1
EXHIBIT 10.4
AMENDED AND RESTATED
SERIES 1996-1 SUPPLEMENT
TO POOLING AND SERVICING AGREEMENT
dated as of November 21, 1997
among
AVONDALE RECEIVABLES COMPANY,
as Transferor,
AVONDALE ▇▇▇▇▇, INC.,
as Servicer,
and
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS...............................1
SECTION 1.1 Definitions.................................................................1
SECTION 1.2 Modification Condition.....................................................12
SECTION 1.3 Incorporation of Terms.....................................................12
SECTION 1.4 ▇▇▇▇ and Hold..............................................................12
SECTION 1.5 Agreed Upon Procedures.....................................................12
ARTICLE II
DESIGNATION..........................................12
SECTION 2.1 Designation................................................................12
ARTICLE III
SUBSTITUTE CERTIFICATE.....................................13
SECTION 3.1 Substitution of Certificate.................................................13
ARTICLE IV
PAYMENTS AND ALLOCATIONS....................................13
SECTION 4.1 Interest; Additional Amounts...............................................13
SECTION 4.2 Daily Calculations and Series Allocations..................................13
SECTION 4.3 Allocations of Daily Series Collections (Other Than in an Early
Amortization Period).......................................................14
SECTION 4.4 Allocations of Daily Series Collections During an Early Amortization
Period.....................................................................15
SECTION 4.5 Withdrawals from the Equalization Account..................................16
SECTION 4.6 Available Subordinated Amount..............................................16
SECTION 4.7 Write-Offs and Recoveries..................................................17
SECTION 4.8 Certain Dilution in an Early Amortization Period...........................17
SECTION 4.9 Defeasance.................................................................18
SECTION 4.10 Tax Opinion . ............................................................18
ARTICLE V
DISTRIBUTIONS AND REPORTS...................................18
SECTION 5.1 Distributions..............................................................18
3
SECTION 5.2 Special Distributions on the Refinancing Date..............................19
SECTION 5.3 Payments in Respect of Transferor Certificate..............................19
SECTION 5.4 Monthly Reports............................................................19
SECTION 5.5 Annual Tax Information.....................................................19
SECTION 5.6 Periodic Perfection Certificate............................................20
ARTICLE VI
EARLY AMORTIZATION EVENTS...................................20
SECTION 6.1 Early Amortization Events..................................................20
SECTION 6.2 Early Amortization Period..................................................22
ARTICLE VII
OPTIONAL REDEMPTION; INDEMNITIES................................22
SECTION 7.1 Optional Redemption of Investor Interests..................................22
SECTION 7.2 Indemnification by Transferor..............................................23
SECTION 7.3 Indemnification by Servicer................................................24
ARTICLE VIII
MISCELLANEOUS.........................................24
SECTION 8.1 Governing Law.............................................................24
SECTION 8.2 Counterparts..............................................................24
SECTION 8.3 Severability of Provisions................................................24
SECTION 8.4 Amendment, Waiver, Etc....................................................24
SECTION 8.5 Trustee...................................................................24
SECTION 8.6 Instructions in Writing...................................................24
SECTION 8.7 Rule 144A.................................................................25
SECTION 8.8 Original Supplement........................................................25
4
EXHIBITS AND SCHEDULES
Schedule I Agreed Upon Procedures
EXHIBIT A Form of Series 1996-1 Certificate
EXHIBIT B Form of Daily Report
Part 1. For Use other than in Early Amortization Period
Part 2. For Use in Early Amortization Period
EXHIBIT C Form of Cash Flow Report
EXHIBIT D Form of Monthly Report
Part 1. For Use other than in Early Amortization Period
Part 2. For Use in Early Amortization Period
EXHIBIT E Form of Seller Guaranty
5
This AMENDED AND RESTATED SERIES 1996-1 SUPPLEMENT, dated as of
November 21, 1997 (this "Supplement"), is made among AVONDALE RECEIVABLES
COMPANY, a Delaware corporation, as Transferor, AVONDALE ▇▇▇▇▇, INC., an Alabama
corporation, as the Initial Servicer, and MANUFACTURERS AND TRADERS TRUST
COMPANY, a New York banking corporation, as Trustee.
WHEREAS, the parties to this Supplement entered into a Series 1996-1
Supplement dated as of April 29, 1996 (the "Original Supplement") pursuant to
which a Series of Certificates ("Series 1996-1") was created;
WHEREAS, pursuant to the Pooling and Servicing Agreement, dated as of
April 29, 1996 (as it may be amended, supplemented or otherwise modified from
time to time, and as supplemented hereby, the "Pooling Agreement"), among
Transferor, Servicer and Trustee, Transferor has issued and may from time to
time issue, and direct Trustee to authenticate, on behalf of the Trust, one or
more Series of Certificates representing undivided interests in the Transferred
Assets. Certain terms applicable to a Series are to be set forth in a
Supplement. This Supplement is a "Supplement" as that term is defined in the
Pooling Agreement;
WHEREAS, the Transferor, the Initial Servicer and the Trustee wish to
amend and restate the Original Supplement in its entirety effective upon the
date hereof to read as set forth in this Supplement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
SECTION I.1 Definitions. (a) Capitalized terms used and not otherwise
defined herein are used as defined in Appendix A to the Pooling Agreement. This
Supplement shall be interpreted in accordance with the conventions set forth in
Part B of that Appendix A.
(b) Each reference in this Supplement to funds on deposit in the
Carrying Cost Account, the Equalization Account or the Principal Funding Account
(or similar phrase) refers only to funds in the administrative sub-accounts of
those Accounts that are allocated to Series 1996-1. Unless the context otherwise
requires, in this Supplement: (i) each reference to a "Daily Report" or "Monthly
Report" refers to a Daily Report or Monthly Report for the Series 1996-1
Certificates; (ii) each reference to the "Servicing Fee" refers to the Servicing
Fee allocable to Series 1996-1; (iii) each reference to the "Series Collection
Allocation Percentage" or the "Series Loss Allocation Percentage" refers to the
Series Collection Allocation Percentage or Series Loss Allocation Percentage for
the Series 1996-1 Certificates; and (iv) each reference to the Transaction
Documents shall include a reference to the Certificate Purchase Agreement.
(c) Each capitalized term defined below relates only to the Series
1996-1 Certificates and to no other Series of Certificates. Whenever used in
this Supplement, the following words and phrases shall have the following
meanings:
"Acquisition Amount" means, on any day, the Invested Amount plus the
Deferred Portion (it being understood that the Acquisition Amount may vary from
day to day); provided that the Acquisition Amount shall be fixed on the last day
of the Revolving Period.
"Additional Amounts" means amounts payable pursuant to Sections 4.2,
4.3, 4.5, 4.6 and 10.5 of the Certificate Purchase Agreement.
1
6
"Adjusted Eligible Receivables" means, on any Business Day, the result
of (a) the aggregate Unpaid Balance of Eligible Receivables held by the Trust on
that day, minus (b) the Unapplied Cash held by the Trust on that day, plus (c)
the Aggregate Retained Balances.
"Aged Receivables Ratio" means, as calculated in each Monthly Report as
of the Cut-Off Date for the related Calculation Period, a fraction (expressed as
a percentage) having (a) a numerator that is the sum of (i) the aggregate Unpaid
Balance of Receivables that remained outstanding 61 to 90 days after their
respective due dates, as determined as of the Cut-Off Date for such Calculation
Period, plus (ii) the aggregate Unpaid Balance of Receivables that were written
off as uncollectible during the most recently ended Calculation Period and that,
if not so written off, would have been outstanding not more than 60 days after
their respective due dates, as determined as of that Cut-Off Date and (b) a
denominator that is the aggregate amount payable pursuant to invoices giving
rise to Receivables that were generated by the Sellers during the Calculation
Period that occurred three Calculation Periods prior to the most recently ended
Calculation Period, as determined as of the Cut-Off Date for such prior
Calculation Period.
"Agent" means The First National Bank of Chicago ("FNBC"), in its
capacity as Agent under the Certificate Purchase Agreement, together with its
successors in that capacity. The Agent is an "Agent" for purposes of the Pooling
Agreement.
"Aggregate Retained Balances" means, on any Business Day, the aggregate
of the balances retained in Lockbox Accounts or Concentration Accounts for items
in the process of collection but for which funds have not been made available by
the related Lockbox Bank or Concentration Account Bank, provided that (i) no
notice of insufficient funds or similar situation shall exist with respect
thereto and (ii) the Unpaid Balance of Receivables shall have been reduced by an
amount equal to such balances.
"Amortization Period" means the period (x) beginning on the earlier of
(i) the date on which a termination notice is given by the Sellers pursuant to
Section 8.1 of the Purchase Agreement and (ii) November 15, 2002, and (y) ending
on the earlier of (i) the Expected Final Payment Date and (ii) the date, if any,
on which an Early Amortization Period commences.
"Applicable Margin" shall mean (i) with respect to any LIBOR Tranche
funded by the issuance of Notes, 0%, and (ii) with respect to any other LIBOR
Tranche, 0.50%.
"Applicable Ratings Factor" means 2.00.
"Applicable Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Minimum Required Reserve Ratio and (b) the Required Reserve
Ratio, in each case as calculated in the Monthly Report required to be delivered
on the Report Date immediately prior to the start of that Distribution Period.
"Approval Condition" means, with respect to any specified event or
change in the terms applicable to this Supplement or the Series 1996-1
Certificates, such event or change shall have been approved in writing, prior to
becoming effective, by the Agent.
"ASA Measuring Period" means, for any Cut-Off Date falling in an Early
Amortization Period, the Calculation Period ending on that Cut-Off Date (or the
portion thereof falling after the Early Amortization Calculation Date, in the
case of the first Cut-Off Date falling in the Early Amortization Period).
"Available Subordinated Amount" means, at any time during an Early
Amortization Period, the amount calculated pursuant to Section 4.6.
"Avondale Credit Agreement" means the Amended and Restated Credit
Agreement dated as of April 29, 1996 among Avondale, the financial institutions
named therein, Wachovia Bank of Georgia, N.A., as Agent, and FNBC, as
Documentation Agent.
2
7
"BA Box" is defined in Section 1.5.
"BofA" is defined in Section 1.5.
"Base Amount" means, on any Business Day, the result of the following
formula:
[NER x SCAP x (100%-ARR)] - CCRR
where:
ARR = the Applicable Reserve Ratio in effect for that Business Day;
CCRR = the Carrying Cost Receivables Reserve for that Business Day;
NER = the Net Eligible Receivables for that Business Day; and
SCAP = the Series Collection Allocation Percentage for that Business
Day;
provided that: from and after the date upon which Transferor gives notice of
prepayment of the Series 1996-1 Certificates pursuant to Section 4.9, the Base
Amount shall equal the lower of (i) the Base Amount as calculated above and (ii)
the Base Amount as calculated for purposes of any Series of Certificates being
issued in connection with that prepayment.
"CBR Tranche" means, at any time, the portion of the Invested Amount
that is designated by Transferor in accordance with the Certificate Purchase
Agreement to accrue interest based on the Corporate Base Rate.
"Carrying Cost Cash Required Amount" means, on any Business Day, an
amount equal to the Current Carrying Costs.
"Carrying Cost Receivables Reserve" means, on any Business Day, the
result of:
(a) the Current Carrying Costs; plus
(b) the product of (i) the Invested Amount, multiplied by (ii)
1.50 times the Certificate Rate, multiplied by (iii) a fraction the
numerator of which is the product of 2 and the number of Turnover Days
and the denominator of which is 360; plus
(c) the product of (i) the Series Collection Allocation
Percentage on the next preceding Distribution Date, multiplied by (ii)
the aggregate Unpaid Balance of Receivables held by Trustee on the next
preceding Distribution Date, multiplied by (iii) 1.25%, multiplied by
(iv) a fraction the numerator of which is the product of 2 multiplied
by the number of Turnover Days and the denominator of which is 360;
minus
(d) the balance on deposit in the Carrying Cost Account at the
beginning of that Business Day.
"Cash Flow Report" means a report of the type described in Section
4.2(b).
"Certificate Purchase Agreement" means, that certain Amended and
Restated Certificate Purchase Agreement dated as of November 21, 1997 among
Transferor, Servicer, the Purchaser of the Series 1996-1 Certificates, and the
Agent. The Certificate Purchase Agreement is designated a "Transaction Document"
for the purposes of the Pooling Agreement.
"Certificate Rate" means, at any time, the interest rate on the Series
1996-1 Certificates.
"Closing Date" means April 29, 1996.
3
8
"Concentration Factor" means, as of any Cut-Off Date, the greatest of:
(i) the "Benchmark Percentage" for purposes of clause (c) of
the definition of "Excess Concentration Balances,"
(ii) two times the "Benchmark Percentage" for purposes of
clause (d) of that definition, and
(iii) four times the "Benchmark Percentage" for purposes of
clause (e) of that definition.
"Corporate Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of:
(a) the rate of interest announced, from time to time, by the
Agent as its prime commercial rate for United States dollar loans made
in the United States for any day, and
(b) the Federal Funds Rate.
Any change in the interest rate resulting from a change in the prime commercial
rate announced by the Agent shall become effective without prior notice to
Transferor or Servicer as of 12:01 a.m., New York City time, on the Business Day
on which each change in the prime commercial rate is announced by the Agent. The
prime commercial rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged by the Agent to any customer. The Agent may
make commercial loans or other loans at rates of interest at, above or below the
prime commercial rate.
"Current Carrying Costs" means, at any time, the amount of interest on
the Series 1996-1 Certificates and the amount of the Servicing Fee that will be
payable on the next Distribution Date.
"Daily Series Collections" is defined in Section 4.2.
"Deferred Portion" means, on any day the portion of the Acquisition
Amount as to which payment is deferred, which portion shall equal the sum of the
following amounts; (i) the Excess Concentration Balances, plus (ii) the
aggregate unpaid balance of Receivables that are not Eligible Receivables, plus
(iii) the Excess ▇▇▇▇ and Hold Balance, plus (iv) the Carrying Cost Receivables
Reserve, plus (v) the Applicable Reserve Ratio times the Net Eligible
Receivables (it being understood that the Deferred Portion may vary from day to
day); provided that the Deferred Portion shall be fixed as of the last day of
the Revolving Period.
"Dilution Horizon Variable" means, at any time, a fraction having (a) a
numerator equal to the sum of the aggregate amounts payable pursuant to invoices
giving rise to Receivables and generated by the Sellers during the three
Calculation Periods ending on the most recent Cut-Off Date (as of that Cut-Off
Date) and (b) a denominator equal to the Net Eligible Receivables as of the most
recent Cut-Off Date.
"Dilution Ratio" means, as calculated in each Monthly Report as of the
most recent Cut-Off Date, a fraction (expressed as a percentage) having (a) a
numerator equal to the aggregate amount of Dilution on the Receivables occurring
during the Calculation Period ending on the most recent Cut-Off Date, and (b) a
denominator equal to the aggregate amounts payable pursuant to invoices giving
rise to Receivables that were generated by the Seller during the third preceding
Calculation Period (so that, for example, if the Calculation Period specified in
clause (a) corresponded to the March fiscal month, the Calculation Period in
this clause (b) would be the one corresponding to the December fiscal month);
provided that if such third preceding Calculation Period is of a shorter
duration than the Calculation Period ending on the most recent Cut-Off Date, the
amount determined pursuant to clause (b) will be multiplied by five and divided
by four; and provided further that if such third preceding Calculation Period is
of a longer duration than the Calculation Period ending on the most recent
Cut-Off Date, the amount determined pursuant to clause (b) will be multiplied by
four and divided by five.
4
9
"Dilution Reserve Ratio" means, as calculated in each Monthly Report,
the result (expressed as a percentage) calculated in accordance with the
following formula:
{(ARF x ADR) + [(HDR-ADR) x (HDR/ADR)]} x DHV
where:
ADR = the average of the Dilution Ratios during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date;
ARF = the Applicable Ratings Factor;
DHV = the Dilution Horizon Variable; and
HDR = the highest average of the Dilution Ratios for any three
consecutive Calculation Periods that occurred during the 12
consecutive Calculation Periods ending on the related Cut-Off
Date.
"Early Amortization Calculation Date" means the day before an Early
Amortization Period begins.
"Early Amortization Period" means the period beginning on the date (if
any) specified in Section 6.2 and ending on the day on which the Invested Amount
has been reduced to zero.
"Excess ▇▇▇▇ and Hold Balance" means, for any Test Period, an amount
(if positive) equal to: (a) the aggregate Unpaid Balance of Eligible Receivables
arising from ▇▇▇▇ and Hold arrangements, as shown in the Daily Report for the
related Test Date, minus (b) 20% of the Adjusted Eligible Receivables, as shown
in such Daily Report.
"Excess Concentration Balances" means, on any day and with respect to
an Obligor, the aggregate Unpaid Balances of Eligible Receivables it owes that,
expressed as a percentage of the Adjusted Eligible Receivables, exceeds the
following percentages for the following Obligors:
(a) 100% for any Tier-1 Obligor;
(b) 100% for any Tier-2 Obligor;
(c) 20% for any Tier-3 Obligor;
(d) 10% for any Tier-4 Obligor; and
(e) 5% for any Tier-5 Obligor.
For purposes of placing Obligors in each of the tiers specified above, (i) all
Obligors that are Affiliates of each other shall be treated as a single Obligor,
and (ii) if an Obligor does not have either a commercial paper rating or a
senior actual or implied debt rating from the Specified Rating Agency, but is
the wholly-owned direct or indirect Subsidiary of a Person that has either such
rating, such Obligor shall be placed in the same tier as such Person would be
placed if it was an Obligor. Each of the percentages above is called a
"Benchmark Percentage." Transferor may from time to time, by notice in any
Monthly Report (and, in each case, after satisfying the Approval Condition)
increase or decrease any Benchmark Percentage. Any such change shall also be
given effect for purposes of the definition of "Concentration Factor" and
consequently may result in a change to the Concentration Factor.
"Expected Final Payment Date" means the Distribution Date in May 2003.
"FALCON" means Falcon Asset Securitization Corporation, a Delaware
corporation.
5
10
"Federal Funds Rate" means (a) the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for the day (or, if the day is
not a Business Day, the immediately preceding Business Day) by the Federal
Reserve Bank of New York; provided that if the rate is not so published for any
Business Day, the rate for purposes of this clause will be the average of the
quotations for the day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it, plus (b) 50 basis
points.
"Final Scheduled Payment Date" means the Distribution Date in November,
2003.
"First Issuance Date" means April 29, 1996.
"Fully Funded Date" means the first date falling in the Amortization
Period or an Early Amortization Period on which: (a) Servicer has delivered a
Daily Report to Trustee and the Agent and (b) there are funds on deposit in the
Carrying Cost Account and the Principal Funding Account that, in the aggregate,
equal or exceed the Investor Repayment Amount and any Servicing Fee payable to
anyone other than a Related Person on the first Distribution Date falling after
that date.
"Guarantor" means Avondale, in its capacity as the guarantor under the
Seller Guaranty.
"Holdback Account Termination Date" is defined in Section 4.4.
"Holder" means a Holder (as defined in the Pooling Agreement) of a
Certificate.
"Intercreditor Provisions" means: (a) the Intercreditor Agreements, and
(b) the provisions of the Avondale Credit Agreement that permit the transactions
contemplated by the Transaction Documents to be consummated (including without
limitation the definitions of Receivables, Receivables Documents, Receivables
Program Assets, Receivables Program Obligations, Receivables Related Assets,
Receivables Securitization Program and Receivables Subsidiary), as such
provisions are in effect on the Closing Date.
"Interest Period" means:
(a) as to the CBR Tranche from time to time, (i) the period
from the Closing Date to the first subsequent Distribution Date and
(ii) each Distribution Period thereafter; and
(b) as to a LIBOR Tranche from time to time, each period from
the date upon which that LIBOR Tranche was first designated as such
pursuant to the Certificate Purchase Agreement (or the end date of the
next preceding Interest Period for such LIBOR Tranche, if there has
been one) to the date that is one month, two months or three months, at
the option of Transferor, thereafter; and if any Interest Period for
the LIBOR Tranche would otherwise end on a day that is not a Business
Day, the LIBOR Tranche shall instead end on the next Business Day (or,
if the next Business Day falls in the next calendar month, then on the
next preceding Business Day).
"Invested Amount" means, at any time, the sum of the purchase prices
paid for Purchases made pursuant to (and as defined in) the Certificate Purchase
Agreement at or prior to that time, reduced (but not below zero) by (a) the
aggregate amount of all distributions that have been made to the Holders of the
Series 1996-1 Certificates on account of principal, and (b) the amount of all
Investor Write-Offs that have been applied to reduce the Invested Amount (net of
Investor Allocable Recoveries and Investor Allocable Dilution Adjustments that
have been applied to reinstate the Invested Amount).
"Investor Allocable Dilution" means, for any ASA Measuring Period, the
product of the aggregate amount of Dilution for that ASA Measuring Period as to
which neither the applicable Seller nor the Guarantor has made any payment
required by Sections 3.1 and 3.5 of the Purchase Agreement, multiplied by the
Series Loss Allocation
6
11
Percentage as of the beginning of that ASA Measuring Period, multiplied by the
Investor Allocation Percentage as of the first Business Day of that ASA
Measuring Period.
"Investor Allocable Dilution Adjustments" is defined in Section 4.8.
"Investor Allocable Loss Amount" means, for any ASA Measuring Period,
the product of the Loss Amount for that ASA Measuring Period, multiplied by the
Series Loss Allocation Percentage as of the beginning of that ASA Measuring
Period, multiplied by the Investor Allocation Percentage as of the first
Business Day of that ASA Measuring Period.
"Investor Allocable Recoveries" means, for any ASA Measuring Period,
the product of the Net Recoveries for that ASA Measuring Period, multiplied by
the Series Loss Allocation Percentage as of the beginning of that ASA Measuring
Period, multiplied by the Investor Allocation Percentage as of the first
Business Day of that ASA Measuring Period.
"Investor Allocation Percentage" means:
(x) on any Business Day falling in the Revolving Period, a
fraction (expressed as a percentage, which in any event may not exceed
100%) (a) the numerator of which is the Net Invested Amount as of that
Business Day, and (b) the denominator of which is the Base Amount as of
that Business Day; and
(y) on any Business Day falling in the Amortization Period or
an Early Amortization Period, a fraction (expressed as a percentage,
which in any event may not exceed 100%) (a) the numerator of which is
the Net Invested Amount as of the first day of the Amortization Period
or the Early Amortization Calculation Date, as applicable, and (b) the
denominator of which is the Base Amount as of the first day of the
Amortization Period or the Early Amortization Calculation Date, as
applicable.
"Investor Ownership Percentage" means, on any Business Day, a fraction
(expressed as a percentage, which in any event may not exceed 100%) (x) the
numerator of which is the Acquisition Amount on such day and (y) the denominator
of which is the excess of (i) the Unpaid Balance of Receivables on such day over
(ii) the Unapplied Cash on such day; provided that the Investor Ownership
Percentage shall be fixed on the last day of the Revolving Period.
"Investor Repayment Amount" means, on any Business Day falling in the
Amortization Period or an Early Amortization Period, the sum of (a) the
outstanding principal amount of the Series 1996-1 Certificates, plus (b) the
interest and any Additional Amounts known to be payable on the Series 1996-1
Certificates on the first Distribution Date falling after that date.
"Investor Write-Offs" means, as calculated in any Monthly Report
relating to a Calculation Period falling completely or partially in an Early
Amortization Period:
(a) if the Available Subordinated Amount is greater than zero
at the end of the related ASA Measuring Period, zero; and
(b) if the Available Subordinated Amount is zero at the end of
the related ASA Measuring Period (after taking into account any
reduction in the Available Subordinated Amount shown in such Monthly
Report), the excess (if any) of (x) the sum of the Investor Allocable
Loss Amount and the Investor Allocable Dilution minus the sum of
Investor Allocable Recoveries and Investor Allocable Dilution
Adjustments for the related ASA Measuring Period, over (y) the
Available Subordinated Amount as of the beginning of that ASA Measuring
Period.
"LIBOR" means for any Interest Period, the rate per annum equal to the
average of the rates at which deposits in Dollars having a maturity comparable
to such Interest Period that appear on Telerate Page 3750 as of
7
12
11:00 a.m., London time, two London Business Days prior to the Distribution Date
on which that Interest Period begins. For purposes of the foregoing, "Telerate
Page 3750" means the display page so designated on the Dow ▇▇▇▇▇ Telerate
Service (or such other pages as may replace that page on that service or such
other service or services as may be nominated by the British Banker's
Association for the purpose of displaying London interbank offered rates for
Dollar deposits), and "London Business Day" means a day upon which dealings in
deposits in Dollars are transacted in the London interbank market.
Notwithstanding the foregoing, in the event that no rate for Dollar deposits
appears on Telerate Page 3750 on the applicable date for determining the LIBOR
with respect to any Distribution Date, then the LIBOR shall be determined as the
arithmetic mean (rounded upwards to the nearest one-sixteenth of 1%) of the
rates at which Dollar deposits having a maturity comparable to such Interest
Period are offered to prime banks in the London interbank market by four major
banks in that market selected by the Agent as of the determination date and time
specified above. If fewer than two quotations are provided by such banks, then
the LIBOR shall be determined as the arithmetic mean (rounded upwards as above)
of the rates at which loans in Dollars are offered to leading European banks by
three major banks in New York City selected by the Agent as of 11:00 a.m. New
York City time on the determination date specified above.
"LIBOR Tranche" means, during any Interest Period, the portion of the
Invested Amount that is designated by Transferor in accordance with the
Certificate Purchase Agreement to accrue interest based on the LIBOR.
"Loss Amount" means, with respect to any ASA Measuring Period, an
amount equal to the positive difference (if any) of (a) the amount of
Receivables held by the Trust that became Write-Offs during that ASA Measuring
Period, minus (b) the amount of Recoveries received during that ASA Measuring
Period.
"Loss Reserve Ratio" means, as calculated in each Monthly Report, the
result (expressed as a percentage) of (a) the Applicable Ratings Factor
multiplied by (b) the highest average of the Aged Receivables Ratio for any
three consecutive Calculation Periods that occurred during the preceding 12
consecutive Calculation Periods ending on the most recent Cut-Off Date
multiplied by (c) a fraction having (i) a numerator equal to the sum of the
aggregate amounts payable pursuant to invoices giving rise to Receivables
generated by the Sellers during the three Calculation Periods preceding or
ending on the most recent Cut-Off Date, and (ii) a denominator equal to the Net
Eligible Receivables, as of the most recent Cut-Off Date, multiplied by (d) the
Payment Term Multiplier.
"Loss to Liquidation Ratio" means, as calculated in each Monthly
Report, a fraction (a) the numerator of which is the aggregate Unpaid Balance of
Receivables (net of recoveries) that were written off as uncollectible or
(without duplication) converted into promissory notes during the three preceding
Calculation Periods in accordance with the Credit and Collection Policy of the
applicable Seller, and (b) the denominator of which is the aggregate amount of
Collections on the Receivables received during such three Calculation Periods.
"Minimum Required Reserve Ratio" means the sum, as of any Cut-Off Date,
of (a) the Concentration Factor for the Cut-Off Date plus (b) the product of the
average of the Dilution Ratios for the period of 12 preceding Calculation
Periods ending on the Cut-Off Date, multiplied by the Dilution Horizon Variable
for the Cut-Off Date; provided that in no event shall the Minimum Required
Reserve Ratio be less than 20%.
"Net Eligible Receivables" means, at any time, (a) the Adjusted
Eligible Receivables, minus (b) the then aggregate amount of all Excess
Concentration Balances with respect to all Obligors, minus (c) the Excess ▇▇▇▇
and Hold Balance.
"Net Invested Amount" means, on any Business Day, the Invested Amount,
reduced by the aggregate balance on deposit in the Equalization Account and the
Principal Funding Account.
"Net Recoveries" means, with respect to any ASA Measuring Period, an
amount equal to the positive difference (if any) of (a) the amount of Recoveries
received in that ASA Measuring Period minus (b) the amount of Receivables that
became Write-Offs in that ASA Measuring Period.
8
13
"Notes" means the U.S. Dollar commercial paper notes issued by FALCON
or another Structured Purchaser, the proceeds of which notes are used to fund
the purchase or maintenance of Structured Purchaser's Series 1996-1 Certificate.
"Payment Term" shall mean, with respect to any Receivable, the number
of days between its invoice date and its due date.
"Payment Term Multiplier" shall mean, with respect to a Receivable, (a)
1.0, if the Payment Term Variable is less than 51, (b) 1.11, if the Payment Term
Variable is equal to or more than 51 but less than 61, (c) 1.22, if the Payment
Term Variable is equal to or more than 61 but less than 71, (d) 1.33, if the
Payment Term Variable is equal to or more than 71 but less than 81, and (e)
1.44, if the Payment Term Variable is equal to or more than 81 but less than 90;
provided, however, that if the Payment Term Variable equals or exceeds 90, the
Payment Term Multiplier for such Receivable shall be determined by calculating
the sum of (x) 1.44, and (y) 0.06, for each 5-day increment by which the Payment
Term Variable exceeds 90, it being understood that the same number shall apply
for all Payment Term Variables that fall within a five-day range.
"Payment Term Variable" shall mean, as calculated in each Monthly
Report as of the most recently ended Cut-Off Date, the quotient of:
(x) the sum of (1) the product of the Unpaid Balance of each
Receivable as of such Cut-Off Date times (2) the Payment Term with
respect to such Receivable; divided by
(y) the aggregate Unpaid Balance of all Receivables as of such
Cut-Off Date.
"Principal Payment Date" means (i) any date on which the Invested
Amount is to be reduced pursuant to Section 3.1 of the Certificate Purchase
Agreement, (ii) any date on which any prepayment is to be made pursuant to
Section 4.9, (iii) the end of each Interest Period in respect of the next
maturing LIBOR Tranche and/or CBR Tranche, in such order as the Agent shall
select so as to minimize "breakage costs," (iv) each Distribution Date falling
in an Early Amortization Period (beginning with the Distribution Date falling in
the Calculation Period after the Calculation Period in which the Early
Amortization Period begins) and (v) any Distribution Date falling on or after
the Expected Final Payment Date.
"Refinancing Date" is defined in Section 4.9.
"Required Purchasers" is defined in Section 9.9 of the Certificate
Purchase Agreement.
"Required Receivables" means, on any Business Day:
(a) So long as an Early Amortization Period has not commenced,
the result of the following formula:
IA + CCRR R
--------- X ---
(1 - ARR) NER
where:
ARR = the Applicable Reserve Ratio in effect for that Business Day;
CCRR = the Carrying Cost Receivables Reserve, as reported in the
Daily Report for that Business Day;
IA = the Invested Amount;
NER = the Net Eligible Receivables; and
R = the aggregate Unpaid Balance of Receivables held by the Trust.
9
14
(b) If an Early Amortization Period has commenced, the result
of the following formula:
AIA + ASA + UCCRR
where:
AIA = the Adjusted Invested Amount, which shall be the Invested
Amount as of the end of the Revolving Period, reduced (but
not below zero) by the amount of all Investor Write-Offs
(net of Investor Allocable Recoveries and Investor Allocable
Dilution Adjustments that have been applied to reinstate the
Invested Amount));
UCCRR = the Unfunded Carrying Cost Receivables Reserve on that
Business Day; and
ASA = the Available Subordinated Amount on that Business Day.
"Required Reserve Ratio" means, as calculated in each Monthly Report,
the Loss Reserve Ratio plus the Dilution Reserve Ratio.
"Required Series Holders" means the Required Purchasers.
"Revolving Period" means the period beginning on the Closing Date and
ending on the day before the first day of the Amortization Period or an Early
Amortization Period.
"Series Allocable Dilution Adjustments" means, for any ASA Measuring
Period, the product of the aggregate amount of payments pursuant to Sections 3.3
and 3.5 of the Purchase Agreement or pursuant to the Seller Guaranty received
during that ASA Measuring Period relating to Dilution that occurred prior to
that ASA Measuring Period, multiplied by the Series Loss Allocation Percentage
as of the beginning of that ASA Measuring Period.
"Series 1996-1" is defined in the preamble.
"Series 1996-1 Certificates" means any of the Series 1996-1
Certificates issued pursuant to this Supplement, each of which shall be
substantially in the form of Exhibit A.
"Specified Rating Agency" means S&P.
"Stated Amount" means as to any Certificate, the initial maximum
principal amount that may be required to be funded by the Holder of such
Certificate, as such amount may be reduced pursuant to Section 2.3 of the
Certificate Purchase Agreement.
"Test Date" means each of: (a) the Closing Date, (b) the Monday of each
calendar week, (c) the Refinancing Date, (d) the first day of the Early
Amortization Period, and (e) any other Business Day on which Servicer has
delivered (or is required to deliver) a Daily Report pursuant to the second
sentence of Section 4.4(a); and provided further that if the Monday of any
calendar week is not a Business Day, then the "Test Date" for such week shall be
the next Business Day. The "related" Test Date for any Test Period shall be the
Test Date that is the first day of such Test Period.
"Test Period" means:
(a) the period from (and including) the Closing Date to (but
excluding) the first Test Date thereafter, and
(b) each subsequent period from (and including) a Test Date to
(but excluding) the next Test Date.
10
15
"Tier-1 Obligor" means any Obligor that has (a) a commercial paper
rating from the Specified Rating Agency of at least "A-1+" (or its equivalent)
or (b) a senior actual or implied debt rating from the Specified Rating Agency
of at least "AAA" (or its equivalent); provided that if such Obligor has both a
commercial paper rating from the Specified Rating Agency and a senior actual or
implied debt rating from the Specified Rating Agency, such Obligor must have a
commercial paper rating from the Specified Rating Agency of at least "A-1+" (or
its equivalent) and a senior actual or implied debt rating from the Specified
Rating Agency of at least "AAA" (or its equivalent) to be a Tier-1 Obligor.
"Tier-2 Obligor" means any Obligor (other than a Tier-1 Obligor) that
has (a) a commercial paper rating from the Specified Rating Agency of at least
"A-1" (or its equivalent) or (b) a senior actual or implied debt rating from the
Specified Rating Agency of at least "AA-" (or its equivalent), provided that if
such Obligor has both a commercial paper rating from the Specified Rating Agency
and a senior actual or implied debt rating from the Specified Rating Agency,
such Obligor must have a commercial paper rating from the Specified Rating
Agency of at least "A-1" (or its equivalent) and a senior actual or implied debt
rating from the Specified Rating Agency of at least "AA-" (or its equivalent) to
be a Tier-2 Obligor.
"Tier-3 Obligor" means any Obligor (other than a Tier-1 Obligor or a
Tier-2 Obligor) that has (a) a commercial paper rating from the Specified Rating
Agency of at least "A-2" (or its equivalent) or (b) a senior actual or implied
debt rating from the Specified Rating Agency of at least "A-" (or its
equivalent), provided that if such Obligor has both a commercial paper rating
from the Specified Rating Agency and a senior actual or implied debt rating from
the Specified Rating Agency, such Obligor must have a commercial paper rating
from the Specified Rating Agency of at least "A-2" (or its equivalent) and a
senior actual or implied debt rating from the Specified Rating Agency of at
least "A-" (or its equivalent) to be a Tier-3 Obligor.
"Tier-4 Obligor" means any Obligor (other than a Tier-1 Obligor, a
Tier-2 Obligor or a Tier-3 Obligor) that has (a) a commercial paper rating from
the Specified Rating Agency of at least "A-3" (or its equivalent) or (b) a
senior actual or implied debt rating from the Specified Rating Agency of at
least "BBB-" (or its equivalent), provided that if such Obligor has both a
commercial paper rating from the Specified Rating Agency and a senior actual or
implied debt rating from the Specified Rating Agency, such Obligor must have a
commercial paper rating from the Specified Rating Agency of at least "A-3" (or
its equivalent) and a senior actual or implied debt rating from the Specified
Rating Agency of at least "BBB-" (or its equivalent) to be a Tier-4 Obligor.
"Tier-5 Obligor" means any Obligor other than a Tier-1 Obligor, a
Tier-2 Obligor, a Tier-3 Obligor or a Tier-4 Obligor.
"Tranche" means each of the CBR Tranche and the LIBOR Tranches.
"Transferor Indemnified Losses" is defined in Section 7.2.
"Transferor Indemnified Party" is defined in Section 7.2.
"Transferor Payment Percentage" means, on any Business Day, the
difference of 100% minus the Investor Allocation Percentage on that Business
Day.
"Unapplied Cash" means, on any Business Day, available funds received
in the Master Collection Account on that day that have not been applied as
Collections on a particular Receivable.
"Unfunded Carrying Cost Receivables Reserve" means, on any Business Day
falling in an Early Amortization Period, the difference (but not less than zero)
of (a) the Carrying Cost Receivables Reserve as of the Early Amortization
Calculation Date, minus (b) the aggregate Collections deposited into the
Carrying Cost Account during the portion of the Early Amortization Period up to
and including that Business Day.
11
16
"Unmatured Early Amortization Event" means an event or condition that,
upon the giving of notice or the passage of time, would become an Early
Amortization Event.
(d) for the purpose of this Series, after the date hereof, "Domestic
Person" will include Persons having a place of business in the Canadian
provinces of Alberta, British Columbia, Manitoba, Ontario or Quebec; provided
that such Persons shall cease to be Domestic Persons unless the Agent shall have
received (within thirty days after the date hereof) an opinion of counsel, in
form and substance satisfactory to the Agent, with respect to the creation and
perfection and protection of the interests of Transferor and the Trustee under
the laws of such province, to the extent such laws apply; provided further that
in any event the aggregate outstanding Unpaid Balance of Receivables owed by
Canadian residents and considered to be Eligible Receivables shall not exceed 5%
of the Net Eligible Receivables at any time.
SECTION I.2 Modification Condition. For so long as the Series 1996-1
Certificates remain outstanding, for purposes of the Transaction Documents the
definition of the term "Modification Condition" shall be as follows:
"Modification Condition" means, with respect to any action, that (i)
each Rating Agency has confirmed in writing that such action will not result in
a reduction or withdrawal of the rating of any outstanding Series or Purchased
Interest that was rated by such Rating Agency, and (ii) if any Series has not
been rated, the Trustee and the Required Series Holders for that Series shall
have consented in writing to such action.
SECTION I.3 Incorporation of Terms. The terms of the Pooling Agreement
are incorporated in this Supplement as if set forth in full herein. As
supplemented by this Supplement, the Pooling Agreement is in all respects
ratified and confirmed and both together shall be read, taken and construed as
one and the same agreement. If the terms of this Supplement and the terms of the
Pooling Agreement conflict, the terms of this Supplement shall control with
respect to the Series 1996-1 Certificates.
SECTION I.4 ▇▇▇▇ and Hold. A Receivable that: (x) satisfies the
requirements of the definition of "Eligible Receivable" set forth in Appendix A
to the Pooling Agreement, other than the requirement (set forth in clause (b) of
that definition) that the related goods have been shipped and (y) arises under
an arrangement that satisfies the definition of "▇▇▇▇ and Hold" in such Appendix
A, shall be an "Eligible Receivable" for purposes of this Supplement.
SECTION I.5 Agreed Upon Procedures. For purposes of this Supplement,
Exhibit D to the Pooling Agreement shall be amended to read as set forth in
Schedule I hereto.
ARTICLE II
DESIGNATION
SECTION II.1 Designation. There is hereby created a Series to be known
as the "Series 1996-1 Certificates." Subject to the conditions set forth in
Article III, Trustee shall authenticate and deliver the Series 1996-1
Certificates, to or upon the order of Transferor in an aggregate Stated Amount
equal to $120,000,000. Notwithstanding the terms of Section 6.1 of the Pooling
Agreement, the Series 1996-1 Certificates shall be in minimum denominations of
$2,000,000 and in integral multiples of $1,000,000 in excess of that amount. The
amount payable on any day by the Holders of such Certificates for the undivided
interests evidenced by the Certificates shall equal the Acquisition Amount.
The Series 1996-1 Certificates represent an undivided interest in the
portion of the Transferred Assets allocable to this Series, which undivided
interest (expressed as a percentage) shall equal the Investor Ownership
Percentage.
The Deferred Portion of the Acquisition Amount shall be subject to a
holdback and shall be paid to the extent (and only to the extent) Daily Series
Collections are not required to pay amounts described in clauses first
12
17
through fourth of Section 4.3 or Section 4.4 (as applicable), it being
understood that the Holders of Series 1996-1 Certificates shall not be liable to
pay any portion of the Deferred Portion not paid out of Daily Series
Collections.
ARTICLE III
SUBSTITUTE CERTIFICATE
SECTION III.1 Substitution of Certificatee. Concurrently with the
execution and delivery hereof, the holder of the Series 1996-1 Certificate
issued pursuant to the Original Supplement shall surrender it to the Trustee,
and the Trustee shall issue, authenticate and deliver to such holder (in
substitution for such surrendered certificate) a new Series 1996-1 Certificate,
substantially in the form of Exhibit A hereto and in the same maximum principal
amount as the certificate being surrendered.
ARTICLE IV
PAYMENTS AND ALLOCATIONS
SECTION IV.1 Interest; Additional Amounts. (a) Subject to Section 4.1
of the Certificate Purchase Agreement, Transferor may from time to time allocate
the outstanding principal amount under the Series 1996-1 Certificates to one CBR
Tranche and/or up to four LIBOR Tranches. Interest on each Tranche shall be
payable on the last day of each Interest Period therefor, except that interest
on the amount of any principal repaid on any other date shall be payable on the
date of the repayment. If any such day is not a Business Day, interest shall
instead be due on the next Business Day (or, if the next Business Day falls in
the next calendar month, then on the next preceding Business Day).
(b) Except as provided in clauses (d) and (e) below, interest on each
LIBOR Tranche shall accrue during any Interest Period therefor at a rate per
annum equal to the LIBOR Rate plus the Applicable Margin and shall be calculated
on the basis of actual days over a year of 360 days.
(c) Except as provided in clauses (d) and (e) below, interest on the
CBR Tranche shall accrue at a rate per annum equal to the Corporate Base Rate in
effect from time to time and shall be calculated on the basis of actual days
over a year of 365 or 366 days, as the case may be.
(d) Interest with respect to the Series 1996-1 Certificates not paid
when due will be due on the next Distribution Date or last day of the next
Interest Period with additional interest on the amount at 2% per annum above the
Corporate Base Rate to the extent permitted by law; provided, however, that
Transferor may direct any such overdue interest to be paid on any Business Day
prior to such next Distribution Date from funds on deposit in the Carrying Cost
Account.
(e) Following the occurrence of a Servicer Default, interest on each
Tranche shall accrue at a rate per annum equal to the Corporate Base Rate plus
2.0%.
(f) Additional Amounts shall also be payable with respect to the Series
1996-1 Certificates as specified in the Certificate Purchase Agreement and to
the extent (but only to the extent) that funds become available for such
Additional Amounts in accordance with Sections 4.2 and 4.3.
SECTION IV.2 Daily Calculations and Series Allocations. (a) On each
Test Date, the Servicer shall prepare and deliver to the Trustee and the Agent a
Daily Report substantially in the form of Exhibit B (or such other form as may
be satisfactory to the Servicer, the Trustee and the Agent). The Servicer shall
also deliver a Daily Report in such form to the Trustee and the Agent on any
other day for which the Agent has requested a Daily Report. The Agent shall not
so request a Daily Report unless an Early Amortization Event has occurred or the
Agent reasonably questions whether there has been a material change in the Base
Amount since the most recent Test Date.
13
18
(b) On each Business Day, the Servicer shall prepare and deliver to the
Trustee and the Agent a Cash Flow Report substantially in the form of Exhibit C
(or such other form as may be satisfactory to Servicer, Trustee and the Agent).
(c) No other Series or Purchased Interest shall be issued so long as
the Series 1996-1 Certificates are outstanding. As a consequence, the Series
Collection Allocation Percentage Series 1996-1 shall be 100%, and all funds
received in the Master Collection Account shall be allocated to Series 1996-1.
All such funds received in the Master Collection Account on any Business Day,
and any funds transferred on such day to the Master Collection Account from the
Equalization Account, are herein called the "Daily Series Collections" for such
day.
(d) On each Business Day, Trustee shall allocate Daily Series
Collections pursuant to Section 4.3 or 4.4 (as applicable) on the basis of the
most recently delivered Daily Report, as supplemented by the Cash Flow Report
(if any) for such day. Without limiting the foregoing, the parties shall assume
that the Base Amount on any day shall not be less than the Base Amount shown in
the most recent Daily Report. Notwithstanding such assumption, if on any
Business Day (as a result of the delivery of a subsequent Daily Report or
otherwise) the Agent determines that the Net Invested Amount exceeded the Base
Amount on any day when the Trustee remitted funds to the Transferor, then
Transferor shall immediately pay to Trustee, for deposit to the Equalization
Account, an amount equal to such excess. Amounts not paid when due pursuant to
the foregoing sentence shall bear interest at a rate of interest equal to 2% per
annum above the Corporate Base Rate to the extent permitted by law.
(e) The requirements of Section 3.2(f)(i) and Section 3.5(c) of the
Pooling Agreement shall be waived on each date on which a Daily Report is not
required to be delivered under this Section 4.2.
(f) The requirements of Section 5.1(l)(i) of the Purchase Agreement and
Section 6.1(k) of the Purchase Agreement shall be waived while the Series 1996-1
Certificates are outstanding.
(g) Nothing in this Section 4.2 shall modify the requirements of the
Transaction Documents regarding the preparation and delivery of Monthly Reports.
SECTION IV.3 Allocations of Daily Series Collections (Other Than in an
Early Amortization Period). On each Business Day (other than a Business Day
falling in an Early Amortization Period or after the Fully Funded Date),
Servicer shall allocate the aggregate amount of Daily Series Collections
required to fund the items described in priorities first through fourth below,
to the following purposes, in the priority indicated (and to the extent of Daily
Series Collections available):
first, to the Carrying Cost Account until the amount allocated
to the Carrying Cost Account equals the Carrying Cost Cash Required
Amount shown in the most recent Daily Report;
second, if Transferor shall have notified the Agent in
accordance with Section 3.1 of the Certificate Purchase Agreement that
it desires to reduce the Invested Amount or if the Amortization Period
has begun, to the Principal Funding Account until the funds on deposit
in that account equal the amount of such reduction or (during the
Amortization Period) the Invested Amount, provided that the amount
allocated pursuant to this priority second on any Business Day shall
not exceed the product of (x) the Investor Ownership Percentage,
multiplied by (y) the excess of the Daily Series Collections over the
amounts allocated on that Business Day pursuant to priority first;
third, if during the Revolving Period the Net Invested Amount
(as shown in the most recent Daily Report) is greater than the Base
Amount (as shown in the most recent Daily Report), to the Equalization
Account until the amount on deposit therein is sufficient to reduce the
Net Invested Amount to an amount equal to the Base Amount; and
14
19
fourth, to hold in the Master Collection Account the amount
necessary to pay on the next Distribution Date all Additional Amounts
payable to the Holders (as shown in the most recent Daily Report).
On such Business Day, Servicer shall allocate the remainder of
the Daily Series Collections to make current and/or deferred transfer
payments to Transferor in respect of the Transferor Certificate,
provided that Transferor may, from time to time, direct Servicer to
direct Trustee to hold all or part of the funds to be paid pursuant to
this sentence in the Master Collection Account to be applied as Daily
Series Collections on the following Business Day.
If, on any day, the amount of Collections that is then allocated to the
Carrying Cost Account exceeds the amount of Collections that is then required to
be allocated to the Carrying Cost Account, Servicer shall reallocate such
Collections on such day to one or more of the obligations described in
priorities second through fourth above, and in the last sentence of the
preceding paragraph, in the order of priority set forth therein.
In addition, if, on any day, funds on deposit in the Master Collection
Account and available for allocation under priority fourth are less than the
amount of the obligations described therein, then the available Collections
shall be allocated by Servicer to the holders of such obligations pro rata
according to the respective amounts of such obligations held by them.
On any Business Day falling after the Fully Funded Date, all Daily
Series Collections shall be paid to Transferor as current and/or deferred
transfer payments.
SECTION IV.4 Allocations of Daily Series Collections During an Early
Amortization Period. On each Business Day falling in an Early Amortization
Period and prior to or on the Fully Funded Date, Servicer shall allocate the
Daily Series Collections to the following purposes, in the priority indicated
(and to the extent of Daily Series Collections available):
first, to the Carrying Cost Account to the extent that the
balance therein is less than the amount of Current Carrying Costs (as
shown in the most recent Daily Report, but excluding any Servicing Fee
payable to any Avondale Person) payable on the Distribution Date
relating to the Calculation Period during which such Business Day
falls;
second, to the Principal Funding Account and to Transferor
(or, prior to the Holdback Account Termination Date, to the Holdback
Account) in the following amounts:
(a) the amount to be transferred to the Principal
Funding Account shall equal the product of (i) the Investor
Allocation Percentage (as shown in the most recent Daily
Report), multiplied by (ii) the excess of the Daily Series
Collections over the amount allocated on that Business Day
pursuant to priority first, provided that the aggregate amount
so deposited shall in no event exceed the lesser of (x) the
Invested Amount and (y) the Investor Ownership Percentage
times the aggregate Unpaid Balance of Receivables as of the
last day of the Revolving Period, in each case as shown in the
most recent Daily Report; and
(b) the amount to be transferred to Transferor (or,
prior to the Holdback Account Termination Date, to the
Holdback Account) shall equal the product of (i) the
Transferor Payment Percentage (as shown in the most recent
Daily Report), multiplied by (ii) the excess of the Daily
Series Collections over the amount allocated on that Business
Day pursuant to priority first;
third, to hold in the Master Collection Account the amount
necessary (as shown in the most recent Daily Report) to pay on the next
Distribution Date all Additional Amounts payable to the Holders;
15
20
fourth, to pay any Servicing Fee payable to any Avondale
Person on the Distribution Date relating to the Calculation Period
during which such Business Day falls; and
fifth, the balance to Transferor, provided that prior to the
Holdback Account Termination Date, amounts payable to Transferor
pursuant to this priority fifth shall be deposited into the Holdback
Account and held as provided below.
The "Holdback Account Termination Date" shall be the earlier to occur
of (i) the date that falls twelve months after the beginning of the Early
Amortization Period and (ii) the Fully Funded Date. If at any time prior to the
Holdback Account Termination Date, the amount of funds on deposit in the
Holdback Account exceeds the difference of (1) the Investor Repayment Amount
minus (2) the amount of funds then held in the Carrying Cost Account and the
Principal Funding Account that are available to pay the Investor Repayment
Amount, then the amount of such excess funds shall be released from the Holdback
Account and paid to Transferor as current and/or deferred transfer payments. On
each Test Date prior to the Holdback Account Termination Date, Servicer shall
calculate the sum of: (i) the aggregate Investor Allocable Dilution as to which
no Series Allocable Dilution Adjustments have been received and (ii) Additional
Amounts due and not paid. Such sum (or, if less, the aggregate amount of funds
in the Holdback Account) shall be transferred to the Master Collection Account
and applied to the items listed in the first paragraph of this Section as
priorities first through fifth, in that order (except that no such funds shall
be allocated to Transferor or the Holdback Account pursuant to priority second
and the amount allocable to the Principal Funding Account shall not be limited
by application of the Investor Allocation Percentage). On the Holdback Account
Termination Date, all remaining funds in the Holdback Account shall be paid to
Transferor.
If, on any day, funds on deposit in the Master Collection Account and
available for allocation under priority third are less than the amount of the
obligations described therein, then the available Collections shall be allocated
by Servicer to the holders of such obligations pro rata according to the
respective amounts of such obligations held by them.
On any Business Day falling after the Fully Funded Date, all Daily
Series Collections shall be paid to Transferor in respect of the Transferor
Certificate.
SECTION IV.5 Withdrawals from the Equalization Account. On any Business
Day during the Revolving Period on which Servicer delivers a Daily Report to the
Trustee and the Agent and no Early Amortization Event or Unmatured Early
Amortization Event exists, Servicer may instruct Trustee in writing to withdraw
funds from the Equalization Account and apply such funds as Daily Series
Collections, so long as the Net Invested Amount would not exceed the Base Amount
after giving effect to such transfer and application. On the first day of the
Amortization Period or an Early Amortization Period, Servicer shall instruct
Trustee to transfer the entire balance in the Equalization Account to the
Principal Funding Account.
SECTION IV. 6 Available Subordinated Amount. (a) If an Early
Amortization Period begins, Servicer shall promptly calculate the Available
Subordinated Amount as of the Early Amortization Calculation Date and report
such amount in the Daily Report for the first day in the Early Amortization
Period. Servicer shall also calculate the Available Subordinated Amount as of
each Cut-Off Date falling in the Early Amortization Period, such calculation to
be reflected in the related Monthly Report.
(b) The Available Subordinated Amount as of the Early Amortization
Calculation Date shall equal the product of (x) the Investor Allocation
Percentage, multiplied by (y) the result of:
(i) the product of the Unpaid Balance of Receivables held by
Trustee at the opening of business on the Early Amortization
Calculation Date, multiplied by the Series Collection Allocation
Percentage on that date; minus
16
21
(ii) the sum of (i) the lesser of (A) the Base Amount and (B)
the Net Invested Amount and (ii) the Carrying Cost Receivables Reserve
at the opening of business on the Early Amortization Calculation Date.
(c) The Available Subordinated Amount, as of any Cut-Off Date in the
Early Amortization Period, shall equal the result of:
(i) the Available Subordinated Amount as of the preceding
Cut-Off Date (or as of the Early Amortization Calculation Date, in the
case of the first Cut-Off Date falling in the Early Amortization
Period); minus
(ii) the Investor Allocable Loss Amount with respect to the
ASA Measuring Period ending on that Cut-Off Date; minus
(iii) any Investor Allocable Dilution with respect to the ASA
Measuring Period ending on that Cut-Off Date; plus
(iv) subject to Sections 4.7 and 4.8, the Investor Allocable
Recoveries and Investor Allocable Dilution Adjustments with respect to
the ASA Measuring Period ending on that Cut-Off Date.
(d) Notwithstanding the foregoing, in no event shall the Available
Subordinated Amount at any time be less than zero or greater than the initial
Available Subordinated Amount calculated pursuant to subsection (b).
SECTION IV.7 Write-Offs and Recoveries. (a) In each Monthly Report
required to be delivered during the Early Amortization Period, Servicer shall
calculate the Investor Write-Offs and the Investor Allocable Recoveries for the
most recently ended ASA Measuring Period.
(b) If the Investor Write-Offs calculated in any Monthly Report exceed
zero, the Invested Amount and the outstanding principal amount of the Series
1996-1 Certificates shall be reduced by the amount of the Investor Write-Offs
with effect from the related Distribution Date.
(c) If the Invested Amount has been reduced on account of any Investor
Write-Offs, then any Investor Allocable Recoveries with respect to any
Calculation Period ending after the reduction takes place shall be applied to
reinstate the Invested Amount and the outstanding principal amount of the Series
1996-1 Certificates, to the extent of such prior reductions that have not
previously been reinstated, with effect from the related Distribution Date. If
Investor Allocable Recoveries are so applied to reinstate the Invested Amount
and the outstanding principal amount of the Series 1996-1 Certificates on any
Distribution Date, then Investor Allocable Recoveries shall be applied to
increase the Available Subordinated Amount on the same Distribution Date only to
the extent of the excess, if any, of the Investor Allocable Recoveries, minus
the amount of Investor Allocable Recoveries previously so applied to reinstate
the Invested Amount.
SECTION IV.8 Certain Dilution in an Early Amortization Period. (a) In
each Monthly Report required to be delivered during the Early Amortization
Period, Servicer shall calculate the Investor Allocable Dilution and the Series
Allocable Dilution Adjustments for the most recently ended ASA Measuring Period.
(b) If the Investor Allocable Dilution calculated in any Monthly Report
is greater than zero, and there are funds in the Holdback Account, then those
funds (up to an amount equal to the amount of the Investor Allocable Dilution),
shall be allocated (i) first, in accordance with priority first of the first
paragraph of Section 4.4, (ii) second, to the Principal Funding Account (in
accordance with priority second of the first paragraph of Section 4.4), so long
as the aggregate amount on deposit therein does not exceed the Invested Amount
and (iii) third, in accordance with priorities third through fifth of the first
paragraph of Section 4.4, in that priority.
(c) If the Available Subordinated Amount or the Invested Amount has
been reduced on account of any Investor Allocable Dilution, then (i) any Series
Allocable Dilution Adjustments with respect to any Calculation
17
22
Period ending after the reduction takes place and (ii) any funds on deposit in
the Holdback Account (the "Investor Allocable Dilution Adjustments") shall be
allocated (x) first, to reinstate the Invested Amount and the outstanding
principal amount of the Series 1996-1 Certificates, and (y) second, to reinstate
the Available Subordinated Amount, in each case to the extent not previously
reinstated. Any amount so allocated on any day shall be allocated (i) first, in
accordance with priority first of Section 4.4, (ii) second, to the Principal
Funding Account, so long as the aggregate amount on deposit therein does not
exceed the Invested Amount and (iii) third, in accordance with priorities third
through fifth of the first paragraph of Section 4.4, in that priority.
SECTION IV.9 Defeasance. On any Business Day falling in the Revolving
Period (but with not less than three Business Days prior written notice from
Servicer to the Holders), Servicer may, upon instruction from Transferor, cause
the Series 1996-1 Certificates to be prepaid in full (but not in part) by
causing the Series Interest to be conveyed to one or more Persons (who may be
the holders of a new Series issued substantially contemporaneously with such
prepayment) for a cash purchase price in an amount equal to the sum of (a) the
Invested Amount, plus (b) to the extent not available in the Carrying Cost
Account, accrued and unpaid interest on the Series 1996-1 Certificates to the
day of such prepayment (the "Refinancing Date"), plus (c) to the extent not
available from funds set aside pursuant to priority fourth of Section 4.3, any
Additional Amounts owed with respect to the Series 1996-1 Certificates
(including any Additional Amounts arising as a result of such prepayment). No
such prepayment or conveyance shall, however, be permitted if as a result
thereof Transferor or any of its Affiliates would acquire such Series Interest
or the underlying Receivables. The purchase price shall be deposited in the
Principal Funding Account and shall be distributed to the Agent, for further
distribution to the Holders, on the Refinancing Date in accordance with the
terms of Section 5.2.
SECTION IV.10 Tax Opinion . If any Tax Opinion is required to be
delivered in connection with the Series 1996-1 Certificates, the term "Tax
Opinion" shall have the meaning specified below:
"Tax Opinion" means, with respect to any action, an Opinion of Counsel
to the effect that, for Federal income tax and state (New York, Alabama,
Georgia, and/or South Carolina, as applicable) income and franchise tax
purposes, (a) such action will not adversely affect the characterization of the
Investor Certificates of Series 1996-1 as debt or partnership interests, (b)
following such action the Trust would not be treated as an association (or
publicly traded partnership) taxable as a corporation, (c) such action would not
be treated as a taxable event to any Series 1996-1 Investor Certificateholder or
Certificate Owner.
ARTICLE V
DISTRIBUTIONS AND REPORTS
SECTION V.1 Distributions. On each Distribution Date and (with respect
to clause (b) below) each Principal Payment Date, other than a Distribution Date
that may be a Refinancing Date, Trustee shall, in accordance with instructions
set out in the applicable Daily Report, distribute to the Agent, for further
distribution among the Holders, the following amounts:
(a) accrued and unpaid interest on the Series 1996-1
Certificates, and any additional interest payable pursuant to Section
4.1, to the extent funds are available for such payment in the Carrying
Cost Account;
(b) on each Principal Payment Date, all funds deposited in the
Principal Funding Account on or prior to the most recent Cut-Off Date
(but in no event in excess of the Invested Amount) shall be distributed
in reduction of the Invested Amount;
(c) if, on the Expected Final Payment Date or any Distribution
Date falling in an Early Amortization Period, the funds on deposit in
the Carrying Cost Account (less any Servicing Fee payable on that day
to anyone other than a Related Person) will be equal to or greater than
the Invested Amount (after giving effect to the distribution required
by subsection (b)) and any then accrued and unpaid
18
23
Additional Amounts, then an amount equal to such remaining Invested
Amount and such Additional Amounts shall be withdrawn from the Carrying
Cost Account and distributed in reduction of the Invested Amount and
such Additional Amounts; and
(d) any Additional Amounts payable with respect to Series
1996-1 Certificates to the extent that funds have been allocated for
those Additional Amounts pursuant to priority fourth of Section 4.3 or
priority third of Section 4.4.
On each Distribution Date, Trustee shall also, in accordance with
instructions set out in the applicable Daily Report, distribute the Servicing
Fee to the Servicer to the extent that funds are available for that purpose in
the Carrying Cost Account.
On any Business Day, Trustee shall, in accordance with instructions set
out in the applicable Daily Report, distribute to the Agent, for further
distribution among the Holders, overdue interest payable pursuant to Section
4.1(d) on such Business Day, to the extent funds are available for such payment
in the Carrying Cost Account.
SECTION V.2 Special Distributions on the Refinancing Date. On the
Refinancing Date, Trustee shall, in accordance with instructions set out in the
applicable Daily Report, distribute to the Agent, for further distribution among
the Holders, the following amounts:
(a) all interest accrued on the Series 1996-1 Certificates
through the Refinancing Date, to the extent funds are available for
such payment in the Carrying Cost Account or have been deposited in the
Principal Funding Account pursuant to Section 4.9;
(b) all funds deposited in the Principal Funding Account
pursuant to Section 4.9; and
(c) any Additional Amounts payable with respect to the Series
1996-1 Certificates to the extent that funds for those Additional
Amounts have been allocated pursuant to priority fourth of Section 4.3
or priority third of Section 4.4 or deposited in the Principal Funding
Account pursuant to Section 4.9.
Any amounts payable to the Holders of Certificates pursuant to this
Section shall be paid to the Agent, and the Agent shall distribute such amounts
to such Holders.
SECTION V.3 Payments in Respect of Transferor Certificate. On each day
on which funds are allocated pursuant to Sections 4.3 and 4.4 (and subject to
the terms of Section 4.4 relating to the Holdback Account), Trustee shall, in
accordance with instructions set out in the applicable Daily Report or Cash Flow
Report, distribute to Transferor, in respect of the Transferor Certificate, all
funds allocated for that purpose in accordance with those Sections. In addition,
after the Invested Amount has been repaid in full and all interest and
Additional Amounts owed to the Holders have been paid, any additional funds on
deposit in the Carrying Cost Account, the Equalization Account or the Principal
Funding Account shall similarly be paid to Transferor, in respect of the
Transferor Certificate.
SECTION V.4 Monthly Reports. Each Monthly Report shall be substantially
in the applicable form set out in Exhibit D or in such other form as may be
satisfactory to Servicer and Trustee and consistent with the terms of this
Supplement and the Pooling Agreement. Copies of each Monthly Report shall be
provided free of charge by the Servicer to the Holders of Series 1996-1
Certificates.
SECTION V.5 Annual Tax Information. On or before February 15 of each
calendar year, beginning with calendar year 1997, Servicer, on behalf of
Trustee, shall furnish or cause to be furnished to each Person who at any time
during the preceding calendar year was a Holder the information for the
preceding calendar year, or the applicable portion thereof during which the
Person was a Holder, as is required to be provided by an issuer of indebtedness
under the Internal Revenue Code to the holders of the issuer's indebtedness and
such other customary
19
24
information as is necessary to enable such Holders to prepare their federal
income tax returns. Servicer's obligations under the preceding sentence shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Agent to the specified Persons pursuant to
the Pooling Agreement or any requirements of the Internal Revenue Code as from
time to time in effect. Notwithstanding anything to the contrary contained in
this Agreement, Trustee shall, to the extent required by applicable law, from
time to time furnish to the appropriate Persons a Form 1099-INT within the
period required by applicable law.
SECTION V.6 Periodic Perfection Certificate. On or before March 30 of
each calendar year, beginning with calendar year 1997, Servicer, on behalf of
Trustee, shall furnish or cause to be furnished to Trustee and the Agent an
Officer's Certificate setting forth a list of all changes in (a) the name,
identity or corporate structure of Transferor or any Seller and (b) the chief
executive office of Transferor or any Seller (or in the place of business of
Transferor or any Seller that has only one place of business) that have taken
place since the date of the Officer's Certificate most recently delivered
pursuant to this Section 5.6 (or since the Closing Date, in the case of the
first such Officer's Certificate to be delivered), or indicating that no such
events have taken place, and stating in each case what filings of UCC financing
statements, or amendments thereto, relating to the Transaction Documents have
been made in connection with each such event (identifying the date and filing
index numbers for each). Any financing statement identified in such an Officer's
Certificate delivered to Trustee shall be deemed to have been identified to
Trustee in writing for purposes of subsection 11.1(c)(v) of the Pooling
Agreement. If any such new UCC financing statements are filed, Servicer shall
cause Trustee to be named as secured party (in the case of any filing against
Transferor) or assignee of the secured party (in the case of any filing against
a Seller). If any "Event of Default" under (and as defined in) the Avondale
Credit Agreement occurs, the Servicer shall deliver an Officer's Certificate
covering the matters described above to the Trustee and the Agent not later than
10 days after the occurrence of such event, and, for so long as any such event
remains outstanding, the Servicer shall deliver such an Officer's Certificate on
the last Business Day of each of March, June, September and December.
ARTICLE VI
EARLY AMORTIZATION EVENTS
SECTION VI.1 Early Amortization Events. Each of the following shall
constitute an "Early Amortization Event":
(a) any of the following shall occur;
(i) failure on the part of Transferor or Servicer to
make any payment of the principal amount of or any interest on
the Series 1996-1 Certificates when due, or to make any
deposit required by the terms of any Transaction Document
within one Business Day after the date the deposit is required
to be made, or to make any other payment required by the terms
of any Transaction Document on or before three Business Days
after the date such payment is required to be made; or
(ii) failure on the part of Servicer to deliver a
Daily Report within the time period required under Section
3.5(c) of the Pooling Agreement, and continuance of such
failure for three Business Days; provided that if the Servicer
shall have estimated the Base Amount in the Daily Report for
one or more days due to adverse circumstances beyond its
control (as described in, and subject to the limitations in,
such Section 3.5(c)), then the three day grace period
specified in this clause (ii) shall be reduced by the number
of days on which the Base Amount was estimated (of, if such
number of days exceeds three, shall be reduced to zero); or
(iii) failure on the part of the Servicer to deliver
a Monthly Report within the time required under Section 3.5(d)
of the Pooling Agreement and the applicable Supplement or PI
Agreement, and continuance of such failure for three Business
Days; or
20
25
(iv) failure on the part of Transferor, Guarantor,
Servicer or any Seller duly to observe or perform in any
material respect Section 6.1(f), 6.1(h), 6.1(i), 6.1(j),
6.3(a), 6.3(b), 6.3(c), 6.3(e) or 6.3(f) of the Purchase
Agreement or Section 7.2(c), 7.2(d)(i), 7.2(d)(ii),
7.2(d)(iii), 7.2(e), 7.2(f), 7.2(h), 7.2(i), 7.2(j), 7.2(k) or
7.2(m) of the Pooling Agreement, which failure continues
unremedied for a period of five Business Days; or
(v) failure on the part of Transferor, Guarantor,
Servicer or any Seller duly to observe or perform any other
covenant or agreement set forth in any Transaction Document,
which failure continues unremedied for a period of 30 days
after the date on which written notice thereof, requiring the
same to be cured, shall have been given to Transferor by
Trustee or to Transferor and Trustee by the Agent; or
(vi) Guarantor gives notice of termination of the
Seller Guaranty;
(b) any representation or warranty made by a Seller in
subsection 5.1(d), 5.1(k), 5.1(n), 5.1(o) or 5.1(r) of the Purchase
Agreement or by Transferor in subsection 2.3(a)(i), 2.3(a)(iii) or
7.1(i) of the Pooling Agreement shall prove to have been incorrect in
any material respect when made, and continues to be incorrect in any
material respect for a period of five Business Days, or any other
representation or warranty made by Transferor, Servicer or any Seller
in any Transaction Document shall prove to have been incorrect in any
material respect when made, and continues to be incorrect in any
material respect for a period of 30 days after the date on which
written notice thereof, requiring the same to be cured, shall have been
given to Transferor by Trustee or to Transferor and Trustee by the
Agent; provided that a mistake in the representation of a Receivable as
an Eligible Receivable or the breach of a representation and warranty
with respect to a Receivable shall not constitute an Early Amortization
Event unless and until the applicable Seller has failed to make the
cash payments (if any) owed under Sections 3.1 and 3.5 of the Purchase
Agreement in respect of such mistake or breach (it being understood
that certain of such mistakes or breaches may result in a non-cash
adjustment under the Purchase Agreement);
(c) a Bankruptcy Event shall occur with respect to Transferor,
Servicer, Guarantor or any Seller, or Transferor shall become unable,
for any reason, to transfer Receivables or other Transferred Assets to
the Trust in accordance with the provisions of this Agreement and the
Pooling Agreement; provided that if, at the time any event that would,
with the passage of time, become a Bankruptcy Event occurs as a result
of a bankruptcy proceeding being filed against Transferor or any
Seller, then, on and after the day on which the bankruptcy proceeding
is filed until the earlier to occur of the dismissal of the proceeding
and the Early Amortization Commencement Date, Transferor shall not
purchase Receivables and Related Assets from the affected Seller or, if
Transferor is the subject of the proceeding, transfer Receivables and
Related Transferred Assets to the Trust;
(d) the Trust or Transferor shall be required to be registered
as an "investment company" under and within the meaning of the
Investment Company Act of 1940, as amended;
(e) the Net Invested Amount exceeds the Base Amount for a
period of three or more consecutive Business Days starting with the
delivery of the related Daily Report (or, if a Daily Report has not
been delivered when required hereunder, starting with the date on which
such delivery was required);
(f) a Servicer Default shall have occurred and shall not have
been remedied;
(g) Avondale shall cease to own, directly or indirectly, 100%
of the issued and outstanding capital stock of Transferor;
(h) the Internal Revenue Service or the PBGC files one or more
Tax or ERISA Liens against the assets of Transferor or any Seller
(including Receivables) and either (x) such Tax or ERISA Liens remain
in effect for fifteen days, or (y) the aggregate amount secured thereby
exceeds $1,000,000;
21
26
(i) the cessation of, or the failure to create, a valid
first-priority perfected and/or protected ownership or security
interest in favor of Trustee in the Receivables or the rights of
Transferor under the Purchase Agreement;
(j) the Invested Amount is not paid in full on the Expected
Final Payment Date;
(k) Transferor's net worth (as calculated in accordance with
GAAP, except that all obligations owed to Transferor from an Avondale
Person shall not constitute assets or equity for purposes of such
calculation) shall be less than 22% of the aggregate Unpaid Balance of
the Receivables at any time and such condition continues for five or
more consecutive Business Days;
(l) any foreclosure or similar proceeding in respect of any
adverse claim on any Buyer Note or the Transferor's common stock shall
have been commenced; or title to any Buyer Note or Transferor's common
stock shall pass to the holders of such adverse claim, it being
understood that the grant of a security interest in the stock of
Transferor or any Buyer Note to a creditor of a Seller that is party to
an Intercreditor Agreement shall not be an Early Amortization Event;
(m) the Intercreditor Provisions shall be amended, waived,
modified or breached without the prior written consent of the Agent;
(n) the average of the Aged Receivables Ratio for any three
consecutive Calculation Periods shall be greater than 5.5%; or
(o) the average of the Dilution Ratio for any three
consecutive Calculation Periods shall be greater than 4.25%.
SECTION VI.2 Early Amortization Period. Upon the occurrence and
continuance of any Early Amortization Event described in subsection 6.1(c), an
Early Amortization Period shall commence without any notice or other action on
the part of Trustee or the Series 1996-1 Certificateholders, immediately upon
the occurrence of such Early Amortization Event. Upon the occurrence and
continuance of any other Early Amortization Event, after the applicable grace
period, if any, set forth in such subsection, Trustee may (and, at the direction
of the Required Series Holders, shall) by notice then given in writing to
Transferor and Servicer, declare that an Early Amortization Period has commenced
as of the date of Transferor's receipt of the notice.
ARTICLE VII
OPTIONAL REDEMPTION; INDEMNITIES
SECTION VII.1 Optional Redemption of Investor Interests. On any
Distribution Date occurring during an Early Amortization Period with respect to
the Series 1996-1 Certificates on or after the date that the Invested Amount is
reduced to ten percent or less of the sum of the initial Stated Amounts for the
Certificates, Transferor shall have the option to redeem the Series 1996-1
Series Interest. The purchase price will be an amount equal to the Invested
Amount plus accrued and unpaid interest (and accrued and unpaid interest with
respect to interest that was due but not paid on any prior Distribution Date)
through the day preceding the Distribution Date at the Certificate Rate
applicable to the Series plus the aggregate amount by which the Invested Amount
has been reduced on account of Investor Write-Offs and Investor Allocable
Dilution (and not subsequently reinstated) plus any Additional Amounts then due.
Upon the tender of the outstanding Certificates of the Series by the Holders,
Trustee shall distribute the amounts, together with all funds on deposit in the
Principal Funding Account that are allocable to the Series 1996-1 Certificates,
to the Holders of the Series on the next Distribution Date in repayment of the
principal amount and accrued and unpaid interest owing to the Holders. Following
any redemption, the Holders of the Series shall have no further rights with
respect to the Receivables. In the event that Transferor fails for any reason to
deposit in the Principal Funding Account the aggregate purchase price for the
Series 1996-1
22
27
Certificates, payments shall continue to be made to the Holders of the Series in
accordance with the terms of the Pooling Agreement and this Supplement.
SECTION VII.2 Indemnification by Transferor. (a) Transferor hereby
agrees to indemnify the Trust, Trustee, each Holder of a Series 1996-1
Certificate and each of the successors, permitted transferees and assigns of any
such Person and all officers, directors, shareholders, controlling Persons,
employees, affiliates and agents of any of the foregoing (each of the foregoing
Persons individually being called a "Transferor Indemnified Party"), forthwith
on demand, from and against any and all damages, losses, claims (whether on
account of settlements or otherwise, and whether or not the relevant Indemnified
Party is a party to any action or proceeding that gives rise to any Transferor
Indemnified Losses (as defined below)), judgments, liabilities and related
reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) (all of the foregoing collectively being called "Transferor
Indemnified Losses") awarded against or incurred by any of them that arise out
of or relate to this Agreement, any other Transaction Document or any of the
transactions contemplated herein or therein or the use of proceeds herefrom or
therefrom (including without limitation any Transferor Indemnified Losses (i)
relating to any Adverse Claim, without regard to whether such Adverse Claim was
a Permitted Adverse Claim, or (ii) arising from any failure to make any filing
or obtain any consent as required by the Federal Assignment of Claims Act with
respect to any Receivables).
Notwithstanding the foregoing, in no event shall any Transferor
Indemnified Party be indemnified for any Transferor Indemnified Losses (i)
resulting from gross negligence or willful misconduct on the part of such
Transferor Indemnified Party (or the gross negligence or willful misconduct on
the part of any of its officers, directors, employees, affiliates or agents), or
the breach by such Transferor Indemnified Party of its obligations under any
Transaction Document, (ii) to the extent they include Transferor Indemnified
Losses in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Transferor for the amount of any Receivable or
Related Transferred Asset not paid by the related Obligor (it being understood
and agreed that the Transferor's liability for the return of funds distributed
to it on a day when the Net Invested Amount exceeded the Base Amount shall not
constitute credit recourse), (iii) to the extent they are or result from lost
profits, (iv) to the extent they are or result from taxes (including interest
and penalties thereon) asserted with respect to (A) distributions on the Series
1996-1 Certificates, (B) franchise or withholding taxes imposed on any
Transferor Indemnified Party other than the Trust or Trustee in its capacity as
Trustee, or (C) federal or other income taxes on or measured by the net income
of such Transferor Indemnified Party (other than franchise taxes imposed on the
Trust) and costs and expenses in defending against the same, or (v) to the
extent they constitute consequential, special or punitive damages.
If for any reason the indemnification provided in this section is
unavailable to a Transferor Indemnified Party or is insufficient to hold a
Transferor Indemnified Party harmless, then Transferor shall contribute to the
amount paid by such Transferor Indemnified Party as a result of any loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by such Transferor Indemnified Party on the one hand
and Transferor on the other hand, but also the relative fault (if any) of such
Transferor Indemnified Party and Transferor and any other relevant equitable
considerations.
Notwithstanding any provisions contained in any Transaction Document to
the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to Article IV of this Supplement. Any amount which Transferor does not
pay pursuant to the operation of the preceding sentence shall not constitute a
claim (as defined in ss.101 of the Bankruptcy Code) against or corporate
obligation of Transferor for any such insufficiency.
(b) If any action, suit, proceeding or investigation is commenced, as
to which a Transferor Indemnified Party proposes to demand indemnification, it
shall notify the Transferor with reasonable promptness; provided, however, that
any failure by such Transferor Indemnified Party to notify the Transferor shall
not relieve the Transferor from its obligations hereunder (except to the extent
that the Transferor is prejudiced by such failure to promptly notify). The
Transferor shall be entitled to assume the defense of any such action, suit,
proceeding or investigation, including the employment of counsel reasonably
satisfactory to the Transferor Indemnified Party.
23
28
The Transferor Indemnified Party shall have the right to counsel of its own
choice to represent it, but the fees and expenses of such counsel shall be at
the expense of such Transferor Indemnified Party unless: (a) the Transferor has
failed promptly to assume the defense and employ counsel reasonably satisfactory
to the Transferor Indemnified Party in accordance with the preceding sentence,
or (b) the Transferor Indemnified Party shall have been advised by counsel that
there exists an actual or potential conflict of interests among the Transferor
and such Transferor Indemnified Party, including situations in which one or more
legal defenses may be available to such Transferor Indemnified Party that are
inconsistent with those available to the Transferor; provided, however, that the
Transferor shall not, in connection with any one such action or proceeding or
separate but substantially similar actions or proceedings arising out of the
same general allegations, be liable for fees and expenses of more than one
separate firm of attorneys (other than local counsel) at any time for all
Transferor Indemnified Parties; and such counsel shall, to the extent consistent
with its professional responsibilities, cooperate with the Transferor and any
counsel designated by the Transferor.
The Transferor further agrees that it will not, without the prior
written consent of the applicable Transferor Indemnified Party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Transferor Indemnified Party is an actual
or potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
Transferor Indemnified Party from all liability and obligations arising
therefrom.
SECTION VII.3 Indemnification by Servicer. Servicer agrees that each
Agent and each Holder of a Series 1996-1 Certificate (or an interest therein)
shall be an "Indemnified Party" for purposes of the Pooling Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION VIII.1 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
SECTION VIII.2 Counterparts. This Supplement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
SECTION VIII.3 Severability of Provisions. If any one or more of the
provisions or terms of this Supplement shall for any reason whatsoever be held
invalid, then the unenforceable provision(s) or term(s) shall be deemed
severable from the remaining provisions or terms of this Supplement and shall in
no way affect the validity or enforceability of the other provisions or terms of
this Supplement.
SECTION VIII.4 Amendment, Waiver, Etc. This Supplement may be amended,
modified or waived from time to time by Servicer, Transferor and Trustee with
the consent of the Required Series Holders or the Holders of Series 1996-1
Certificates (as applicable) to the extent permitted by Section 13.1 of the
Pooling Agreement and Section 10.1 of the Certificate Purchase Agreement, and
the terms of that section shall apply to any such amendment, modification or
waiver.
SECTION VIII.5 Trustee. Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplement
or for or in respect of the recitals contained herein, all of which recitals are
made solely by Transferor and Servicer.
SECTION VIII.6 Instructions in Writing. All instructions given by
Servicer to Trustee pursuant to this Supplement shall be in writing, and may be
included in a Daily Report, Cash Flow Report or Monthly Report.
24
29
SECTION VIII.7 Rule 144A. So long as any of the Series 1996-1
Certificates are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, Transferor shall, unless it becomes subject to and
complies with the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, or rule 12g3-2(b) thereunder,
provide to any Holder of such restricted securities, or to any prospective
purchaser of such restricted securities designated by a Holder, upon the request
of such Holder or prospective purchaser, any information required to be provided
by Rule 144A(d)(4) under the Act.
SECTION VIII.8 Original Supplement. This Supplement amends and restates
the Original Supplement in its entirety. References to the Original Supplement
in any other agreement or document shall be deemed to constitute a reference to
this Supplement.
25
30
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
AVONDALE RECEIVABLES COMPANY,
as Transferor
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
Title: Assistant Secretary
---------------------------------
AVONDALE ▇▇▇▇▇, INC., as Servicer
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
By: Vice President, Treasurer and
-------------------------------------
Assistant Secretary
----------------------------------------
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: Assistant Vice President
---------------------------------