seller setting forth
details of such Early Amortization Event commencement or event
and the action which the Seller has taken and proposes to take
with respect thereto, and (B) within two Business Days after the
occurrence thereof, notice of any other event, development or
information which is reasonably likely to materially adversely
effect the ability of the Seller to perform its obligations under
this Series Supplement, the Agreement or any Receivables Purchase
Agreement; and
(ii) promptly, from time to time, such other
information, documents, records or reports with respect to the
Receivables, the other Trust Assets or the condition or
operations, financial or otherwise, of the Seller as the Trustee
or the Program Agent may from time to time reasonably request.
(e) Activities of the Seller. The Seller shall not
engage in, enter into or be a party to any business, activity or
transaction of any kind other than the business, activities and
transactions contemplated and authorized by this Series
Supplement, the Agreement or any Receivables Purchase Agreement
or any document related hereto or thereto.
(f) Indebtedness. Except as provided in this Series
Supplement, the Agreement or in any Receivables Purchase
Agreement, the Seller shall not create, incur or assume any
indebtedness (other than operating expenses incurred in the
performance of its obligations under this Series Supplement, the
Agreement or any Receivables Purchase Agreement) or sell or
transfer any receivables to a trust or other Person which issues
securities in respect of any such receivables.
(g) Investments. The Seller shall not make or suffer
to exist any loans or advances to, or extend any credit to, or
make any investments (by way of transfer of property,
43
contributions to capital, purchase of stock or securities or
evidences of indebtedness, acquisition of the business or assets
or otherwise) in, any Affiliate or any other Person except for
purchase of Receivables pursuant to the terms of the Receivables
Purchase Agreement and investments in Eligible Investments in
accordance with the terms of the Agreement.
(h) Organization. The Seller shall not amend its
amended and restated articles of incorporation or bylaws without
the prior written consent of the Program Agent.
(i) Marking Books and Records. The Seller shall on or
prior to the date hereof, at its own expense, ▇▇▇▇ its master
date processing records and other books and records relating to
the Receivables to indicate that the Receivables have been
transferred to the Trust pursuant to the Agreement for the
benefit of the Investor Certificateholders.
SECTION 7.08. Credit Policies. The Seller and the Servicer
shall timely and fully (i) perform and comply with all provisions
and covenants and other promises required to be observed by it
under terms of such Receivable and (ii) comply in all material
respects with the credit and collection policies and procedures
in effect on the date hereof (the "Credit Policies") with respect
to the Receivables, a copy of which is attached hereto as
Exhibit F. Neither the Seller nor the Servicer shall amend,
modify or supplement the Credit Policies in any material adverse
respect without the prior written consent of the Program Agent,
which consent shall not be unreasonably withheld. Upon any
amendment, modification or supplement to the Credit Policies
consented to by the Program Agent, the Seller shall deliver to
the parties hereto and the Class A Certificateholders such
amendment, modification or supplement and Exhibit F shall be
deemed to be amended by such amendment, modification or
supplement.
SECTION 7.09. New Series Issued. The Seller shall not
cause to be issued any new Series of Investor Certificates
pursuant to Section 6.03 of the Agreement without the prior
written consent of the Program Agent.
ARTICLE VIII
Termination
SECTION 8.01. Optional Repurchase. In addition to the
payment of any Optional Repayment Amounts pursuant to Section
4.07, the Seller shall have the option, on any Distribution Date
on which the Class A Invested Amount is $10,000,000 or less, to
44
purchase the entire Class A Certificateholders' Interest, by
depositing to the Series 1997-1 Trustee's Account on such
Distribution Date in immediately available funds not later than
12:00 noon, New York City time, a purchase price (determined
after giving effect to any payment of principal and interest on
such Distribution Date) equal to the sum of (i) the Class A
Invested Amount on such Distribution Date, plus (ii) the amount
of Class A Monthly Interest relating to such Distribution Date
and any Class A Monthly Interest previously due and not paid and
any Class A Additional Interest, plus (iii) the amount of any
accrued and unpaid Program Fees, Administration Fees, Other Fees
and Breakage Costs, plus (iv) the amount of accrued and unpaid
Monthly Servicing Fee as of such Distribution Date, plus (v) all
other amounts owing to the Class A Certificateholders under any
Transaction Document (such purchase price being the "Repurchase
Price"); provided, however, if the Series 1992-1 Certificates or
the Series 1993-1 Certificates are outstanding, the Seller may
not make such Optional Repurchase pursuant to this Section 4.07.
The Seller shall give the Servicer, the Trustee and the Class A
Certificateholders at least ten days prior written notice of the
date on which the Seller intends to exercise such option to
purchase. The funds deposited to the Series 1997-1 Trustee's
Account as payment of the Repurchase Price shall be allocated and
distributed pursuant to Article V with the other Series 1997-1
Collections received during the Collection Period preceding such
Distribution Date.
ARTICLE IX
Final Distributions
SECTION 9.01. Sale of Certificateholders, Interest Pursuant
to Section 2.03 of the Agreement; Distributions Pursuant to
Section 2.03 or 12.02(c) of the Agreement. (a) The amount to be
paid by the Seller to the Collection Account with respect to
Series 1997-1 in connection with a purchase of the
Certificateholders' Interest pursuant to Section 2.03 of the
Agreement shall equal the Reassignment Amount for the
Distribution Date on which such repurchase occurs.
(b) With respect to the Reassignment Amount deposited into
the Collection Account pursuant to this Section 9.01 of this
Series Supplement or Section 2.03 of the Agreement or any
Termination Proceeds deposited into the Collection Account
pursuant to Section 12.02(c) of the Agreement, the Trustee shall,
not later than 12:00 noon, New York City time, on the
Distribution Date on which such amounts are deposited (or, if
such date is not a Distribution Date, on the immediately
following Distribution Date) (in accordance with the Distribution
Date Statement delivered pursuant to Section 5.02 and in the
priority set forth below) deposit the Reassignment Amount or the
Termination Proceeds into the Series 1997-1 Trustee's Account and
distribute such amounts on the applicable Distribution Date in
accordance with Section 5.01(c) hereof
45
(c) Notwithstanding anything to the contrary in this Series
Supplement or the Agreement, the entire amount deposited in the
Series 1997-1 Trustee's Account pursuant to Section 9.01 and all
other amounts on deposit therein shall be distributed in full to
the Series 1997-1 Certificateholders on such date and any
distribution made pursuant to paragraph (b) above shall be deemed
to be a final distribution pursuant to Section 12.02 of the
Agreement with respect to Series 1997-1.
SECTION 9.02. Distribution of Proceeds of Sale, Disposition
or Liquidation of the Receivables Pursuant to Section 9.02 of the
Agreement. (a) Not later than 12:00 noon, New York City time,
on the Distribution Date following the date on which the
Insolvency Proceeds are deposited into the Collection Account
pursuant to Section 9.02(b) of the Agreement, the Trustee shall
deposit the Insolvency Proceeds into the Series 1997-1 Trustee's
Account and distribute such amount on the applicable Distribution
Date in accordance with Section 5.01(c) hereof.
(b) Notwithstanding anything to the contrary in this Series
Supplement or the Agreement, the entire amount deposited in the
Series 1997-1 Trustee's Account pursuant to this Section and all
other amounts on deposit therein shall be distributed in full to
the Series 1997-1 Certificateholders on the Distribution Date on
which funds are deposited pursuant to this Section (or, if not so
deposited on a Distribution Date, on the immediately following
Distribution Date) and any distribution made pursuant to this
Section shall deemed to be a final distribution pursuant to
Section 12.02 of the Agreement with respect to Series 1997-1.
46
ARTICLE X
Miscellaneous Provisions
SECTION 10.01. Ratification of Agreement. As supplemented
by this Series Supplement, the Agreement is in all respects
ratified and confirmed and the Agreement as so supplemented by
this Series Supplement shall be read, taken and construed as one
and the same instrument.
SECTION 10.02. Counterparts. This Series Supplement may be
executed in two or more counterparts (and by different parties on
separate counterparts), each of which shall be an original, but
all of which together shall constitute one and the same
instrument.
SECTION 10.03. GOVERNING LAW. THIS SERIES SUPPLEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF
LAW PROVISIONS, THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 10.04. The Trustee. The Trustee is hereby
authorized to execute and deliver the Escrow Deposit Agreement
and to perform the obligations thereunder. The Trustee shall not
be responsible in any manner whatsoever for or in respect of the
validity or sufficiency of this Series Supplement, or for or in
respect of the recitals contained herein, all of which recitals
are made solely by the Seller and the Servicer.
SECTION 10.05. Amendment. This Supplement may be amended
from time to time by the Servicer, the Seller and the Trustee,
with the prior written consent of all Class A Certificateholders;
provided, however, if all amounts owing to the Holders of the
Series 1992-1 and the Holders of the Series 1993-1 Certificates
have not been paid in full, the Rating Agency rating such
Investor Certificates shall be notified of such proposed
amendment and in no event shall any amendment to Articles I or IV
herein that affects distributions to the Series 1992-1 or Series
1993-1 Certificateholders be entered into unless the Rating
Agency Condition is satisfied.
SECTION 10.06. The Certificates. Each Certificate shall be
executed by manual or facsimile signature by the Trustee by an
authorized officer. 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 the
Trustee shall not be rendered invalid, notwithstanding that such
individual ceased to be so authorized prior to the authentication
and delivery of such Certificates or does not hold such office at
the date of such Certificates.
47
SECTION 10.07. Indemnities by the Servicer. Without
limiting any other rights which the Program Agent or any
Purchaser may have hereunder or under applicable law, the
Servicer hereby agrees to indemnify the Program Agent and each
Purchaser and their respective officers, directors, agents and
employees (each an "Indemnified Party") from and against any and
all damages, losses, claims, taxes, liabilities, costs, expenses
and for all other amounts payable, including reasonable
attorneys' fees (which attorneys may be employees of the Program
Agent or such Purchaser) and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts") awarded
against or incurred by any of them arising out of or as a result
of Transaction Documents, excluding, however:
(i) Indemnified Amounts to the extent that final
judgment of a court of competent jurisdiction holds such
Indemnified Amounts resulted from gross negligence or willful
misconduct on the part of the Indemnified Party seeking
indemnification; or
(ii) Indemnified Amounts to the extent the same
includes losses in respect of Eligible Receivables which are
wholly or partially uncollectible on account of the insolvency,
bankruptcy or lack of credit worthiness of the related Obligor or
the failure of such Collections to cover interest and principal
owed to a Class A Certificateholder;
provided, however, that nothing contained in this sentence shall
limit the liability of the Servicer or limit the recourse of the
Purchasers to the Servicer for amounts otherwise specifically
provided to be paid by the Servicer under the terms of the
Transaction Documents. Without limiting the generality of the
foregoing indemnification, the Servicer shall indemnify the
Program Agent and the Purchasers for Indemnified Amounts
resulting from:
(i) any representation or warranty made by the
Servicer (or any officers of the Servicer) under or in connection
with any Transaction Document or any other information or report
delivered by the Servicer pursuant thereto, having been false or
incorrect in any material respect when made or deemed made;
(ii) the failure by the Servicer to comply with
any applicable law, rule or regulation with respect to any
Receivable related thereto, or the nonconformity of any
Receivable included therein with any such applicable law, rule or
regulation;
48
(iii) any material failure of the Servicer to
perform its duties or obligations in accordance with the
provisions of any Transaction Document;
(iv) any offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of
any Receivable (including, without limitation, a defense based on
such Receivable not being a legal, valid and binding obligation
of such Obligor enforceable against it in accordance with its
terms), or any Credit Memo granted (other than for credit losses)
or any products liability or warranty claim arising out of or in
connection with the sale of merchandise which gave rise to the
Receivable, or any other claim relating to the furnishing or
failure to furnish such merchandise;
(v) the commingling of Collections of Receivables
at any time with other funds;
(vi) any investigation, litigation or proceeding
brought by a third party related to or arising from any
Transaction Document and the transactions contemplated thereby,
or any other investigation, litigation or proceeding brought by a
third party relating to the Servicer in which any Indemnified
Party becomes involved as a result of any of the transactions
contemplated thereby other than any investigation or proceeding
arising from (i) the gross negligence or wilful misconduct of the
Program Agent and/or one or more of the Purchasers or (ii) the
unlawful conduct of the Program Agent and/or one or more of the
Purchasers; and
(vii) any Servicer Default.
Notwithstanding the foregoing, the Servicer shall not under
any circumstances indemnify the Program Agent or any Purchaser
for any Indemnified Amounts that result from any delay in the
collection of any Receivables or any default by an Obligor with
respect to any Receivables unless such delay or default is caused
by the Servicer or arises by reason of any breach or alleged
breach of any representation or warranty of the Servicer.
SECTION 10.08. Net Pool Balance/Required Participation
Amount. The parties hereto agree that, solely for purposes of
the Series 1997-1 Supplement, notwithstanding any provision in
the Agreement to the contrary, any reference to the Net Pool
Balance being compared to the Required Participation Amount shall
be deemed to mean that the Minimum Enhancement Amount is greater
than the sum of (i) Contractual Dilution and (ii) Aggregate
Reserves.
49
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee
have caused this Series Supplement to be duly executed by their
respective officers as of the day and year first above written.
FEDERAL-MOGUL FUNDING CORPORATION,
Seller
By: -------------------------------
Name:
Title:
FEDERAL-MOGUL CORPORATION,
Servicer
By: -------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, Trustee
By: -------------------------------
Name:
Title: