<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended March 31, 1997
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Commission File Number 1-1511
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FEDERAL-MOGUL CORPORATION
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(Exact name of Registrant as specified in its charter)
Michigan 38-0533580
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(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
26555 Northwestern Highway, Southfield, Michigan 48034
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(Address of principal executive offices) (Zip Code)
(810) 354-7700
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common Stock - 35,181,205 shares as of May 8, 1997
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<TABLE>
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
<CAPTION>
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
Three Months Ended
March 31,
--------------------
1997 1996
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(Millions of Dollars,
Except Per Share Amounts)
<S> <C> <C>
Net sales $ 485.6 $ 521.9
Cost of products sold 373.5 409.7
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Gross margin 112.1 112.2
Selling, general and administrative expenses 78.4 83.0
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Operating earnings 33.7 29.2
Other income (expense):
Interest expense (9.8) (11.2)
Interest income .7 .8
International currency exchange losses (.1) (.9)
Other, net (2.0) (.9)
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Earnings Before Income Taxes 22.5 17.0
Income taxes 8.6 6.4
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Net Earnings 13.9 10.6
Preferred stock dividends, net of tax benefits 2.1 2.2
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Net Earnings Available for Common Shares $ 11.8 $ 8.4
======= =======
Earnings Per Common Share
Primary $ .33 $ .24
======= =======
Fully Diluted $ .32 $ .23
======= =======
See accompanying notes.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
1997 1996
------------ ------------
(Millions of Dollars)
<S>
Assets
<C> <C>
Current Assets:
Cash and equivalents $ 33.0 $ 33.1
Accounts receivable 255.5 231.3
Inventories 385.7 417.0
Prepaid expenses and income tax benefits 83.0 81.5
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Total Current Assets 757.2 762.9
Property, Plant and Equipment 325.3 350.3
Goodwill 149.3 154.0
Other Intangible Assets 61.9 63.1
Business Investments and Other Assets 126.0 124.9
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Total Assets $1,419.7 $1,455.2
======= =======
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 258.7 $ 280.1
Accounts payable 134.1 142.7
Accrued compensation 37.1 37.6
Other accrued liabilities 209.7 203.4
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Total Current Liabilities 639.6 663.8
Long-Term Debt 206.9 209.6
Postemployment Benefits 199.8 207.1
Other Accrued Liabilities 63.2 56.2
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Total Liabilities 1,109.5 1,136.7
Shareholders' Equity:
Series D preferred stock 76.6 76.6
Series C ESOP preferred stock 51.5 53.1
Unearned ESOP compensation (28.4) (28.4)
Common stock 175.3 175.7
Additional paid-in capital 282.9 283.5
Retained earnings (186.0) (193.0)
Currency translation and other (61.7) (49.0)
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Total Shareholders' Equity 310.2 318.5
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Total Liabilities and Shareholders' Equity $1,419.7 $1,455.2
======= =======
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
--------------------
1997 1996
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(Millions of Dollars)
<S> <C> <C>
Cash Provided From (Used By) Operating Activities
Net earnings $ 13.9 $ 10.6
Adjustments to reconcile net earnings to net cash
provided from (used by) operating activities
Depreciation and amortization 14.0 15.5
Deferred income taxes 4.6 (.7)
Postemployment benefits (.4) 1.4
Increase in accounts receivable (38.0) (15.9)
Decrease in inventories 17.1 3.5
Decrease in accounts payable (2.4) (4.8)
Increase in current liabilities and other 28.3 22.5
Payments against restructuring
and reengineering reserves (9.0) (7.0)
----- -----
Net Cash Provided From Operating Activities 28.1 25.1
Cash Provided From (Used By) Investing Activities
Expenditures for property, plant and equipment (8.4) (13.0)
Proceeds from sale of business investments 10.4 -
Purchase of business investments - (.3)
Other - .3
----- -----
Net Cash Provided From (Used By) Investing Activities 2.0 (13.0)
Cash Provided From (Used By) Financing Activities
Proceeds from issuance of common stock .8 .4
Net increase (decrease) in debt (23.3) 13.8
Dividends (5.7) (5.7)
Other (2.0) (.9)
----- -----
Net Cash Provided From (Used By) Financing Activities (30.2) 7.6
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Increase (Decrease) in Cash and Equivalents (.1) 19.7
Cash and Equivalents at Beginning of Period 33.1 19.4
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Cash and Equivalents at End of Period $ 33.0 $ 39.1
===== =====
See accompanying notes.
</TABLE>
<PAGE> 5
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three-month period ending March 31, 1997 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1997.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the company's annual report on Form 10-K for
the year ended December 31, 1996.
2. EARNINGS PER COMMON SHARE
The computation of primary earnings per share is based on the weighted
average number of outstanding common shares during the period plus, when
their effect is dilutive, common stock equivalents consisting of certain
shares subject to stock options. Fully diluted earnings per share
additionally assumes the conversion of outstanding Series C ESOP and
Series D preferred stock and the contingent issuance of common stock to
satisfy the Series C ESOP preferred stock redemption price guarantee when
their effect is dilutive. The number of contingent shares used in the
fully diluted calculation is based on the market price of the common stock
on March 31 and the number of preferred shares held by the Employee Stock
Ownership Plan (ESOP) that were allocated to participants' accounts as of
March 31 of each of the respective years.
The primary weighted average number of common and equivalent shares
outstanding (in thousands) was 35,210 for the three-month period ended
March 31, 1997 and 35,066 for the three-month period ended March 31, 1996.
The fully diluted weighted average number of common and equivalent shares
outstanding (in thousands) was 37,159 for the three-month period ended
March 31, 1997 and 37,464 for the three-month period ended March 31, 1996.
Net earnings used in the computations of primary earnings per share are
reduced by preferred stock dividend requirements. Net earnings used in
the computation of fully diluted earnings per share are reduced by amounts
representing the preferred stock dividends when their effect is antidilutive
and amounts representing the additional after-tax contribution that would be
necessary to meet ESOP debt service requirements under an assumed conversion
of the Series C ESOP preferred stock when their effect is dilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share".
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997. The adoption of SFAS No. 128 would not impact the
results of the earnings per share calculation for the three months ended
March 31, 1997 and 1996 and is not expected to impact the results of the
earnings per share calculation for the year ended December 31, 1997.
<PAGE> 6
3. SALE OF HEAVY WALL BEARING DIVISION
In January 1997, the company completed the previously announced sale of its
heavy wall bearing division in Germany and Brazil to Zollern BHW Gleitlager
GmbH, a member of Fuerstlich Hohenzollernsche Werke Laucherthal GmbH Co.
The company received $10.4 million, which approximated the carrying value
of the assets. The results of operations of the heavy wall bearing division
have been included in the company's consolidated statements of earnings
through the date of the sale.
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1996
Sales for the first quarter of 1997 were $485.6 million compared to $521.9
million in the same 1996 quarter. North American original equipment sales
decreased 2.3 percent to $110.5 million from $112.8 million in the first
quarter of 1996. Excluding the effect of the divestiture of the U.S. ball
bearing and the electrical product operations, sales increased 15.4 percent
from the first quarter of 1996. International original equipment sales
decreased 25.1 percent to $44.2 million from $59.0 million in the same 1996
quarter. The sales decrease was primarily attributable to the sale of the
company's heavy wall bearing operations in early January 1997, combined with
unfavorable exchange rates. Excluding the effect of the divestiture and
the unfavorable exchange rates, sales increased 7.0 percent due to new
projects awarded by Volvo, SKF, Renault, Bertrand Farre and Saab. North
American replacement sales decreased 4.6 percent to $186.2 million, from
$195.2 million in the first quarter of 1996. The decrease was primarily
due to continued industry softness in the automotive aftermarket.
International replacement sales decreased 6.6 percent to $144.7 million
from $154.9 million in the first quarter of 1996. The decrease in sales
was primarily attributable to unfavorable currency fluctuations.
The company's operating earnings increased $4.5 million to $33.7 million
compared to the first quarter of 1996. The operating margin increased from
5.6 percent in the first quarter of 1996 to 6.9 percent in the first
quarter of 1997. The company attributes this increase to an increased
focus on the company's cost structure and productivity improvements in its
businesses.
Pretax earnings increased to $22.5 million for the first quarter of 1997
compared to $17.0 million for the same 1996 quarter. The increase is
attributable to higher operating earnings and reduced interest expense
due to lower levels of debt. Net earnings were $13.9 million or $.32 per
common share on a fully diluted basis in the first quarter of 1997 compared
to $10.6 million or $.23 per common share in the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was favorably impacted by a decrease in inventory of
$17.1 million in the first quarter of 1997 compared to $3.5 million
decrease in the first quarter of 1996. The increase in the inventory
reduction is due primarily to a decrease in lead times and lot sizes and
an increase in fill rates in the North American replacement business.
Accounts receivable increased $38.0 million in the first quarter of 1997
compared to an increase of $15.9 million in the first quarter of 1996.
The increase is attributable to the timing of customer payments partially
offset by a decrease in past due accounts receivable. The company expects
that available cash and existing short-term lines of credit will be
sufficient to meet its normal operating requirements.
Net cash used for investing activities consists primarily of capital
expenditures for property, plant and equipment to implement process
improvements, information technology and new product introduction offset
by proceeds from the sale of the heavy wall bearing division in Germany
and Brazil.
<PAGE> 8
PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
10.1* Federal-Mogul Corporation 1997 Long-Term Incentive Plan,
as adopted by the shareholders of the company on April 23,
1997. (Filed herewith.)
10.2* Executive Severance Agreement, dated as of February 21,
1997, between the company and Thomas W. VanHimbergen.
(Filed herewith.)
10.3 Third Amendment, dated as of January 13, 1997, to
Revolving Credit and Competitive Advance Facility
Agreement, dated as of June 30, 1994, among the
company, various banks, and The Chase Manhattan Bank
(formerly Chemical Bank), as Administrative Agent.
(Filed herewith.)
10.4 Form of Amended and Restated Pooling and Servicing
Agreement ("Pooling and Servicing Agreement") among
Federal-Mogul Funding Corporation ("FMFC"), as Seller,
the company, as Servicer, and The Chase Manhattan Bank,
as trustee. (Filed herewith.)
10.5** Form of Series 1997-1 Supplement to the Pooling and
Servicing Agreement. (Filed herewith.)
10.6 Form of Amended and Restated Receivables Purchase
Agreement between the company and FMFC. (Filed herewith.)
10.7 Form of Certificate Purchase Agreement among FMFC as
Seller, Falcon Asset Securitization Corporation, as
Purchaser, The Liquidity Providers Named Therein, as
Liquidity Providers, and The First National Bank of
Chicago, as Program Agent. (Filed herewith.)
11.1 Statement Re: Computation of Per Share Earnings.
(Filed herewith.)
---------------------
*Denotes management contract of compensatory plan or
arrangement.
**Confidential treatment has been requested for portions
of this exhibit.
The company will furnish upon request any exhibit described
above upon payment of the company's reasonable expenses for
furnishing such exhibit.
(b) Reports on Form 8-K:
During the first quarter of 1997, the company filed one Current
Report on Form 8-K, as follows:
Current Report on Form 8-K, dated as of February 6, 1997,
reporting under Item 5 thereof, a Press Release of the company
on February 6, 1997 relating to the company's restructuring
plan, special charge and 1996 financial results.
<PAGE> 9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FEDERAL-MOGUL CORPORATION
By: (Thomas W. Ryan)
---------------------------
THOMAS W. RYAN
Senior Vice President and
Chief Financial Officer
FEDERAL-MOGUL CORPORATION
By: (Kenneth P. Slaby)
---------------------------
KENNETH P. SLABY
Vice President and Controller and
Chief Accounting Officer
Dated: May 14, 1997
<PAGE> 10
EXHIBIT INDEX
-------------
S-K Item 601 No. Document
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10.1 Federal-Mogul Corporation 1997 Long-Term Incentive Plan,
as adopted by the shareholders of the company on April 23,
1997.
10.2 Executive Severance Agreement, dated as of February 21,
1997, between the company and Thomas W. VanHimbergen.
10.3 Third Amendment, dated as of January 13, 1997, to
Revolving Credit and Competitive Advance Facility
Agreement, dated as of June 30, 1994, among the company,
various banks, and the Chase Manhattan Bank (formerly
Chemical Bank), as Administrative Agent.
10.4 Form of Amended and Restated Pooling and Servicing
Agreement ("Pooling and Servicing Agreement") among
Federal-Mogul Funding Corporation ("FMFC"), as Seller,
the company, as Servicer, and The Chase Manhattan Bank,
as trustee.
10.5 Form of Series 1997-1 Supplement to the Pooling and
Servicing Agreement.
10.6 Form of Amended and Restated Receivables Purchase
Agreement between the company and FMFC.
10.7 Form of Certificate Purchase Agreement among FMFC as
Seller, Falcon Asset Securitization Corporation, as
Purchaser, The Liquidity Providers Named Therein, as
Liquidity Providers, and The First National Bank of
Chicago, as Program Agent.
11.1 Statement Re: Computation of Per Share Earnings.
<PAGE> 1
FEDERAL-MOGUL CORPORATION 1997 LONG TERM INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to assist the Corporation and its
subsidiaries in attracting, retaining and motivating officers and
employees and to provide the Corporation and its subsidiaries with
a stock plan providing incentives more directly linked to the
profitability of the Corporation's businesses and increases in
shareholder value.
For purposes of the Plan, the following terms are defined as set
forth below:
a. "Affiliate" means a corporation or other entity controlled
by the Corporation and designated by the Committee from time to
time as such.
b. "Award" means a Stock Appreciation Right, Stock Option,
Restricted Stock or Performance Unit.
c. "Award Cycle" shall mean a period of consecutive fiscal years
or portions thereof designated by the Committee over which Awards
are to be earned or are to vest.
d. "Board" means the Board of Directors of the Corporation.
e. "Cause" means (1) conviction of a participant for committing
a felony under federal law or the law of the state in which such
action occurred, (2) dishonesty in the course of fulfilling a
participant's employment duties or (3) willful and deliberate
failure on the part of a participant to perform employment duties
in any material respect, or such other events as shall be
determined by the Committee. The Committee shall have the sole
discretion to determine whether "Cause" exists, and its
determination shall be final.
f. "Change of Control" and "Change in Control Price" have the
meanings set forth in Sections 9(b) and (c), respectively.
g. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
h. "Commission" means the Securities and Exchange Commission or
any successor agency.
i. "Committee" means the Committee, as defined in Section 2.
<PAGE> 2
j. "Common Stock" means the common stock of the Corporation.
k. "Corporation" means Federal-Mogul Corporation, a Michigan
corporation.
l. "Covered Employee" means a participant designated prior to the
grant of shares of Restricted Stock or Performance Units by the
Committee who is or may be a "covered employee" within the
meaning of Section 162(m)(3) of the Code in the year in which
Restricted Stock or Performance Units are expected to be taxable to
such participant.
m. "Disability" means permanent and total disability as
determined under procedures established by the Committee for
purposes of the Plan.
n. "Early Retirement" means retirement from active employment
with the Corporation, a subsidiary or an Affiliate pursuant to the
early retirement provisions of the applicable pension plan of such
employer.
o. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
p. "Fair Market Value" means, except as provided in Section 5(j)
and 6 (b) (ii) (2), as of any given date, the mean between the
highest and lowest reported sales prices of the Common Stock on the
New York Stock Exchange Composite Tape or, if not listed on such
exchange, on any other national securities exchange on which the
Common Stock is listed or on NASDAQ. If there is no regular public
trading market for such Common Stock, the Fair Market Value of the
Common Stock shall be determined by the Committee in good faith.
q. "Incentive Stock Option" means any Stock Option designated as,
and qualified as, an "Incentive Stock Option" within the meaning of
Section 422 of the Code.
r. "Nonqualified Stock Option" means any Stock Option that is not
an Incentive Stock Option.
s. "Non-Employee Director" means a member of the Board who
qualifies as a Non-Employee Director as defined in Rule 16b-3(b)(3),
as promulgated by the Commission under the Exchange Act,
or any successor definition adopted by the Commission.
t. "Normal Retirement" means retirement from active employment
with the Corporation, a subsidiary or an Affiliate at or after age
65.
<PAGE> 3
u. "Performance Goals" means the performance goals established
by the Committee prior to the grant of Restricted Stock or
Performance Units that are based on the attainment of one or any
combination of the following: Specified levels of earnings per
share from continuing operations, operating income, revenues,
return on assets, return on equity, return on invested capital,
shareholder value, economic value added, shareholder return
(measured in terms of stock price appreciation) and/or total
shareholder return (measured in terms of stock price appreciation
and/or dividend growth), achievement of cost control, production
targets, or the price of the Common Stock, fixed on a company-wide
basis or with reference to the subsidiary, business unit, division
or department of the Corporation for or within which the
participant is primarily employed, and that are intended to qualify
under Section 162(m)(4)(C) of the Code. Such Performance Goals also
may be based upon attaining specified levels of performance under
one or more of the measures described above relative to the
performance of other corporations. Such Performance Goals shall be
set by the Committee within the time period prescribed by Section
162(m) of the Code and related regulations.
v. "Performance Units" means an award made pursuant to Section 8.
w. "Plan" means the Federal-Mogul Corporation 1997 Long Term
Incentive Plan, as set forth herein and as hereinafter amended from
time to time.
x. "Restricted Stock" means an award granted under Section 7.
y. "Retirement" means Normal or Early Retirement.
z. "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as amended from
time to time.
aa. "Stock Appreciation Right" means a right granted under
Section 6.
bb. "Stock Option" means an option granted under Section 5.
cc. "Termination of Employment" means the termination of the
participant's employment with the Corporation and any subsidiary or
Affiliate. A participant employed by a subsidiary or an Affiliate
shall also be deemed to incur a Termination of Employment if the
subsidiary or Affiliate ceases to be such a subsidiary or an
Affiliate, as the case may be, and the participant does not
immediately thereafter become an employee of the Corporation or
another subsidiary or Affiliate. Temporary absences from employment
because of illness, vacation or leave of absence and transfers
among the Corporation and its subsidiaries and Affiliates shall not
be considered Terminations of Employment.
In addition, certain other terms used herein have definitions given
to them in the first place in which they are used.
<PAGE> 4
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee or
such other committee of the Board as the Board may from time to
time designate (the "Committee"), which shall be composed of not
less than two Non-Employee Directors, each of whom shall be
required to be an "outside director" for purposes of Section
162(m)(4) of the Code, and shall be appointed by and serve at the
pleasure of the Board.
The Committee shall have plenary authority to grant Awards pursuant
to the terms of the Plan to officers and employees of the
Corporation and its subsidiaries and Affiliates.
Among other things, the Committee shall have the authority, subject
to the terms of the Plan:
(a) To select the officers and employees to whom Awards may from
time to time be granted;
(b) Determine whether and to what extent Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Restricted
Stock and Performance Units or any combination thereof are to be
granted hereunder;
(c) Determine the number of shares of Common Stock to be covered
by each Award granted hereunder;
(d) Determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price (subject
to Section 5(a)), any vesting condition, restriction or limitation
(which may be related to the performance of the participant, the
Corporation or any subsidiary or Affiliate) and any vesting
acceleration or forfeiture waiver regarding any Award and the
shares of Common Stock relating thereto, based on such factors as
the Committee shall determine;
(e) Modify, amend or adjust the terms and conditions of any Award,
at any time or from time to time, including but not limited to
Performance Goals; provided however, that the Committee may not
adjust upwards the amount payable to a designated Covered Employee
with respect to a particular award upon the satisfaction of
applicable Performance Goals;
(f) Determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award shall be
deferred; and
<PAGE> 5
(g) Determine under what circumstances and/or in what proportions
an Award may be settled in cash or Common Stock under Sections 5(j)
and 8(b)(i).
The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the
Plan as it shall from time to time deem advisable, to interpret the
terms and provisions of the Plan and any Award issued under the
Plan (and any agreement relating thereto) and to otherwise
supervise the administration of the Plan.
The Committee may act only by a majority of its members then in
office, except that the members thereof may (i) delegate to an
officer of the Corporation the authority to make decisions pursuant
to paragraphs (c), (f), (g), (h) and (i) of Section 5 (provided
that no such delegation may be made that would cause any Award or
transaction under the Plan to cease to be exempt from Section 16(b)
of the Exchange Act or cause any Award or payment made in respect
thereof to be "applicable employee remuneration" under Section
162(m)(4)(A) of the Code) and (ii) authorize any one or more of
their number or any officer of the Corporation to execute and
deliver documents on behalf of the Committee.
Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to
any Award shall be made in the sole discretion of the Committee or
such delegate at the time of the grant of the Award or, unless in
contravention of any express term of the Plan, at any time
thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of the
Plan shall be final and binding on all persons, including the
Corporation and Plan participants.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
The total number of shares of Common Stock reserved and available
for grant under the Plan shall be 1,300,000, no more than 130,000
of which shares shall be granted as Awards of Restricted Stock. No
participant may be granted Awards covering in excess of 350,000
shares of Common Stock over the life of the Plan, including Awards
that expire or terminate unexercised. Shares subject to an Award
under the Plan may be authorized and unissued shares or may be
treasury shares.
Any shares subject to an Award under the Plan, which Award for any
reason expires or is terminated unexercised as to such shares,
shall, subject to the provisions of the previous paragraph that may
restrict their reissuance to a particular participant, again be
available for the grant of other Awards under the Plan.
<PAGE> 6
Subject to Section 7(c)(iv), if any shares of Restricted Stock are
forfeited or if any Stock Option (and related Stock Appreciation
Right, if any) terminates without being exercised, or if any Stock
Appreciation Right is exercised for cash, shares subject to such
Awards shall, subject to the provisions of the first paragraph of
this section that may restrict their distribution to a particular
participant, again be available for distribution in connection with
Awards under the Plan.
In the event of any change in corporate capitalization, such as a
stock split or a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other
distribution of stock or property of the Corporation, any
reorganization (whether or not such reorganization comes within the
definition of such term in Section 368 of the Code) or any partial
or complete liquidation of the Corporation, the Committee or Board
may make such substitution or adjustments in the aggregate number
and kind of shares reserved for issuance under the Plan, in the
number, kind and option price of shares subject to outstanding
Stock Options and Stock Appreciation Rights, in the number and kind
of shares subject to other outstanding Awards granted under the
Plan and/or such other equitable substitution or adjustments as it
may determine to be appropriate in its sole discretion; provided
however, that the number of shares subject to any Award shall
always be a whole number. Such adjusted option price shall also be
used to determine the amount payable by the Corporation upon the
exercise of any Stock Appreciation Right associated with any Stock
Option.
SECTION 4. ELIGIBILITY
Officers and employees of the Corporation, its subsidiaries and
Affiliates who are responsible for or contribute to the
management,growth and profitability of the business of the
Corporation, its subsidiaries and Affiliates are eligible to be
granted Awards under the Plan. No grant shall be made under this
Plan to a director who is not an officer or a salaried employee of
the Corporation, its subsidiaries or Affiliates.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types, Incentive Stock
Options and Nonqualified Stock Options. Any Stock Option granted
under the Plan shall be in such form as the Committee may from time
to time approve.
<PAGE> 7
The Committee shall have the authority to grant any optionee
Incentive Stock Options, Nonqualified Stock Options or both types
of Stock Options (in each case with or without Stock Appreciation
Rights); provided however, that grants hereunder are subject to the
aggregate limit on grants to individual participants set forth in
Section 3. Incentive Stock Options may be granted only to employees
of the Corporation and its subsidiaries (within the meaning of
Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so
designated does not qualify as an Incentive Stock Option, it shall
constitute a Nonqualified Stock Option.
Stock Options shall be evidenced by option agreements, the terms
and provisions of which may differ. An option agreement shall
indicate on its face whether it is intended to be an agreement for
an Incentive Stock Option or a Nonqualified Stock Option. The grant
of a Stock Option shall occur on the date on which the Committee by
resolution selects an individual to be a participant in any grant
of a Stock Option, determines the number of shares of Common Stock
to be subject to such Stock Option to be granted to such individual
and specifies the terms and provisions of the Stock Option. The
Corporation shall notify a participant of any grant of a Stock
Option, and a written option agreement or agreements shall be duly
executed and delivered by the Corporation to the participant. Such
agreement or agreements shall become effective upon execution by
the Corporation and the participant.
Anything in the Plan to the contrary notwithstanding, no term of
the Plan relating to Incentive Stock Options shall be interpreted,
amended or altered nor shall any discretion or authority granted
under the Plan be exercised so as to disqualify the Plan under
Section 422 of the Code or, without the consent of the optionee
affected, to disqualify any Incentive Stock Option under said
Section 422.
Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional
terms and conditions as the Committee shall deem desirable:
(a)Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the
Committee and set forth in the option agreement, but shall not be
less than the Fair Market Value of the Common Stock subject to the
Stock Option on the date of grant.
(b)Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more
than 10 years after the date on which the Stock Option is granted.
<PAGE> 8
(c) Exercisability. Except as otherwise provided herein, Stock
Options shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Committee.
If the Committee provides that any Stock Option is exercisable only
in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on such
factors as the Committee may determine. In addition, the Committee
may at any time accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section
5, Stock Options may be exercised, in whole or in part, at any time
during the option term by giving written notice of exercise to the
Corporation specifying the number of shares of Common Stock subject
to the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of
the purchase price by certified or bank check or such other
instrument as the Corporation may accept. If approved by the
Committee, payment, in full or in part, may also be made in the
form of unrestricted Common Stock already owned by the optionee
(based on the Fair Market Value of the Common Stock on the date the
Stock Option is exercised) and which has been held by the optionee
for at least 6 months; provided however, that, in the case of an
Incentive Stock Option the right to make a payment in the form of
already owned shares of Common Stock may be authorized only at the
time the Stock Option is granted.
In the discretion of the Committee, payment for any
shares subject to a Stock Option may also be made by delivering a
properly executed exercise notice to the Corporation, together with
a copy of irrevocable instructions to a broker to deliver promptly
to the Corporation the amount of sale or loan proceeds to pay the
purchase price, and, if requested, by the amount of any federal,
state, local or foreign withholding taxes. To facilitate the
foregoing, the Corporation may enter into agreements for
coordinated procedures with one or more brokerage firms.
In addition, in the discretion of the Committee, payment
for any shares subject to a Stock Option may also be made by
instructing the Committee to withhold a number of such shares
having a Fair Market Value on the date of exercise equal to the
aggregate exercise price of such Stock Option.
No shares of Common Stock shall be issued until full
payment therefor has been made. An optionee shall have all of the
rights of a shareholder of the Corporation holding the class or
series of Common Stock that is subject to such Stock Option
(including, if applicable, the right to vote the shares and the
right to receive dividends), when the optionee has given written
notice of exercise, has paid in full for such shares and, if
requested, has given the representation described in Section 12(a).
<PAGE> 9
(e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws
of descent and distribution; or (ii) in the case of a Nonqualified
Stock Option, pursuant to (a) a qualified domestic relations order
(as defined in the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder)
or (b) a gift to such optionee's children, whether directly or
indirectly or by means of a trust or partnership or otherwise, if
expressly permitted under the applicable option agreement. All
Stock Options shall be exercisable, subject to the terms of this
Plan, during the optionee's lifetime, only by the optionee or by
the guardian or legal representative of the optionee or, in the
case of a Nonqualified Stock Option, its alternative payee pursuant
to such qualified domestic relations order or the recipient of a
gift permitted under the applicable option agreement, it being
understood that the terms "holder" and "optionee" include the
guardian and legal representative of the optionee named in the
option agreement and any person to whom an option is transferred by
will or the laws of descent and distribution or, in the case of a
Nonqualified Stock Option, pursuant to a qualified domestic
relations order or a gift permitted under the applicable option
agreement.
(f) Termination by Death. Unless otherwise determined by the
Committee,if an optionee's employment terminates by reason of
death, any Stock Option held by such optionee may thereafter be
exercised in full, whether or not then exercisable, or on such
accelerated basis as the Committee may determine, for a period of
3 years (or such other period as the Committee may specify in the
option agreement) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever
period is the shorter.
(g) Termination by Reason of Disability. Unless otherwise
determined by the Committee, if an optionee's employment terminates
by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was
exercisable at the time of termination, or on such accelerated
basis as the Committee may determine, for a period of 3 years (or
such shorter period as the Committee may specify in the option
agreement) from the date of such termination of employment or until
the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided however, that if the optionee dies
within such period, any unexercised Stock Option held by such
optionee shall, notwithstanding the expiration of such period,
continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 1 year from the
date of such death or until the expiration of the stated term of such
Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Disability, if an Incentive
Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Nonqualified Stock Option.
<PAGE> 10
(h) Termination by Reason of Retirement. Unless otherwise
determined by the Committee, if an optionee's employment terminates
by reason of Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was
exercisable at the time of such Retirement, or on such accelerated
accelerated basis as Committee may determine, for a period of 5
years (or such shorter period as the Committee may specify in the
option agreement) from the date of such termination of employment
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided however, that if the
optionee dies within such period, any unexercised Stock Option held
by such optionee shall, notwithstanding the expiration of such
period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months from the
date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive
Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Nonqualified Stock
Option.
(i) Other Termination. Unless otherwise determined by the
Committee: (A) If an optionee incurs a Termination of Employment
for Cause, all Stock Options held by such optionee shall thereupon
terminate; and (B) If an optionee incurs a Termination of
Employment for any reason other than death, Disability or
Retirement or for Cause, any Stock Option held by such optionee, to
the extent then exercisable, or on such accelerated basis as the
Committee may determine, may be exercised for the lesser of 3
months from the date of such Termination of Employment or the
balance of such Stock Option's term; provided however, that if the
optionee dies within such 3-month period, any unexercised Stock
Option held by such optionee shall, notwithstanding the expiration
of such 3-month period, continue to be exercisable to the extent to
which it was exercisable at the time of death for a period of 12
months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
Notwithstanding the foregoing, if an optionee incurs a Termination
of Employment at or after a Change in Control (as defined Section
9(b)), other than by reason of death, Disability or Retirement, any
Stock Option held by such optionee shall be exercisable for the
lesser of (1) 6 months and 1 day from the date of such Termination
of Employment, and (2) the balance of such Stock Option's term. In
the event of Termination of Employment, if an Incentive Stock
Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock
Option will thereafter be treated as a Nonqualified Stock Option.
<PAGE> 11
(j) Cashing Out of Stock Option. Upon receipt of written notice
of exercise, the Committee may elect to cash out all or part of the
portion of the shares of Common Stock for which a Stock Option is
being exercised by paying the optionee an amount, in cash or Common
Stock, equal to the excess of the Fair Market Value of the Common
Stock over the option price times the number of shares of Common
Stock for which the Option is being exercised on the effective date
of such cash-out.
(k) Change in Control Cash-Out. Notwithstanding any other
provision of the Plan, during the 60-day period from and after
a Change in Control (the "Exercise Period"), unless the
Committee shall determine otherwise at the time of grant, an
optionee shall have the right, whether or not the Stock Option
is fully exercisable and in lieu of the payment of the exercise
price for the shares of Common Stock being purchased under the
Stock Option and by giving notice to the Corporation, to elect
(within the Exercise Period) to surrender all or part of the
Stock Option to the Corporation and to receive cash, within
30 days of such notice, in an amount equal to the amount by
which the Change in Control Price per share of the Common
Stock on the date of such election shall exceed the exercise
price per share of Common Stock under the Stock Option (the
"Spread") multiplied by the number of shares of Common Stock
granted under the Stock Option as to which the right granted
under this Section 5 (k) shall have been exercised.
(l) Notwithstanding anything in the Plan to the contrary,
no Stock Option shall be reissued or repriced.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option granted
Plan. In the case of a Nonqualified Stock Option, such rights may
be granted either at or after the time of grant of such Stock
Option. In the case of an Incentive Stock Option, such rights may
be granted only at the time of grant of such Stock Option. A Stock
Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an
optionee in accordance with Section 6(b) by surrendering
the applicable portion of the related Stock Option in
accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner
prescribed in Section 6(b). Stock Options which have been
so surrendered shall no longer be exercisable to the
extent the related Stock Appreciation Rights have been
exercised.
<PAGE> 12
(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions as shall be determined by the
Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to
which they relate are exercisable in accordance with the provisions
Section 5 and this Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash, shares of
Common Stock or both, equal in value to the excess of the Fair
Market Value of one share of Common Stock over the option price per
share specified in the related Stock Option multiplied by the
number of shares in respect of which the Stock Appreciation Right
shall have been exercised, with the Committee having the right to
determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance
with Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right
is related shall be deemed to have been exercised for the purpose
of the limitation set forth in Section 3 on the number of shares of
Common Stock to be issued under the Plan, but only to the extent of
the number of shares covered by the Stock Appreciation Right at the
time of exercise based on the value of the Stock Appreciation Right
at such time.
SECTION 7. RESTRICTED STOCK
(a) Administration. Shares of Restricted Stock may be awarded
either alone or in addition to other Awards granted under the Plan.
The Committee shall determine the officers and employees to whom
and the time or times at which grants of Restricted Stock will be
awarded, the number of shares to be awarded to any participant
(subject to the aggregate limit on grants to individual
participants set forth in Section 3), the conditions for vesting,
the time or times within which such Awards may be subject to
forfeiture and any other terms and conditions of the Awards, in
addition to those contained in Section 7(c).
<PAGE> 13
The Committee may, prior to grant, condition vesting of
Restricted Stock upon the attainment of Performance Goals
Goals. The Committee may, in addition to requiring
satisfaction of Performance Goals, condition vesting upon
the continued service of the participant. The provisions
of Restricted Stock Awards (including the applicable
Performance Goals) need not be the same with respect
to each recipient. All Performance Goals applicable to
Awards of Restricted Stock shall be approved by the
Committee in writing as required by Section 162(m) of the
Code and the rules and regulations thereunder in order
for the value of the Restricted Stock delivered pursuant
to such Award to be deductible.
(b) Awards and Certificates. Shares of Restricted Stock shall
be evidenced in such manner as the Committee may deem appropriate,
including book-entry registration or issuance of one or more stock
certificates. Any certificate issued in respect of shares of
Restricted Stock shall be registered in the name of such
participant and shall bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Award,
substantially in the following form:
"THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES
OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS
(INCLUDING FORFEITURE) OF FEDERAL-MOGUL CORPORATION 1997 LONG TERM
INCENTIVE PLAN AND A RESTRICTED STOCK AGREEMENT. COPIES OF SUCH
PLAN AND AGREEMENT ARE ON FILE AT THE OFFICES OF THE SECRETARY OF
FEDERAL-MOGUL CORPORATION, 26555 NORTHWESTERN HIGHWAY, SOUTHFIELD,
MICHIGAN."
The Committee may require that the certificates evidencing such
shares be held in custody by the Corporation until the restrictions
thereon shall have lapsed and that, as a condition of any Award of
Restricted Stock, the participant shall have delivered a stock
power delivered a stock power, endorsed in blank, relating to the
Common Stock covered by such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be
subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the
Restricted Stock Agreement referred to in Section 7(c)(vi), during
the period, if any, set by the Committee, commencing with the date
of such Award for which such participant's continued service is
required (the "Restriction Period"), and until the later of (i) the
expiration of the Restriction Period and (ii) the date the
applicable Performance Goals (if any) are satisfied, the
participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares of Restricted Stock; provided,
that the foregoing shall not prevent a participant from pledging
Restricted Stock as security for a loan, the sole purpose of which
is to provide funds to pay the option price for Stock Options.
Within these limits, the Committee may provide for the lapse of
<PAGE> 14
restrictions based upon period of service in installments or
otherwise and may accelerate or waive, in whole or in part,
restrictions based upon period of service or upon performance;
provided however, that in the case of Restricted Stock subject to
Performance Goals granted to a participant who is a Covered
Employee, the applicable Performance Goals have been satisfied.
(ii) Except as provided in this paragraph (ii) and Section
7(c)(i) and the Restricted Stock Agreement, the participant shall
have, with respect to the shares of Restricted Stock, all of the
rights of a shareholder of the Corporation holding the class or
series of Common Stock that is the subject of the Restricted Stock,
including, if applicable, the right to vote the shares and the
right to receive any cash dividends. If so determined by the
Committee in the applicable Restricted Stock Agreement and subject
to Section 12(e) of the Plan, (1) cash dividends on the class or
series of Common Stock that is the subject of the Restricted Stock
Award shall be automatically deferred and reinvested in additional
Restricted Stock, held subject to vesting of the underlying
Restricted Stock, or held subject to meeting Performance Goals
applicable only to dividends, and (2) dividends payable in Common
Stock shall be paid in the form of Restricted Stock of the same
class as the Common Stock with which such dividend was paid, held
subject to vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to dividends.
(iii) Except to the extent otherwise provided in the
applicable Restricted Stock Agreement and Sections 7(c)(i),
7(c)(iv) and 9 (a)(ii), upon a participant's Termination of
Employment for any reason during the Restriction Period or before
the applicable Performance Goals are satisfied, all shares still
subject to restriction shall be forfeited by the participant.
(iv) Except to the extent otherwise provided in Section
9(a)(ii), in the event that a participant retires or such
participant's employment is involuntarily terminated (other than
for Cause), the Committee shall have the discretion to waive, in
whole or in part, any or all remaining restrictions (other than, in
the case of Restricted Stock with respect to which a participant is
a Covered Employee, satisfaction of any applicable Performance
Goals unless the participant's employment is terminated by reason
of death or Disability) with respect to any or all of such
participant's shares of Restricted Stock.
(v) If and when any applicable Performance Goals are
satisfied and the Restriction Period expires without a prior
forfeiture of the Restricted Stock, unlegended certificates for
such shares shall be delivered to the participant upon surrender of
the legended certificates.
(vi) Each Award shall be confirmed by, and be subject to,
the terms of a Restricted Stock Agreement.
<PAGE> 15
SECTION 8. PERFORMANCE UNITS
(a) Administration. Performance Units may be awarded either
alone or in addition to other Awards granted under the Plan. The
Committee shall determine the officers and employees to whom and
the time or times at which Performance Units shall be awarded, the
number of Performance Units to be awarded to any participant
(subject to the aggregate limit on grants to individual
participants set forth in Section 3), the duration of the Award
Cycle and any other terms and conditions of the Award, in addition
to those contained in Section 8(b).
The Committee may, prior to grant, condition the settlement of
Performance Units upon continued employment and/or the
attainment of Performance Goals. The provisions of such Awards
(including the applicable Performance Goals) need not be the
same with respect to each recipient. All Performance Goals
applicable to Awards of Performance Units awarded during an
Award Cycle shall be approved by the Committee in writing as
required by Section 162(m) of the Code and the rules and
regulations thereunder in order for the cash and/or property
delivered pursuant to such Award to be deductible.
(b) Terms and Conditions. Performance Units Awards shall be
subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the
Performance Units Agreement referred to in Section 8(b)(vi),
Performance Units may not be sold, assigned, transferred, pledged
or otherwise encumbered during the Award Cycle. At the expiration
of the Award Cycle, the Committee shall evaluate the Corporation's
performance in light of the Performance Goals for such Award to the
extent applicable, and shall determine the value of Performance
Units granted to the participant which have been earned, and the
Committee may then elect to deliver (1) a number of shares of
Common Stock equal to the value of Performance Units determined by
the Committee to have been earned, or (2) cash equal to the Fair
Market Value of such number of shares of Common Stock to the
participant. The maximum value of cash and property that any
participant may receive with respect to Performance Units in any
year is $3,000,000.
(ii) Except to the extent otherwise provided in the
applicable Performance Unit Agreement and Sections 8(b)(iii) and
9(a)(iii), upon a participant's Termination of Employment for any
reason during the Award Cycle or before any applicable Performance
Goals are satisfied, the rights to the shares still covered by the
Performance Units Award shall be forfeited by the participant.
(iii) Except to the extent otherwise provided in Section
9(a)(iii), in the event that a participant's employment is
terminated (other than for Cause) or in the event a participant
<PAGE> 16
retires, the Committee shall have the discretion to waive, in whole
or in part, any or all remaining payment limitations (other than,
in the case of Performance Units with respect to which a
participant participant is a Covered Employee, satisfaction of any
applicable Performance Goals unless the participant's employment is
terminated by reason of death or Disability) with respect to any or
all of such participant's Performance Units.
(iv) A participant may elect to further defer receipt of
the Performance Units payable under an Award (or an installment of
an Award) for a specified period or until a specified event,
subject in each case to the Committee's approval and to such terms
as are determined by the Committee (the "Elective Deferral
Period"). Subject to any exceptions adopted by the Committee, such
election must generally be made prior to commencement of the Award
Cycle for the Award (or for such installment of an Award).
(v) If and when any applicable Performance Goals are
satisfied and the Elective Deferral Period expires without a prior
forfeiture of the Performance Units, payment in accordance with
Section 8(b)(i) hereof shall be made to the participant.
(vi) Each Award shall be confirmed by, and be subject to,
the terms of a Performance Unit Agreement.
SECTION 9. CHANGE IN CONTROL PROVISIONS
(a) Impact of Event. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights
outstanding as of the date such Change in Control is determined to
have occurred, and which are not then exercisable and vested, shall
become fully exercisable and vested to the full extent of the
original grant.
(ii) The restrictions and deferral limitations applicable
to any Restricted Stock shall lapse, and such Restricted Stock
shall become free of all restrictions and become fully vested and
transferable to the full extent of the original grant.
(iii) All Performance Units shall be considered to be earned
and payable in full, and any deferral or other restriction shall
lapse and such Performance Units shall be settled in cash as
promptly as is practicable.
(b) Definition of Change in Control. For purposes of the Plan,
a "Change in Control" shall mean the happening of any of the
following events:
<PAGE> 17
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either
(1) the then outstanding shares of Common Stock of the Corporation
(the "Outstanding Corporation Common Stock") or (2) the combined
voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors
(the "Outstanding Corporation Voting Securities"); provided,
however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control; (1) any
acquisition directly from the Corporation, (2) any acquisition
by the Corporation, (3) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Corporation or
any corporation controlled by the Corporation or (4) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (1), (2) and (3) of subsection (iii) of this
Section 9(b); or
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) Approval of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the
assets of the Corporation (a "Business Combination"), in each case,
unless, following such Business Combination, (1) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of Common Stock and the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
<PAGE> 18
Outstanding Corporation Common Stock and Outstanding Corporation
Voting Securities, as the case may be, (2) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the
Business Combination and (3) at least a majority of the members of
the Board resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
(c) Change in Control Price. For purposes of the Plan, "Change
in Control Price" means the higher of (i) the highest reported
sales price, regular way, of a share of Common Stock in any
transaction reported on the New York Stock Exchange Composite Tape
or other national exchange on which such shares are listed or on
NASDAQ during the 60-day period prior to and including the date of
a Change in Control or (ii) if the Change in Control is the result
of a tender or exchange offer or a Corporate Transaction, the
highest price per share of Common Stock paid in such tender or
exchange offer or Corporate Transaction; provided however, that in
the case of Incentive Stock Options and Stock Appreciation Rights
relating to Incentive Stock Options, the Change in Control Price
shall be in all cases the Fair Market Value of the Common Stock on
the date such Incentive Stock Option or Stock Appreciation Right is
exercised. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities
or other noncash consideration, the value of such securities or
other noncash consideration shall be determined in the sole
discretion of the Board.
SECTION 10. TERM, AMENDMENT AND TERMINATION
The Plan will terminate 5 years after the effective date of the
Plan. Awards outstanding as of such date shall not be affected or
impaired by the termination of the Plan.
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration or discontinuation shall be made which would
(i) impair the rights of an optionee under a Stock Option or a
recipient of a Stock Appreciation Right, Restricted Stock Award or
Performance Unit Award therefore granted without the optionee's or
recipient's consent, except such an amendment made to cause the
Plan to qualify for the exemption provided by Rule 16b-3, or (ii)
<PAGE> 19
disqualify the Plan or any Award or transaction thereunder from the
exemption provided by Rule 16b-3. In addition, no such amendment
shall be made without the approval of the Corporation's
shareholders to the extent such approval is required by law or
agreement.
The Committee may amend the terms of any Stock Option or other
Award theretofore granted, prospectively or retroactively, but no
such amendment shall impair the rights of any holder without the
holder's consent except such an amendment made to cause the Plan,
or Award, transaction or payment made under the Plan, to qualify
for the exemption provided by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and
accounting rules as will as other developments, and to grant Awards
which qualify for beneficial treatment under such rules with
shareholder approval.
SECTION 11. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan shall constitute an
"unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided however, that
unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded"
status of the Plan.
SECTION 12. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or
receiving shares pursuant to an Award to represent to and agree
with the Corporation in writing that such person is acquiring the
shares without a view to the distribution thereof. The certificates
for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements
made pursuant thereto, the Corporation shall not be required
to issue or deliver any certificate or certificates for shares of
Common Stock under the Plan prior to fulfillment of all of the
following conditions:
(1) Listing or approval for listing upon notice of
issuance of such shares on the New York Stock Exchange, Inc., or
such other securities exchange as may at the time be the principal
market for the Common Stock;
<PAGE> 20
(2) Any registration or other qualification of such shares
of the Corporation under any state or federal law or regulation,
or maintaining in effect any such registration or other
qualification which the Committee shall, in its absolute discretion
upon the advice of counsel, deem necessary or advisable; and
(3) Obtaining any other consent, approval or permit from
any state or federal governmental agency which the Committee shall,
in its absolute discretion after receiving the advice of counsel,
determine to be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation
or any subsidiary or Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Neither adoption of the Plan nor the grant or any Award
thereunder shall confer upon any employee any right to continued
employment, nor shall it interfere in any way with the right of the
Corporation or any subsidiary or Affiliate to terminate the
employment of any employee at any time.
d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal
income tax purposes with respect to any Award under the Plan, the
participant shall pay to the Corporation, or make arrangements
satisfactory to the Corporation regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law
to be withheld with respect to such amount. Unless otherwise
determined by the Corporation, withholding obligations may be
settled with Common Stock, including Common Stock that is part of
the Award that gives rise to the withholding requirement. The
obligations of the Corporation under the Plan shall be conditioned
upon such payment or arrangements, and the Corporation and its
Affiliates shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the
participant. The Committee may establish such procedures as it
deems appropriate, including making irrevocable elections, for
settlement of withholding obligations with Common Stock.
(e) Reinvestment of dividends in additional Restricted Stock at
the time of any dividend payment shall only be permissible if
sufficient shares of Common Stock are available under Section 3 for
such reinvestment (taking into account then outstanding Stock
Options and other Awards).
(f) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom
any amounts payable in the event of the participant's death are to
paid or by whom any rights of the participant, after the
participant's death, may be exercised.
<PAGE> 21
(g) In the case of a grant of an Award to any employee of a
subsidiary of the Corporation, the Corporation may, if the
Committee so directs, issue or transfer the shares of Common Stock,
if any, covered by the Award to the subsidiary, for such lawful
consideration as the Committee may specify, upon the condition or
understanding that the subsidiary will transfer the shares of
Common Stock to the employee in accordance with the terms of the
Award specified by the Committee pursuant to the provisions of the
Plan.
(h) Notwithstanding the foregoing, if any right granted
pursuant to this Plan would make a Change in Control transaction
ineligible for pooling-of-interests accounting under APB No. 16
that but for the nature of such grant would otherwise be eligible
for such accounting treatment, the Committee shall have the ability
to substitute for any cash payable pursuant to such right Common
Stock with a Fair Market Value equal to the cash that would
otherwise be payable hereunder.
(i) Notwithstanding anything in this Plan to the contrary, no
transaction between a participant and the Corporation that requires
as a condition of its exemption from Section 16 of the Exchange Act
approval in the manner set forth in paragraph (d)(1) or (d)(2) of
Rule 16b-3 shall be consummated until such approval is obtained;
but failure to obtain such approval shall not cause a transaction
consummated to be void or voidable without the consent of such
participant nor shall it disqualify the transaction from the
benefit of any of available exemption from said Section 16.
(j) Unless the Committee shall otherwise determine or any
provision of the Plan shall otherwise specifically require, no
delivery of cash and/or property shall be made to any "covered
employee", as that term is defined in Section 162(m)(3) of the
Code, or any transferee to whom the right of such covered employee
to receive such cash and/or property has been transferred as the
result of a transfer permitted by the Plan, in any year to the
extent that the value such cash and/or property, together with the
value of all other cash and/or property delivered to such covered
employee or transferee in such year, shall not be deductible by the
Corporation as a result of the operation of Section 162(m) of the
Code. Any cash and/or property not deliverable because of the
application of the previous sentence shall be delivered in each
succeeding year to the extent that the value of such cash and/or
property, together with the value of all other cash and/or property
delivered to such covered employee or transferee in such year, is
so deductible, until such cash and/or property shall have been
delivered in full and such undelivered cash and/or property shall
bear interest from the date on which it was first payable, but for
the application of this Section (j), until paid in full, at a rate
of interest per annum to be determined by the Committee in
accordance with any rules adopted under said Section 162; for
purposes of computing such interest, the Committee shall determine
the value of such property, based upon (i) its Fair Market Value
<PAGE> 22
(adjusted as the Committee shall see fit, but at least quarterly)
if it is Common Stock or if its value is determinable with
reference to the price of Common Stock or (ii) as the Committee
shall determine in all other cases. This Section (j) shall cease to
have effect upon the occurrence of a Change in Control and the Plan
shall thereafter be construed as if this Section (j) had never been
part thereof, except in respect of the obligation of the
Corporation to pay interest pursuant to the provisions of this
Section (j); without limiting the generality of this sentence, (i)
all cash and/or property deliverable as a result of such occurrence
shall be delivered when due as if this Section (j) were not part of
the Plan and (ii) all cash and/or property deliverable, but for the
provisions of this Section (j), shall become deliverable upon such
Change in Control, together with interest accrued thereon.
(k) The Plan and all Awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of
the State of Delaware, without reference to principles of conflict
of laws.
SECTION 13. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date it is approved by at
least a majority of the outstanding shares of Common Stock of the
Corporation.
<PAGE> 1
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made as of
this 21st day of February, 1997, by and between Thomas W.
VanHimbergen ("Mr.VanHimbergen"), an individual, and Federal-Mogul
Corporation ("Federal-Mogul"), a Michigan corporation.
WHEREAS, Mr. VanHimbergen was serving as Senior Vice
President and Chief Financial Officer of Federal-Mogul;
WHEREAS, Federal-Mogul has decided to undertake
certain changes in its management structure; and
WHEREAS, in light of these changes, Mr. VanHimbergen
and Federal-Mogul desire an orderly separation of Mr. VanHimbergen's
employment with Federal-Mogul.
NOW, THEREFORE, in consideration of the covenants
undertaken in this Agreement, and for other good and valuable
consideration, Mr. VanHimbergen and Federal-Mogul hereby
agree as follows:
1. RESIGNATION AS AN OFFICER AND EMPLOYEE: Mr.
VanHimbergen hereby acknowledges that he was terminated from his
position as Senior Vice President and Chief Financial Officer of
Federal-Mogul effective at the close of business on February 21, 1997
(the "Termination Date"). Mr. VanHimbergen also hereby resigns from
any and all other positions he holds as an employee, director or
officer of Federal-Mogul or any of its subsidiaries, related,
or affiliated companies, such resignation to be effective at the
close of business on the Termination Date. Federal-Mogul will pay to
Mr. VanHimbergen his base salary at the annual rate of Two Hundred
Fifty-Five Thousand Dollars and No Cents ($255,000.00), less
applicable income tax withholdings and other normal payroll
deductions, through the Termination Date, in accordance with
Federal-Mogul's regular payroll practices. Federal-Mogul will also
continue to provide employment benefits generally available to
executives, including medical and dental insurance, life insurance,
pension and other benefits, through the Termination Date.
2. SEVERANCE PAY AND BENEFITS: Federal-Mogul hereby
agrees that the following compensation and benefits will be provided
to Mr. VanHimbergen in accordance with the terms of this Agreement:
<PAGE> 2
A. Severance Payment: Federal-Mogul will make a lump
sum payment to Mr. VanHimbergen in the sum of Two Hundred Seventy Six
Thousand Two Hundred Fifty Dollars and No Cents ($276,250.00)
(thirteen (13) months of Mr. VanHimbergen's annual base salary),
less applicable income tax withholdings and other normal payroll
deductions. Such payment represents severance pay and shall be in
lieu of any other severance pay or other compensation, if any, that
Mr. VanHimbergen normally would have been granted from Federal-Mogul
upon the termination of his employment, including without limitation
any payments under Federal-Mogul's Severance Plan for Salaried
Employees. Mr. VanHimbergen shall be entitled to such severance
payment in accordance with the terms of this Agreement following the
effective date of this Agreement (the last day of the seven-day
revocation period as set forth in Paragraph 5 of this Agreement),
unless Mr. VanHimbergen revokes this Agreement in accordance with
Paragraph 5. Federal-Mogul will also make a separate payment of
Eighteen Thousand Four Hundred Eighty Dollars and No Cents
($18,480.00), less applicable income tax withholdings, in
lieu of any and all other benefits which Mr. VanHimbergen might
otherwise be eligible to receive (except as otherwise provided in
this Paragraph 2), including without limitation payments for
home security, executive physical, and travel and related expenses
associated with outplacement services (travel and related expenses to
be grossed-up if documented and non-reimbursable by
any other party). Such payment will be made following the last day
of the seven-day revocation period as set forth in Paragraph 5 of
this Agreement, unless Mr. VanHimbergen revokes this Agreement in
accordance with Paragraph 5.
B. Vacation and Other Leave Benefits:
Federal-Mogul will pay to Mr. VanHimbergen the sum of Nineteen
Thousand Six Hundred Fifteen Dollars and No Cents ($19,615.00),
less applicable income tax withholdings and other normal payroll
deductions, representing his 1997 vacation benefit entitlement.
In addition, Federal-Mogul will pay Mr. VanHimbergen Six Thousand
Eight Hundred Sixty Five and No Cents ($6,865.00), less applicable
income tax withholdings and other normal payroll deductions for
unused and deferred 1996 vacation benefits that he is entitled to
receive prior to the Termination Date pursuant to Federal-Mogul's
Vacations for Salaried Personnel Plan, less applicable income tax
withholdings and other normal payroll deductions. Such payments
will be made at the time payments under Paragraph 2A are made.
Effective on the Termination Date, Mr. VanHimbergen shall not be
eligible for or entitled to any additional vacation or other leave
benefits, including without limitation any sick or personal leave.
C. Medical And Dental Coverage: Effective on the
Termination Date, Mr. VanHimbergen will be eligible to continue to
participate in Federal-Mogul's CHOICE plan for hospital-surgical-medical,
dental, life and vision insurance coverage (the "CHOICE
Plan"), at Federal-Mogul's expense, for a period of up to the earlier
of (x) the date he is eligible for such coverage under any new
<PAGE> 3
employer's plan or (y) twelve (12) months after the Termination Date,
subject to the terms of such plan, and subject to Mr. VanHimbergen
electing to continue such coverage in accordance with the
Consolidated Omnibus Budget Reconciliation Act ("COBRA"). During
such period, Mr. VanHimbergen shall continue to pay the cost of his
share of such coverage, in the same manner that he shared in the cost
of coverage prior to the Termination Date. After such twelve-month
period, Mr. VanHimbergen may continue coverage under the CHOICE Plan
for an additional period of six (6) months, entirely at Mr.
VanHimbergen's expense, in accordance with and subject to COBRA.
Federal-Mogul shall also continue to provide Mr. VanHimbergen with
the annual credit for 1997 under the Company's Executive
(Supplemental) Medical Plan in the amount of up to Three Thousand
Dollars and No Cents ($3,000.00), in accordance with the terms
of such plan and subject to Mr. VanHimbergen continuing to
participate in the CHOICE Plan.
D. Split Dollar Life Insurance Plan: Effective on
the Termination Date, Mr. VanHimbergen's participation in
Federal-Mogul's Split Dollar Life Insurance Plan (the "SDLIP") will
terminate in accordance with the terms of the SDLIP. On or after the
Termination Date, Federal-Mogul may withdraw the sum of all premium
payments Federal-Mogul has made in connection with such policy.
Mr. VanHimbergen agrees to sign an insurance form entitled "Life
Policy Service Request -- Surrender, Tax Withholding Options, Release
of Interest," and to submit such form to Federal-Mogul on or before
the date of execution of this Agreement.
E. Outplacement: Federal-Mogul will pay the
reasonable costs of a mutually agreeable outplacement firm, provided
such costs do not exceed Forty Thousand Dollars and No Cents
($40,000.00).
F. Executive Lease Car Program: Effective on
March 7, 1997, Mr. VanHimbergen's participation in Federal-Mogul's
Executive Lease Car Program (the "Lease Car Program") will
terminate. Mr. VanHimbergen will return the 1996 Jeep Grand
Cherokee. In lieu of extending the participation of Mr. VanHimbergen
in the Lease Car Program, Federal-Mogul will make a payment to Mr.
VanHimbergen of Fourteen Thousand Dollars and No Cents ($14,000.00),
less applicable income tax withholdings. Such payment will be made
following the effective date of this Agreement (the last day of the
seven-day revocation period as set forth in Paragraph 5), unless Mr.
VanHimbergen revokes this Agreement in accordance with Paragraph 5.
Mr. VanHimbergen will be responsible for all car lease, insurance
payments and other costs in connection with the 1995 Blazer and 1996
Lincoln Continental.
G. Country Club Membership: Federal-Mogul will
continue to pay the monthly dues of Mr. VanHimbergen's membership in
the Pine Lake Country Club (the "Country Club") from the Termination
Date through and including December 31, 1997. Following the
<PAGE> 4
Termination Date, Federal-Mogul will no longer be responsible for any
other costs or fees in connection with Mr. VanHimbergen's membership
in the Country Club. Mr. VanHimbergen will be responsible for all
monthly dues after December 31, 1997.
H. Retirement Plans: Federal-Mogul shall distribute
to Mr. VanHimbergen amounts due to Mr. VanHimbergen through the
Termination Date, if any, from the Personal Retirement Account
("PRA"), the Supplemental Executive Retirement Program (the "SERP"),
and the Thrift Plan (including the 401(k) Plan, the Salaried
Employees' Investment Program (the "SEIP"), and the Employee
Stock Ownership Plan (the "ESOP")), in accordance with the terms of
such plans. Federal-Mogul shall also distribute
to Mr. VanHimbergen Sixty Thousand Nine Hundred Eighty- Five Dollars
and No Cents ($60,985.00) which represents the after tax cash
equivalent of the Federal-Mogul contributions to the PRA, SERP and
401(k) that it would have made on Mr. VanHimbergen's behalf between
the Termination Date and February 21, 1999. Except for any vested
benefits in such plans and the additional amounts described above,
Mr. VanHimbergen's participation in all such plans shall
terminate effective on the Termination Date.
I. Home Computer Equipment: Subject to the
limitations in this subparagraph (I), Mr. VanHimbergen may continue
to use at his home the personal computer and other home office
equipment provided to him by Federal-Mogul during his employment (the
"Home Office Equipment"). Mr. VanHimbergen shall be responsible for
any maintenance and other costs in connection with the Home Office
Equipment. Mr. VanHimbergen shall deliver the Home Office
Equipment to Federal-Mogul (in care of Diane L. Kaye, Esq., Vice
President, General Counsel and Secretary of Federal-Mogul) in good
working condition no later than the earlier of (x) the
date he receives other employment or (y) December 31, 1997.
J. 1989 Performance Incentive Stock Plan: Federal-Mogul
acknowledges that Mr. VanHimbergen is entitled to receive the
benefit of all awards under Federal-Mogul's 1989 Performance
Incentive Stock Plan (the "1989 Plan") to which he was entitled to
immediate exercise or receipt as of the Termination Date.
Mr. VanHimbergen acknowledges that he has no claim to any restricted
shares or stock options under the 1989 Plan, except as follows:
An award of 3,000 restricted shares, granted on
February 7, 1996 as a long-term incentive grant,
and with respect to which restrictions have
lapsed.
The parties acknowledge and agree that Mr. VanHimbergen has
received the restricted shares described above. The parties further
acknowledge and agree that Mr. VanHimbergen is not eligible for
additional vesting of any unvested restricted shares or stock
options. The parties further acknowledge and agree that, except as
otherwise provided above, no other restrictions on restricted shares
under the 1989 Plan will lapse.
<PAGE> 5
K. Tax Preparation and Financial and Estate
Planning: Mr. VanHimbergen will be eligible for tax preparation
assistance for his 1996 income tax returns (One Thousand Dollars
and No Cents ($1,000.00) allowance grossed-up), in accordance with
Federal-Mogul's policies regarding tax preparation assistance for
executives. In addition, Mr. VanHimbergen will be eligible for
financial and estate planning assistance in 1997 (Five
Thousand Dollars and No Cents ($5,000.00) allowance grossed-up), in
accordance with Federal-Mogul's policies regarding financial and
estate planning assistance for executives.
L. Executive AT&T Card: Mr. VanHimbergen may
continue to use the Federal-Mogul Executive AT&T Card until the
earlier of (x) the date he receives other employment or
(y) December 31, 1997.
3. NO OTHER PAYMENTS OR BENEFITS: Except for the payments
made and benefits provided in this Agreement, Mr. VanHimbergen
acknowledges and agrees that he is entitled to no other benefits,
compensation, or payments from Federal-Mogul, including without
limitation salary, bonus (including any Supplemental Compensation
award), incentive compensation, severance pay, pension, vacation pay,
life insurance or any other fringe benefits of Federal-Mogul.
4. RELEASE OF FEDERAL-MOGUL: In consideration for the
compensation and benefits provided in this Agreement, and for all
other good and valuable consideration, Mr. VanHimbergen hereby
knowingly, voluntarily, and willingly releases, discharges, and
covenants not to sue Federal-Mogul and its direct and indirect
parents, subsidiaries, affiliates, and related companies, past and
present, as well as each of their directors, officers, employees,
representatives, attorneys, agents, trustees, insurers, assigns, and
successors, past and present (collectively hereinafter referred to as
the "RELEASEES"), from and with respect to any and all actions,
claims, or lawsuits, whether known or unknown, suspected or
unsuspected, in law or in equity, which against the RELEASEES,
Mr. VanHimbergen, and his heirs, executors, administrators,
successors, assigns, dependents, descendants, and attorneys ever had,
now have, or hereafter can, shall, or may have arising out of or in
any way relating to Mr. VanHimbergen's employment by Federal-Mogul or
his separation from that employment, including without limitation the
following:
i. any and all claims arising out of or
in any way relating to breach of oral or written employment contracts
(whether such contracts were express or implied), or any and all tort
claims;
<PAGE> 6
ii. any and all claims arising out of or
in any way relating to age, race, sex, religion, national origin,
disability, or other form of employment discrimination, including
without limitation any claims under Title VII of the Civil Rights Act
of 1964, as amended, the Age Discrimination in Employment Act of
1967, as amended, the Americans with Disabilities Act of 1990, the
Employee Retirement Income Security Act of 1974, as amended, the
Michigan Civil Rights Act, or any other federal, state or local law,
statute,ordinance, or administrative regulation; or
iii. any and all claims for salary, bonus, severance
pay, pension, vacation pay, life insurance, health or medical
insurance, or any other fringe benefits, workers' compensation or
disability, other than the payments and benefits provided for in this
Agreement; provided, however, that Mr. VanHimbergen is not releasing
any claims he may have under any pension plan of Federal-Mogul in
which he participated during his employment with Federal-Mogul.
It is the express intention of Mr. VanHimbergen and Federal-Mogul
that this Agreement constitutes a full and comprehensive release of
all claims and potential claims, to the fullest extent permitted by
law. Mr. VanHimbergen acknowledges that he may hereafter discover
claims or facts in addition to or different from those which he now
knows or believes to exist with respect to the subject matter of this
Agreement and which, if known or suspected at the time of executing
this Agreement, may have materially affected this Agreement or his
decision to enter into it. Nevertheless, Mr. VanHimbergen hereby
waives any right, claim or cause of action that might arise as a
result of such different or additional claims or facts.
5. ADEA WAIVER OF CLAIMS: Mr. VanHimbergen expressly
acknowledges and agrees that his release and waiver of rights and
claims is knowing and voluntary, that by this Agreement he will
receive compensation beyond that which he was already entitled to
receive before entering into this Agreement, that he has been given
a period of twenty-one (21) days within which to consider this
Agreement, and that he elects to execute this Agreement on this
date. Mr. VanHimbergen shall have seven (7) days following the
execution of this Agreement by both parties within which he may
revoke this Agreement, and this Agreement shall not become effective
or enforceable until such seven-day revocation period has expired and
Mr. VanHimbergen has not revoked this Agreement. To be effective,
such revocation must be in writing and delivered to counsel for
Federal-Mogul on or before the last day of the seven-day
revocation period. Mr. VanHimbergen certifies that he understands
and agrees to all of the terms of this Agreement, and has had an
opportunity to discuss these terms with an attorney of his own
choosing. Mr. VanHimbergen further acknowledges that he has been
advised previously by Federal-Mogul, and by this writing is again
advised by Federal-Mogul, to consult with an attorney prior to
executing this Agreement and regarding his release of claims herein,
including without limitation the release of claims under the Age
Discrimination in Employment Act of 1967, as amended.
<PAGE> 7
6. CONFIDENTIALITY:
A. Confidentiality of Agreement: Mr. VanHimbergen
agrees that he shall keep this Agreement, and the terms and
conditions of this Agreement, confidential. Mr.VanHimbergen shall
not in any manner or for any reason disclose this Agreement, or
the terms hereof, without the express prior written consent of
Federal-Mogul, except (i) to members of his family, his attorneys,
and his accountants on a "need to know" basis, (ii) to the Internal
Revenue Service, and (iii) as otherwise required by law.
B. Confidential Information: Mr. VanHimbergen
acknowledges that by reason of his employment with Federal-Mogul, he
has been given access to financial information, other corporate
information (including without limitation contractual arrangements,
plans, strategies, tactics, and intellectual property), marketing
information (including without limitation sales or business plans,
strategies, methods, customer lists, and market research data),
technical information, personnel information, and similar
confidential and proprietary materials and information respecting
Federal-Mogul's business. Mr. VanHimbergen represents and
warrants that he has kept and will continue to keep all such
materials and information confidential, and that he will not use such
information for any purpose without the prior written consent of
Federal-Mogul. Mr. VanHimbergen further agrees that, on
and after the Termination Date, Federal-Mogul's Patent Assignment and
Confidentiality Agreement (the "Confidentiality Agreement") shall
remain in full force and effect and Mr. VanHimbergen shall remain
bound by the terms and conditions of such Confidentiality Agreement.
7. NON-SOLICITATION: In consideration of the payments and
benefits conferred on Mr. VanHimbergen by Federal-Mogul under
Paragraph 2 of this Agreement, Mr.VanHimbergen agrees that he will
not, for a period of one (1) year following the date of execution of
this Agreement, solicit any employees of Federal-Mogul to work for
any business, individual, partnership, firm, corporation, or other
entity.
8. NON-DISPARAGEMENT: In consideration of the payments
and benefits conferred on Mr. VanHimbergen by Federal-Mogul under
Paragraph 2 of this Agreement, Mr. VanHimbergen agrees that he will
not make or cause to be made any statements to any person, firm,
corporation, or governmental or other entity which reflect
negatively on Federal-Mogul or on its directors, officers, employees,
affiliates, and related companies.
9. ADDITIONAL PROVISIONS: The following additional terms
and conditions shall apply to this Agreement:
A. No Claim Filed And No Assignment of Claims:
Mr. VanHimbergen represents and warrants that neither he nor any of
his representatives have filed, or will file, any complaints, charges
<PAGE> 8
or lawsuits with any court or government agency arising out of or
relating to any claims being released by Mr. VanHimbergen in this
Agreement.
Mr. VanHimbergen further represents and warrants that neither he nor
any of his representatives have assigned or transferred, or will
assign or transfer, to any other person other than Federal-Mogul any
of the released matters set forth in this Agreement, and that he
shall defend, indemnify and hold harmless Federal-Mogul from and
against any claim (including the payment of attorneys' fees and costs
actually incurred whether or not litigation is commenced) based on or
in connection with or arising out of any such assignment or transfer.
B. Severability of Provisions: If any of
the provisions, terms, or clauses of this Agreement are held invalid,
illegal, unenforceable or ineffective, such provisions, terms and
clauses shall be deemed severable such that all other provisions,
terms, and clauses of this Agreement shall remain valid and binding
upon the parties.
C. Choice of Law: This Agreement and the rights and
obligations of the parties hereunder shall be governed by and
construed and enforced in accordance with the laws of the
State of Michigan, without regard to principles of conflict of laws.
D. Arbitration: Any and all controversies, claims or
disputes arising out of or in any way relating to this Agreement
shall be resolved by final and binding arbitration in Detroit,
Michigan before a single arbitrator licensed to practice law and
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA"). The arbitration shall
be commenced by filing a demand for arbitration with the AAA within
sixty (60) days after the occurrence of the facts giving rise to any
such controversy, claim or dispute. The arbitrator shall decide all
issues relating to arbitrability. The costs of such arbitration,
including the arbitrator's fees, shall be split between the parties
to the arbitration. Each party shall be responsible to pay its own
attorneys' fees.
E. Entire Agreement: This Agreement is an integrated
document and constitutes and contains the complete understanding and
agreement of the parties with respect to the subject matter addressed
herein, and supersedes and replaces all prior negotiations and
agreements, whether written or oral, concerning the subject matter
hereof. No provision of this Agreement may be amended or waived
except by written agreement signed by the parties hereto.
F. No Waiver of Breach: No waiver of any breach of
any term or provision of this Agreement shall be construed to be, or
shall be, a waiver of any other breach of this Agreement. No waiver
shall be binding unless in writing and signed by the party waiving
the breach.
<PAGE> 9
G. Representation: Mr. VanHimbergen and Federal-Mogul
each represent and agree that they have carefully read and
understand this Agreement, and agree that neither they nor any
of Federal-Mogul's officers, agents, directors, or employees have
made any representations other than those contained herein. Further,
the parties each expressly agree that they have entered into
this Agreement freely and voluntarily and without pressure or
coercion from anyone.
H. Captions: The captions of this Agreement are for
descriptive purposes only and are not part of the provisions hereof
and shall have no force or effect.
I. Counterparts: This Agreement may be executed in
counterparts, and each counterpart, when executed, shall have
the effect of a signed original. Photographic copies of
such signed counterparts may be used in lieu of the original for any
purpose.
IN WITNESS WHEREOF, Mr. VanHimbergen and Federal-Mogul,
intending to be legally bound, have executed this Agreement as of the
date first written above.
THOMAS W. VANHIMBERGEN
-----------------------------------
Date:------------------------------
FEDERAL-MOGUL CORPORATION
By:--------------------------------
[Name of Officer or Director]
Date:------------------------------
<PAGE> 1
THIRD AMENDMENT
THIS AMENDMENT, dated as of January 13, 1997 (this
"Amendment"), to the Revolving Credit and Competitive Advance
Facility Agreement, dated as of June 30, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Federal-Mogul Corporation, a Michigan
corporation (the "Borrower"), the banks and other financial
institutions parties thereto (the "Lenders"), The Chase Manhattan
Bank (formerly known as Chemical Bank), as administrative agent for
the Lenders (in such capacity, the "Administrative Agent") and as
CAF Advance Agent, and Comerica Bank, Bank of America Illinois
(formerly known as Continental Bank), NBD Bank (formerly known as
NBD Bank, N.A.) and The Bank of New York, as co-agents.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders
have agreed to make, and have made, certain loans and other
extensions of credit to the Borrower; and
WHEREAS, the Borrower has requested that certain
provisions of the Credit Agreement be modified in the manner
provided for in this Amendment, and the Lenders are willing to
agree to such modifications as provided for in this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Defined Terms. Terms defined in the Credit
Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
2. Amendments to Credit Agreement. (a) Subsection
1.1 of the Credit Agreement is hereby amended by deleting the table
contained in the definition of "Eurodollar Margin" contained in
such subsection in its entirety and inserting in lieu thereof the
following table:
<PAGE> 2
<TABLE>
<CAPTION>
<S>
Bond Rating Eurodollar
(S&P/Moody's) Level Margin
<C> <C>
A-/A3 or better I .2750%
BBB+/Baa1 or better II .2750%
BBB/Baa2 or better III .2625%
BBB-/Baa3 or better IV .3000%
BB+/Ba1 or better V .5000%
BB/Ba2 or better VI .5000%
BB-/Ba3 or below VII .6250%
</TABLE>
(b) Subsection 2.8(a) of the Credit Agreement is
hereby amended by deleting the table contained therein in its
entirety and inserting in lieu thereof the following table:
<TABLE>
<CAPTION>
<S>
Bond Rating Facility
(S&P/Moody's) Level Fee Rate
<C> <C>
A-/A3 or better I .1250%
BBB+/Baa1 or better II .1500%
BBB/Baa2 or better III .1875%
BBB-/Baa3 or better IV .2000%
BB+/Ba1 or better V .2500%
BB/Ba2 or better VI .2500%
BB-/Ba3 or below VII .3750%
</TABLE>
(c) Notwithstanding any provision in the Credit
Agreement to the contrary, for the purposes of determining
compliance with subsection 6.1 of the Credit Agreement for the
periods ending December 31, 1996 and March 31, 1997, the
determination of Cash Flow Coverage will be made without giving
effect to the charges taken by the Borrower in the fourth quarter
of 1995 in an aggregate amount not to exceed $250,000,000 ( of
which no more than $45,000,000 will constitute net cash
expenditures in 1997).
<PAGE> 3
(d) Notwithstanding any provision in the Credit
Agreement to the contrary, subsection 6.2 of the Credit Agreement
shall be deemed to require for the periods ending December 31, 1996
and March 31, 1997 that Consolidated Total Liabilities plus
Minority Interests as a percentage of Consolidated Tangible Net
Worth as of the last day of such fiscal quarters not be greater
than 425%.
(e) Notwithstanding any provision in the Credit
Agreement to the contrary, subsection 6.7 of the Credit Agreement
shall be deemed to require for the period from December 31, 1996
through March 31, 1997, that the Borrower will not, nor will it
permit any Subsidiary to, lease, sell or otherwise dispose of all
or any portion of its property, assets or business to any Person
except for (i) sales of assets in the ordinary course of business,
(ii) the sale of Precision Forged and the Heavy Wall Bearing
business, (iii) sales of account receivable or related contract
rights, (iv) sales of assets of the Borrower's international retail
business and (v) any other sales of assets having a book value
which, when added to the book value of all other assets sold
pursuant to this clause (v) since the date of this Agreement, does
not exceed 20% of the Borrower's consolidated net worth as of the
last day of the fiscal quarter ended immediately prior to the date
of such sale.
3. Conditions to Effectiveness. This Amendment shall
become effective (retroactive to December 31, 1996) on the date
(the "Amendment Effective Date") on which the Borrower and the
Required Lenders shall have executed and delivered to the
Administrative Agent this Amendment.
4. Representations and Warranties. The
representations and warranties made by the Borrower in the Loan
Documents are true and correct in all material respects on and as
of the Amendment Effective Date, after giving effect to the
effectiveness of this Amendment, as if made on and as of the
Amendment Effective Date.
5. Payment of Expenses. The Borrower agrees to pay
or reimburse the Administrative Agent for all of its reasonable
out-of-pocket costs and expenses incurred in connection with this
Amendment, any other documents prepared in connection herewith and
the transactions contemplated hereby, including, without
limitation, the reasonable free and disbursements of counsel to the
Administrative Agent.
6. No Other Amendments; Confirmation. Except as
expressly amended, modified and supplemented hereby, the provisions
of the Credit Agreement and the Notes are and shall remain in full
force and effect.
<PAGE> 4
7. Governing Law; Counterparts. (a) This Amendment
and the rights and obligations of the parties hereto shall be
governed by, and construed and interpreted in accordance with, the
laws of the State of New York.
(b) This amendment may be executed by one or more of
the parties to this Amendment on any number of separate
counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the
copies of this Amendment signed by all the parties shall be lodged
with the borrower and the Agent. This Amendment may be delivered
by facsimile transmission of the relevant signature pages hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective
proper and duly authorized officers as of the day and year first
above written.
FEDERAL-MOGUL CORPORATION
By--------------------------------
Title:
THE CHASE MANHATTAN BANK (formerly,
known as Chemical Bank) as
Administrative Agent and CAF
Advance Agent
By---------------------------------
Title:
<PAGE> 1
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
dated as of February 1, 1997, among FEDERAL-MOGUL FUNDING
CORPORATION, a Michigan corporation, as Seller (the "Seller"),
FEDERAL-MOGUL CORPORATION, a Michigan corporation, as Servicer (the
"Servicer") and THE CHASE MANHATTAN BANK, formerly known as
Chemical Bank, a New York banking corporation, as trustee (the
"Trustee") amending and restating the POOLING AND SERVICING
AGREEMENT dated as of June 1, 1992, among the Seller, the Servicer
and the Trustee.
In consideration of the mutual agreements herein
contained, each party agrees as follows for the benefit of the
other parties and for the benefit of the Certificateholders and the
other Beneficiaries to the extent provided herein:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this
Agreement, the following words and phrases shall have the following
meanings:
"Adjustments" shall mean with respect to any Collection
Period, the aggregate amount, if any, by which the balances of
Receivables were adjusted downward pursuant to Section 3.09 during
such Collection Period.
"Adjustment Payment" shall have the meaning specified in
Section 3.09.
"Affiliate" shall mean, with respect to any specified
Person, any other Person controlling or controlled by or under
common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of
such Person, directly or indirectly whether through the ownership
of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" shall mean, with respect to any Series, the
Person so designated in the related Supplement.
"Agreement" shall mean this Amended and Restated Pooling
and Servicing Agreement, as the same may from time to time be
amended, modified or otherwise supplemented, including, with
respect to any Series or Class, the related Supplement.
"Allocable Miscellaneous Payments" shall mean, with
<PAGE> 2
respect to any Series and for any Collection Period, the product of
the amount of Miscellaneous Payments for such Collection Period and
a fraction, the numerator of which is the Invested Amount for such
Series immediately prior to the following Distribution Date and the
denominator of which is the Trust Invested Amount as of such time.
"Applicants" shall have the meaning specified in Section
6.07.
"Appointment Date" shall have the meaning specified in
Section 9.02.
"Authorized Newspaper" shall mean any newspaper or
newspapers of general circulation in New York City customarily
published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
"Available Subordinated Amount" shall mean, with respect
to any Series at any time of determination, an amount equal to the
available subordinated amount specified in the related Supplement
at such time.
"Bearer Certificates" shall have the meaning specified in
Section 6.01.
"Beneficiary" shall mean any of the holders of the
Investor Certificates and any Enhancement Provider.
"Benefit Plan" shall have the meaning specified in
Section 6.04(c).
"Book-Entry Certificates" shall mean beneficial interests
in the Investor Certificates, ownership and transfers of which
shall be made through book entries by a Depository as described in
Section 6.08.
"Business Day" shall mean any day other than (a) a
Saturday or a Sunday or (b) another day on which banking
institutions in the State of Michigan, the State of Illinois or the
State of New York or The Depository Trust Company is, authorized or
obligated by law, executive order or governmental decree to be
closed.
"Cedel" shall mean Centrale de Livraison de Valeurs
Mobilieres S.A.
"Certificate" shall mean any of the Investor Certificates
or the Seller's Certificates.
"Certificate Owner" shall mean, with respect to a Book-
<PAGE> 3
Entry Certificate, the Person who is the beneficial owner of a
Book-Entry Certificate.
"Certificate Rate" shall mean, with respect to any Series
or Class, the certificate rate specified therefor in the related
Supplement.
"Certificate Register" shall have the meaning specified
in Section 6.04(a).
"Certificateholder" or "Holder" shall mean an Investor
Certificateholder or a Person in whose name any one of the Seller's
Certificates is registered.
"Certificateholders' Interest" shall have the meaning
specified in Section 4.01.
"Class" shall mean, with respect to any Series, any one
of the classes of Investor Certificates of that Series.
"Closing Date" shall mean, with respect to any Series,
the Closing Date specified in the related Supplement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral Security" shall mean, with respect to any
Receivable and subject to the terms of the related Receivables
Purchase Agreement, the security interest, if any, granted by or on
behalf of the related Obligor with respect thereto, including a
first priority perfected security interest in the merchandise
related to such Receivable.
"Collection Account" shall have the meaning specified in
Section 4.02.
"Collection Period" shall mean, with respect to any
Distribution Date, the calendar month preceding the month in which
such Distribution Date occurs.
"Collections" shall mean, without duplication, all
payments by or on behalf of Obligors received by the Servicer in
respect of the Receivables, in the form of cash, checks, wire
transfers or any other form of payment.
"Common Depositary" shall mean the Person specified in
the applicable Supplement, in its capacity as common depositary for
the respective accounts of any Foreign Clearing Agencies.
"Corporate Trust Office" shall mean the principal office
<PAGE> 4
of the Trustee in the City of New York, at which at any particular
time its corporate trust business shall be administered, which
office at the date of the execution of this Agreement is located at
450 West 33rd Street, 15th Floor, New York, New York, Attention:
Vice President-Corporate Trust Administration.
"Coupon" shall have the meaning specified in Section
6.01.
"Cut-Off Date" shall mean May 31, 1992.
"Date of Processing" shall mean, with respect to any
transaction, the date on which such transaction is first recorded
on the Servicer's computer file of accounts receivable (without
regard to the effective date of such recordation).
"Defaulted Amount" on any Determination Date shall mean
an amount equal to (a) the amount of Receivables which became
Defaulted Receivables during the immediately preceding Collection
Period minus (b) the full amount of any such Defaulted Receivables
which are subject to reassignment or assignment to the Seller or
the Servicer in accordance with the terms of this Agreement;
provided, however, that, if an Insolvency Event occurs with respect
to the Seller, the amounts of such Defaulted Receivables which are
subject to reassignment to the Seller shall not be included in
clause (b) and, if an Insolvency Event occurs with respect to the
Servicer, the amount of such Defaulted Receivables which are
subject to assignment to the Servicer shall not be included in
clause (b).
"Defaulted Receivables" on any Determination Date shall
mean all Receivables which are charged off as uncollectible in
respect of the immediately preceding Collection Period in
accordance with the Servicer's customary and usual billing and
collection procedures or became more than 90 days delinquent during
the immediately preceding Collection Period.
"Definitive Certificates" shall have the meaning
specified in Section 6.08.
"Definitive Euro-Certificates" shall have the meaning
specified in Section 6.11.
"Deposit Date" shall mean each day on which the Servicer
deposits Collections in the Collection Account pursuant to Section
4.03 hereof.
"Depository" shall mean The Depository Trust Company, as
initial Depository, the nominee of which is CEDE & Co., or any
other organization registered as a "clearing agency" pursuant to
<PAGE> 5
Section 17A of the Securities Exchange Act of 1934, as amended.
The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the
State of New York.
"Depository Agreement" shall mean, with respect to any
Series or Class, the agreement among the Seller, the Trustee and
the initial Depository, dated as of the related Closing Date and
substantially in the form of Exhibit D.
"Depository Participant" shall mean a broker, dealer,
bank or other financial institution or other Person for whom from
time to time a Depository effects book-entry transfers and pledges
of securities deposited with the Depository.
"Determination Date" with respect to any Distribution
Date shall mean the day that is four days prior to such
Distribution Date or, if such fourth preceding day is not a
Business Day, the next succeeding Business Day or such other day as
is set forth in the Supplement for a Series.
"Discount Collections" shall mean, with respect to any
Receivables and each Series, that portion of Collections allocable
to Discount as set forth in Section 3.10. Discount Collections
shall include all Recoveries.
"Discount Rate" shall have the meaning specified in
Section 3.10.
"Distribution Date" shall mean the fifteenth day of each
month or, if such day is not a Business Day, the next succeeding
Business Day or with respect to any Series, such other day as is
set forth in the Supplement for a Series.
"Distribution Date Statement" shall mean, with respect to
any Series, a report prepared by the Servicer and delivered to the
Trustee on each Determination Date for the immediately preceding
Collection Period in substantially the form set forth in the
related Supplement.
"Early Amortization Event" shall have the meaning
specified in Section 9.01 and, with respect to any Series, shall
also mean any Early Amortization Event specified in the related
Supplement.
"Early Amortization Period" shall mean, with respect to
any Series, unless otherwise specified in the Supplement related to
such Series, the period beginning at the close of business on the
Business Day immediately preceding the day on which the Early
Amortization Event is deemed to have occurred, and in each case
<PAGE> 6
ending upon the earlier to occur of (a) the payment in full to the
Investor Certificateholders of such Series of the Invested Amount
with respect to such Series, (b) the Termination Date with respect
to such Series and (c) if such Early Amortization Period has
resulted from the occurrence of an Early Amortization Event
described in Section 9.01(f), the end of the first Collection
Period during which an Early Amortization Event would no longer be
deemed to exist pursuant to Section 9.01(f), so long as no other
Early Amortization Event with respect to such Series shall have
occurred and the scheduled termination of the Revolving Period with
respect to such Series shall not have occurred.
"Eligible Deposit Account" shall mean either (a) a
aggregated account with an Eligible Institution or (b) a segregated
trust account with the corporate trust department of a depository
institution or trust company organized under the laws of the United
States of America or any one of the states thereof, including the
District of Columbia (or any domestic branch of a foreign bank) or
any depository institution or trust company organized under the
laws of Canada, having corporate trust powers and acting as trustee
for funds deposited in such account, so long as any of the
securities of such depository institution or trust company shall
have a credit rating from each Rating Agency in one of its generic
rating categories which signifies investment grade.
"Eligible Institution" shall mean (a) the corporate trust
department of the Trustee or (b) a depository institution or trust
company organized under the laws of the United States of America or
any one of the states thereof, the District of Columbia (or any
domestic branch of a foreign bank) or any depository institution or
trust company organized under the laws of Canada, which at all
times (i) has either (A) a long-term unsecured debt rating of A2 or
better by Moody's and of AAA or better by Standard & Poor's or such
other rating that is acceptable to each Rating Agency, as evidenced
by a letter from such Rating Agency to the Trustee or (B) a
certificate of deposit rating of P-1 by Moody's and A-1+ by
Standard & Poor's or such other rating that is acceptable to each
Rating Agency, as evidenced by a letter from such Rating Agency to
the Trustee; provided, however, that with respect to an Eligible
Institution at which a Lockbox Account is maintained the
requirement of clause (B) above shall be a rating of A-1 by
Standard & Poor's and (ii) whose deposits are insured by the FDIC.
"Eligible Investments" shall mean book-entry securities,
negotiable instruments or securities represented by Instruments in
bearer or registered form (a) having original or remaining
maturities of 30 days or less, but in no event occurring later than
the Business Day immediately preceding the Distribution Date next
succeeding the Trustee's acquisition thereof or (b) which are
redeemable at par and without penalty not later than the Business
<PAGE> 7
Day immediately preceding such next succeeding Distribution Date
or, in the case of either clause (a) or (b), which mature or are
redeemable on or before 10:00 a.m. on such next succeeding
Distribution Date in the case of Eligible Investments on which the
Trustee is the obligor, which evidence:
(a) direct obligations of, and obligations fully guaranteed
as to timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company incorporated under
the laws of the United States of America or any state thereof (or
any domestic branch of a foreign bank) and subject to supervision
and examination by Federal or state banking or depository
institution authorities; provided, however, that at the time of the
Trust's investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations
(other than such obligations the rating of which is based on the
credit of a person or entity other than such depository institution
or trust company) thereof shall have a credit rating from each of
the Rating Agencies in the highest investment category granted
thereby;
(c) commercial paper having, at the time of the Trust's
investment or contractual commitment to invest therein, a rating
from each of the Rating Agencies in the highest investment category
granted thereby;
(d) investments in money market funds having a rating from
each Rating Agency in the highest investment category granted
thereby or otherwise approved in writing thereby;
(e) demand deposits, time deposits and certificates of
deposit which are fully insured by the FDIC;
(f) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(g) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United
States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a
depository institution or trust company (acting as principal)
described in clause (b); and
(h) any other investment as may be permitted, as evidenced in
writing, by any Rating Agency without reducing or withdrawing the
rating of the Certificates of any Series.
<PAGE> 8
"Eligible Receivables" shall mean, unless otherwise defined in
any Supplement, each Receivable:
(a) which was originated or acquired by Federal-Mogul or any
subsidiary of Federal-Mogul in the ordinary course of business;
(b) as to which at the time of transfer to the Trust the
Obligor on which shall not have commenced, or have had commenced
against it, any proceeding under applicable bankruptcy law or, if
such Obligor is under the protection of a bankruptcy court, such
court has approved payment of such Receivable by such Obligor;
(c) which is owned by Federal-Mogul or any Subsidiary thereof
at the time of sale by Federal-Mogul to the Seller;
(d) which represents the obligation of a purchaser of goods
from Federal-Mogul or any subsidiary thereof (each, an "Obligor")
to pay for such goods in United States dollars or Canadian dollars;
(e) the Obligor on which is not an affiliate of Federal-Mogul;
(f) which was created in compliance in all respects with all
requirements of law applicable thereto;
(g) with respect to which all consents and governmental
authorizations required to be obtained by Federal-Mogul or the
Seller in connection with the creation of such Receivable or the
transfer thereof to the Trust have been duly obtained;
(h) as to which at all times following the transfer of such
Receivable to the Trust, the Trust will have good and marketable
title thereto free and clear of all liens arising from the actions
of the Seller or Federal-Mogul prior to the transfer or arising at
any time;
(i) which has been the subject of a valid transfer and
Assignment from the Seller to the Trust of all the Seller's
interest therein (including any proceeds thereof);
(j) which will at all times be the legal and assignable
payment obligation of the Obligor relating thereto, enforceable
against such Obligor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy or other
similar laws;
(k) which at the time of transfer to the Trust is not subject
to any right of rescission, setoff (other than an adjustment to
such Receivable's balance in the ordinary course of business),
dispute, claim, counterclaim or any other defense (including
defenses arising out of violations of usury laws) of the Obligor;
<PAGE> 9
(l) as to which, at the time of transfer of such Receivable
to the Trust, Federal-Mogul and the Seller have satisfied all their
respective obligations with respect to such Receivable required to
be satisfied at such time;
(m) as to which, at the time of transfer of such Receivable
to the Trust, neither Federal-Mogul nor the Seller has taken or
failed to take any action which would impair the rights of the
Trust or the certificateholders therein;
(n) which constitutes an "account" or a "general intangible"
as defined in Article 9 of the UCC as then in effect in the State
of Michigan;
(o) which at the time of transfer to the Trust is not past
due more than 90 days;
(p) which was created without fraud and in accordance with
the credit policies and guidelines of Federal-Mogul; and
(q) on which payment in full is due from the related Obligor
within 90 days of the date on which such Receivable is purchased by
the Trust, provided, however, that with respect to a Receivable on
which General Motors Corporation, Ford Motor Company or Genuine
Parts Company is the Obligor and to the extent the Obligor
Overconcentration for such Obligor is greater than 2%, payment in
full is due within 60 days of the date on which such Receivable is
purchased by the Trust.
"Eligible Servicer" shall mean the Trustee or an entity
which, at the time of its appointment as Servicer, (a) is legally
qualified and has the capacity to service the Receivables, (b) has
demonstrated the ability to professionally and competently service
a portfolio of similar accounts in accordance with high standards
of skill and care and (c) is qualified to use the software that is
then currently being used to service the Receivables or obtains the
right to use or has its own software which is adequate to perform
its duties under this Agreement.
"Enhancement" shall mean the rights and benefits provided
to the Investor Certificateholders of any Series or Class pursuant
to any letter of credit, surety bond, cash collateral account,
spread account, guaranteed rate agreement, maturity liquidity
facility, tax protection agreement, interest rate swap agreement or
other similar arrangement. The subordination of any Series or
Class to any other Series or Class or of the Seller's Interest to
any Series or Class shall be deemed to be an Enhancement.
"Enhancement Agreement" shall mean any agreement,
instrument or document governing the terms of any Enhancement or
pursuant to which any Enhancement is issued or outstanding.
<PAGE> 10
"Enhancement Provider" shall mean the Person providing
any Enhancement, other than any Certificateholders (including any
holders of the Seller's Certificates) the Certificates of which are
subordinated to any Series or Class.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Escrow Agent" shall mean any escrow agent with respect
to an escrow account maintained for the benefit of the Investor
Certificateholders of any Series or Class.
"Euroclear Operator" shall mean Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the
Euroclear System.
"Excess Principal Collections" shall have the meaning
specified in Section 4.04.
"Excess Seller's Percentage" shall have the meaning
specified in each Supplement.
"Exchange Date" shall mean any date that is after the
Series Issuance Date, in the case of Definitive Euro-Certificates
in registered form, or upon presentation of certification of
non-United States beneficial ownership (as described in Section 6.11),
in the case of Definitive Euro-Certificates in bearer form.
"Excluded Obligor" shall have the meaning specified in
Section 2.07.
"FDIC" shall mean the Federal Deposit Insurance
Corporation or any successor entity thereto.
"Federal-Mogul" shall mean Federal-Mogul Corporation, a
Michigan corporation, and its successors in interest to the extent
permitted hereunder.
"Final Maturity Date" shall have the meaning specified in
Section 12.01.
"FMFC" shall mean Federal-Mogul Funding Corporation, a
Michigan corporation, and its successors in interest to the extent
permitted hereunder.
"FMFC Certificate" shall mean the certificate executed by
the Seller and authenticated by the Trustee, substantially in the
form of Exhibit A.
<PAGE> 11
"Foreign Clearing Agency" shall mean Cedel and the
Euroclear Operator.
"Global Certificate" shall have the meaning specified in
Section 6.11.
"Governmental Authority" shall mean the United States of
America, any state or other political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Incremental Default Amount" on any Determination Date
shall mean (a) the sum of (i) the Overconcentration Default Amount
on such Determination Date and (ii) all the Ineligible Receivables
that became Defaulted Receivables during the immediately preceding
Collection Period minus (b) the full amount of any of such
Defaulted Receivables which are subject to a reassignment or
assignment to the Seller or the Servicer in accordance with the
terms of this Agreement (but not less than zero); provided,
however, that if an Insolvency Event occurs with respect to the
Seller, the amount of such Defaulted Receivables which are subject
to reassignment to the Seller shall not be so subtracted and, if an
Insolvency Event occurs with respect to the Servicer, the amount of
such Defaulted Receivables which are subject to assignment to the
Servicer shall not be so subtracted; provided, further, that the
Incremental Default Amount for any Determination Date shall not
exceed the Overconcentration Amount on such Determination Date.
"Ineligible Amount" on any date of determination shall
mean the amount of Ineligible Receivables included in the Trust on
such date pursuant to Section 2.06.
"Ineligible Receivable" shall mean any Receivable that
was not an Eligible Receivable at the time of its transfer to the
Trust and was transferred to the Trust in accordance with Section
2.06.
"Initial Invested Amount" shall mean, with respect to any
Series and for any date, an amount equal to the initial invested
amount specified in the related Supplement. The Initial Invested
Amount for any Series may be increased or decreased from time to
time as specified in the related Supplement.
"Insolvency Event" shall mean any event specified in
Section 9.01(a) or 9.01(b).
"Insolvency Proceeds" shall have the meaning specified in
Section 9.02.
Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended.
<PAGE> 12
"Invested Amount" shall mean, with respect to any Series
and for any date, an amount equal to the invested amount specified
in and calculated in accordance with the related Supplement;
provided, that the "Invested Amount" for a Series will be zero if
money or securities in an amount necessary to pay in full, by
redemption or when due, all principal of and accrued interest on
such Series will have been deposited with the Trustee, any Paying
Agent or any Escrow Agent in trust for the Certificateholders of
such Series.
"Investment Company Act" shall mean the Investment
Company Act of 1940, as amended.
"Investor Certificateholder" shall mean the Person in
whose name a Registered Certificate is registered in the
Certificate Register or the bearer of any Bearer Certificate (or
the Global Certificate, as the case may be) or Coupon.
"Investor Certificates" shall mean any one of the
certificates (including the Bearer Certificates, the Registered
Certificates or any Global Certificate) executed by the Seller and
authenticated by or on behalf of the Trustee, substantially in the
form attached to the related Supplement, other than the Seller's
Certificates.
"Investors' Servicing Fee" shall mean the portion of the
Servicing Fee allocable to the Investor Certificateholders pursuant
to the terms of the Supplements.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other),
preference, participation interest, priority or other security
agreement or preferential arrangement of any kind or nature
whatsoever.
"Lockbox Account" shall have the meaning specified in
Section 3.03(a)(ix).
"Manager" shall mean the lead manager, manager or co-manager
or Person performing a similar function with respect to an
offering of Definitive Euro-Certificates.
"Miscellaneous Payments" shall mean, with respect to any
Collection Period, the sum of (a) Adjustment Payments and Transfer
Deposit Amounts on deposit in the Collection Account on the related
Distribution Date and (b) Unallocated Principal Collections
available to be treated as Miscellaneous Payments pursuant to
Section 4.04 on such Distribution Date.
<PAGE> 13
"Monthly Servicing Fee" shall mean, with respect to any
Series, the amount specified therefor in the related Supplement.
"Moody's" shall mean Moody's Investors Service, Inc., or
its successor.
"Net Pool Balance" shall mean, as of the time of
determination thereof, an amount equal to the Pool Balance on such
date divided by the sum of 1 and the Discount Rate on such date.
"Obligor" shall mean each Person who is obligated to pay
for merchandise purchased from, and which gave rise to an account
receivable with, Federal-Mogul or any Receivables Seller, including
any guarantor of such Person's obligations.
"Obligor Overconcentration" unless otherwise specified in
the Supplement for a Series, on any Determination Date shall mean
(i) the excess of (a) the aggregate of all amounts of Receivables
owned by the Trust and generated under accounts receivable with any
one Obligor as of the last day of the Collection Period immediately
preceding such Determination Date over (b) 2% of the Pool Balance
on the last day of such immediately preceding Collection Period;
provided, that the Obligor Overconcentration with respect to
General Motors Corporation, Ford Motor Company and Genuine Parts
Company (so long as the short-term debt of General Motors
Corporation and Ford Motor Company and Genuine Parts Company shall
be rated A-1 or higher by Standard & Poor's or other conditions
established by each Rating Agency have been satisfied) shall be the
applicable amount described in clause (a) in excess of 10%, 7% and
5%, respectively, of the Pool Balance on the last day of such
immediately preceding Collection Period; provided, however, that
the Seller may adjust (a) the amount of the Obligor
Overconcentrations specified, And (b) the Obligors included in, the
preceding proviso if such adjustment does not cause any Rating
Agency to lower or withdraw its rating of any Series of
Certificates and (ii) the excess of (x) the aggregate of all
amounts of Receivables owned by the Trust that are denominated in
Canadian dollars as of the last day of the Collection Period
immediately preceding such Determination Date over (y) 5% of the
Net Pool Balance on the last day of such immediately preceding
Collection Period; provided, that the Seller may adjust the
percentage of Canadian dollar-denominated Receivables permitted in
clause (y) above if such adjustment does not cause any Rating
Agency to lower or withdraw its rating of any Series of
Certificates.
"Officers' Certificate" with respect to any corporation
shall mean, unless otherwise specified in this Agreement, a
certificate signed by (a) the Chairman of the Board, Vice Chairman
of the Board, President or any Vice President and (b) a Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary of such
corporation.
<PAGE> 14
"Opinion of Counsel" shall mean a written opinion of
counsel, who may be counsel of the Seller or Federal-Mogul and who
shall be acceptable to the Trustee.
"Overconcentration Amount" on any date of determination
shall mean the sum of the Obligor Overconcentrations on such date.
"Overconcentration Default Amount" on any Determination
Date shall mean with respect to each Obligor as to which there
exists an Obligor Overconcentration during the immediately
preceding Collection Period, the lesser of (a) the portion of the
Defaulted Amount attributable to the Receivables of such Obligor
with respect to the immediately preceding Collection Period and (b)
the aggregate amount of such Obligor Overconcentrations on such
Determination Date.
"Paying Agent" shall mean any paying agent appointed
pursuant to Section 6.13 and shall initially be the Trustee.
"Permitted Transaction" shall have the meaning specified
in Section 2.05(e).
"Person" shall mean any legal person, including any
individual, corporation, partnership, limited liability company,
association, joint-stock company, trust, unincorporated
organization, governmental entity or other entity of similar
nature.
"Pool Balance" shall mean, as of the time of
determination thereof, the aggregate of Receivables in the Trust at
such time.
"Principal Collections" shall mean Collections under the
Receivables not deemed to be Discount Collections.
"Principal Terms" shall mean, with respect to any Series:
(a) the name or designation; (b) the initial principal amount (or
method for calculating such amount); (c) the Certificate Rate (or
method for the determination thereof); (d) the payment date or
dates and the date or dates from which interest shall accrue; (e)
the method for allocating collections to Investor
Certificateholders; (f) the designation of any Series Accounts and
the terms governing the operation of any such Series Accounts; (g)
the Monthly Servicing Fee and the Investors' Servicing Fee; (h) the
Enhancement Provider and terms of any form of Enhancement with
respect thereto; (i) the terms on which the Investor Certificates
of such Series may be exchanged for Investor Certificates of
<PAGE> 15
another Series, repurchased by the Seller or remarketed to other
investors; (j) the Termination Date; (k) the number of Classes of
Investor Certificates of such Series and, if more than one Class,
the rights and priorities of each such Class; (l) the extent to
which the Investor Certificates of such Series will be issuable in
temporary or permanent global form (and, in such case, the
depositary for such Global Certificate or certificate, the terms
and conditions, if any, upon which such Global Certificate may be
exchanged, in whole or in part, for Definitive Certificates, and
the manner in which any interest payable on a temporary or Global
Certificate will be paid); (m) whether the Investor Certificates of
such Series may be issued in bearer form and any limitations
imposed thereon; (n) the priority of such Series with respect to
any other Series; (o) whether such Series will be part of a group;
and (p) any other terms of such Series.
"Purchase Price" shall mean, with respect to any
Receivable for any date on which such Receivable is to be purchased
pursuant to Section 3.03, an amount equal to (a) the amount payable
by the Obligor in respect thereof as reflected in the records of
the Servicer as of the date of purchase, minus (b) the product of
the Discount Rate and such amount payable by the Obligor, plus (c)
interest at a rate equal to the Discount Rate on the amount
calculated in clauses (a) and (b) above from the Transfer Date for
such Receivable to the date such Receivable is purchased from the
Trust.
"Rating Agency" shall mean, with respect to any
outstanding Series or Class, each statistical rating agency
selected by the Seller to rate the Investor Certificates of such
Series or Class.
"Rating Agency Condition" shall mean, with respect to any
action, that each Rating Agency shall have notified the Seller, the
Servicer and the Trustee in writing that such action will not
result in a reduction or withdrawal of the rating of any
outstanding Series or Class with respect to which it is a Rating
Agency, provided, however, that if there is no Series outstanding
which is rated by a Rating Agency, the Rating Agency Condition need
not be satisfied.
"Receivables" shall mean all the U.S. dollar denominated
and all the Canadian dollar-denominated accounts receivable shown
on the records of Federal-Mogul or any subsidiary as of the Cut-Off
Date, and from time to time thereafter, arising from the sale of
merchandise by Federal-Mogul or any subsidiary in the ordinary
course of business; provided, however, that "Receivables" that
includes a Stock Lift shall be sold to the Trust net of any
adjustment with respect to such Stock Lift. Receivables which
become Defaulted Receivables will cease to be included as
<PAGE> 16
Receivables on the day on which they become Defaulted Receivables.
The term "Receivables" shall not include Receivables with respect
to Excluded Obligors.
"Receivables Purchase Agreement" shall mean each
agreement between the Seller and the Seller named in each such
Agreement, in substantially the form attached hereto as Exhibit G,
dated as of the date hereof, governing the terms and conditions
upon which the Seller is acquiring the initial Receivables
transferred to the Trust on the Closing Date and all Receivables
acquired thereafter, as the same may from time to time be amended,
modified or otherwise supplemented.
"Receivables Seller" shall mean any Seller named in each
respective Receivables Purchase Agreement and "Receivables Sellers"
shall refer collectively to all the Receivables Sellers.
"Record Date" shall mean, with respect to any
Distribution Date, (a) the close of business on the day preceding
such Distribution Date, with respect to a Series for which Book-Entry
Certificates have been issued and (b) the last day of the
month preceding the month in which such Distribution Date occurs,
with respect to a Series for which Definitive Certificates or
definitive, fully registered Investor Certificates have been
issued.
"Recoveries" on any Determination Date shall mean all
amounts received by the Servicer during the Collection Period
immediately preceding such Determination Date with respect to
Receivables which have previously become Defaulted Receivables.
"Registered Certificateholder" shall mean the Holder of
a Registered Certificate.
"Registered Certificates" shall have the meaning
specified in Section 6.01.
"Related Documents" unless otherwise specified in the
Supplement for a Series, shall mean, collectively, the Receivables
Purchase Agreements and, with respect to any Series, any applicable
Enhancement Agreement.
"Required Participation Amount" shall mean, at any time
of determination, an amount equal to (a) the aggregate for each
Series of the product of (i) the sum of 100% plus the percentage
equivalent of a fraction the numerator of which is the sum of
(A) the Base Subordinated Percentage, (B) the Required
Participation Percentage and (C) the Excess Subordinated
Percentage, if any, and the denominator of which is 100% minus the
sum of (X) the Base Subordinated Percentage, (Y) the Required
<PAGE> 17
Participation Percentage and (Z) the Excess Subordinated
Percentage, if any, and (ii) the Initial Principal Amount plus
(b) the sum of the Overconcentration Amount and the Ineligible
Amount as of the end of the immediately preceding Collection Period
minus (c) the aggregate for each Series of the excess, if any, of
the Initial Principal Amount over the Invested Amount (in the case
of clauses (b) and (c), after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the
Distribution Date following such Determination Date).
"Required Participation Percentage" shall mean, with
respect to any Series, the percentage specified therefor in the
related Supplement.
"Requirements of Law" for any Person shall mean the
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation, or determination of an arbitrator or Governmental
Authority, in each cave applicable to or binding upon such Person
or to which such Person is subject, whether Federal, state or local
(including usury laws and the Federal Truth in Lending Act).
"Responsible Officer" shall mean any officer in the
Corporate Trust Department of the Trustee with direct
responsibility for the administration of this Agreement.
"Revolving Period" shall mean with respect to any Series,
the period specified as such in the related Supplement.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Seller" shall mean Federal-Mogul Funding Corporation, a
Michigan corporation, and its successors in interest to the extent
permitted hereunder.
"Seller's Certificates" shall mean, collectively, the
FMFC Certificate and any outstanding Supplemental Certificates.
"Seller's Interest" shall have the meaning specified in
Section 4.01.
"Seller's Participation Amount" shall mean, at any time
of determination, an amount equal to the Net Pool Balance at such
time minus the aggregate Invested Amounts for all outstanding
Series at such time.
"Series" shall mean any series of Investor Certificates.
"Series Account" shall mean any deposit, trust, escrow,
reserve or similar account maintained for the benefit of the
<PAGE> 18
Investor Certificateholders of any Series or Class, as specified in
any Supplement.
"Series Cut-Off Date" shall mean, with respect to any
Series, the date specified as such in the related Supplement.
"Series Issuance Date" shall mean, with respect to any
Series, the date on which the Investor Certificates of such Series
are to be originally issued in accordance with Section 6.03 and the
related Supplement.
"Servicer" shall initially mean Federal-Mogul, in its
capacity as Servicer under this Agreement, and after any Service
Transfer, the Successor Servicer.
"Servicer Default" shall have the meaning specified in
Section 10.01.
"Service Transfer" shall have the meaning specified in
Section 10.01.
"Servicing Fee" shall have the meaning specified in
Section 3.02.
"Servicing Officer" shall mean any officer of the
Servicer involved in, or responsible for, the administration and
servicing of the Receivables whose name appears on a list of
servicing officers furnished to the Trustee by the Servicer as such
list may from time to time be amended.
"Standard & Poor's" shall mean Standard & Poor's Ratings
Group or its successor.
"Stock Lift" shall mean an account receivable, or portion
thereof, as to which Federal-Mogul or one of its subsidiaries has
issued a credit in an amount equal to the balance of such account
receivable or portion thereof.
"Successor Servicer" shall have the meaning specified in
Section 10.02(a).
"Supplement" shall mean, with respect to any Series, a
Supplement to this Agreement, executed and delivered in connection
with the original issuance of the Investor Certificates of such
Series pursuant to Section 6.03, and all amendments thereof and
supplements thereto.
"Supplemental Certificate" shall have the meaning
specified in Section 6.03(c).
<PAGE> 19
"Tax Opinion" shall mean, with respect to any action, an
Opinion of Counsel to the effect that, for federal income and
Michigan state income and single business tax purposes, (a) such
action will not adversely affect the characterization of the
Investor Certificates of any outstanding Series or Class as debt of
FMFC, (b) such action will not cause or constitute a taxable event
with respect to any Investor Certificateholders or the Trust and
(c) in the case of Section 6.03(b), the Investor Certificates of
the new Series will be characterized as debt of FMFC.
"Termination Date" shall mean, with respect to any
Series, the termination date specified in the related Supplement.
"Termination Notice" shall have the meaning specified in
Section 10.01.
"Termination Proceeds" shall have the meaning specified
in Section 12.02(c).
"Transfer Agent and Registrar" shall have the meaning
specified in Section 6.04(a).
"Transfer Date" shall have the meaning specified in
Section 2.01.
"Transfer Deposit Amount" shall mean, with respect to any
Receivable reassigned or assigned to the Seller or the Servicer, as
applicable, pursuant to Section 2.04(c) or Section 3.03(c), the
amounts to be transferred by the Seller or the Servicer specified
in such Sections.
"Trust" shall mean the Federal-Mogul Trade Receivables
Master Trust created by this Agreement, the corpus of which shall
consist of the Trust Assets.
"Trust Assets" shall have the meaning specified in
Section 2.01.
"Trust Available Subordinated Amount" shall mean, at any
time of determination, the sum of the Available Subordinated
Amounts, if any, for all outstanding Series at such time.
"Trustee" shall mean The Chase Manhattan Bank, or its
successor in interest, or any successor trustee appointed as herein
provided.
"Trust Incremental Subordinated Amount" on any
Determination Date shall mean the excess, if any, of (a) the sum of
the Overconcentration Amount and the aggregate amount of Ineligible
Receivables, in each case, on such Determination Date over (b) the
Incremental Default Amount for such Determination Date.
<PAGE> 20
"Trust Invested Amount" shall mean, at any time of
determination, the sum of the Invested Amounts for all outstanding
Series at such time.
"Trust Termination Date" shall have the meaning specified
in Section 12.01.
"UCC" shall mean the Uniform Commercial Code, as amended
from time to time, as in effect in any specified jurisdiction.
"Unallocated Principal Collections" shall have the
meaning specified in Section 4.04.
"Vice President" when used with respect to the Seller or
the Servicer shall mean any vice president whether or not
designated by a number or word or words added before or after the
title "vice president".
SECTION 1.02. Other Definitional Provisions. (a) All
terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or
other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Agreement or in any such
certificate or other document, and accounting terms partly defined
in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in
any such certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting
principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement; Section, Schedule and Exhibit references contained
in this Agreement are references to Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and
the term "including" shall mean "including without limitation".
(d) The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such terms.
<PAGE> 21
SECTION 1.03. Business Day Certificate. On the
Closing Date (with respect to the remainder of calendar year 1992)
and thereafter, within 15 days prior to the end of each calendar
year while this Agreement shall remain in effect, the Servicer
shall provide an Officer's Certificate to the Trustee specifying
with respect to the succeeding calendar year the days on which
banking institutions in the State of Michigan are authorized or
obligated by law, executive order or governmental decree to be
closed.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. By
execution of this Agreement, the Seller does hereby sell, transfer,
assign, set over and otherwise convey, without recourse (except as
expressly provided herein), to the Trust for the benefit of the
Certificateholders and the other Beneficiaries on the first Closing
Date (a) all of its right, title and interest in, to and under the
Receivables and all Collateral Security with respect thereto, if
any, owned by the Seller at the close of business on the Cut-Off
Date and all monies due or to become due and all amounts received
with respect thereto and all proceeds (including "proceeds"), as
defined in Section 9-306 of the UCC as in effect in the State of
Michigan, and Recoveries) thereof and (b) all of the Seller's
rights, remedies, powers and privileges with respect to such
Receivables under the Receivables Purchase Agreements. As of each
Business Day prior to the earlier of (i) the occurrence of an Early
Amortization Event specified in Section 9.01(a) or (b) and (ii) the
Trust Termination Date, on which Receivables are created (a
"Transfer Date"), the Seller does hereby sell, transfer, assign,
set over and otherwise convey, without recourse (except as
expressly provided herein), to the Trust for the benefit of the
Certificateholders and the other Beneficiaries, all of its right,
title and interest in, to and under the Receivables and all
Collateral Security with respect thereto, if any, owned by the
Seller at the close of business on such Transfer Date and not
theretofore conveyed to the Trust, all monies due or to become due
and all amounts received with respect thereto and all proceeds
(including "proceeds", as defined in Section 9-306 of the UCC as in
effect in the State of Michigan, and Recoveries) thereof. Such
property, together with all monies on deposit in, and Eligible
Investments credited to, the Collection Account or any Series
Account, and any Enhancements shall collectively constitute the
assets of the Trust (the "Trust Assets"). The foregoing sale,
transfer, assignment, set-over and conveyance and any subsequent
sales, transfers, assignments, set-overs and conveyances do not
constitute, and are not intended to result in, the creation or an
assumption by the Trust, the Trustee, any Agent or any Beneficiary
of any obligation of Federal-Mogul, the Seller or any other Person
in connection with the Receivables or under the Receivables
Purchase Agreements or any other agreement or instrument relating
thereto, including any obligation to any Obligors.
<PAGE> 22
In connection with such sales, the Seller agrees to
record and file, at its own expense, a financing statement or
statements on form UCC-1 (and continuation statements when
applicable) with respect to the Receivables now existing and
hereafter created for the sale of accounts and general intangibles
(as defined in Section 9-106 of the UCC as in effect in any state
where the Seller's or Federal-Mogul's chief executive offices or
books and records relating to the Receivables are located) meeting
the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the sale and assignment
of the Receivables and all proceeds thereof to the Trust, and to
deliver a file-stamped copy of such financing statements or other
evidence of such filing to the Trustee on or prior to the first
Closing Date. The Trustee shall be under no obligation whatsoever
to file such financing statement or statements, or a continuation
statement to such financing statement or statements, or to make any
other filing under the UCC in connection with such sales.
In connection with such sales, the Seller further agrees,
at its own expense, on or prior to the Closing Date, to cause each
of Federal-Mogul and its subsidiaries to indicate in its computer
files, as required by the Receivables Purchase Agreements, that the
Receivables have been sold, and will continue to be sold, to the
Seller in accordance with the Receivables Purchase Agreements and
have been sold, and will continue to be sold, to the Trust pursuant
to this Agreement for the benefit of the Certificateholders and the
other Beneficiaries.
It is the intention of the parties hereto that the
conveyance be characterized as a sale. If, however, such
conveyance is not characterized as a sale, the Seller hereby grants
to the Trustee, for the benefit of the Investor Certificateholders,
a security interest in the property described in the first
paragraph of this Section 2.01.
SECTION 2.02. Acceptance by Trustee. (a) The Trustee
hereby acknowledges its acceptance, on behalf of the Trust, of all
right, title and interest previously held by the Seller to the
property, now existing and hereafter created, conveyed to the Trust
pursuant to Section 2.01 and declares that it shall maintain such
right, title and interest, upon the trust herein set forth, for the
benefit of the Certificateholders and the other Beneficiaries.
(b) The Trustee shall have no power to create, assume or
incur indebtedness or other liabilities in the name of the Trust
other than as contemplated in this Agreement.
SECTION 2.03. Representations and Warranties of the
Seller Relating to the Seller and the Agreement. The Seller hereby
represents and warrants to the Trust and to the Trustee as of each
Closing Date that:
(a) Organization and Good Standing. The Seller is a
corporation duly organized and validly existing and in good
standing under the law of the State of Michigan and has, in all
<PAGE> 23
material respects, full corporate power, authority and legal right
to own its properties and conduct its business as such properties
are presently owned and such business is presently conducted, and
to execute, deliver and perform its obligations under this
Agreement and to execute and deliver to the Trustee pursuant hereto
the Certificates.
(b) Due Qualification. The Seller is duly qualified to
do business and, where necessary, is in good standing as a foreign
corporation (or is exempt from such requirement) and has obtained
all necessary license and approvals in each jurisdiction in which
the conduct of its business requires such qualification except
where the failure to so qualify or obtain licenses or approvals
would not have a material adverse effect on its ability to perform
its obligations hereunder.
(c) Due Authorization. The execution and delivery of
this Agreement and the applicable Supplement and the Related
Documents and the execution and delivery to the Trustee of the
Certificates by the Seller and the consummation of the transactions
provided for or contemplated by this Agreement and the applicable
Supplement and the Related Documents, have been duly authorized by
the Seller by all necessary corporate action on the part of the
Seller.
(d) No Conflict. The execution and delivery of this
Agreement, the applicable Supplement, the Related Documents and the
Certificates, the performance of the transactions contemplated by
this Agreement and the applicable Supplement and the Related
Documents and the fulfillment of the terms hereof and thereof, will
not conflict with, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or
lapse of time or both) a material default under, any indenture,
contract, agreement, mortgage, deed of trust, or other instrument
to which the Seller is a party or by which it or its properties are
bound.
(e) No Violation. The execution and delivery of this
Agreement, the applicable Supplement, the Related Documents and the
Certificates, the performance of the transactions contemplated by
this Agreement and the applicable Supplement and the Related
Documents and the fulfillment of the terms hereof and thereof
applicable to the Seller, will not conflict with or violate any
material Requirements of Law applicable to the Seller.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Seller,
threatened against the Seller before any Governmental Authority (i)
asserting the invalidity of this Agreement, the applicable
Supplement, any of the Related Documents or the Certificates, (ii)
<PAGE> 24
seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by this
Agreement and the Applicable Supplement or the Related Documents,
(iii)seeking any determination or ruling that, in the reasonable
judgment of the Seller, would materially and adversely affect the
performance by the Seller of its obligations under this Agreement
and the applicable Supplement or the Related Documents, (iv)
seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement
and the applicable Supplement, the Related Documents or the
Certificates or (v) seeking to affect adversely the income tax
attributes of the Trust under the United States Federal or any
State income, single business or franchise tax systems.
(g) All Consents Required. All appraisals,
authorizations, consents, orders, approvals or other actions of any
Person or of any governmental body or official required in
connection with the execution and delivery of this Agreement, the
applicable Supplement, the Related Documents and the Certificates,
the performance of the transactions contemplated by this Agreement,
the applicable Supplement and any of the Related Documents, and the
fulfillment of the terms hereof and thereof, have been obtained.
(h) Enforceability. This Agreement and the applicable
Supplement and the Related Documents each constitutes a legal,
valid and binding obligation of the Seller enforceable against the
Seller in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect affecting the enforcement of creditors' rights in general
and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in
equity).
(i) Valid Transfer. This Agreement constitutes a valid
sale, transfer and assignment to the Trust of all right, title and
interest of the Seller in the Receivables and the proceeds thereof
and all of the Seller's rights, remedies, powers and privileges
with respect to the Receivables under the Receivables Purchase
Agreements. Except as otherwise provided in this Agreement,
neither the Seller nor any Person claiming through or under the
Seller has any claim to or interest in the Trust Assets.
(j) Investment Company Act. The Seller is not an
"investment company" within the meaning of the Investment Company
Act that is required to register under the Investment Company Act.
(k) Locations. The chief place of business and chief
executive office of the Seller, and the office where the Seller
keeps all of its books, records and documents evidencing
<PAGE> 25
Receivables are located at the addresses specified in Schedule I
hereto (or at such other locations, identified to the Trustee in
accordance with Section 13.06 hereof, in jurisdiction with respect
to which all applicable action required by Section 13.02(b) or
13.02(c) hereof has been taken and completed).
(l) Information. Each certificate, report, information,
exhibit, financial statement, document, book, record or report
furnished by the Seller to the Trustee or the Servicer in
connection with this Agreement is accurate in all material respects
as of its date, when considered as a whole with all other such
documents, and no such document contains any material misstatement
of fact or omits to state a material fact or any fact necessary
to make the statements contained therein not materially misleading.
(m) Solvency. The Seller is solvent and will not
become insolvent after giving effect to the transactions
contemplated by this Agreement; the Seller is currently repaying
all of its indebtedness as such indebtedness becomes due; and,
after giving effect to the transactions contemplated by this
Agreement, the Seller will have adequate capital to conduct its
business.
The representations and warranties set forth in this
Section 2.03 shall survive the transfer and assignment of the
Receivables to the Trust and the issuance of the Certificates.
Upon discovery by the Seller, the Servicer, any Agent or a
Responsible Officer of the Trustee of a breach of any of the
foregoing representations and warranties, the party discovering
such breach shall give prompt written notice to the other parties,
any Agent and to any Enhancement Providers.
In the event of any breach of any of the representations
and warranties set forth in this Section 2.03 having a material
adverse effect on the interests of the Investor Certificateholders,
then either the Trustee or the Holders of Investor Certificates
evidencing not less than a majority in aggregate unpaid principal
amount of all outstanding Investor Certificates, by notice then
given in writing to the Seller (and to the Trustee, any Enhancement
Providers and the Servicer if given by the Investor
Certificateholders), may direct the Seller to purchase the
Certificateholders' Interest within 60 days of such notice (or
within such longer period as may be specified in such notice), and
the Seller shall be obligated to make such purchase on a
Distribution Date occurring within such 60-day period on the terms
and conditions set forth below; provided, however, that no such
purchase shall be required to be made if, by the end of such 60-day
period (or such longer period as may be specified), the
representations and warranties set forth in this Section 2.03 shall
be true and correct in all material respects, and any material
<PAGE> 26
adverse effect on the Certificateholders' Interest caused thereby
shall have been cured.
The Seller shall deposit in the Collection Account in
immediately available funds on the Business Day preceding such
Distribution Date, in payment for such purchase, an amount equal to
the sum of the amounts specified therefor with respect to each
outstanding Series in the related Supplement. Notwithstanding
anything to the contrary in this Agreement, such amounts shall be
distributed to the Investor Certificateholders on such Distribution
Date in accordance with Article IV and the terms of each
Supplement. If the Trustee or the Investor Certificateholders give
notice directing the Seller to purchase the Certificateholders'
Interest as provided above, the obligation of the Seller to
purchase the Certificateholders' Interest pursuant to this Section
2.03 shall constitute the sole remedy respecting an event of the
type specified in the first sentence of this Section 2.03 available
to the Investor Certificateholders (or the Trustee on behalf of the
Investor Certificateholders).
SECTION 2.04. Representations and Warranties of the
Seller Relating to the Receivables. (a) Representations and
Warranties. The Seller hereby represents and warrants to the Trust
and the Trustee that:
(i) Each Receivable existing on the first Closing Date
and on each Transfer Date has been conveyed to the Trust free and
clear of any Lien (other than the Lien created by this Agreement in
favor of the Trustee on behalf of the Trust).
(ii) With respect to each Receivable existing on the
first Closing Date and on each Transfer Date, all consents,
licenses, approvals or authorizations of or registration or
declarations with any Governmental Authority required to be
obtained, effected or given by the Seller in connection with the
conveyance of such Receivable to the Trust have been duly obtained,
effected or given and are in full force and Seller shall accept a
reassignment of each such Receivable by directing the Servicer to
deduct, subject to the next sentence, the outstanding balance of
each such Receivable from the Pool Balance on or prior to the end
of the Collection Period in which such reassignment obligation
arises. If, following such deduction, the Net Pool Balance would
be less than the Required Participation Amount on the immediately
preceding Determination Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on
the Distribution Date following such Determination Date), then not
later than 12:00 noon on the day on which such reassignment occurs,
the Seller shall deposit in the Collection Account in immediately
available funds the amount (the "Transfer Deposit Amount") by which
the Net Pool Balance would be less than such Required Participation
<PAGE> 27
Amount (up to the principal amount of such Receivables); provided
that if the Transfer Deposit Amount is not deposited as required by
this sentence, then the outstanding balances of such Receivables
shall be deducted from the Pool Balance only to the extent that the
Net Pool Balance is not reduced below the Required Participation
Amount and the Receivables the principal amounts of which have not
been so deducted shall not be reassigned to the Seller and shall
remain part of the Trust. Upon reassignment of any such
Receivable, but only after payment by the Seller of the Transfer
Deposit Amount, if any, the Trust shall automatically and without
further action be deemed to sell, transfer, assign, set over and
otherwise convey to the Seller, without recourse, representation or
warranty, all the right, title and interest of the Trust in and to
such Receivable and all moneys due or to become due with respect
thereto and all proceeds thereof. Upon the written request of the
Seller, the Trustee shall execute such documents and instruments of
transfer or assignment as shall be prepared by the Seller and shall
take such other actions as shall reasonably be requested by the
Seller to effect the conveyance of such Receivables pursuant to
this Section. The obligation of the Seller to accept a
reassignment of any such Receivable and to pay any related Transfer
Deposit Amount shall constitute the sole remedy respecting the
event giving rise to such obligation available to
Certificateholders (or the Trustee on behalf of
Certificateholders), any Agents and any Enhancement Providers.
SECTION 2.05. Covenants of the Seller. The Seller
hereby covenants that:
(a) No Liens. Except for the conveyances hereunder or
as provided in Section 6.03(c), the Seller will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur,
assume or suffer to exist any Lien on, any Receivable, whether now
existing or hereafter created, or any interest therein, or the
Seller's rights, remedies, powers or privileges with respect to the
Receivables under the Receivables Purchase Agreements, or the
Seller's Interest or the Seller's Certificates and the Seller
shall defend the right, title and interest of the Trust in, to and
under the Receivables, whether now existing or hereafter created,
and such rights, remedies, powers and privileges, against all
claims of third parties claiming through or under the Seller.
(b) Delivery of Collections. In the event that the
Seller, Federal-Mogul or any Affiliate thereof receives payment in
respect of Receivables, the Seller and Federal-Mogul agree to pay
or cause to be paid to the Servicer or any Successor Servicer all
payment received thereby in respect of the Receivables as soon as
practicable after receipt thereof, but in no event later than two
Business Days after the receipt by the Seller, Federal-Mogul or any
Affiliate thereof.
<PAGE> 28
(c) Notice of Liens. The Seller shall notify the
Trustee and any Agent promptly after becoming aware of any Lien on
any Receivable other than the conveyances hereunder.
(d) Compliance with Law. The Seller hereby agrees to
comply in all material respects with all Requirements of Law
applicable to the Seller.
(e) Activities of the Seller. The Seller will not
engage in any business or activity of any kind or enter into any
transaction other than (i) the businesses, activities and
transactions contemplated and authorized by this Agreement or the
Related Documents, (ii) acquiring, selling, financing, holding,
assigning, pledging and otherwise dealing with accounts receivables
arising out of the sale of merchandise by the Receivables Sellers,
(iii) transferring such receivables to trusts pursuant to a pooling
and servicing agreement or similar agreement or arrangement, (iv)
authorizing, selling and delivering any class of certificates or
other securities of any such trust, (v) engaging in any activity
and exercising any powers permitted to corporations under the laws
of the State of Michigan that are related or incidental to the
foregoing and necessary, convenient or advisable to accomplish the
foregoing, (vi) any other activity in connection with which the
Rating Agency Condition has been satisfied (such businesses,
activities and transactions, collectively, "Permitted
Transactions") and (vii) any other business, activities and
transactions contemplated and authorized by the Articles of
Incorporation of the Seller in furtherance of the other provisions
in this Paragraph (e).
(f) Indebtedness. The Seller will not create, incur or
assume any indebtedness or issue any securities or sell or transfer
any receivables to a trust or other Person which issues securities
in respect of any such receivables, unless (i) any such
indebtedness or securities have no recourse to any assets of the
Seller other than the specified assets to which such indebtedness
or securities relate and (ii) the Rating Agency Condition shall
have been satisfied in connection therewith prior to the incurrence
or issuance thereof.
(g) Guarantees. The Seller will not become or remain
liable, directly or contingently, in connection with any
indebtedness or other liability of any other Person, whether by
guarantee, endorsement (other than endorsements of negotiable
instruments for deposit or collection in the ordinary course of
business), agreement to purchase or purchase, agreement to supply
or advance funds, or otherwise, except in connection with Permitted
Transactions and unless the Rating Agency Condition shall have been
satisfied with respect thereto.
<PAGE> 29
(h) Investments. The Seller will not make or suffer to
exist any loans or advances to, or extend any credit to, or make
any investments (by way of transfer of property, contributions to
capital, purchase of stock or securities or evidences of
indebtedness, acquisition of the business or assets, or otherwise)
in, any Affiliate, unless prior thereto the Rating Agency Condition
shall have been satisfied with respect thereto; provided, however,
that the Seller shall not be prohibited under this Section 2.05(h)
from declaring or paying any dividends in respect of its common
stock.
(i) Stock; Merger. The Seller will not, (i) sell any
shares of any class of its capital stock to any Person (other than
Federal-Mogul), or enter into any transaction of merger or
consolidation unless (A) the surviving Person of such merger or
consolidation assumes all of the Seller's obligations under this
Agreement, (B) the Seller shall have given each Rating Agency and
the Trustee at least 10 days' prior notice and the Rating Agency
Condition shall have been satisfied with respect to such
transaction and (C) such merger or consolidation does not conflict
with any provisions of the Articles of Incorporation of the Seller,
or (ii) terminate, liquidate or dissolve itself (or suffer any
termination, liquidation or dissolution) unless in connection with
any merger or consolidation described in clause (i) of this
subsection, or (iii) acquire or be acquired by any Person, or
otherwise make (or suffer) any material change in the organization
of or method of conducting its business.
(j) Agreements. The Seller will not become a party to,
or permit any of its properties to be bound by, any indenture,
mortgage, instrument, contract, agreement, lease or other
undertaking, except this Agreement, the Related Documents and any
document relating to a Permitted Transaction, or amend or modify
its Certificate of Incorporation or cancel, terminate, mend,
supplement, modify or waive any of the provisions of the
Receivables Purchase Agreements or any of the other Related
Documents or request, consent or agree to or suffer to exist or
permit any such cancellation, termination, amendment, supplement,
modification or waiver unless, in any such case, the Rating Agency
Condition shall have been satisfied with respect thereto.
SECTION 2.06. Sale of Ineligible Receivables. The
Seller shall sell to the Trust on the Closing Date and on each
Transfer Date any and all Receivables that are Ineligible
Receivables, provided that the Trust Incremental Subordinated
Amount is adjusted in accordance with the definition thereof with
respect to such Ineligible Receivables.
SECTION 2.07. Exclusion of Obligors. (a) On each
Determination Date the Seller shall have the right to terminate the
<PAGE> 30
sale to the Trust of Receivables relating to any Obligor (each, an
"Excluded Obligor") in the manner prescribed in Section 2.07(b)
(b) To terminate the sale of Receivables relating
to an Excluded Obligor, the Seller (or the Servicer on its behalf)
shall take the following actions and make the following
determinations:
(i) not less than five Business Days prior to the
date on which such sales are to terminate (the "Obligor Termination
Date"), furnish to the Trustee, any Agent, any Enhancement
Providers and the Rating Agencies a written notice (the
"Termination Notice") specifying the name of the Excluded Obligors
and Determination Date (which may be the Determination Date on
which such notice is given) on which sale of the related
Receivables will cease;
(ii) from and after such Obligor Termination
Date, cease to transfer to the Trust any and all receivables
arising with respect to such Excluded Obligor;
(iii) represent and warrant that the cessation of
sales of such receivables shall not, in the reasonable belief of
the Seller, cause an Early Amortization Event to occur or cause the
Net Pool Balance to be less than the Required Participation Amount;
(iv) represent and warrant that no selection
procedures reasonably believed by the Seller to be adverse to the
interests of the Beneficiaries were utilized in selecting the
Obligor to be excluded;
(v) represent and warrant that it has received
notice from each Rating Agency that such removal will not result in
a reduction or withdrawal of the rating of any outstanding Series
or Class by the applicable Rating Agency;
(vi) deliver to the Trustee, each Rating Agency,
any Agent and any Enhancement Providers a Tax Opinion, dated the
Obligor Termination Date, with respect to such removal; and
(vii) on or before the related Obligor
Termination Date, deliver to the Trustee, any Agent and any
Enhancement Providers an Officers' Certificate confirming the items
set forth in clauses (iii) through (v) above; the Trustee may
conclusively rely on such Officers' Certificate and shall have no
duty to make inquiries with regard to the matters set forth therein
and shall incur no liability in so relying.
No Obligor shall be excluded if such exclusion will result in a
reduction or withdrawal of the rating of any outstanding Series or
Class by the applicable Rating Agency.
<PAGE> 31
(c) On and after an Obligor Termination Date, the
Seller shall cease to sell to the Trust any Receivables relating to
the Excluded Obligor. Any Receivables owned by the Trust on such
Obligor Termination Date, and any Collections then held or
thereafter received by the Trust with respect to such Receivables,
shall remain the property of the Trust.
ARTICLE III
Administration and Servicing
of Receivables
SECTION 3.01. Acceptance of Appointment and Other
Matters Relating to the Servicer. (a) The Servicer shall service
and administer the Receivables, shall collect payments due under
the Receivables and shall charge-off as uncollectible Receivables,
all in accordance with its customary and usual billing and
collection procedures for servicing its portfolio of accounts
receivable. The Servicer shall have full power and authority,
acting alone or through any party properly designated by it
hereunder, to do any and all things in connection with such
servicing and administration which it may deem necessary or
desirable. Subject to the Supplement for any Series, without
limiting the generality of the foregoing and subject to Section
10.01, the Servicer is hereby authorized and empowered, unless such
power and authority is revoked by the Trustee on account of the
occurrence of a Servicer Default pursuant to Section 10.01, (i) to
instruct the Trustee to make withdrawals and payments from the
Collection Account and any Series Account as set forth in this
Agreement, (ii) to instruct the Trustee to take any action required
or permitted under any Enhancement, (iii) to execute and deliver,
on behalf of the Trust for the benefit of the Certificateholders
and the other Beneficiaries, any and all instruments of
satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to
the Receivables and, after the delinquency of any Receivable and to
the extent permitted under and in compliance with applicable
Requirements of Law, to commence enforcement proceedings with
respect to such Receivables, (iv) to make any filings, reports,
notices, applications, registrations with, and seek any consents or
authorizations from, the Securities and Exchange Commission and any
State securities authority on behalf of the Trust as may be
necessary or advisable to comply with any federal or state
securities laws or reporting requirement, and (v) to delegate
certain of its servicing, collection, enforcement and
administrative duties hereunder with respect to the Receivables to
any Person who agrees to conduct such duties in accordance with
this Agreement; provided, however, that the Servicer shall notify
the Trustee, the Rating Agencies, any Agent and any Enhancement
Providers in writing of any such delegation of its duties which is
not in the ordinary course of its business, that no delegation will
relieve the Servicer of its liability and responsibility with
<PAGE> 32
respect to such duties and that the Rating Agency Condition shall
have been satisfied with respect to any such delegation. The
Trustee shall execute and return to the Servicer any powers of
attorney and other documents prepared by the Servicer reasonably
necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
(b) In the event that the Seller is unable for any
reason to transfer Receivables to the Trust in accordance with the
provisions of this Agreement (including by reason of the
application of the provisions of Section 9.02 or any court of
competent jurisdiction ordering that the Seller not transfer any
additional Receivables to the Trust), the Servicer agrees to give
prompt written notice thereof to the Trustee, any Enhancement
Providers, any Agent and each Rating Agency.
(c) The Servicer shall comply with and perform its
servicing obligations with respect to the Receivables in accordance
with its customary billing and collection procedures for its
accounts receivables portfolio.
SECTION 3.02. Servicing Compensation. As full
compensation for its servicing activities hereunder and
reimbursement for its expenses as set forth in the immediately
following paragraph, the Servicer shall be entitled to receive the
Servicing Fee on each Deposit Date on or prior to the Trust
Termination Date payable in arrears. The "Servicing Fee" shall be
the aggregate of the Monthly Servicing Fees specified in the
Supplements. The Servicing Fee shall be payable to the Servicer
solely to the extent amounts are available for payment in
accordance with the terms of the Supplements.
The Servicer's expenses include the amounts due to the
Trustee pursuant to Section 11.05 and the reasonable fees and
disbursements of independent accountants and all other expenses
incurred by the Servicer in connection with its activities
hereunder, and including all other fees and expenses of the Trust
not expressly stated herein to be for the account of the
Certificateholders. The Servicer shall be required to pay such
expenses for its own account, and shall not be entitled to any
payment therefor other than the Servicing Fee. The Servicer will
be solely responsible for all fees and expenses incurred by or on
behalf of the Servicer in connection herewith and the Servicer will
not be entitled to any fee or other payment from, or claim on, any
of the Trust Assets (other than the Servicing Fee).
SECTION 3.03. Representations; Warranties and Covenants
of the Servicer. (a) Federal-Mogul, as Servicer, hereby makes,
and any Successor Servicer by its appointment hereunder shall make,
on each Closing Date (and on the date of any such appointment) the
following representations, warranties and covenants:
(i) Organization and Good Standing. Such party is a
corporation duly organized, validly existing and in good standing
under the applicable laws of the state of its incorporation and
<PAGE> 33
has, in all material respects, full corporate power, authority and
legal rights to own its properties and conduct its accounts
receivable servicing business at such properties are presently
owned and as such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement and the
applicable Supplement.
(ii) Due Qualification. Such party is duly qualified
to do business and is in good standing as a foreign corporation (or
is exempt from such requirements) and has obtained all necessary
licenses and approvals in each jurisdiction in which the servicing
of the Receivables as required by this Agreement requires such
qualification except where the failure to so qualify or obtain
licenses or approvals would not have a material adverse effect on
its ability to perform its obligations hereunder.
(iii) Due Authorization. The execution, delivery, and
performance of this Agreement and the applicable Supplement has
been duly authorized by such party by all necessary corporate
action on the part thereof.
(iv) Binding Obligation. This Agreement and the
applicable Supplement constitutes a legal, valid and binding
obligation of such party, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect, affecting the enforcement of creditors'
rights and except as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at law or
in equity).
(v) No Violation. The execution and delivery of this
Agreement and the applicable Supplement by such party, the
performance of the transactions contemplated by this Agreement and
the applicable Supplement and the fulfillment of the terms hereof
and thereof applicable to such party will not conflict with,
violate, result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of
time or both) a material default under, any Requirement of Law
applicable to such party or any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which such party is
a party or by which it is bound.
(vi) No proceedings. There are no proceedings or
investigations pending or, to the best knowledge of such party,
threatened against such party before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
Agreement and the applicable Supplement, seeking any determination
<PAGE> 34
or ruling that, in the reasonable judgment of such party, would
materially and adversely affect the performance by such party of
its obligations under this Agreement and the applicable Supplement,
or seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement
and the applicable Supplement.
(vii) Compliance with Requirements of Law. Such party
shall duly satisfy all obligations on its part to be fulfilled
under or in connection with the Receivables, will maintain in
effect all qualifications required under Requirements of Law in
order to service properly the Receivables and will comply in all
material respects with all Requirements of Law in connection with
servicing the Receivables the failure to comply with which would
have a material adverse effect on the interests of Beneficiaries.
(viii) Protection of Beneficiaries Rights. Such party
shall take no action, nor omit to take any action, which would
impair the rights of Beneficiaries in the Receivables nor shall it
reschedule, revise or defer payments due on any Receivable except
in accordance with the credit and collection policies of Federal-Mogul;
and in no event will Federal-Mogul extend the date on which
payment in full of a Receivable is due more than 90 days beyond the
date on which such Receivable was sold to the Trust.
(ix) Servicer Lockbox Account. The Servicer maintains
deposit accounts (each, a "Lockbox Account") into which it shall
deposit all amounts paid by Obligors under the Receivables. Each
Lockbox Account shall be maintained by the Servicer in an Eligible
Deposit Account at a depository institution solely in the name of
the Trustee. The Servicer agrees (i) that it will not change this
method of collection without the prior written consent of each
Enhancement Provider and Agent and unless the Rating Agency
Condition shall have been satisfied; (ii) with respect to amounts
deposited into the Lockbox Accounts in respect of a particular day,
that it will not transfer such amounts from the Lockbox Accounts
until the Servicer has posted all Collections in respect of the
Receivables for such day and (iii) concurrently with the transfer
of amounts from the Lockbox Accounts in respect of a particular
day, the Servicer will make the deposits and transfers required by
the terms of this Agreement for such day.
(x) Negative Pledge. Except for the conveyance here
under to the Trustee, the Servicer will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or
suffer to exist any Lien on, any Receivable sold and assigned to
the Trust, whether now existing or hereafter created, or any
interest therein, and the Servicer shall defend the rights, title
and interest of the Trust in, to And under any Receivable sold and
assigned to the Trust, whether now existing or hereafter created,
against all claims of third parties claiming through or under the
Seller or the Servicer.
<PAGE> 35
(b) Notice of Breach. The representations and
warranties set forth in this Section 3.03 shall survive the
transfer and assignment of the Receivables to the Trust and the
issuance of the Certificates. Upon discovery by the Seller, the
Servicer or a Responsible Officer of the Trustee of a breach of any
of the representations and warranties set forth in this Section
3.03, the party discovering such breach shall give prompt written
notice to the other parties and to any Agent and any Enhancement
Providers.
(c) Purchase. In the event any representation or
warranty under Section 3.03(a) (vii) or (viii) is not true and
correct in any material respect as of the date specified therein
with respect to any Receivable and such breach has a material
adverse effect on the Certificateholders' Interest in such
Receivable, then, within 30 days (or such longer period as may be
agreed to by the Trustee) of the earlier to occur of the discovery
of any such event by the Seller or the Servicer, or receipt by the
Seller or the Servicer of written notice of any such event given by
the Trustee or any Enhancement Provider, the Servicer shall
purchase such Receivable on the Determination Date immediately
succeeding the expiration of such 30-day period on the terms and
conditions set forth in the next succeeding paragraph; provided,
however, that no such purchase shall be required to be made with
respect to such Receivable if, by the end of such 30-day period (or
such longer period as may be agreed to by the Trustee) the breached
representation or warranty shall then be true and correct in all
material respects and any material adverse effect caused thereby
shall have been cured. The Servicer shall effect such purchase by
depositing in the Collection Account in immediately available funds
an amount equal to the Purchase Price of such Receivable. Any such
deposit of such Purchase Price into the Collection Account shall be
considered a Transfer Deposit Amount and shall be applied in
accordance with the terms of this Agreement.
Upon each such payment of such Purchase Price, the Trust
shall automatically and without further action be deemed to sell,
transfer, assign, set over and otherwise convey to the Servicer,
without recourse, representation or warranty, all right, title and
interest of the Trust in and to such Receivables, all monies due or
to become due with respect thereto and all proceeds thereof. Upon
the written request of the Servicer, the Trustee shall execute such
documents and instruments of transfer or assignment as shall be
prepared by the Servicer and take such other actions as shall be
reasonably requested by the Servicer to effect the conveyance of
any such Receivables pursuant to this Section. The obligation of
the Servicer to purchase such Receivables, and to make the deposits
required to be made to the Collection Account as provided in the
<PAGE> 36
preceding paragraph, shall constitute the sole remedy respecting
the event giving rise to such obligation available to
Certificateholders (or the Trustee on behalf of
Certificateholders), any Agent or any Enhancement Provider.
SECTION 3.04. Reports and Records for the Trustee. (a)
On or before each Distribution Date, with respect to each
outstanding Series, the Servicer shall deliver to each Enhancement
Provider, each Rating Agency, the Trustee and each Investor
Certificateholder a Distribution Date Statement for such
Distribution Date substantially in the form set forth in the
related Supplement.
(b) The Servicer shall at all times maintain its
computer files with respect to the Receivables in such a manner so
that the Receivables as a group may be specifically identified.
Upon prior request of the Trustee, the Servicer shall make
available to the Trustee, at the office of the Servicer selected by
the Servicer on any Business Day during the Servicer's normal
business hours, any computer programs necessary to make such
identifications. Upon prior written notice by the Trustee, the
Servicer shall make available at the office of the Servicer
selected by the Servicer for inspection by the Trustee on any
Business Day during the Servicer's normal business hours its
records relating to its servicing of the Receivables.
SECTION 3.05. Annual Servicer's Certificate. The
Servicer will deliver to the Rating Agencies (insofar as Rating
Agencies are rating any outstanding Series), the Trustee, each
Agent and each Enhancement Provider on or before April 30 of each
calendar year, beginning with April 30, 1993, an Officers'
Certificate substantially in the form of Exhibit B stating that (a)
a review of the activities of the Servicer during the preceding
calendar year and of its performance under this Agreement was made
under the supervision of the officer signing such certificate and
(b) to the best of such officer's knowledge, based on such review,
the Servicer has performed in all material respects its obligations
under this Agreement throughout such year, or, if there has been a
material default in the performance of any such obligation,
specifying each such default known to such officer and the nature
and status thereof. A copy of such certificate may be obtained by
any Investor Certificateholder by a request in writing to the
Trustee addressed to the Corporate Trust Office.
SECTION 3.06. Annual Independent Public Accountants'
Servicing Report. The Servicer shall cause a nationally recognized
firm of independent certified public accountants, who may also
render other services to the Servicer or to the Seller, to deliver
to the Trustee, the Rating Agencies (insofar as Rating Agencies are
rating any outstanding Series), each Agent and each Enhancement
<PAGE> 37
Provider on or before April 30 of each year, beginning April 30,
1993, a report addressed to the Board of Directors of the Servicer
and to the Trustee, to the effect that such firm has examined the
financial statements of the Servicer or, if applicable, the parent
corporation of the Servicer, and issued its report thereon and that
such examination: (a) was made in accordance with generally
accepted auditing standards, and accordingly included such tests of
the accounting records and such other auditing procedures as such
firm considered necessary in the circumstances, (b) included tests
relating to accounts receivable in accordance with generally
accepted auditing standards and (c) except as described in the
report, disclosed no exceptions or errors in the records relating
to accounts receivable that, in the firm's opinion, generally
accepted auditing standards requires such firm to report. A copy
of such report may be obtained by any Investor Certificateholder by
a request in writing to the Trustee addressed to the Corporate
Trust Office.
SECTION 3.07. Tax Treatment. The Seller has entered
into this Agreement and the Investor Certificates have been (or
will be) issued with the intention that the Investor Certificates
will qualify under applicable tax law as indebtedness of FMFC
secured by the Receivables. The Seller, each Beneficiary and each
Certificateholder and Certificate Owner, by the acceptance of its
Certificate or Book-Entry Certificate, as applicable, agrees to
treat, and to take no action inconsistent with the treatment of,
the Investor Certificates as indebtedness of FMFC secured by the
Receivables for federal income taxes, state and local income and
franchise taxes, Michigan Single Business tax and any other taxes
imposed on or measured by income.
SECTION 3.08. Notices to Federal-Mogul. In the event
Federal-Mogul is no longer acting as Servicer, any Successor
Servicer appointed pursuant to Section 10.02 shall deliver or make
available to Federal-Mogul, as the case may be, each certificate
and report required to be prepared, forwarded or delivered
thereafter pursuant to Sections 3.04, 3.05 or 3.06.
SECTION 3.09. Adjustments. (a) If the Servicer adjusts
downward the amount of any Receivable because of a rebate, price
adjustment, billing error or other reason (other than the
collectibility of such Receivable), then, in any such case, the
Pool Balance will be automatically reduced by the amount of the
adjustment. Furthermore, if following such a reduction the Net
Pool Balance would be less than the Required Participation Amount
on the immediately preceding Determination Date (after giving
effect to the allocation, distributions, withdrawals and deposits
to be made on the Distribution Date following such Determination
Date), then the Seller shall be required to pay an amount equal to
such deficiency (up to the amount of such adjustment) into the
<PAGE> 38
Collection Account on the Business Day on which such adjustment or
reduction occurs (each such payment an "Adjustment Payment").
(b) If (i) the Servicer makes a deposit into the
Collection Account in respect of a Collection of a Receivable and
such Collection was received by the Servicer in the form of a check
which is not honored for any reason or (ii) the Servicer makes a
mistake with respect to the amount of any Collection and deposits
an amount that is less than or more than the actual amount of such
Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such
dishonored check or mistake. Any Receivable in respect of which a
dishonored check is received shall be deemed not to have been paid.
SECTION 3.10. Discount. The Trust will purchase
Eligible Receivables from the Seller at discounts from the
outstanding balances of such Receivables (with respect to each
Series, the "Discount Rate"). Subject to the Supplement for any
Series, it is intended that the Discount Rate for each Series will
be sufficient to pay interest on the Certificates at the
Certificate Rate and the Servicing Fee. The Discount Rate for each
Series will be specified in the related Supplement. With respect
to each Series and any date of determination, Collections will be
deemed collections of such discount ("Discount Collections") in an
amount equal to the product of the Discount Rate and the aggregate
Collections on such date of determination, provided, however, that
with respect to each Collection Period, all Collections shall be
first deemed Discount Collections allocable to the Investor
Certificateholders up to an amount equal to Monthly Interest to be
paid on the Distribution Date occurring in the month next
succeeding such Collection Period. The remainder of such
Collections will be deemed collections of principal ("Principal
Collections").
<PAGE> 39
ARTICLE IV
Rights of Certificateholders and
Allocation and Application of Collections
SECTION 4.01. Rights of Certificateholders. The
Investor Certificates shall represent fractional undivided
interests in the Trust, which, with respect to each Series, shall
consist of the right to receive, to the extent necessary to make
the required payments with respect to the Investor Certificates of
such Series at the times and in the amounts specified in the
related Supplement, the portion of Collections allocable to
Investor Certificateholders of such Series pursuant to this
Agreement and such Supplement, funds on deposit in the Collection
Account allocable to Certificateholders of such Series pursuant to
this Agreement and such Supplement, funds on deposit in any related
Series Account and funds available pursuant to any related
Enhancement (collectively, with respect to all Series, the
"Certificateholders' Interest"), it being understood that the
Investor Certificates of any Series or Class shall not represent
any interest in any Series Account or Enhancement for the benefit
of any other Series or Class. The Seller's Certificate shall
represent the ownership interest in the remainder of the Trust
Assets not allocated pursuant to this Agreement or any Supplement
to the Certificateholders' Interest, including the right to receive
Collections with respect to the Receivables and other amounts at
the times and in the amounts specified in this Agreement or in any
Supplement to be paid to the Seller on behalf of all holders of the
Seller's Certificates (the "Seller's Interest"); provided, however,
that the Seller's Certificates shall not represent any interest in
the Collection Account, any Series Account or any Enhancement,
except as specifically provided in this Agreement or any
Supplement.
SECTION 4.02. Establishment of the Collection Account.
The Servicer, for the benefit of the Certificateholders and,
subject to the rights of the Certificateholders, the other
Beneficiaries, shall cause to be established and maintained in the
name of the Trust an Eligible Deposit Account bearing a designation
clearly indicating that the funds deposited therein are held for
the benefit of the Certificateholders and, subject to the rights of
the Certificateholders, the other Beneficiaries (the "Collection
Account"). The Trustee shall possess all right, title and interest
in all funds from time to time on deposit in, and all Eligible
Investments credited to, the Collection Account and in all proceeds
thereof. Except as provided herein, the Collection Account shall
be under the sole dominion and control of the Trustee for the
benefit of the Certificateholders and the other Beneficiaries. If,
at any time, the Collection Account ceases to be an Eligible
<PAGE> 40
Deposit Account, the Servicer shall establish a substitute Eligible
Deposit Account as the Collection Account, instruct the Trustee to
transfer any cash and/or any Eligible Investments to such new
Collection Account and, from the date any such substitute account
is established, such account shall be the Collection Account.
Except as provided herein, neither the Seller nor the Servicer, nor
any person or entity claiming by, through or under the Seller or
Servicer, shall have any right, title or interest in, or any right
to withdraw any amount from, the Collection Account. Pursuant to
the authority granted to the Servicer in Section 3.01, the Servicer
shall have the power, revocable by the Trustee, to instruct the
Trustee to make withdrawals and payments from the Collection
Account for the purposes of carrying out the Servicer's or
Trustee's duties specified in this Agreement.
All Eligible Investments shall be held by the Trustee for
the benefit of the Certificateholders and the other Beneficiaries.
Subject to the Supplement for any Series, funds on deposit in the
Collection Account shall at the direction of the Servicer be
invested by the Trustee solely in Eligible Investments that will
mature or be redeemable so that such funds (a), with respect to
amounts held for distribution on the next Distribution Date will be
available at the close of business on or before the Business Day
next preceding the following Distribution Date and (b), with
respect to all other amounts, will be available at the close of
business on or before the next Business Day (or on or before 10:00
a.m. on such next Distribution Date or Business Day as the case
may be in the case of Eligible Investments in respect of which the
Trustee is the obligor). Any request by the Servicer to invest
funds on deposit in the Collection Account shall be in writing and
shall certify that the requested investment is an Eligible
Investment which matures at or prior to the time required hereby.
As of each date on which Eligible Investments mature or are
redeemed, all interest and other investment earnings (net of losses
and investment expenses) on funds on deposit in the Collection
Account received on such date shall be credited to the Collection
Account. Schedule 2, which is hereby incorporated into and made
part of this Agreement, identifies the Collection Account by
setting forth the account number of such account, the account
designation of such account and the name and location of the
Institution with which such account has been established. If a
substitute Collection Account is established pursuant to this
Section 4.02, the Servicer shall provide to the Trustee an amended
Schedule 2, setting forth the relevant information for such
substitute Collection Account.
SECTION 4.03. Allocations and Applications of
Collections and Other Funds. (a) On or prior to March 31, 1997,
the Servicer shall cause all Collections deposited into a Lockbox
Account to be deposited directly into the Collection Account as
<PAGE> 41
promptly as possible and in no event later than two Business Days
after receipt thereof in a Lockbox Account; provided, that payments
in a Lockbox Account in the form of a check shall be deposited in
the Collection Account no later than two Business Days after such
check becomes available funds.
(b) Subject to the Supplement for any Series and Section
4.04, but notwithstanding anything else in this Agreement to the
contrary, with respect to any Collection Period, (i) the Servicer
will only be required to deposit Collections into the Collection
Account up to the aggregate amount of Collections required to be
deposited into all Series Accounts or, without duplication,
distributed on the related Distribution Date to all Investor
Certificateholders, to each Agent or to each Enhancement Provider
pursuant to the terms of any Supplement or Enhancement Agreement
and (ii) if at any time prior to such Distribution Date the amount
of Collections deposited in the Collection Account exceeds the
amount required to be deposited pursuant to clause (i) above, the
Servicer will be permitted to withdraw the excess from the
Collection Account, including an amount equal to any Monthly
Servicing Fee then owing to it, as well as the Monthly Servicing
Fee payable on the next Distribution Date. In the event Federal-Mogul
becomes a debtor in a bankruptcy case, all collections
received by the Servicer with respect to the Receivables of a
specific obligor will be deposited by the Servicer into the
Collection Account as described herein, in the order in which such
Receivables were originated.
(c) Subject to the Supplement for any Series, Principal
Collections, Discount Collections, Collections of Defaulted
Receivables and Miscellaneous Payments will be allocated to each
Series from and after the related Series Cut-Off Date as specified
in the related Supplement, and amounts so allocated to any Series
will not, except as specified in the related Supplement, be
available to the Investor Certificateholders of any other Series.
Allocations thereof between the Certificateholders' Interest and
the Seller's Interest, among the Series in any group and among the
Classes in any Series shall be set forth in the related Supplement
or Supplements.
SECTION 4.04. Unallocated Principal Collections.
Subject to the Supplement for any Series, on each Distribution
Date, (a) the Servicer shall allocate Excess Principal Collections
(as described below) to each Series as set forth in the related
Supplement and (b) the Servicer shall instruct the Trustee to
withdraw from the Collection Account and pay to the Seller (i) an
amount equal to the excess, if any, of (x) the aggregate amount for
all outstanding Series of Principal Collections which the related
Supplements specify are to be treated as "Excess Principal
Collections" with respect to such Distribution Date over (y) the
aggregate amount for all outstanding Series which the related
<PAGE> 42
Supplements specify are "Principal Shortfalls" with respect to such
Distribution Date and, without duplication, (ii) the aggregate
amount for all outstanding Series of that portion of Principal
Collections which the related Supplements specify are to be
allocated and paid to the Seller with respect to such Distribution
Date; provided, however, that, in the case of clauses (i) and (ii),
such amounts shall be paid to the Seller only if the Net Pool
Balance for such Distribution Date (determined after giving effect
to any Receivables transferred to the Trust on such date) exceeds
the Required Participation Amount for the immediately preceding
Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on such
Distribution Date). Any amount held in the Collection Account
pursuant to this paragraph because the Net Pool Balance does not
exceed the Required Participation Amount ("Unallocated Principal
Collection") shall be paid to the Seller at the time the Net Pool
Balance exceeds the Required Participation Amount for the
immediately preceding Determination Date (after giving effect to
the allocations, distributions, withdrawals and deposits to be made
on the Distribution Date immediately following such Determination
Date); provided, however, that any Unallocated Principal
Collections on deposit in the Collection Account at any time during
which any Series is in its amortization period, accumulation period
or Early Amortization Period shall be deemed to be "Miscellaneous
Payments" and shall be allocated and distributed in accordance with
Section 4.03 and the terms of each Supplement.
<PAGE> 43
ARTICLE V
Distributions and Reports to
Certificateholders
Distributions shall be made to, and reports shall be
provided to, Certificateholders as set forth in the applicable
Supplement.
ARTICLE VI
The Certificates
SECTION 6.01. The Certificates. The Investor
Certificates of any Series or Class may be issued in bearer form
("Bearer Certificates") with attached interest coupons and one or
more special coupons (collectively, the "Coupons") pursuant to
Section 6.11, or in fully registered form ("Registered
Certificates") and shall be substantially in the form of the
exhibits with respect thereto attached to the applicable
Supplement. The FMFC Certificate will be issued in registered
form, substantially in the form of Exhibit A, and shall upon issue,
be executed and delivered by the Seller to the Trustee for
authentication and redelivery as provided in Section 6.02. Except
as otherwise provided in any Supplement, Bearer Certificates shall
be issued in minimum denominations of $5,000, $50,000 and $100,000
and Registered Certificates shall be issued in minimum
denominations of $1,000,000 and in integral multiples of $1,000 in
excess thereof. If specified in any Supplement, the Investor
Certificates of any Series or Class shall be issued upon initial
issuance as a single certificate evidencing the aggregate original
principal amount of such Series or Class as described in Section
6.11. The FMFC Certificate shall be initially issued as a single
certificate and shall initially represent the entire Seller's
Interest. Unless otherwise indicated in any Supplement, each
Certificate shall be executed by manual or facsimile signature on
behalf of the Seller by its President or any Vice President.
Certificates bearing the manual or facsimile signature of the
individual who was, at the time when such signature was affixed,
authorized to sign on behalf of the Seller shall not be rendered
invalid, notwithstanding that such individual ceased to be so
authorized prior to the authentication and delivery of such
Certificates or does not hold such office at the date of such
Certificates. No Certificates shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication
substantially in the form provided for herein executed by or on
behalf of the Trustee by the manual signature of a duly authorized
signatory (which may be a duly authorized signatory of an
authenticating agent appointed by the Trustee), and such
certificate upon any Certificate shall be conclusive evidence, and
the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Registered Certificates
and Seller's Certificates shall be dated the date of their
authentication. All Bearer Certificates shall be dated the date of
the applicable Series Issuance Date as provided in the related
Supplement.
<PAGE> 44
SECTION 6.02. Authentication of Certificates. The
Trustee shall authenticate and deliver the Investor Certificates of
each Series and Class that are issued upon original issuance to or
upon the order of the Seller against payment to the Seller of the
purchase price therefor. The Trustee shall authenticate and
deliver the FMFC Certificate to the Seller simultaneously with its
delivery of the Investor Certificates of the first Series to be
issued hereunder. If specified in the related Supplement for any
Series or Class, the Trustee shall authenticate and deliver outside
the United States the Global Certificate that is issued upon
original issuance thereof.
SECTION 6.03. New Issuances. (a) The Seller may from
time to time direct the Trustee, on behalf of the Trust, to issue
one or more new Series of Investor Certificates pursuant to a
Supplement. The Investor Certificates of all outstanding Series
shall be equally and ratably entitled as provided herein to the
benefit of this Agreement without preference, priority or
distinction, all in accordance with the terms and provisions of
this Agreement and the applicable Supplement except, with respect
to any Series or Class, as provided in the related Supplement.
(b) On or before the Series Issuance Date relating to
any new Series, the parties hereto will execute and deliver a
Supplement which will specify the Principal Terms of such new
Series. The terms of such Supplement may modify or amend the terms
of this Agreement solely as applied to such new Series. The
obligation of the Trustee to issue the Investor Certificates of
such new Series and to execute and deliver the related Supplement
is subject to the satisfaction of the following conditions:
(i) on or before the fifth Business Day immediately
preceding the Series Issuance Date, the Seller shall have given the
Trustee, the Servicer, each Rating Agency (insofar as Rating
Agencies are rating any outstanding Series), any Agent and any
Enhancement Provider written notice of such issuance and the Series
Issuance Date;
(ii) the Seller shall have delivered to the Trustee the
related Supplement, in form satisfactory to the Trustee, executed
by each party hereto other than the Trustee;
(iii) the Seller shall have delivered to the Trustee any
related Enhancement Agreement executed by each of the parties
thereto, other than the Trustee;
(iv) such issuance will not result in the occurrence of
an Early Amortization Event and the Seller shall have delivered to
the Trustee, any Agent and any Enhancement Provider an Officer's
<PAGE> 45
Certificate, dated the Series Issuance Date (upon which the Trustee
may conclusively rely), to the effect that the Seller reasonably
believes that such issuance will not result in the occurrence of an
Early Amortization Event and is not reasonably expected to result
in the occurrence of an Early Amortization Event at any time in the
future;
(v) the Seller shall have delivered to the Trustee an
Opinion of Counsel to the effect that the issuance of the Investor
Certificates of such Series (A) has been, or need not be,
registered under the Securities Act of 1933, as amended, and will
not result in the requirement that any other Series of Investor
Certificates not registered under the Securities Act of 1933, as
amended, be so registered (unless the Seller has elected, in its
sole discretion, to register such Certificates), and (B) will not
result in the Trust becoming subject to registration as an
investment company under the Investment Company Act of 1940, as
amended, and (C) will not require this Agreement or the related
Supplement to be qualified under the Trust Indenture Act of 1939,
as amended;
(vi) the Seller shall have delivered to the Trustee and
any Enhancement Provider a Tax Opinion, dated the Series Issuance
Date, with respect to such issuance; and
(vii) Reserved
(viii) the Seller shall have delivered to the Trustee an
Officer's Certificate certifying that the result obtained by
multiplying (x) the Seller's Participation Amount by (y) the
percentage equivalent of the portion of the Seller's Interest
represented by the FMFC Certificate, shall not be less than 2% of
the Pool Balance, in each case as of the Series Issuance Date, and
after giving effect to such issuance.
Upon satisfaction of the above conditions, the Trustee shall
execute the Supplement and the Seller shall execute and deliver the
Investor Certificates of such Series for authentication and
redelivery to or upon the order of the Seller. Notwithstanding the
provisions of this Section 6.03(b), prior to the execution of any
Supplement, the Trustee shall be entitled to receive and rely upon
an Opinion of Counsel stating that the execution of such Supplement
is authorized or permitted by this Agreement and any Supplement
related to any outstanding Series. The Trustee may, but shall not
be obligated to, enter into any such Supplement which affects the
Trustee's own rights, duties or immunities under this Agreement.
(c) The Seller may surrender the FMFC Certificate to the
Trustee in exchange for a newly issued FMFC Certificate and a
second certificate (a "Supplemental Certificate"), the terms of
which shall be defined in a supplement to this Agreement (which
<PAGE> 46
Supplement shall be subject to Section 13.01 hereof to the extent
that it amends any of the terms of this Agreement), to be delivered
to or upon the order of the Seller (or the holder of a Supplemental
Certificate, in the case of the transfer or exchange thereof, as
provided below), upon satisfaction of the following conditions:
(i) the Seller shall have delivered to the Trustee an
Officer's Certificate certifying that the result obtained by
multiplying (x) the Seller's Participation Amount by (y) the
percentage equivalent of the portion of the Seller's Interest
represented by the FMFC Certificate, shall not be less than 2% of
the Pool Balance, in each case as of the date of, and after giving
effect to, such exchange;
(ii) the Rating Agency Condition shall have been
satisfied with respect to such exchange (or transfer or exchange as
provided below); and
(iii) the Seller shall have delivered to the Trustee,
any Agent and any Enhancement Provider a Tax Opinion, dated the
date of such exchange (or transfer or exchange as provided below),
with respect thereto.
The FMFC Certificate will at all times be beneficially owned by the
Seller. Any Supplemental Certificate may be transferred or
exchanged only upon satisfaction of the conditions set forth in
clauses (ii) and (iii) above.
SECTION 6.04. Registration of Transfer and Exchange
of Certificates. (a) The Trustee shall cause to be kept at the
office or agency to be maintained in accordance with the provisions
of Section 6.04(b) a register (the "Certificate Register") in
which, subject to such reasonable regulations as it may prescribe,
a transfer agent and registrar (the "Transfer Agent and Registrar")
shall provide for the registration of the Registered Certificates
and of transfers and exchanges of the Registered Certificates as
herein provided. The Transfer Agent and Registrar shall initially
be the Trustee and any co-transfer agent and co-registrar chosen by
the Seller and acceptable to the Trustee. If any Investor
Certificate is issued as a Global Certificate, the Trustee may, or
if and so long as any Series of Investor Certificates are listed on
the Luxembourg Stock Exchange and such exchange shall so require,
the Trustee shall, appoint a co-transfer agent and co-registrar in
Luxembourg or another European city. Any reference in this
Agreement to the Transfer Agent and Registrar shall include any
co-transfer agent and co-registrar unless the context requires
otherwise.
Subject to paragraph (c) below, upon surrender for
registration of transfer of any Registered Certificate at any
<PAGE> 47
office or agency of the Transfer Agent and Registrar maintained for
such purpose, one or more new Registered Certificates (of the same
Series and Class) in authorized denominations of like aggregate
fractional undivided interests in the Certificateholders' Interest
shall be executed, authenticated and delivered, in the name of the
designated transferee or transferees.
At the option of a Registered Certificateholder,
Registered Certificates may be exchanged for other Registered
Certificates (of the same Series and Class) of authorized
denominations of like aggregate fractional undivided interests in
the Certificateholders' Interest, upon surrender of the Registered
Certificates to be exchanged at any such office or agency
maintained for that purpose; Registered Certificates, including
Registered Certificates received in exchange for Bearer
Certificates, may not be exchanged for Bearer Certificates. At the
option of the Holder of a Bearer Certificate, subject to applicable
laws and regulations, Bearer Certificates may be exchanged for
other Bearer Certificates or Registered Certificates (of the same
Series and Class) of authorized denominations of like aggregate
fractional undivided interests in the Certificateholders' Interest,
upon surrender of the Bearer Certificates to be exchanged at an
office or agency of the Transfer Agent and Registrar located
outside the United States. Each Bearer Certificate surrendered
pursuant to this Section shall have attached thereto all unmatured
Coupons; provided that any Bearer Certificate, so surrendered after
the close of business on the Record Date preceding the relevant
Distribution Date after the expected final Distribution Date need
not have attached the Coupon relating to such Distribution Date (in
each case, as specified in the applicable Supplement).
The preceding provisions of this Section notwithstanding,
the Trustee or the Transfer Agent and Registrar, as the case may
be, shall not be required to register the transfer of or exchange
any Certificate for a period of 15 days preceding the due date for
any payment with respect to the Certificate.
Whenever any Investor Certificates are so surrendered for
exchange, the Seller shall execute, and the Trustee shall
authenticate and deliver (in the case of Bearer Certificates,
outside the United States) the Investor Certificates which the
Investor Certificateholder making the exchange is entitled to
receive. Every Investor Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a
written instrument of transfer in a form satisfactory to the
Trustee and the Transfer Agent and Registrar duly executed by the
Investor Certificateholder or the attorney-in-fact thereof duly
authorized in writing.
<PAGE> 48
No service charge shall be made for any registration of
transfer or exchange of Investor Certificates, but the Transfer
Agent and Registrar may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in
connection with any such transfer or exchange.
All Investor Certificates (together with any Coupons)
surrendered for registration of transfer and exchange or for
payment shall be canceled and disposed of in a manner satisfactory
to the Trustee. The Trustee shall cancel and destroy any Global
Certificate upon its exchange in full for Definitive Euro-Certificates
and shall deliver a certificate of destruction to the
Seller. Such certificate shall also state that a certificate or
certificates of a Foreign Clearing Agency to the effect referred to
in Section 6.11 was received with respect to each portion of the
Global Certificate exchanged for Definitive Euro-Certificates.
The Seller shall execute and deliver to the Trustee
Bearer Certificates and Registered Certificates in such amounts and
at such times as are necessary to enable the Trustee to fulfill its
responsibilities under this Agreement and the Certificates.
(b) The Transfer Agent and Registrar will maintain at
its expense in the Borough of Manhattan, The City of New York, an
office or agency where Investor Certificates may be surrendered for
registration of transfer or exchange (except that Bearer
Certificates may not be surrendered for exchange at any such office
or agency in the United States).
(c) (i) Registration of transfer of Investor
Certificates containing a legend to the effect set forth on Exhibit
C-1 shall be effected only if such transfer is made pursuant to an
effective registration statement under the Securities Act, or is
exempt from the registration requirements under the Securities Act.
In the event that registration of a transfer is to be made in
reliance upon an exemption from the registration requirements under
the Securities Act, the transferor or the transferee shall deliver,
at its expense, to the Seller, the Servicer and the Trustee, (A) an
Opinion of Counsel to the effect that the proposed transfer is in
compliance with (or exempt from) such registration requirements or
(B) an investment letter from the transferee, substantially in the
form attached to the applicable Supplement, that such transfer is
being made pursuant to an exemption from the registration
requirements of the Securities Act (upon which the Trustee may
conclusively rely for purposes of verifying such exemption) and no
registration of transfer shall be made until such letter is so
delivered.
<PAGE> 49
Investor Certificates issued upon registration of
transfer of, or Investor Certificates issued in exchange for,
Investor Certificates bearing the legend referred to above shall
also bear such legend unless the Seller, the Servicer, the Trustee
and the Transfer Agent and Registrar receive an Opinion of Counsel,
satisfactory to each of them, to the effect that such legend may be
removed.
Whenever an Investor Certificate containing the legend
referred to above is presented to the Transfer Agent and Registrar
for registration of transfer, the Transfer Agent and Registrar
shall promptly seek instructions from the Servicer regarding such
transfer and shall be entitled to receive and conclusively rely
upon instructions signed by a Servicing Officer prior to
registering any such transfer. The Seller hereby agrees to
indemnify the Transfer Agent and Registrar and the Trustee and to
hold each of them harmless against any loss, liability or expense
incurred without negligence or bad faith on their part arising out
of or in connection with actions taken or omitted by them in
relation to any such instructions furnished pursuant to this clause
(i).
(ii) Registration of transfer of Investor Certificates
containing a legend to the effect set forth on Exhibit C-2 shall be
effected only if such transfer is made to a Person which is not an
employee benefit plan, trust or account, including an individual
retirement account, that is subject to ERISA or that is described
in Section 4975(e)(1) of the Code or an entity whose underlying
assets include plan assets by reason of a plan's investment in such
entity (a "Benefit Plan"). By accepting and holding any such
Investor Certificate, an Investor Certificateholder shall be deemed
to have represented and warranted that it is not a Benefit Plan.
By acquiring any interest in a Book-Entry Certificate, a
Certificate Owner shall be deemed to have represented and warranted
that it is not a Benefit Plan.
(d) Notwithstanding any other provision of this Section
6.04, no registration of transfer of any Investor Certificate shall
be made unless the transferor or the transferee shall deliver, at
its expense, to the Seller, the Servicer and the Trustee, a
representation letter, substantially in the form attached to the
applicable Supplement, stating whether such transferee is a
"benefit plan investor" as defined in Section 2510.3-101(f)(2) of
the Labor Regulations promulgated under ERISA. The Transfer Agent
and Registrar will maintain, as a part of the Certificate Register,
a list of all Registered Certificateholders that are benefit plan
investors. The Transfer Agent and Registrar will not register the
transfer of any Investor Certificate if, immediately after the
registration of transfer of such Investor Certificate, more than
23% of the outstanding principal balance of the Investor
<PAGE> 50
Certificates of all Series are held by benefit plan investors.
Notwithstanding anything else to the contrary herein, any purported
transfer of an Investor Certificate to a benefit plan investor in
violation of the preceding sentence shall be void and of no effect.
SECTION 6.05. Mutilated Destroyed Lost or Stolen
Certificates. If (a) any mutilated Certificate (together, in the
case of Bearer Certificates, with all unmatured Coupons (if any)
appertaining thereto) is surrendered to the Transfer Agent and
Registrar or the Transfer Agent and Registrar receives evidence to
its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Transfer Agent and
Registrar and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the
absence of notice to the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Seller shall execute, and
the Trustee shall authenticate and deliver (in the case of Bearer
Certificates, outside the United States), in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate,
a new Certificate of like tenor and aggregate fractional undivided
interest. In connection with the issuance of any new Certificate
under this Section, the Trustee or the Transfer Agent and Registrar
may require the payment by the Certificateholder of a sum
sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee and Transfer Agent and
Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be
found at any time.
SECTION 6.06. Persons Deemed Owners. The Trustee, the
Transfer Agent and Registrar and any agent of any of them may
(a) prior to due presentation of a Registered Certificate for
registration of transfer, treat the Person or Persons in whose name
any Registered Certificate is registered as the owner of such
Registered Certificate for the purpose of receiving distributions
pursuant to the terms of the applicable Supplement and for all
other purposes whatsoever, and (b) treat the bearer of a Bearer
Certificate or Coupon as the owner of such Bearer Certificate or
Coupon for the purpose of receiving distributions pursuant to the
terms of the applicable Supplement and for all other purposes
whatsoever; and, in any such case, neither the Trustee, the
Transfer Agent and Registrar nor any agent of any of them shall be
affected by any notice to the contrary. Notwithstanding the
foregoing, in determining whether the Holders of the requisite
Investor Certificates have given any request, demand,
authorization, direction, notice, consent or waiver hereunder,
Certificates owned by the Seller, the Servicer, any other Holder of
<PAGE> 51
a Seller's Certificate or any Affiliate thereof, shall be
disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent
or waiver, only Certificates which a Responsible Officer of the
Trustee knows to be so owned shall be so disregarded. Certificates
so owned which have been pledged in good faith shall not be
disregarded and may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Certificates and that the pledgee is
not the Seller, the Servicer, any other holder of a Seller's
Certificate or any Affiliate thereof.
SECTION 6.07. Access to List of Registered
Certificateholders' Names and Addresses. The Trustee will furnish
or cause to be furnished by the Transfer Agent and Registrar to the
Servicer, within five Business Days after receipt by the Trustee of
a written request therefor, a list in such form as the Servicer may
reasonably require, of the names and addresses of the Registered
Certificateholders of any Series. If three or more Holders of
Investor Certificates (the "Applicants") apply to the Trustee, and
such application states that the Applicants desire to communicate
with other Investor Certificateholders with respect to their rights
under this Agreement or any Supplement or under the Investor
Certificates and is accompanied by a copy of the communication
which such Applicants propose to transmit, then the Trustee, after
having been indemnified to its reasonable satisfaction by such
Applicants for its costs and expenses, shall afford or shall cause
the Transfer Agent and Registrar to afford such Applicants access
during normal business hours to the most recent list of Registered
Certificateholders of such Series or all outstanding Series, as
applicable, held by the Trustee, within five Business Days after
the receipt of such application. Such list shall be as of a date
no more than 45 days prior to the date of receipt of such
Applicants' request.
Every Registered Certificateholder, by receiving and
holding a Registered Certificate, agrees with the Trustee that
neither the Trustee, the Transfer Agent and Registrar, nor any of
their respective agents, shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of
the Registered Certificateholders hereunder, regardless of the
sources from which such information was derived.
SECTION 6.08. Book-Entry Certificates. Unless otherwise
specified in the related Supplement for any Series or Class, the
Investor Certificates, upon original issuance, shall be issued in
the form of one or more typewritten Investor Certificates
representing the Book-Entry Certificates, to be delivered to the
Depository, by, or on behalf of, the Seller. The Investor
<PAGE> 52
Certificates shall initially be registered on the Certificate
Register in the name of the Depository or its nominee, and no
Certificate Owner will receive a definitive certificate
representing such Certificate Owner's interest in the Investor
Certificates, except as provided in Section 6.10. Unless and until
definitive, fully registered Investor Certificates ("Definitive
Certificates") have been issued to the applicable Certificate
Owners pursuant to Section 6.10 or as otherwise specified in any
such Supplement:
(a) the provisions of this Section shall be in full
force and effect with respect to such Series;
(b) the Seller, the Servicer and the Trustee may deal
with the Depository and the Depository Participants for all
purposes (including the making of distributions) as the authorized
representatives of the respective Certificate Owners;
(c) to the extent that the provisions of this Section
conflict with any other provisions of this Agreement, the
provisions of this Section shall control; and
(d) the rights of the respective Certificate Owners of
each such Series shall be exercised only through the Depository
and the Depository Participants and shall be limited to those
established by law and agreements between such Certificate Owners
and the Depository and/or the Depository Participants. Pursuant to
the Depository Agreement applicable to such Series, unless and
until Definitive Certificates are issued pursuant to Section 6.10,
the Depository will make book-entry transfers among the Depository
Participants and receive and transmit distributions of principal
and interest on the related Investor Certificates to such
Depository Participants.
For purposes of any provision of this Agreement requiring
or permitting actions with the consent of, or at the direction of,
Investor Certificateholders evidencing a specified percentage of
the aggregate unpaid principal amount of Investor Certificates,
such direction or consent may be given by Certificate Owners
(acting through the Depository and the Depository Participants)
owning Investor Certificates evidencing the requisite percentage of
principal amount of Investor Certificates.
SECTION 6.09. Notices to Depository. Whenever any
notice or other communication is required to be given to Investor
Certificateholders of any Series or Class with respect to which
Book-Entry Certificates have been issued, unless and until
Definitive Certificates shall have been issued to the related
Certificate Owners, the Trustee shall give all such notices and
communications to the applicable Depository for distribution to
Certificateholders.
<PAGE> 53
SECTION 6.10. Definitive Certificates. If Book-Entry
Certificates have been issued with respect to any Series or Class
and (a) the Seller Advises the Trustee that the Depository is no
longer willing or able to discharge properly its responsibilities
under the Depository Agreement with respect to such Series or Class
and the Trustee or the Seller is unable to locate a qualified
successor, (b) the Seller, at its option, advises the Trustee that
it elects to terminate the book-entry system with respect to such
Series or Class through the Depository or (c) after the occurrence
of a Servicer Default, Certificate Owners of such Series or Class
evidencing not less than 50% of the aggregate unpaid principal
amount of such Series or Class advise the Trustee and the
Depository through the Depository Participants that the
continuation of a book-entry system with respect to the Investor
Certificates of such Series or Class through the Depository is no
longer in the best interests of the Certificate Owners with respect
to such Certificates, then the Trustee shall notify all Certificate
Owners of such Certificates, through the Depository, of the
occurrence of any such event and of the availability of Definitive
Certificates to Certificate Owners requesting the same. Upon
surrender to the Trustee of any such Certificates by the
Depository, accompanied by registration instructions from the
Depository for registration, the Trustee shall authenticate and
deliver Such Definitive Certificates. Neither the Seller nor the
Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected
in relying on, such instructions. Upon the issuance of such
Definitive Certificates all references herein to obligations
imposed upon or to be performed by the Depository shall be deemed
to be imposed upon and performed by the Trustee, to the extent
applicable with respect to such Definitive Certificates, and the
Trustee shall recognize the Holders of such Definitive Certificates
as Investor Certificateholders hereunder.
SECTION 6.11 Global Certificate; Exchange Date. (a) If
specified in the related Supplement for any Series or Class, the
Investor Certificates will initially be issued in the form of a
single temporary global Certificate (the "Global Certificate") in
bearer form, without interest coupons, in the denomination of the
entire aggregate principal amount of such Series or Class and
substantially in the form set forth in the exhibit with respect
thereto attached to the related Supplement. The Global Certificate
will be authenticated by the Trustee upon the same conditions, in
substantially the same manner and with the same effect as the
Definitive Certificates. The Global Certificates may be exchanged
as described below for Bearer or Registered Certificates in
definitive form (the "Definitive Euro-Certificates").
<PAGE> 54
(b) The Manager shall, upon its determination of the
date of completion of the distribution of the Investor Certificates
of such Series or Class, so advise the Trustee, the Seller, the
Common Depositary, and each Foreign Clearing Agency forthwith.
Without unnecessary delay, but in any event not prior to the
Exchange Date, the Seller will execute and deliver to the Trustee
at its London office or its designated agent outside the United
States definitive Bearer Certificates in an aggregate principal
amount equal to the entire aggregate principal amount of such
Series or Class. All Bearer Certificates so issued and delivered
will have Coupons attached. The Global Certificate may be
exchanged for an equal aggregate principal amount of Definitive
Euro-Certificates only on or after the Exchange Date. A United
States institutional investor may exchange the portion of the
Global Certificate beneficially owned by it only for an equal
aggregate principal amount of Registered Certificates bearing the
applicable legend set forth in the form of Registered Certificate
attached to the related Supplement and having a minimum
denomination of $500,000, which may be in temporary form if the
Seller so elects. The Seller may waive the $500,000 minimum
denomination requirement in writing if it so elects. Upon any
demand for exchange for Definitive Euro-Certificates in accordance
with this paragraph, the Seller shall direct the Trustee in writing
to authenticate and deliver the Definitive Euro-Certificates to the
Holder (x) outside the United States, in the case of Bearer
Certificates, and (y) according to the instructions of the
Holder,in the case of Registered Certificates, but in either case
only upon presentation to the Trustee of a written statement
substantially in the form of Exhibit E-1 with respect to the Global
Certificate or portion thereof being exchanged, signed by a Foreign
Clearing Agency and dated on the Exchange Date or a subsequent
date, to the effect that it has received in writing or by tested
telex a certification substantially in the form of (i) in the case
of beneficial ownership of the Global Certificate or a portion
thereof being exchanged by a United States institutional investor
pursuant to the second preceding sentence, the certificate in the
form of Exhibit E-2 signed by the Manager which sold the relevant
Certificates or (ii) in all other cases, the certificate in the
form of Exhibit E-3, the certificate referred to in this clause
(ii) being dated on the earlier of the first actual payment of
interest in respect of such Certificates and the date of the
delivery of such Certificate in definitive form. Upon receipt of
such certification, the Trustee shall cause the Global Certificate
to be endorsed in accordance with paragraph (d) below. Any
exchange as provided in this Section shall be made free of charge
to the Holders and the beneficial owners of the Global Certificate
and to the beneficial owners of the Definitive Euro-Certificates
issued in exchange, except that a Person receiving Definitive
Euro-Certificates must bear the cost of insurance, postage,
<PAGE> 55
transportation and the like in the event that such Person does not
receive such Definitive Euro-Certificates in person at the offices
of a Foreign Clearing Agency.
(c) The delivery to the Trustee by a Foreign Clearing
Agency of any written statement referred to above may be relied
upon by the Seller and the Trustee as conclusive evidence that a
corresponding certification or certifications has or have been
delivered to such Foreign Clearing Agency pursuant to the terms of
this Agreement.
(d) Upon any such exchange of all or a portion of the
Global Certificate for a Definitive Euro-Certificate or
Certificates, such Global Certificate shall be endorsed by or on
behalf of the Trustee to reflect the reduction of its principal
amount by an amount equal to the aggregate principal amount of such
Definitive Euro-Certificate or Certificates. Until so exchanged in
full, such Global Certificate shall in all respects be entitled to
the same benefits under this Agreement as Definitive Euro-Certificates
authenticated and delivered hereunder except that the
beneficial owners of such Global Certificate shall not be entitled
to receive payments of interest on the Certificates until they have
exchanged their beneficial interests in such Global Certificate for
Definitive Euro-Certificates.
SECTION 6.12. Meetings of Certificateholders. (a) If
at the time any Bearer Certificates are issued and outstanding with
respect to any Series or Class to which any meeting described below
relates, the Servicer or the Trustee may at any time call a meeting
of Investor Certificateholders of any Series or Class or of all
Series, to be held at such time and at such place as the Servicer
or the Trustee, as the case may be, shall determine, for the
purpose of approving a modification of or amendment to, or
obtaining a waiver of any covenant or condition set forth in, this
Agreement, any Supplement or the Investor Certificates or of taking
any other action permitted to be taken by Investor
Certificateholders hereunder or under any Supplement. Notice of
any meeting of Investor Certificateholders, setting forth the time
and place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be given in accordance with
Section 13.05, the first mailing and publication to be not less
than 20 nor more than 180 days prior to the date fixed for the
meeting. To be entitled to vote at any meeting of Investor
Certificateholders a Person shall be (i) a Holder of one or more
Investor Certificates of the applicable Series or Class or (ii) a
Person appointed by an instrument in writing as proxy by the Holder
of one or more such Investor Certificates. The only Persons who
shall be entitled to be present or to speak at any meeting of
Investor Certificateholders shall be the Persons entitled to vote
at such meeting and their counsel and any representatives of the
Seller, the Servicer and the Trustee and their respective counsel.
<PAGE> 56
(b) At a meeting of Investor Certificateholders, Persons
entitled to vote Investor Certificates evidencing a majority of the
aggregate unpaid principal amount of the applicable Series or Class
or all outstanding Series, as the case may be, shall constitute a
quorum. No business shall be transacted in the absence of a
quorum, unless a quorum is present when the meeting is called to
order. In the absence of a quorum at any such meeting, the meeting
may be adjourned for a period of not less than 10 days; in the
absence of a quorum at any such adjourned meeting, such adjourned
meeting may be further adjourned for a period of not less than 10
days; at the reconvening of any meeting further adjourned for lack
of a quorum, the Persons entitled to vote Investor Certificates
evidencing at least 25% of the aggregate unpaid principal amount of
the applicable Series or Class or all outstanding Series, as the
case may be, shall constitute a quorum for the taking of any action
set forth in the notice of the original meeting. Notice of the
reconvening of any adjourned meeting shall be given as provided
above except that such notice must be given not less than five days
prior to the date on which the meeting is scheduled to be
reconvened. Notice of the reconvening of an adjourned meeting
shall state expressly the percentage of the aggregate principal
amount of the outstanding applicable Investor Certificates which
shall constitute a quorum.
(c) Any Investor Certificateholder who has executed an
instrument in writing appointing a Person as proxy shall be deemed
to be present for the purposes of determining a quorum and be
deemed to have voted; provided that such Investor Certificateholder
shall be considered as present or voting only with respect to the
matters covered by such instrument in writing. Subject to the
provisions of Section 13.01, any resolution passed or decision
taken at any meeting of Investor Certificateholders duly held in
accordance with this Section shall be binding on all Investor
Certificateholders whether or not present or represented at the
meeting.
(d) The holding of Bearer Certificates shall be proved
by the production of such Bearer Certificates or by a certificate,
satisfactory to the Servicer, executed by any bank, trust company
or recognized securities dealer, wherever situated, satisfactory to
the Servicer. Each such certificate shall be dated and shall state
that on the date thereof a Bearer Certificate bearing a specified
serial number was deposited with or exhibited to such bank, trust
company or recognized securities dealer by the Person named in such
certificate. Any such certificate may be issued in respect of one
or more Bearer Certificates specified therein. The holding by the
Person named in any such certificate of any Bearer Certificate
specified therein shall be presumed to continue for a period of one
year from the date of such certificate unless at the time of any
determination of such holding (i) another certificate bearing a
<PAGE> 57
later date issued in respect of the same Bearer Certificate shall
be produced, (ii) the Bearer Certificate specified in such
certificate shall be produced by some other Person or (iii) the
Bearer Certificate specified in such certificate shall have ceased
to be outstanding. The appointment of any proxy shall be proved by
having the signature of the Person executing the proxy guaranteed
by any bank, trust company or recognized securities dealer
satisfactory to the Trustee.
(e) The Trustee shall appoint a temporary chairman of
the meeting. A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the Holders of Investor
Certificates evidencing a majority of the aggregate unpaid
principal amount of Investor Certificates of the applicable Series
or Class or all outstanding Series, as the case may be, represented
at the meeting. No vote shall be cast or counted at any meeting in
respect of any Investors Certificate challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding.
The chairman of the meeting shall have no right to vote except as
an Investor Certificateholder or proxy. Any meeting of Investor
Certificateholders duly called at which a quorum is present may be
adjourned from time to time, and the meeting may be held as so
adjourned without further notice.
(f) The vote upon any resolution submitted to any
meeting of Investor Certificateholders shall be by written ballot
on which shall be subscribed the signatures of Investor
Certificateholders or proxies and on which shall be inscribed the
serial number or numbers of the Investor Certificates held or
represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and
file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in
duplicate of the proceedings of each meeting of Investor
Certificateholders shall be prepared by the secretary of the
Meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken
thereat and affidavits by one or more persons having knowledge of
the facts setting forth a copy of the notice of the meeting and
showing that said notice was published as provided above. The
record shall be signed and verified by the permanent chairman and
secretary of the meeting and one of the duplicates shall be
delivered to the Servicer and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting. Any record so signed and verified
shall be conclusive evidence of the matters therein stated.
SECTION 6.13. Appointment of Paying Agent. (a )The
Trustee may appoint one or more Paying Agents from time to time.
<PAGE> 58
The Paying Agent shall make distributions to Investor
Certificateholders pursuant to Article V. Any Paying Agent shall
have the revocable power to withdraw funds from the Collection
Account and any Series Accounts for the purpose of making
distributions referred to above. The Trustee may revoke such power
and remove the Paying Agent if the Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. The
Paying Agent shall initially be the Trustee. The Trustee shall be
permitted to resign as Paying Agent upon 30 days' written notice to
the Seller and the Servicer. In the event that the Trustee shall
no longer be the Paying Agent, the initial Seller or the Servicer
or, in the event that Successor Servicer shall have been appointed,
the Trustee, shall appoint a successor. The provisions of Sections
11.01, 11.02 and 11.03 shall apply to the Trustee also in its role
as Paying Agent, for so long as the Trustee shall act as Paying
Agent.
(b) The Trustee hereby agrees, and shall cause the
Paying Agent (if other than the Trustee) to execute and deliver to
the Trustee an instrument in which such Paying Agent shall agree
with the Trustee that the Paying Agent will hold all sums, if any,
held by it for payment to the Investor Certificateholders in trust
for the benefit of the Investor Certificateholders entitled thereto
until such sums shall be paid to such Certificateholders and shall
agree, and if the Trustee shall be the Paying Agent, it hereby
agrees, to comply with all requirements of the Code regarding the
withholding of payments in respect of federal income taxes by the
Trustee.
SECTION 6.14. Authenticating Agent. (a) The Trustee
may appoint one or more authenticating agents with respect to the
Certificates which shall be authorized to act on behalf of the
Trustee in authenticating the Certificates in connection with the
issuance, delivery, registration of transfer, exchange or repayment
of the Certificates. Whenever reference is made in this Agreement
to the authentication of Certificates by the Trustee or the
Trustee's certificate of authentication, such reference shall be
deemed to include authentication on behalf of the Trustee by an
authenticating agent and a certificate of authentication executed
on behalf of the Trustee by an authenticating agent. Each
authenticating agent must be acceptable to the Seller and the
Servicer.
(b) Any institution succeeding to the corporate agency
business of an authenticating agent shall continue to be an
authenticating agent without the execution or filing of any paper
or any further act on the part of the Trustee or such
authenticating agent.
<PAGE> 59
(c) An authenticating agent may at any time resign by
giving written notice of resignation to the Trustee, the Seller and
the Servicer. The Trustee may at any time terminate the agency of
an authenticating agent by giving notice of termination to such
authenticating agent to the Seller and the Servicer. Upon receiving
such a notice of resignation or upon such a termination, or in case
at any time an authenticating agent shall cease to be acceptable to
the Trustee, the Seller and the Servicer, the Trustee promptly may
appoint a successor authenticating agent. Any successor
authenticating agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as
an authenticating agent. No successor authenticating agent shall
be appointed unless acceptable to the Trustee, the Seller and the
Servicer.
(d) The Seller agrees to pay each authenticating agent
from time to time reasonable compensation for its services under
this Section 6.14.
(e) The provisions of Sections 11.01, 11.02 and 11.03
shall be applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section
16.14, the Certificates may have endorsed thereon, in lieu of the
Trustee's certificate of authentication, an alternate certificate
of Authentication in substantially the following form:
Certificate of Authentication
This is one of the Certificates described in the
Pooling and Servicing Agreement.
------------------------------
[Name of Authenticating Agent]
as Authenticating Agent for
the Trustee,
By:---------------------------
Authorized Officer
<PAGE> 60
ARTICLE VII
Other Matters Relating
to the Seller
SECTION 7.01. Liabilities of the Seller. The Seller
shall be liable for all obligations, covenants, representations and
warranties of the Seller arising under or related to this
Agreement. Except as provided in the preceding sentence, the
Seller shall be liable only to the extent of the obligations
specifically undertaken by it in its capacity as Seller hereunder.
SECTION 7.02. Limitation on Liability of the Seller.
Subject to Section 7.03, neither the Seller nor any of the
directors or officers or employees or agents of the Seller in its
capacity as Seller shall be under any liability to the Trust, the
Trustee, the Certificateholders or any other Person for any action
taken or for refraining from the taking of any action in the
capacity as Seller pursuant to this Agreement whether arising from
express or implied duties under this Agreement; provided, however,
that this provision shall not protect the Seller or any such person
against any liability which would otherwise be imposed by reason of
wilful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Seller and any director or
officer or employee or agent of the Seller may rely in good faith
on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder.
SECTION 7.03. Seller Indemnification of the Trust and
the Trustee. The Seller shall indemnify and hold harmless the
Trust, for the benefit of the Certificateholders and the other
Beneficiaries, and the Trustee (including its directors, officers,
employees and agents), from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any
acts, omissions or alleged acts or omissions arising out of
activities of the Trust or the Trustee pursuant to this Agreement,
including any judgment, award, settlement, reasonable attorneys'
fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim;
provided, however, that the Seller shall not indemnify the Trust or
the Trustee if such acts, omissions or alleged acts or omissions
constitute fraud, gross negligence, breach of fiduciary duty or
wilful misconduct by the Trustee; and provided further that the
Seller shall not indemnify the Trust, the Trustee or the
Certificateholders or any other Beneficiaries for any liabilities,
cost or expense of the Trust with respect to any action taken by
the Trustee at the request of any such Certificateholders or other
Beneficiaries to the extent the Trustee is fully indemnified by
such Certificateholders or other Beneficiaries with respect to such
action or with respect to any federal, state or local income or
franchise taxes (or any interest or penalties with respect thereto)
<PAGE> 61
required to be paid by the Trust or any Certificateholder or other
Beneficiary in connection herewith to any taxing authority. Any
indemnification pursuant to this Article VII shall only be from (i)
the excess of the Seller's Interest for any date of determination
over the Required Participation Amount as of such date and (ii) any
other assets of the Seller not pledged to third parties or
otherwise encumbered in a manner permitted by the Seller's
Certificate of Incorporation and shall only be made after payment
in full of any amounts that the Seller is obligated to deposit in
the Collection Account pursuant to this Agreement. Any
indemnification under this Article VII shall survive the
resignation or removal of the Trustee and the termination of this
Agreement.
ARTICLE VIII
Other Matters Relating
to the Servicer
SECTION 8.01. Liability of the Servicer. The Servicer
shall be liable under this Article VIII only to the extent of the
obligations specifically undertaken by the Servicer in its capacity
as Servicer.
SECTION 8.02. Merger or Consolidation of, or Assumption
of, the Obligations of the Servicer. The Servicer shall not
consolidate with or merge into any other corporation or convey or
transfer its properties and assets substantially as an entirety to
any Person, unless:
(a) the corporation formed by such consolidation or
into which the Servicer is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Servicer
substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America or any
State or the District of Columbia and, if the Servicer is not the
surviving entity, such corporation shall assume, without the
execution or filing of any paper or any further act on the part of
any of the parties hereto, the performance of every covenant and
obligation of the Servicer hereunder; and
(b) the Servicer has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that
such consolidation, merger, conveyance or transfer comply with this
Section 8.02 and that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 8.03. Limitation on Liability of the Servicer
and Others. Except as provided in Section 8.04, neither the
Servicer nor any of the directors or officers or employees or
agents of the Servicer, shall be under any liability to the Trust,
the Trustee, the Certificateholders or any other Person for any
action taken or for refraining from the taking of any action in its
<PAGE> 62
capacity as Servicer pursuant to this Agreement; provided, however,
that this provision shall not protect the Servicer or any such
Person against any liability which would otherwise be imposed by
reason of wilful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Servicer and any director or
officer or employee or agent of the Servicer may rely in good faith
on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder.
The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its
duties to service the Receivables in accordance with this Agreement
which in its reasonable opinion may involve it in any expense or
liability.
SECTION 8.04. Servicer Indemnification of the Trust and
the Trustee. The Servicer shall indemnify and hold harmless the
Trust, for the benefit of the Certificateholders and the other
Beneficiaries, and the Trustee (including its directors, officers,
employees and agents), from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any
acts, omissions or alleged acts or omissions arising out of
activities of the Servicer, the Trust or the Trustee pursuant to
this Agreement, including any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action,
proceeding or claim; provided, however, that the Servicer shall not
indemnify the Trust or the Trustee if such acts, omissions or
alleged acts or omissions constitute fraud, gross negligence,
breach of fiduciary duty or wilful misconduct by the Trustee; and
provided further that the Servicer shall not indemnify the Trust,
the Trustee or the Certificateholders or the other Beneficiaries
for any liabilities, cost or expense of the Trust with respect to
any action taken by the Trustee at the request of the
Certificateholders or any other Beneficiaries to the extent the
Trustee is fully indemnified by such Certificateholders or other
Beneficiaries with respect to such action or with respect to any
federal, state or local income or franchise taxes (or any interest
or penalties with respect thereto) required to be paid by the Trust
or the Certificateholders or the other Beneficiaries in connection
herewith to any taxing authority. Any indemnification under this
Article VIII shall survive the termination of this Agreement and
the resignation and removal of the Trustee.
SECTION 8.05. The Servicer Not to Resign. The Servicer
shall not resign from the obligations and duties hereby imposed on
it except upon determination that (a) the performance of its duties
hereunder is no longer permissible under applicable law and (b)
there is no reasonable action which the Servicer could take to make
the performance of its duties hereunder permissible under
applicable law. Any such determination permitting the resignation
of the Servicer shall be evidenced as to clause (a) above by an
Opinion of Counsel to such effect delivered to the Trustee. No
<PAGE> 63
such resignation shall become effective until the Trustee or a
Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 10.02
hereof. If the Trustee is unable within 120 days of the date of
such determination to appoint a Successor Servicer, the Trustee
shall serve as Successor Servicer hereunder.
SECTION 8.06. Access to Certain Documentation and
Information Regarding the Receivables. The Servicer shall provide
to the Trustee access to the documentation regarding the
Receivables in such cases where the Trustee is required in
connection with the enforcement of the rights of the
Certificateholders, or by applicable statutes or regulations, to
review such documentation, such access being afforded without
charge but only (a) upon reasonable request, (b) during normal
business hours, (c) subject to the Servicer's normal security and
confidentiality procedures and (d) at offices designated by the
Servicer. Nothing in this Section 8.06 shall derogate from the
obligation of the Seller, the Trustee or the Servicer to observe
any applicable law prohibiting disclosure of information regarding
the Obligors and the failure of the Servicer to provide access as
provided in this Section 8.06 as a result of such obligation shall
not constitute a breach of this Section 8.06.
SECTION 8.07. Delegation of Duties. Subject to Section
3.01, in the ordinary course of business, the Servicer may at any
time delegate any duties hereunder to any Person who agrees to
conduct such duties in accordance with this Agreement. The
Servicer shall give prompt written notice of any such delegation of
a material function to the Trustee, any Rating Agency, any Agent
and any Enhancement Providers. Such delegation shall not relieve
the Servicer of its liability and responsibility with respect to
such duties, and shall not constitute a resignation within the
meaning of Section 8.05 and the Rating Agency Condition shall have
been satisfied with respect to such delegation prior to such
delegation.
SECTION 8.08. Examination of Records. The Seller and
the Servicer shall indicate generally in its computer files or
other records that the Receivables have been conveyed to the Trust
pursuant to this Agreement for the benefit of the
Certificateholders and the other Beneficiaries. The Seller and the
Servicer shall, prior to the sale or transfer to a third party of
any receivable held in its custody, examine its computer and other
records to determine that such receivable is not a Receivable.
<PAGE> 64
ARTICLE IX
Early Amortization Events
SECTION 9.01. Early Amortization Events. If any one of
the following events shall occur:
(a) the Seller or the Servicer (or Federal-Mogul, if it
is not the Servicer) shall file a petition commencing a voluntary
case under any chapter of the Federal bankruptcy laws; or the
Seller or the Servicer (or Federal-Mogul, as aforesaid) shall file
a petition or answer or consent seeking reorganization,
arrangement, adjustment, or composition under any other similar
applicable federal law, or shall consent to the filing of any such
petition, answer, or consent; or the Seller or the Servicer (or
Federal-Mogul, as aforesaid) shall appoint, or consent to the
appointment of, a custodian, receiver, liquidator, trustee,
assignee, sequestrator or other similar official in bankruptcy or
insolvency of it or of any substantial part of its property; or the
Seller or the Servicer (or Federal-Mogul, as aforesaid) shall make
an assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become
due;
(b) any order for relief against the Seller or the
Servicer (or Federal-Mogul, if it is not the Servicer) shall have
been entered by a court having jurisdiction in the premises under
any chapter of the Federal bankruptcy laws, and such order shall
have continued undischarged or unstayed for a period of 60 days; or
a decree or order by a court having jurisdiction in the premises
shall have been entered approving as properly filed a petition
seeking reorganization, arrangement, adjustment, or composition of
the Seller or the Servicer (or Federal-Mogul, as aforesaid) under
any other similar applicable federal law, and such decree or order
shall have continued undischarged or unstayed for a period of 120
days; or a decree or order of a court having jurisdiction in the
premises for the appointment of a custodian, receiver, liquidator,
trustee, assignee, sequestrator, or other similar official in
bankruptcy or insolvency of the Seller or the Servicer (or
Federal-Mogul, as aforesaid) or of any substantial part of its
property or for the winding up or liquidation of its affairs, shall
have been entered, and such decree or order shall have remained in
force undischarged or unstayed for a period of 120 days;
(c) failure on the part of the Seller, the Servicer or
Federal-Mogul, as applicable, (i) to make any payment or deposit
(including any Transfer Deposit Amount or Adjustment Payment)
required by the terms of this Agreement or the Receivables Purchase
Agreements on or before the date occurring two Business Days after
<PAGE> 65
the date such payment or deposit is required to be made herein, or
(ii) With respect to any Series, to deliver a Distribution Date
Statement within five Business Days of the day such item is due to
be delivered under this Agreement, or (iii) duly to observe or
perform in any material respect the covenant of the Seller set
forth in Section 2.05(a) or (iv) duly to observe or perform in any
material respect any other covenants or agreements of the Seller or
the Servicer, as the case may be, set forth in this Agreement or
the Receivables Purchase Agreements, which failure in the case of
this clause (iv) has a materially adverse effect on the Investor
Certificate holder and continue unremedied for a period of 45 days
after the date on which written notice of such failure, requiring
the same to be remedied, shall have been received by the Seller
from the Trustee or by the Seller and the Trustee from any
Enhancement Provider;
(d) any representation or warranty made by Federal-Mogul
in the Receivables Purchase Agreements or the Seller in this
Agreement (i) shall prove to have been incorrect in any material
respect when made, and shall continue to be incorrect in any
material respect for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Seller by the Trustee and (ii) as a
result of such incorrectness the interests of the Holders of the
Investor Certificates are materially and adversely affected;
provided, however, that an Early Amortization Event shall not be
deemed to have occurred under this paragraph if the Seller has
repurchased the related Receivable or all such Receivables, if
applicable, during such period in accordance with the provisions of
this Agreement; and
(e) the Trust or the Seller shall become an "investment
company" within the meaning of the Investment Company Act;
then, subject to applicable law, and after the applicable grace
period, if any, an amortization event (an "Early Amortization
Event") shall occur without any notice or other action on the part
of the Trustee, any Agent, the Certificateholders or any other
Beneficiary, immediately upon the occurrence of such event.
SECTION 9.02. Additional Rights Upon the Occurrence of
Certain Events. If an Insolvency Event occurs with respect to the
Seller or the Seller violates Section 2.05(a) for any reason, the
Seller shall on the day such Insolvency Event or violation occurs
(the "Appointment Date") immediately cease to transfer Receivables
to the Trust and shall promptly give written notice to the Trustee
of such Insolvency Event or violation. Notwithstanding any
cessation of the transfer to the Trust of additional Receivables,
Receivables transferred to the Trust prior to the occurrence of
such Insolvency Event or violation and Collections in respect of
<PAGE> 66
such Receivables whenever created or accrued in respect of such
Receivables, shall continue to be a part of the Trust. Within 15
days of its receipt of written notice of the Appointment Date, the
Trustee shall (i) publish a notice in an Authorized Newspaper that
an Insolvency Event or violation has occurred and that the Trustee
intends to sell, dispose of or otherwise liquidate the Receivables
on commercially reasonable terms and in a commercially reasonable
manner and (ii) give notice to Investor Certificateholders
describing the provisions of this Section and requesting
instructions from such Holders. Unless the Trustee shall have
received instructions wi-thin 90 days from the date notice pursuant
to clause (ii) above is first given from (x) Holders of Investor
Certificates evidencing more than 50% of the aggregate unpaid
principal amount of each Series or, with respect to any Series with
two or more Classes, of each Class, to the effect that such
Investor Certificateholders disapprove of the liquidation of the
Receivables and wish to continue having Receivables transferred to
the Trust as before such Insolvency Event or violation, and (y)
each Holder of a Supplemental Certificate to such effect, then,
unless prohibited from acting by applicable law, the Trustee shall
promptly sell, dispose of or otherwise liquidate the Receivables,
or cause to be sold, disposed of or otherwise liquidated, in a
commercially reasonable manner and on commercially reasonable
terms, which shall include the solicitation of competitive bids;
provided that if such sale, disposition or liquidation is being
made solely on account of the Seller's violation of Section
2.05(a), then the Trustee shall effect such sale, disposition or
liquidation, to be effected, only if the net proceeds of such sale,
disposition or liquidation, applied in accordance with Section
9.02(b), will be sufficient to pay accrued interest on each Series
of Certificates plus the excess of the outstanding principal
balance of each Series of Certificates over the unreimbursed
Investor Charge-Offs for such Series. The Trustee may obtain and
conclusively rely upon a prior determination from any applicable
conservator, receiver or liquidator that the terms and manner of
any proposed sale, disposition or liquidation are commercially
reasonable. The provisions of Sections 9.01 and 9.02 shall not be
deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or
liquidation of the Receivables pursuant to paragraph (a), after
payments of all costs and expenses of the Trustee incurred in
connection with such sale, disposition or liquidation ("Insolvency
Proceeds") shall be promptly deposited in the Collection Account.
The Trustee shall determine conclusively the amount of the
Insolvency Proceeds which are deemed to be Principal Collections
and Discount Collections. The Insolvency Proceeds shall be
allocated and distributed to Investor Certificateholders in
accordance with Article IV and the terms of each Supplement and the
Trust shall terminate immediately thereafter.
<PAGE> 67
ARTICLE X
Servicer Defaults
SECTION 10.01. Servicer Defaults. If any one of the
following events (a "Servicer Default") shall occur and be
continuing with respect to the Servicer:
(a) any failure by the Servicer to make any payment,
transfer or deposit or to give notice to the Trustee to make such
payment, transfer or deposit or to take any action required to be
taken under any Enhancement Agreement on or before the date
occurring five days after the date such payment, transfer or
deposit or such instruction or notice is required to be made or
given, as the case may be, under the terms of this Agreement or the
terms of any Enhancement Agreement;
(b) failure on the part of the Servicer duly to observe
or perform any other covenants or agreements of the Servicer set
forth in this Agreement which has a material adverse effect on the
Investor Certificateholders of any Series, which continues
unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee; or the Servicer
shall delegate its duties under this Agreement, except as permitted
by Sections 3.01 and 8.07;
(c) any representation, warranty or certification made
by the Servicer in this Agreement or in any certificate delivered
pursuant to this Agreement shall prove to have been incorrect when
made, which has a material adverse effect on the rights of the
Investor Certificateholders of any Series and which material
adverse effect continues for a period of 60 days after the date on
which written notice thereof, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee;
(d) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator or other similar official in
any bankruptcy, insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its
property, or a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment
of a conservator or receiver or liquidator or other similar
official in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up
or liquidation of its affairs, shall have been entered against
the Servicer and such decree or order shall have remained in force
undischarged or unstayed; or the Servicer shall admit in writing
its inability to pay its debts generally as they become due, file
<PAGE> 68
a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make any assignment for the
benefit of its creditors or voluntarily suspend payment of its
obligations;
then, in the event of any Servicer Default, so long as the Servicer
Default shall not have been remedied, the Trustee, by notice then
given in writing to the Servicer (a "Termination Notice"), may
terminate all but not less than all of the rights and obligations
(other than its obligations that have accrued up to the time of
such termination) of the Servicer as Servicer under this Agreement
and in and to the Receivables and the proceeds thereof. After
receipt by the Servicer of a Termination Notice, and on the date
that a Successor Servicer shall have been appointed by the Trustee
pursuant to Section 10.02, all authority and power of the Servicer
under this Agreement shall pass to and be vested in a Successor
Servicer (a "Service Transfer") and, without limitation, the
Trustee is hereby authorized and empowered (upon the failure of the
Servicer to cooperate) to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, all documents and other
instruments upon the failure of the Servicer to execute or deliver
such documents or instruments, and to do and accomplish all other
acts or things necessary or appropriate to effect the purposes of
such Service Transfer. The Servicer agrees to cooperate with the
Trustee and such Successor Servicer in effecting the termination of
the responsibilities and rights of the Servicer to conduct
servicing hereunder, including the transfer to such Successor
Servicer of all authority of the Servicer to service the
Receivables provided for under this Agreement, including all
authority over all Collections which shall on the date of transfer
be held by the Servicer for deposit, or which have been deposited
by the Servicer, in the Collection Account, or which shall
thereafter be received with respect to the Receivables, and in
assisting the Successor Servicer. The Servicer shall, at its
expense, promptly transfer a copy of its electronic records
relating to the Receivables to the Successor Servicer in such
electronic form as the Successor Servicer may reasonably request
and shall promptly transfer to the Successor Servicer all other
records, correspondence and documents necessary for the continued
servicing of the Receivables in the manner and at such times as the
Successor Servicer shall reasonably request. To the extent that
compliance with this Section 10.01 shall require the Servicer to
disclose to the Successor Servicer information of any kind which
the Servicer reasonably deems to be confidential, the Successor
Servicer shall be required to enter into such customary licensing
and confidentiality agreements as the Servicer shall deem necessary
to protect its interest.
Notwithstanding the foregoing, a delay in or failure of
performance under Section 10.01(a) for a period of 10 Business Days
<PAGE> 69
or under Section 10.01(b) or (c) for a period of 60 Business Days,
shall not constitute a Servicer Default if such delay or failure
could not be prevented by the exercise of reasonable diligence by
the Servicer and such delay or failure was caused by an act of God
or the public enemy, acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning,
fire, hurricanes, earthquakes, floods or similar causes. The
preceding sentence shall not relieve the Servicer from using its
best efforts to perform its respective obligations in a timely
manner in accordance with the terms of this Agreement and the
Servicer shall provide the Trustee, any Agents, any Enhancement
Providers, the Seller and the Certificateholders with an Officers'
Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts to perform its
obligations. The Servicer shall immediately notify the Trustee in
writing of any Servicer Default.
SECTION 10.02. Trustee to Act; Appointment of Successor.
(a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 10.01, the Servicer shall continue to
perform all servicing functions under this Agreement until the date
specified in the Termination Notice or otherwise specified by the
Trustee in writing or, if no such date is specified in such
Termination Notice, or otherwise specified by the Trustee, until a
date mutually agreed upon by the Servicer and the Trustee. The
Trustee shall as promptly as possible after the giving of a
Termination Notice appoint an Eligible Servicer as a successor
servicer (the "Successor Servicer"), subject to the consent of any
Enhancement Providers and any Agents, which consent shall not be
unreasonably withheld, and such Successor Servicer shall accept its
appointment by a written assumption in a form acceptable to the
Trustee. In the event that a Successor Servicer has not been
appointed or has not accepted its appointment at the time when the
Servicer ceases to act as Servicer, the Trustee without further
action shall automatically be appointed the Successor Servicer.
The Trustee may delegate any of its servicing obligations to an
affiliate or agent of the Trustee in accordance with Sections 3.01
and 8.07. Notwithstanding the above, the Trustee shall, if it is
legally unable so to act, petition a court of competent
jurisdiction to appoint any established institution having a net
worth of not less than $100,000,000 and whose regular business
includes the servicing of accounts receivable as the Successor
Servicer hereunder. The Trustee shall immediately give notice to
the Rating Agencies, any Enhancement Providers, any Agents and the
Certificateholders upon the appointment of a Successor Servicer.
(b) Upon its appointment, the Successor Servicer shall
be the successor in all respects to the Servicer with respect to
servicing functions under this Agreement and shall be subject to
<PAGE> 70
all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof (except
as provided below and that the Successor Servicer shall not be
liable for any liabilities incurred by the predecessor Servicer),
and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer, except for the
references in Sections 8.04 and 11.05, which shall then refer to
Federal-Mogul. If the Trustee becomes Successor Servicer, and the
Trustee's expenses as Successor Servicer exceed the Servicing Fee,
the Seller shall reimburse the Trustee to the extent of such excess
in an amount, with respect to each Collection Period not to exceed
the amount of the Excess Seller's Percentage of Collections that
would otherwise be available for release to the Seller. Any
Successor Servicer, by its acceptance of its appointment, will
automatically agree to be bound by the terms and provisions of any
Enhancement Agreement.
(c) In connection with any Termination Notice, the
Trustee will review any bids which it obtains from Eligible
Servicers and shall be permitted to appoint any Eligible Servicer
submitting such a bid as a Successor Servicer for servicing
compensation not in excess of the Servicing Fee (provided that if
all such bids exceed the Servicing Fee the Seller at its own
expense shall pay the amount of any compensation in excess of the
Servicing Fee, but not in an amount, with respect to each
Collection Period, exceeding the Excess Seller's Percentage of
Collections with respect to each Collection Period that would
otherwise be available for release to the Seller); provided,
however, that the Seller shall be responsible for payment of the
Seller's portion of the Servicing Fee as determined pursuant to
this Agreement and all other amounts in excess of the Investors'
Servicing Fee, and that no such monthly compensation paid out of
Collections shall be in excess of the Investors' Servicing Fee
permitted to the Servicer. The holders of the Seller's
Certificates agree that if Federal-Mogul (or any Successor
Servicer) is terminated as Servicer hereunder, the portion of
Collections to be paid to the Seller shall be reduced by an amount
sufficient to pay Seller's share of the compensation of the
Successor Servicer.
(d) All authority and power granted to the Successor
Servicer under this Agreement shall automatically cease and
terminate upon termination of the Trust pursuant to Section 12.01,
and shall pass to and be vested in the Seller and, without
limitation, the Seller is hereby authorized and empowered to
execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments,
and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing
rights. The Successor Servicer agrees to cooperate with the Seller
<PAGE> 71
in effecting the termination of the responsibilities and rights of
the Successor Servicer to conduct servicing on the Receivables.
The Successor Servicer shall transfer its electronic records
relating to the Receivables to the Seller in such electronic form
as the Seller may reasonably request and shall transfer all other
records, correspondence and documents to the Seller in the manner
and at such times as the Seller shall reasonably request. To the
extent that compliance with this Section 10.02 shall require the
Successor Servicer to disclose to the Seller information of any
kind which the Successor Servicer deems to be confidential, the
Seller shall be required to enter into such customary licensing and
confidentiality agreements as the Successor Servicer shall deem
necessary to protect its interests.
ARTICLE XI
The Trustee
SECTION 11.01. Duties of Trustee. (a) The Trustee,
prior to the occurrence of a Servicer Default of which it has
knowledge and after the curing of all Servicer Defaults which may
have occurred (the appointment of a Successor Servicer including
the Trustee, to constitute a cure for purposes of this Article),
undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement and no implied covenants
or obligations shall be read into this Agreement. If to the
knowledge of a Responsible Officer of the Trustee a Servicer
Default has occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it
by this Agreement and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs; provided,
however, that if the Trustee shall assume the duties of the
Servicer pursuant to Section 10.02, the Trustee in performing such
duties shall use the degree of skill and attention customarily
exercised by a servicer with respect to comparable receivables that
it services for itself or others. With respect to any Enhancement
Provider, the Trustee undertakes to perform or observe only such
covenants and obligations as are specifically set forth in this
Agreement or any Supplement and no implied covenants or obligations
with respect to any Enhancement Provider shall be read into this
Agreement or any Supplement against the trustee and nothing in this
Agreement or any Supplement shall be construed to establish any
fiduciary duty on the part of the Trustee to any enhancement
Provider.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or
other instruments furnished to the Trustee which are specifically
required to be furnished pursuant to any provision of this
Agreement, shall examine them to determine whether they
substantially conform to the requirements of this Agreement.
<PAGE> 72
(c) Subject to Section 11.01(a), no provision of this
Agreement shall be construed to relieve the Trustee from liability
for its own grossly negligent action, its own grossly negligent
failure to act or its own wilful misconduct; provided, however,
that:
(i) the Trustee shall not be personally liable for
an error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be charged with
knowledge of any Servicer Default or the failure by the Servicer to
comply with the obligations of the Servicer referred to in Section
10.01(a) and (b) or any breach by the Servicer contemplated by
Section 10.01(c) unless a Responsible Officer of the Trustee
obtains actual knowledge of such failure;
(iii) the Trustee shall not be charged with
knowledge of an Early Amortization Event unless a Responsible
Officer of the Trustee obtains actual knowledge thereof;
(iv) the Trustee shall not be personally liable
with respect to any action taken, suffered or omitted to be taken
by it in good faith in accordance with the direction of the Holders
of Investor Certificates of any Series given pursuant to the terms
hereof relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee in relation to such
Series, under this Agreement; and
(v) in making a determination of any material and
adverse effect upon Certificateholders, the Investor Certificates
or any Enhancement Provider, the Trustee may, as to matters of law,
rely exclusively upon an Opinion of Counsel.
(d) The Trustee shall not be required to expend or risk
its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or under any Supplement
or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured to it, and none of the provisions contained in this
Agreement shall in any event require the Trustee to perform, or be
responsible for the manner of performance of, any obligations of
the Servicer under this Agreement except during such time, if any,
as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement. Notwithstanding the
prior sentence, the Trustee when acting as Successor Servicer, is
still entitled to indemnification under Sections 7.03 and 8.04.
<PAGE> 73
(e) Except as expressly provided in this Agreement, the
Trustee shall have no power to vary the corpus of the Trust
including the power to (i) accept any substitute obligation for a
Receivable initially assigned to the Trust under Section 2.01 (ii)
add any other investment, obligation or security to the Trust or
(iii) withdraw from the Trust any Receivables.
(f) In the event that the Transfer Agent and Registrar
shall fail to perform any obligation, duty or agreement in the
manner or on the day required to be performed by the Transfer Agent
and Registrar, as the case may be, under this Agreement, the
Trustee shall be obligated promptly upon the actual knowledge of a
Responsible Officer of the Trustee to perform such obligation, duty
or agreement in the manner so required.
(g) If the Seller has agreed to transfer any of its
receivables (other than the Receivables) to another Person, then
upon the written request of the Seller, the Trustee will enter into
such intercreditor agreements with the transferee of such
receivables as are customary and necessary to identify separately
the rights of the Trust and such other Person in the Seller's
accounts receivable; provided, however, that the Trustee shall not
be required to enter into any intercreditor agreement which could,
in the sole opinion of the Trustee, adversely affect the interests
of the Investor Certificateholders or the Trustee and, upon the
request of the Trustee, the Seller will deliver an Opinion of
Counsel on any matters relating to such intercreditor agreement,
reasonably requested by the Trustee.
(h) Notwithstanding any other provision contained
herein, the Trustee is not acting as, and shall not be deemed to
be, a fiduciary for any Enhancement Provider in its capacity as
such or as a Beneficiary, and the Trustee's sole responsibility
with respect to said parties shall be to perform those duties with
respect to said parties as are specifically set forth herein And no
implied duties or obligations shall be read into this Agreement
against the Trustee with respect to any such party.
(i) Notwithstanding anything in this Agreement to the contrary, the
Trustee shall not be liable for or in respect of any action taken,
suffered or omitted to be taken following an Early Amortization
Event, including, without limitation, the taking, suffering or
omitting to take any action during or with respect to the related
Early Amortization Period, unless and until the Trustee shall have
knowledge of the occurrence of such Early Amortization Event.
SECTION 11.02. Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 11.01:
(a) the Trustee may rely on and shall be protected in
acting on, or in refraining from acting in accord with, any
resolution, Officers' Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or
document believed by it to be genuine and to have been signed or
presented to it pursuant to this Agreement by the proper party or
parties;
<PAGE> 74
(b) the Trustee may consult with counsel and any advice
or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by
it hereunder in good faith and in accordance with such advice or
Opinion of Counsel;
(c) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation hereunder or in
relation hereto, at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(d) the Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed
by it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(e) the Trustee shall not be bound to make any
investigation into the facts of matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, consent order, approval, bond or other paper or document;
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian, and the Trustee shall
not be responsible for any misconduct or negligence on the part of
any such agent, attorney or custodian appointed with due care by it
hereunder; and
(g) except as may be required by Section 11.01(a)
hereof, the Trustee shall not be required to make any initial or
periodic examination of any documents or records related to the
Receivables for the purpose of establishing the presence or absence
of defects, the compliance by the Seller with its representations
and warranties or for any other purpose.
SECTION 11.03. Trustee Not Liable for Recitals in
Certificates. The Trustee assumes no responsibility for the
correctness of the recitals contained herein and in the
Certificates (other than the certificate of authentication on the
Certificates). Except as set forth in Section 11.14, the Trustee
makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the certificate of
authentication on the Certificates) or of any Receivable or related
document or any security interest of the Trust therein. The Trustee
shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security
interest or lien granted to it hereunder or to prepare or file any
<PAGE> 75
Securities and Exchange Commission filing for the Seller, the
Servicer or the Trust or to record this Agreement or any
Supplement.
SECTION 11.04. Trustee May Own Certificates. The
Trustee in its individual or any other capacity may become the
owner or pledgee of Investor Certificates, and may otherwise deal
with the Seller, any Servicer or any Enhancement Provider, with the
same rights as it would have if it were not the Trustee.
SECTION 11.05. Servicer to Pay Trustee's Fees and
Expenses. The Servicer covenants and agrees to pay to the Trustee
from time to time, and the Trustee shall be entitled to receive,
reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of
the trust hereby created and in the exercise and performance of any
of the power and duties hereunder of the Trustee, and, subject to
Section 8.04, the Servicer will pay at own expense or reimburse the
Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
of the provisions of this Agreement (including the reasonable fees
and expenses of its agents, any co-trustee and counsel) except any
such expense, disbursement or advance as may arise from its gross
negligence or bad faith and except as provided in the second
following sentence. The Servicer's covenants to pay the expenses,
disbursements and advances provided for in the preceding sentence
shall survive the resignation or removal of the Trustee and the
termination of this Agreement. If the Trustee is appointed
Successor Servicer pursuant to Section 10.02, the provisions of
this Section 11.05 shall not apply to expenses, disbursements and
advances made or incurred by the Trustee in its capacity as
Successor Servicer, which shall be covered out of the Servicing
Fee; provided, however, if such expenses, disbursements and
advances incurred by the Trustee are in amount in excess of the
Servicing Fee, such excess amount shall be paid in full to the
Trustee by Federal-Mogul. To the extent, if any, that any federal,
state or local taxes are payable by the Trust, such taxes shall be
payable solely out of Trust Assets and not out of the personal
assets of the Trustee.
SECTION 11.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation organized
and doing business under the laws of the United States of America
or any state thereof authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by
Federal or state authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority,
<PAGE> 76
then for the purpose of this Section 11.06 the combined capital
and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition 80 published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this
Section 11.06, the Trustee shall resign immediately in the manner
and with the effect specified in Section 11.07.
SECTION 11.07. Resignation or Removal of Trustee. (a)
The Trustee may at any time resign and be discharged from
the trust hereby created by giving written notice thereof to the
Seller and the Servicer. Upon receiving such notice of
resignation, the Seller shall promptly appoint a successor trustee
by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of
a successor trustee.
(b) If at any time the Trustee shall cease to be
eligible in accordance with the provisions of Section 11.06 hereof
and shall fail to resign after written request therefor by the
Servicer, or if at any time the Trustee shall be legally unable to
act, or shall be adjudged a bankrupt or insolvent, or if a receiver
of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation
or liquidation, then the Servicer may remove the Trustee and
promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and
appointment of successor trustee pursuant to any of the provisions
of this Section shall not become effective until acceptance of
appointment by the successor trustee as provided in Section 11.08
hereof.
SECTION 11.08. Successor Trustee. (a) Any successor
trustee appointed as provided in Section 11.07 hereof shall
execute, acknowledge and deliver to the Seller and to its
predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become
fully vested with all the rights, powers, duties and obligations of
its predecessor hereunder, with like effect as if originally named
as Trustee herein. The predecessor Trustee shall deliver to the
<PAGE> 77
successor trustee all documents or copies thereof, at the expense
of the Servicer, and statements held by it hereunder; and the
Seller and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor
trustee all such rights, power, duties and obligations. The
Servicer shall immediately give notice to each Rating Agency and
the Certificateholders upon the appointment of a successor trustee.
(b) No successor trustee shall accept appointment as
provided in this Section 11.08 unless at the time of such
acceptance such successor trustee shall be eligible under the
provisions of Section 11.06 hereof.
SECTION 11.09. Merger or Consolidation of Trustee. Any
Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Trustee shall be
a party, or any Person succeeding to all or substantially all of
the corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 11.06 hereof, without the
execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary
notwithstanding.
SECTION 11.10. Appointment of Co-Trustee or Separate
Trustee. (a) Notwithstanding any other provisions of this
Agreement, at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the Trust may
at the time be located, the Trustee shall have the power and may
execute and deliver all instruments to appoint one or more Persons
to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof,
and, subject to the other provisions of this Section 11.10, such
powers, duties, obligations, rights and trusts as the Trustee may
consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 11.06 and no notice to
Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 11.08 hereof.
(b) Every separate trustee and co-trustee shall, to the
extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
<PAGE> 78
upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act separately
without the Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or
acts are to be performed (whether as Trustee hereunder or as
successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the
holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be personally
liable by reason of any act or omission of any other trustee
hereunder; and
(iii) the Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to
each of them. Every instrument appointing any separate trustee or
co-trustee shall refer to this Agreement and the conditions of this
Article XI. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the
estates or property specified in its instrument of appointment,
either jointly with the Trustee or separately, as may be provided
therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating
to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed
with the Trustee and a copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee, its agent or attorney-in-fact, with full
power and authority, to the extent not prohibited by law, to do any
lawful act under or in respect of this Agreement on its behalf and
in its name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and
be exercised by the Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
SECTION 11.11. Tax Returns. In the event the Trust
shall be required to file tax returns, the Servicer shall prepare,
or shall cause to be prepared, and shall deliver, or shall cause to
be delivered, to the Trustee no later than five days immediately
<PAGE> 79
preceding any applicable due date and the Trustee shall execute, to
the extent it is the appropriate person to so execute, file any
such tax returns to be filed by the Trust. The Servicer in
accordance with the terms of the supplements shall also prepare or
shall cause to be prepared all tax information required by law to
be distributed to the Investor Certificateholders. The Trustee
will distribute or cause to be distributed such information to the
Investor Certificateholders. The Servicer, upon request, will
furnish the Trustee with all such information known to the Servicer
as may be reasonably required in connection with the distribution
of tax information to the Investor Certificateholders.
SECTION 11.12. Trustee May Enforce Claims Without
Possession of Certificates. All rights of action and claims under
this Agreement or the Certificates may be prosecuted and enforced
by the Trustee without the possession of any of the Certificates or
the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its
own name as trustee. Any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel,
be for the ratable benefit of the Certificateholders in respect of
which such judgment has been obtained.
SECTION 11.13. Suits for Enforcement. If a Servicer
Default shall occur and be continuing, the Trustee, in its
discretion may, subject to the provisions of Section 10.01, proceed
to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by suit, action or
proceeding in equity or at law or otherwise whether for the
specific performance of any covenant or agreement contained in this
Agreement or in aid of the execution of any power granted in this
Agreement or for the enforcement of any other legal, equitable or
other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the
Trustee or the Certificateholders. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Certificateholder any plan of
reorganization, arrangement adjustment or composition affecting
the Certificates or the rights of any Holder thereof, or authorize
the Trustee to vote in respect of the claim of any
Certificateholder in any such proceeding.
SECTION 11.14. Representations and Warranties of
Trustee. The Trustee represents and warrants that:
(i) the Trustee is a banking corporation organized,
existing and in good standing under the laws of the State of New
York;
<PAGE> 80
(ii) the Trustee has full power, authority and
right to execute, deliver and perform this Agreement, and has taken
all necessary action to authorize the execution, delivery and
performance by it of this Agreement; and
(iii) this Agreement has been duly executed and
delivered by the Trustee.
SECTION 11.15. Maintenance of Office or Agency. The
Trustee will maintain at its expense in the Borough of Manhattan,
The City of New York, an office or offices or agency or agencies
where notices and demands to or upon the Trustee in respect of the
Certificates and this Agreement may be served. The Trustee
initially designates its Corporate Trust Office as its office for
such purposes in New York. The Trustee will give prompt written
notice to the Servicer and to Holders of the Certificates of any
change in the location of the Certificate Register or any such
office or agency.
ARTICLE XII
Termination
SECTION 12.01. Termination of Trust. The Trust and the
respective obligations and responsibilities of the Seller, the
Servicer and the Trustee created hereby (other than the obligation
of the Trustee to make payments to Investor Certificateholders as
hereafter set forth) shall terminate, except with respect to the
duties described in Sections 7.03, 8.04, 11.05 and 12.02(b), upon
the earlier of (i) December 31, 2012 (the "Final Maturity Date"),
(ii) the day following the Distribution Date on which the Invested
Amount for all Series is zero and (iii) the time provided in
Section 9.02(b) (the "Trust Termination Date"). The Servicer will
give the Rating Agencies prompt notice of the termination of the
Trust.
SECTION 12.02. Final Distribution. (a) The Servicer
shall give the Trustee at least 30 days prior notice of the
Distribution Date on which the Investor Certificateholders of any
Series or Class may surrender their Investor Certificates for
payment of the final distribution on and cancellation of such
Investor Certificates (or, in the event of a final distribution
resulting from the application of Section 2.03 or 9.01, notice of
such Distribution Date promptly after the Servicer has determined
that a final distribution will occur, if such determination is made
less than 30 days prior to such Distribution Date, but in no event
less than five Business Days prior to the date on which the Trustee
is required to give notice to the Investor Certificateholders
referred to below). Such notice shall be accompanied by an
Officer's Certificate setting forth the information specified in
<PAGE> 81
Section 3.05 covering the period during the then-current calendar
year through the date of such notice and the information required
by clauses (i) and (ii) below. Not later than the fifth day of the
month in which the final distribution in respect of such Series or
Class is payable to Investor Certificateholders, the Trustee shall
provide notice to Investor Certificateholders of such Series or
Class specifying (i) the date upon which final payment of such
Series or Class will be made upon presentation and surrender of
Investor Certificates of such Series or Class at the office or
offices therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such
payment date is not applicable, payments being made only upon
presentation and surrender of such Investor Certificates at the
office or offices therein specified (which, in the case of Bearer
Certificate, shall be outside the United States). The Trustee
shall give such notice to the Transfer Agent and Registrar and the
Rating Agencies at the time such notice is given to Investor
Certificateholders.
(b) Notwithstanding a final distribution to the Investor
Certificateholders of any Series or Class (or the Termination of
the Trust), except as otherwise provided in this paragraph, all
funds then on deposit in the Collection Account and any Series
Account allocated to such Investor Certificateholders shall
continue to be held in trust for the benefit of such Investor
Certificateholders and the Trustee shall pay such funds to such
Investor Certificateholders upon surrender of their Investor
Certificates (and any excess shall be paid in accordance with the
terms of any Enhancement Agreement). In the event that all such
Investor Certificateholders shall not surrender their Investor
Certificates for cancellation within six months after the date
specified in the notice from the Trustee described in paragraph
(a), the Trustee shall give a second notice to the remaining such
Investor Certificateholders to surrender their Investor
Certificates for cancellation and receive the final distribution
with respect thereto (which surrender and payment, in the case of
Bearer Certificates, shall be outside the United States). If
within one year after the second notice all such Investor
Certificates shall not have been surrendered for cancellation, the
Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining such Investor
Certificateholders concerning surrender of their Investor
Certificates, and the cost thereof shall be paid out of the funds
in the Collection Account or any Series Account held for the
benefit of such Investor Certificateholders. The Trustee shall pay
to the Seller any monies held by it for the payment of principal or
interest that remain unclaimed for two years. After payment to the
Seller, Investor Certificateholders entitled to the money must look
to the Seller for payment as general creditors unless an applicable
abandoned property law designates another Person.
<PAGE> 82
(c) In the event that the Invested Amount with respect
to any Series is greater than zero on its Termination Date (after
giving effect to deposits and distributions otherwise to be made on
such Termination Date), the Trustee will sell or cause to be sold
on such Termination Date Receivables (or interests therein) in an
amount equal to the sum of (i) 110% of the Invested Amount with
respect to such Series on such Termination Date (after giving
effect to such deposits and distributions) and (ii) the Available
Subordinated Amount with respect to such Series on the preceding
Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the
Distribution Date following such Determination Date); provided,
however, that in no event shall such amount exceed such Series'
Allocation Percentage (as defined in the Series Supplements and for
the Collection Period in which such Termination Date occurs) of
Receivables on such Termination Date. The proceeds (the
"Termination Proceeds") from such sale shall be immediately
deposited into the Collection Account for the benefit of the
Investor Certificateholders of such Series. The Termination
Proceeds shall be allocated and distributed to the Investor
Certificateholders of such Series in accordance with the terms of
the applicable Supplement.
SECTION 12.03. Seller's Termination Rights. Upon the
termination of the Trust pursuant to Section 12.01 and the
surrender of the Seller's Certificates, the Trustee shall sell,
assign and convey to the Seller or its designee, without recourse,
representation or warranty, all right, title and interest of the
Trust in the Receivables, whether then existing or thereafter
created, all monies due or to become due and all amounts received
with respect thereto and all proceeds thereof, except for amounts
held by the Trustee pursuant to Section 12.02(b), and all of the
Seller's rights, remedies, powers and privileges with respect to
such Receivables under the Receivables Purchase Agreements. The
Trustee shall execute and deliver such instruments of transfer and
assignment, in each case without recourse, representation or
warranty, as shall be reasonably requested by the Seller to vest in
the Seller or its designee all right, title and interest which the
Trust had in all such property.
<PAGE> 83
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.01. Amendment. (a) Subject to the
Supplement for any Series, this Agreement or any Supplement may be
amended from time to time (including in connection with the
issuance of a Supplemental Certificate) by the Servicer, the Seller
and the Trustee without the consent of any of the
Certificateholders, provided that such action shall not, as
evidenced by an Opinion of Counsel (which counsel shall not be an
employee of Federal-Mogul or the Seller), for the Seller, addressed
and delivered to the Trustee, adversely affect in any material
respect the interests of any Investor Certificateholder.
Notwithstanding anything contained herein to the contrary, the
Trustee, with the consent of any Enhancement Providers may at any
time and from time to time amend, modify or supplement the form of
Distribution Date Statement.
(b) This Agreement or any Supplement may also be amended
from time to time (including in connection with the issuance of a
Supplemental Certificate) by the Servicer, the Seller and the
Trustee, with the consent of the Holders of Investor Certificates
evidencing not less than 66-2/3% of the aggregate unpaid principal
amount of the Investor Certificates of all adversely affected
Series, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement
or any Supplement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall
(i) reduce in any manner the amount of or delay the timing of any
distributions to be made to Investor Certificateholders or deposits
of amounts to be so distributed or the amount available under any
Enhancement without the consent of each affected Investor
Certificateholder, (ii) change the definition of or the manner of
calculating the interest of any Investor Certificateholder without
the consent of each affected Investor Certificateholder or (iii)
reduce the aforesaid percentage required to consent to any such
amendment, in the case of (i), without the consent of each such
affected Certificateholder and, in the case of (ii) and (iii),
without the consent of all Investor Certificateholders. Any
amendment to be effected pursuant to this paragraph shall be deemed
to adversely affect all outstanding Series, other than any Series
with respect to which such action shall not, as evidenced by an
Opinion of Counsel (which counsel shall not be an employee of, or
counsel for, Federal-Mogul or the Seller), addressed and delivered
to the Trustee, adversely affect in any material respect the
interests of any Investor Certificateholder of such Series.
<PAGE> 84
(c) Promptly after the execution of any such amendment
or consent (other than an amendment pursuant to paragraph (a)), the
Trustee shall furnish notification of the substance of such
amendment to each Investor Certificateholder, and the Servicer
shall furnish notification of the substance of such amendment to
each Rating Agency, each Agent and each Enhancement Provider.
(d) It shall not be necessary for the consent of
Investor Certificateholders under this Section to approve the
particular form of any proposed amendment, but it shall be
sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor
Certificateholders shall be subject to such reasonable requirements
as the Trustee may prescribe.
(e) Notwithstanding anything in this Section to the
contrary, no amendment may be made to this Agreement or any
Supplement which would adversely affect in any material respect the
interests of any Enhancement Provider without the consent of such
Enhancement Provider.
(f) Any Supplement executed in accordance with the
provisions of Section 6.03 shall not be considered an amendment to
this Agreement for the purposes of this Section.
(g) Prior to the execution of any amendment to this
Agreement or any Supplement, the Trustee shall be entitled to
receive and rely upon an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this
Agreement. The Trustee may, but shall not be obligated to, enter
into any such amendment which affects the Trustee's own rights,
duties or immunities under this Agreement, any Supplement or
otherwise.
(h) If all amounts owing to the Holders of the Series
1992-1 Certificates and the Series 1993-1 Certificates have not
been paid in full, the Rating Agency rating such Investor
Certificates shall be notified of any proposed amendment to this
Agreement.
SECTION 13.02. Protection of Right, Title and Interest
to Trust. (a) The Servicer shall cause this Agreement, all
amendments hereto and/or all financing statements and continuation
statements and any other necessary documents covering the
Certificateholders' and the Trustee's right, title, and interest in
and to the Trust to be promptly recorded, registered and filed, and
at all times to be kept recorded, registered and filed, all in such
manner and in such places as may be required by law fully to
preserve and protect the right, title and interest of the
<PAGE> 85
Certificateholders and the Trustee hereunder to all property
comprising the Trust. The Servicer shall deliver to the Trustee
file-stamped copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as
available following such recording, registration or filing. The
Seller shall cooperate fully with the Servicer in connection with
the obligations set forth above and will execute any and all
documents reasonably required to fulfill the intent of this Section
13.02(a).
(b) Within 30 days after the Seller or the Servicer
makes any change in its name, identity or corporate structure which
would make any financing statement or continuation Statement filed
in accordance with Section 13.02(a) seriously misleading within the
meaning of Section 9-402(7) of the UCC as in effect in Michigan
(including as a result of a Designated Affiliate Transfer), the
Seller shall give the Trustee and any Agent notice of any such
change and shall file such financing statements or amendments as
may be necessary to continue the perfection of the Trust's security
interest in the Receivables and the proceeds thereof.
(c) The Seller and the Servicer will give the Trustee
and any Agent prompt written notice of any relocation of any office
from which it services Receivables or keeps records concerning the
Receivables or of its principal executive office and whether, as a
result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments as
may be necessary to perfect or to continue the perfection of the
Trust's security interest in the Receivables and the proceeds
thereof. The Seller and the Servicer shall at all times maintain
each office from which it services Receivables and its principal
executive officer within the United States of America.
(d) The Servicer will deliver to the Trustee, any Agent
and any Enhancement Provider: (i) upon the execution and delivery
of each amendment of this Agreement or any Supplement, an Opinion
of Counsel to the effect specified in Exhibit F-1; and (ii) on or
before April 30 of each year, beginning with April 30, 1993, an
Opinion of Counsel substantially in the form of Exhibit F-2.
SECTION 13.03. Limitation on Rights of
Certificateholders. (a) The death or incapacity of any
Certificateholder shall not operate to terminate this Agreement or
the Trust, nor shall such death or incapacity entitle such
Certificateholders' legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any
court for a partition or winding-up of the Trust, nor otherwise
affect the rights, obligations and liabilities of the parties
hereto or any of them.
<PAGE> 86
(b) No Investor Certificateholder shall have any right
to vote (except as expressly provided in this Agreement) or in any
manner otherwise control the operation and management of the Trust,
or the obligations of the parties hereto, nor shall anything herein
set forth, or contained in the terms of the Certificates, be
construed so as to constitute the Investor Certificateholders from
time to time as partners or members of an association, nor shall
any Investor Certificateholder be under any liability to any third
person by reason of any action taken by the parties to this
Agreement pursuant to any provision hereof.
(c) No Investor Certificateholder shall have any right
by virtue of any provisions of this Agreement to institute any
suit, action or proceeding in equity or at law upon or under or
with respect to this Agreement, unless such Investor
Certificateholder previously shall have made, and unless the
Holders of Investor Certificates evidencing more than 50% of the
aggregate unpaid principal amount of all Investor Certificates (or,
with respect to any such action, suit or proceeding that does not
relate to all Series, 50% of the aggregate unpaid principal amount
of the Investor Certificates of all Series to which such action,
suit or proceeding relates) shall have made, a request to the
Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee
such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after such request and offer of indemnity,
shall have neglected or refused to institute any such action, suit
or proceeding; it being understood and intended, and being
expressly covenanted by each Investor Certificateholder with every
other Investor Certificateholder and the Trustee, that no one or
more Investor Certificateholders shall have any right in any manner
whatever by virtue or by availing itself or themselves of any
provisions of this Agreement to affect, disturb or prejudice the
rights of the holders of any other of the Investor Certificates, or
to obtain or seek to obtain priority over or preference to any
other such Investor Certificateholder, or to enforce any right
under this Agreement, except in the manner herein provided and for
the equal, ratable and common benefit of all Investor
Certificateholders except as otherwise expressly provided in this
Agreement. For the protection and enforcement of the provisions of
this Section, each and every Investor Certificateholder and the
Trustee shall be entitled to such relief as can be given either at
law or in equity.
SECTION 13.04. No Petition. The Servicer, Federal-Mogul
(if it is no longer the Servicer) and the Trustee (not in its
individual capacity but solely as Trustee hereunder), by entering
<PAGE> 87
into this Agreement, each Investor Certificateholder, by accepting
an Investor Certificate, each holder of a Supplemental Certificate
by accepting a Supplemental Certificate and any Successor Servicer
and each other Beneficiary, by accepting the benefits of this
Agreement, hereby covenants and agrees that they will not at any
time institute against FMFC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or
similar law.
SECTION 13.05. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 13.06. Notices. (a) All demands, notices,
instructions, directions and communications (collectively,
"Notices") under this Agreement shall be in writing and shall be
deemed to have been duly given if personally delivered at or mailed
by certified mail, return receipt requested, to (i) in the case of
FMFC, 26555 Northwestern Highway, Southfield, Michigan 48034,
Attention: Secretary, (ii) in the case of Federal-Mogul, 26555
Northwestern Highway, Southfield, Michigan 48034, Attention:
Secretary, and (iii) in the case of the Trustee, 450 West 33rd
Street, New York, New York, 10001, Attention: Corporate Trust
Department; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party.
Any notice or other document required to be delivered or mailed by
the Trustee to any Rating Agency, any Agent or any Enhancement
Provider shall be given on a best efforts basis and only as a
matter of courtesy and accommodation and the Trustee shall have no
liability for failure to deliver such notice or document to any
Rating Agency, any Agent or any Enhancement Provider.
(b) Any Notice required or permitted to be given to a
Holder of Registered Certificates shall be given by first-class
mail, postage prepaid, at the address of such Holder as shown in
the Certificate Register. No Notice shall be required to be mailed
to a Holder of Bearer Certificates or Coupons but shall be given as
provided below. Any Notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly
given, whether or not the Investor Certificateholder receives such
Notice. In addition, in the case of any Series or Class with
respect to which any Bearer Certificates are outstanding, any
Notice required or permitted to be given to Investor
Certificateholders of such Series or Class shall be published in an
Authorized Newspaper within the time period prescribed in this
Agreement.
<PAGE> 88
SECTION 13.07. Severability of Provisions. If any one
or more of the covenants, agreements, provisions or terms of this
Agreement shall for any reason whatsoever be held invalid, then
such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or
terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the
Certificates or rights of the Certificateholders.
SECTION 13.08. Assignment. Notwithstanding anything to
the contrary contained herein, except as provided in Section 8.02,
this Agreement may not be assigned by the Servicer.
SECTION 13.09. Certificates Nonassessable and Fully
Paid. It is the intention of the parties to this Agreement that
the Investor Certificateholders shall not be personally liable for
obligations of the Trust, that the interests in the Trust
represented by the Investor Certificates shall be nonassessable for
any losses or expenses of the Trust or for any reason whatsoever
and that Investor Certificates upon authentication thereof by the
Trustee are and shall be deemed fully paid.
SECTION 13.10. Further Assurances. The Seller and the
servicer agree to do and perform, from time to time, any and all
acts and to execute any and all further instruments required or
reasonably requested by the Trustee more fully to effect the
purposes of this Agreement, including the execution of any
financing statements or continuation statements relating to the
Receivables for filing under the provisions of the UCC of any
applicable jurisdiction.
SECTION 13.11. No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of the
Trustee or the Certificateholders, any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy,
power or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and
privileges provided under this Agreement are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided
by law.
SECTION 13.12. Counterparts. This Agreement may be
executed in two or more counterparts (and by different parties on
separate counterparts), each of which shall be an original, but all
of which together shall constitute one and the same instrument.
<PAGE> 89
SECTION 13.13. Third-Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the
parties hereto, the Certificateholders and the other Beneficiaries
and their respective successors and permitted assigns. Except as
otherwise expressly provided in this Agreement, no other Person
will have any right or obligation hereunder.
SECTION 13.14. Actions by Certificateholders. Any
request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind such
Certificateholder and every subsequent holder of any Certificate
issued upon the registration of transfer of the Certificates of
such Certificateholder or in exchange therefor or in lieu thereof
in respect of anything done or omitted to be done by the Trustee or
the Servicer in reliance thereon, whether or not notation of such
action is made upon any such Certificate.
SECTION 13.15. Rule 144A Information. For so long as
any of the Investor Certificates of any Series or Class are
"restricted securities" within the meaning of Rule 144(a)(3) under
the Act, each of the Seller, the Trustee, the Servicer and any
Enhancement Providers agree to cooperate with each other to provide
to any Investor Certificateholder of such Series or Class and to
any prospective purchaser of Investor Certificates designated by
such an Investor Certificateholder, upon the request of such
Investor Certificateholder or prospective purchaser and at the
expense of the Servicer, any information required to be provided to
such holder or prospective purchaser to satisfy the condition set
forth in Rule 144A(d)(4) under the Act.
SECTION 13.16. Action by Trustee. Upon any application
or request by the Seller or Servicer to the Trustee to take any
action under any provision under this Agreement, the Seller or
Servicer, as the case may be, shall furnish to the Trustee an
Officer's Certificate stating that all conditions precedent, if
any, provided for in this Agreement relating to the proposed action
have been complied with and an Opinion of Counsel stating that in
the opinion of such Counsel all such conditions precedent, if any,
have been complied with. The Trustee shall be entitled to
conclusively rely on the Officer's Certificate or the Opinion of
Counsel, as the case may be, as authority for any action undertaken
in connection therewith.
SECTION 13.17. Merger and Integration. Except as
specifically stated otherwise herein, this Agreement sets forth the
entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are
superseded by this Agreement. This Agreement may not be modified,
amended, waived, or supplemented except as provided herein.
<PAGE> 90
SECTION 13.18. Headings. The headings herein are for
purposes of reference only and shall not otherwise affect the
meaning or interpretation or any provision hereof.
IN WITNESS WHEREOF, the Seller, the Servicer and the
Trustee have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
FEDERAL-MOGUL FUNDING CORPORATION,
Seller
By--------------------------------
Name:
Title:
FEDERAL-MOGUL CORPORATION,
Servicer
By--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
Trustee
By-------------------------------
Name:
Title:
<PAGE> 1
SERIES 1997-1 SUPPLEMENT dated as of February 1, 1997
(the "Series Supplement"), among FEDERAL-MOGUL FUNDING
CORPORATION, a Michigan corporation, as Seller, FEDERAL-MOGUL
CORPORATION, a Michigan corporation, as Servicer, and THE CHASE
MANHATTAN BANK, a New York banking corporation, as Trustee.
Pursuant to Section 6.03 of the Amended and Restated
Pooling and Servicing Agreement, dated as of February 1, 1997
(as amended and supplemented, the "Agreement"), among the Seller,
the Servicer and the Trustee, the Seller may from time to time
direct the Trustee to issue, on behalf of the Trust, one or more
new Series of Investor Certificates representing fractional
undivided interests in the Trust. The Principal Terms of any new
Series are to be set forth in a Supplement to the Agreement.
Pursuant to this Series Supplement, the Seller shall
create a new Series of Investor Certificates and specify the
Principal Terms thereof.
ARTICLE I
Creation of the Series 1997-1 Certificates
SECTION 1.01. Designation. (a) There is hereby
created a Series of Investor Certificates to be issued pursuant
to the Agreement and this Series Supplement to be known as the
"Floating Rate Trade Receivables Asset Backed Certificates,
Series 1997-1, Class A" and "Trade Receivables Asset Backed
Certificates, Series 1997-1, Class B."
(b) In the event that any term or provision contained
herein shall conflict with or be inconsistent with any term or
provision contained in the Agreement, with respect to the Series
of Investor Certificates created hereby, the terms and provisions
of this Series Supplement shall govern.
(c) The parties hereto intend that to the extent that
the payment of all amounts due to be paid to the Holders of the
Series 1992-1 Certificates (as defined herein) and Series 1993-1
Certificates (as defined herein) are held in escrow and paid in
accordance with the terms of the Escrow Deposit Agreement, the
Invested Amount of the Series 1992-1 Certificates and the Series
1993-1 Certificates shall each be zero and all Collections
received by the Trustee shall be allocated and applied solely in
accordance with the terms of this Series Supplement.
<PAGE> 2
ARTICLE II
Definitions
SECTION 2.01. Definitions. (a) Whenever used in this
Series Supplement the following words and phrases shall have the
following meanings.
"Additional Early Amortization Event" shall have the meaning
specified in Section 6.01.
"Administration Fee" shall have the meaning specified in the
Fee Letter.
"Agent" shall mean, with respect to Series 1997-1, the
Program Agent.
"Aggregate Reserves" shall equal, as of any Determination
Date, the product of (a) the Aggregate Reserve Percentage and (b)
Available Receivables.
"Aggregate Reserve Percentage" shall mean, as of any
Determination Date, the sum of (a) the Loss Reserve Percentage,
(b) the Floating Dilution Reserve Percentage, (c) the
Discount/Fees Reserve Percentage and (d) the Servicing Reserve
Percentage.
"Amortization Commencement Date" shall occur on the earliest
of the following events: (a) 364 days from the Closing Date,
(b) five Business Days after written notice from Federal-Mogul to
the Program Agent and the Trustee of the intent to commence the
Amortization Period and (c) the occurrence of an Early
Amortization Event.
"Amortization Period" shall mean the period beginning on the
Amortization Commencement Date and ending upon the earliest to
occur of (a) the payment in full of the Invested Amount, all
Class A Monthly Interest and all other Class A Additional
Interest and all other amounts owed to Certificateholders
hereunder and under any other Transaction Document, (b) the Early
Amortization Commencement Date or (c) the Termination Date.
"Available Collections" shall have the meaning set forth in
Section 4.01(b).
"Available Receivables" shall equal, as of any Determination
Date, the excess of the Net Receivables Balance over the
Contractual Dilution Balance.
<PAGE> 3
"Breakage Costs" shall mean (a) with respect to Falcon and
for each Collection Period during which the Class A Invested
Amount is reduced, the amount, if any, by which (i) the
additional interest at the Class A Certificate Rate (calculated
without taking into account any Breakage Costs), which would have
accrued on that portion of the Class A Invested Amount that was
reduced, through the last day of such Collection Period exceeds
(ii) the income received by Falcon from investing the proceeds of
such reductions of Class A Invested Amount; or (b) with respect
to a Liquidity Provider and for each Collection Period during
which the Class A Invested Amount is reduced, the amount, if any,
by which (i) the additional interest at the Class A Certificate
Rate (calculated without taking into account any Breakage Costs),
which would have accrued on that portion of the Class A Invested
Amount that was reduced or its pro rata portion thereof, through
the last day of the period for which the LIBO Rate has been set
exceeds (ii) the income received by such Liquidity Provider from
investing the proceeds of such reductions of Class A Invested
Amount, or its pro rata portion of such Class A Invested Amount.
"Canadian Receivables" shall mean Receivables which are
payable in Canadian Dollars and generated from sales to Obligors
located in Canada.
"Certificate Purchase Agreement" shall mean the agreement,
dated February 28, 1997, by and among the Seller, Falcon, the
Program Agent and the Liquidity Providers named therein.
"Class" shall mean either the Class A Certificates or the
Class B Certificates, as applicable.
"Class A Additional Interest" shall have the meaning
specified in Section 4.02(a).
"Class A Certificate" shall mean any one of the Series 1997-1
Class A Certificates executed and authenticated by the Trustee,
substantially in the form attached as Exhibit A-1.
"Class A Certificateholders' Interest" shall mean that
portion of the Certificateholder's Interest evidenced by the
Class A Certificate.
"Class A Certificate Rate" shall mean the CP Rate, LIBO Rate
or Base Rate, each as defined in the Certificate Purchase
Agreement.
"Class A Controlled Amortization Amount" shall mean an
amount equal to the Class A Invested Amount as of the last day of
the Revolving Period divided by three.
<PAGE> 4
"Class A Interest Shortfall" shall have the meaning
specified in Section 4.02(a).
"Class A Invested Amount" shall mean, when used with respect
to any date, an amount equal to (a) $0 plus (b) the aggregate
amount of the Purchase of the Class A Certificates on the Closing
Date plus (c) the aggregate amount of Increases made under any
Class A Certificate after the Closing Date minus (d) the
aggregate amount of the Class A Monthly Principal, any Optional
Repayment Amount, any Coverage Amount and any Escrow Account
Amount received and distributed to Class A Certificateholders in
reduction of the Class A Invested Amount from time to time on or
prior to such date; provided, however, that the Class A Invested
Amount shall not be reduced by any amount of Series 1997-1
Collections so received and distributed if at any time such
distribution of such amount of Series 1997-1 Collections is
rescinded or must be returned for any reason; and provided,
further, that on any date of determination, the Class A Invested
Amount shall not exceed the Class A Purchase Limit.
"Class A Monthly Interest" shall have the meaning specified
in Section 4.02.
"Class A Monthly Principal" shall have the meaning specified
in Section 4.03(a).
"Class A Purchase Limit" shall mean, on any date of
determination, $100,000,000 as such amount may be reduced
pursuant to Section 2.04 of the Certificate Purchase Agreement.
"Class B Certificate" shall mean any one of the Series 1997-1
Class B Certificates executed and authenticated by the Trustee,
substantially in the form attached as Exhibit A-2.
"Class B Certificateholders' Interest" shall mean that
portion of the Certificateholders Interest evidenced by the Class
B Certificate.
"Class B Certificate Rate" shall be 0%.
"Class B Invested Amount" shall mean, when used with respect
to any date, an amount equal to the Pool Balance minus the Class
A Invested Amount.
"Class B Monthly Principal" shall have the meaning specified
in Section 4.03(b).
"Closing Date" shall mean February 28, 1997.
"Collections" shall have the meaning designated in the
<PAGE> 5
Agreement; provided, however, that for the purposes of this
Series Supplement, and as long as no allocations of Collections
need to be made among Series, no distinction will be made between
Discount Collections and Principal Collections.
"Confidential Information" shall mean, in relation to any
Person, any written information delivered or made available by or
on behalf of Federal-Mogul (or its Affiliates or subsidiaries) or
the Seller to such Person in connection with or pursuant to this
Agreement or the transactions contemplated hereby which is
proprietary in nature and clearly marked or identified in writing
as being confidential information, other than information (i)
which was publicly known, or otherwise known to such Person, at
the time of disclosure (except pursuant to disclosure in
connection with this Agreement), (ii) which subsequently becomes
publicly known through no act or omission by such Person, or
(iii) which otherwise becomes known to such Person other than
through disclosure by Federal-Mogul or the Seller.
"Contractual Dilution Balance" shall mean, as of any
Determination Date, the sum of (a) 2% of North American
Aftermarket sales during the immediately preceding Collection
Period, (b) the greater of (i) the accrual for obsolescence and
(ii) two times the aggregate amount of Credit Memos issued during
such Collection Period due to obsolescence, (c) 1.5 times the
aggregate amount of Credit Memos issued during such Collection
Period due to stock lifts and (d) the total rebates and
adjustments currently owed to Obligors as of the end of such
Collection Period (as reflected in the Customer Program Balances
in the books and records of the Servicer).
"Coverage Amount" shall mean, as of any Determination Date,
the deficiency, if any, in an amount equal to (a) the Class A
Invested Amount as of such Determination Date minus the Funding
Adjustment determined as of such Determination Date minus (b) the
Primary Funding determined as of such Determination Date.
"CP Note" shall mean any commercial paper note issued by
Falcon.
"Credit Memo" shall mean any credit memo relating to (a) the
North American Aftermarket obsolescence, (b) the North American
Aftermarket stock lifts, (d) the North American Aftermarket core
deposits, (e) the North American Aftermarket billing adjustments,
(f) the North American Aftermarket customer accommodation
returns, (g) the North American Aftermarket other and (h)
Original Equipment Manufacturers.
"Delinquency Ratio" shall mean, as of any Determination
Date, the percentage equivalent of a fraction, the numerator of
<PAGE> 6
which is the aggregate amount of Receivables as of the last
Business Day of the immediately preceding Collection Period that
are 61 or more days past due and the denominator of which is the
Pool Balance as of such Business Day.
"Determination Date" shall mean the fifteenth day of each
month, or if such day is not a Business Day, the next succeeding
Business Day.
"Dilution Horizon Ratio" or "DHR" shall mean, for any
Determination Date, a fraction, the numerator of which is the sum
of the aggregate amounts of all new Receivables generated during
the two immediately preceding Collection Periods and the
denominator of which is the Available Receivables as of such
Determination Date.
"Dilution Ratio" shall mean, as of any Determination Date,
the percentage equivalent of a fraction, the numerator of which
is all non-cash reductions to the Pool Balance, not related to
the credit-worthiness of the Obligor, including, but not limited
to, the aggregate amount of Credit Memos issued during the
immediately preceding Collection Period, adjustments related to
2/10 discounts made during the immediately preceding Collection
Period, and other adjustments made during the immediately
preceding Collection Period and the denominator of which is the
Pool Balance as of such Business Day.
"Discount/Fees Reserve Percentage" shall mean, as of any
Determination Date:
the greater of (i) 1% and 2 x TD/365 x [PL x AF + (H.15 + 50
bps + PF) x IA] + accrued and unpaid interest/fees
Available Receivables
where,
PL = Class A Purchase Limit
AF = 27.5 bps
H.15 = 30 day H.15 rate, as of the last day of the
preceding Collection Period, on an interest-
bearing basis
PF = 15 bps
IA = Class A Invested Amount as of the last day of
the second immediately preceding Collection
Period
TD = Turnover Days
<PAGE> 7
"Discount Rate" shall mean zero.
"Distribution Date" shall be the twentieth day of each month
or, if such day is not a Business Day, the next succeeding
Business Day.
"Early Amortization Commencement Date" shall mean the date
on which an Early Amortization Event is deemed to have occurred.
"Early Amortization Event" shall mean any Early Amortization
Event specified in Section 9.01 of the Agreement, together with
any Additional Early Amortization Event specified in Section 6.01
of this Series Supplement.
"Early Amortization Period" shall mean the period from and
including the Early Amortization Commencement Date to and
including the earlier of (a) the date of the final distribution
to Investor Certificateholders of this Series and (b) the
Termination Date.
"Eligible Receivables" shall mean each Receivable which
meets the following characteristics:
(i) the obligation is denominated and payable in U.S.
dollars in the United States, or, if a Canadian Receivable, is
denominated and payable in Canadian dollars; or is related to an
Original Equipment Manufacturer export and is denominated in U.S.
dollars;
(ii) the related Obligor is a resident of the United States
or Canada or is an Original Equipment Manufacturer;
(iii) the related Obligor is not an Affiliate of any of the
parties hereto;
(iv) the contract terms of the Receivables call for payment
within 90 days of original billing date, except for up to 3% of
the Pool Balance which may have terms that call for payment
within 91 to 180 days of original billing date, and except that
any Receivables purchased on or before the Closing Date may have
contract terms that call for payment on or before December 31,
1997, subject to the preceding 3% limitation;
(v) the Receivable is not more than 90 days past due;
(vi) the purchase of the Receivable is a "current
transaction" within Section 3(a)(3) of the Securities Act;
<PAGE> 8
(vii) the Receivable is an "account" under Section 9-106 of
the Uniform Commercial Code;
(viii) the Receivable is a legal, valid and binding
obligation of the related Obligor;
(ix) the terms of the contract for the Receivable do not
require the consent of the Obligor to sell or assign such
Receivable;
(x) the Program Agent has not notified the Seller that the
Receivable is not acceptable;
(xi) the Receivable was generated in the ordinary course of
business of the Receivables Seller;
(xii) the Receivable satisfies all applicable requirements
of the credit and collection policies of the Receivables Sellers
and the Seller;
(xiii) There are no offset arrangements with the related
Obligor;
(xiv) the contract for the Receivable represents all or a
part of the sales price of merchandise, insurance and services
within the meaning of the Investment Company Act, Section
3(c)(5);
provided, however, if, as of any Determination Date, the
aggregate amount of Receivables for an Obligor represent 2.00% or
more of the Pool Balance and 30.00% or more of such Receivables
are 91 days or more past due, all Receivables relating to such
Obligor shall not constitute "Eligible Receivables" for purposes
of the Agreement and this Series Supplement.
"Escrow Account" shall mean the escrow account established
pursuant to the Escrow Deposit Agreement.
"Escrow Deposit Agreement" shall mean the escrow deposit
agreement, dated February 28, 1997, by and among the Seller,
Federal-Mogul Corporation, the Trustee, The Chase Manhattan Bank,
as Escrow Agent and The Chase Manhattan Bank, in its individual
capacity.
"Escrow Account Amount" shall mean the amount, if any,
transferred to the Series 1997-1 Trustee's Account from the
Escrow Account pursuant to paragraph 9 of the Escrow Deposit
Agreement.
"Expected Floating Dilution Ratio" or "EFD" shall mean, as
of any Determination Date, the average of the Floating Dilution
Ratios for the twelve immediately preceding Collection Periods.
<PAGE> 9
"Falcon" shall mean Falcon Asset Securitization Corporation,
a corporation organized and existing under the laws of the State
of Delaware, and any successor or assignee of Falcon and that is
a receivables investment company which in the ordinary course of
its business issues commercial paper or other securities to fund
its acquisition and maintenance of receivables.
"Fee Letter" shall mean that certain letter agreement dated
as of the date hereof between the Seller, Falcon and the Program
Agent, as it may be amended or modified and in effect from time
to time.
"Floating Dilution Ratio" shall mean, as of any
Determination Date, the percentage equivalent of a fraction, the
numerator of which shall be the Floating Dilution determined as
of such Determination Date and the denominator of which shall be
the aggregate amount of new Receivables transferred to the Trust
during the second immediately preceding Collection Period.
"Floating Dilution" shall mean, as of any Determination
Date, the aggregate amount of Credit Memos issued during the
immediately preceding Collection Period relating to the (i) North
American Aftermarket core deposits, (ii) the North American
Aftermarket billing adjustments, (iii) the North American
Aftermarket customer accommodation returns, (iv) the North
American Aftermarket other and (v) Original Equipment
Manufacturers.
"Floating Dilution Reserve Percentage" or "FDRP" shall
equal, as of any Determination Date:
the greater of (a) 15% and
(b) 1.75 X EFD X DHR + [ (FDS - EFD) x FDS ]
EFD
where,
FDR = Floating Dilution Ratio
EFD = Expected Floating Dilution Ratio
FDS = Floating Dilution Spike Ratio
DHR = Dilution Horizon Ratio
"Floating Dilution Spike Ratio" or "FDS" shall mean, as of
any Determination Date, the highest average of the Floating
Dilution Ratio for any two consecutive Collection Periods that
occurred during the twelve immediately preceding Collection
Periods.
<PAGE> 10
"Funding Adjustment" shall mean, (a) as of the Determination
Dates occurring in March 1997, April 1997 and May 1997, an amount
equal to the lesser of (w) $25,000,000, (x) an amount equal to
$95,400,000 minus Primary Funding determined as of the applicable
Determination Date, and (y) the Contractual Dilution Balance
determined as of the applicable Determination Date, and (b) as of
any Determination Date occurring after the month of May 1997, $0.
"Guaranty" shall mean any guaranty by any Person of
Indebtedness or other obligations of any other Person that is not
a consolidated subsidiary of such Person or any assurance with
respect to the financial condition of any other Person that is
not a consolidated subsidiary of such Person (including, without
limitation, any purchase or repurchase agreement, any indemnity
or any keep-well, take-or-pay, through-put or other arrangement
having the effect of assuring or holding harmless any third
Person against loss with respect to any Indebtedness or other
obligation of such other Person) except endorsements of
negotiable instruments for collection in the ordinary course of
business.
"Increase" shall mean the amount of each increase in the
Class A Invested Amount funded by CP Notes or the Liquidity
Providers and paid to the Seller by the Program Agent pursuant to
the terms of the Certificate Purchase Agreement.
"Indebtedness" shall mean any (a) indebtedness for borrowed
money or for the deferred purchase price of property or services,
(b) obligations under leases which, in accordance with generally
accepted accounting principles, are to be recorded as capital
leases, (c) obligations which are evidenced by notes, acceptances
or other instruments, (d) net liabilities under interest rate
swap, foreign currency swap, commodity swap, exchange or cap
agreements and (e) obligations, whether or not assumed, secured
by Liens or payable out of proceeds or production from property
now or hereafter owned or acquired; provided, however, that the
term "Indebtedness" shall not include short-term obligations
payable to suppliers incurred in the ordinary course of business.
"Initial Class A Invested Amount" shall equal $95,400,000.
"Interest Period" shall mean, with respect to any
Distribution Date, the period from and including the Distribution
Date immediately preceding such Distribution Date (or, in the
case of the first Distribution Date, from and including the
Closing Date) to but excluding such Distribution Date.
<PAGE> 11
"Invested Amount" shall mean, when used with respect to any
date, the sum of the Class A Invested Amount and the Class B
Invested Amount.
"Investment Proceeds" shall mean, with respect to any
Determination Date, all interest and other investment earnings
(net of losses and investment expenses) on funds on deposit in
the Series 1997-1 Trustee's Account, together with an amount
equal to all interest and other investment earnings on funds held
in the Collection Account.
"LIBO Rate" is the rate specified in the Certificate
Purchase Agreement.
"Liquidity Providers" shall mean the banks and financial
institutions defined in the Certificate Purchase Agreement.
"Loss Reserve Percentage" shall mean, as of any
Determination Date, the greater of (a) 5% and (b) 3 times the
Loss-to-Liquidation Ratio.
"Loss-to-Liquidation Ratio" shall mean, as of any
Determination Date, a fraction, the numerator of which equals the
sum of (a) the aggregate of Receivables that were 61 to 90 days
past due as of the last day of the immediately preceding
Collection Period and (b) the excess, if any, of (i) the
aggregate amount of placed accounts balance during the
immediately preceding Collection Period over (ii) the aggregate
amount of placed accounts balance during the second immediately
preceding Collection Period, and the denominator of which is
Collections received during the immediately preceding Collection
Period.
"Minimum Enhancement Amount" shall mean, as of any
Determination Date, an amount equal to the greater of (i) an
amount equal to the product of (w) the Aggregate Reserve
Percentage as of such Determination Date and (x) a fraction the
numerator of which is equal to the Class A Invested Amount as of
such Determination Date minus the Funding Adjustment as of such
Determination Date and the denominator of which is 1 minus such
Aggregate Reserve Percentage plus (y) the Contractual Dilution as
of such Determination Date and (ii) $5,000,000.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.01.
"Net Receivables Balance" shall equal, as of any
Determination Date, (a) the aggregate outstanding balance of all
Eligible Receivables minus (b) the Overconcentration Amount at
such time.
<PAGE> 12
"Obligor Overconcentration" shall mean, as of any
Determination Date, the excess of (a) the aggregate of all
amounts of Eligible Receivables owned by the Trust and generated
under accounts receivable with any one Obligor or type of
Receivable as of the last day of the Collection Period
immediately preceding such Determination Date over (b) 2% of the
Eligible Receivables on the last day of such immediately
preceding Collection Period; provided, that the Obligor
Overconcentration with respect to the following Obligors or types
of Receivables, shall be the applicable amount described in
clause (a) in excess of the following percentages respectively,
of the Eligible Receivables on the last day of such immediately
preceding Collection Period:
<TABLE>
<CAPTION>
<S>
Obligor/Receivable Type Percentage
<C>
Chrysler 4%
Ford 7%
General Motors 7%
Genuine Parts 4%
Caterpillar 3%
Canadian Receivables 6%
OEM Export Receivables 5%
</TABLE>
"Optional Repayment Amount" shall mean with respect to any
Distribution Date, the amount, if any, of Series 1997-1
Collections which the Seller directs the Trustee to deposit into
the Series 1997-1 Trustee's Account pursuant to Section 4.07 for
distribution on such Distribution Date in reduction of the Class
A Invested Amount.
"Other Fees" shall have the meaning specified in the Fee
Letter.
"Overconcentration Amount" shall mean, as of any
Determination Date, the sum of the Obligor Overconcentrations on
such date.
"Primary Funding" shall mean, as of any Determination Date,
an amount equal to the Available Receivables determined as of
such Determination Date minus the Aggregate Reserves determined
as of such Determination Date.
<PAGE> 13
"Prior Series Deficiency" shall have the meaning specified
in Section 4.01(c).
"Program Agent" shall mean The First National Bank of
Chicago and its successors , in its capacity as agent for Falcon
and the Liquidity Providers.
"Program Fee" shall have the meaning specified in the Fee
Letter.
"Purchase" shall mean, with respect to the Class A
Certificates, the amount of the initial purchase of the Class A
Certificates paid to the Seller by the Program Agent pursuant to
the terms of the Certificate Purchase Agreement.
"Purchaser" shall have the meaning assigned to such term in
the Certificate Purchase Agreement.
"Reassignment Amount" shall mean, with respect to any
Distribution Date, after giving effect to any deposits and
distributions otherwise to be made on such Distribution Date, the
sum of (i) the Invested Amount on such Distribution Date, (ii)
the Class A Monthly Interest relating to such Distribution Date
and any Class A Monthly Interest previously due and unpaid, (iii)
the Class A Additional Interest, if any, for such Distribution
Date and any Class A Additional Interest previously due and
unpaid and (iv) the amount of any accrued and unpaid Program
Fees, Administration Fees, Other Fees and Breakage Costs.
"Receivables Seller" shall mean one of the Sellers listed in
the Receivables Purchase Agreements.
"Related Documents" shall mean the Transaction Documents.
"Repurchase Price" shall have the meaning specified in
Section 8.01.
"Revolving Period" shall mean the period beginning at the
close of business on the Business Day immediately preceding
February 28, 1997 and ending on the earlier of (a) the last day
of the Collection Period ending on the Business Day immediately
preceding the Amortization Commencement Date, and (b) the
Business Day immediately preceding the Early Amortization
Commencement Date; provided, however, that, if any Early
Amortization Period ends as described in the definition thereof,
the Revolving Period will recommence as of the close of business
on the day such Early Amortization Period ends.
<PAGE> 14
"Series 1992-1 Certificates" shall mean the Investor
Certificates issued pursuant to the Agreement and the Series
1992-1 Supplement.
"Series 1992-1 Supplement" shall mean the Series 1992-1
Supplement to the Agreement, dated as of June 1, 1992, among the
Seller, the Servicer and the Trustee.
"Series 1993-1 Certificates" shall mean the Investor
Certificates issued pursuant to the Agreement and the Series
1993-1 Supplement.
"Series 1993-1 Supplement" shall mean the Series 1993-1
Supplement to the Agreement, dated as of March 1, 1993, among the
Seller, the Servicer and the Trustee.
"Series 1997-1" shall mean the Series of Investor
Certificates, the terms of which are specified in this Series
Supplement.
"Series 1997-1 Certificateholders" shall mean the Holders of
Series 1997-1 Certificates.
"Series 1997-1 Certificateholders' Interest" shall mean that
portion of the Certificateholders' Interest evidenced by the
Series 1997-1 Certificates.
"Series 1997-1 Certificates" shall mean any one of the Class
A Certificates and Class B Certificates executed and
authenticated by the Trustee, substantially in the form of
Exhibits A-1 and A-2.
"Series 1997-1 Collections" shall have the meaning specified
in Section 4.01(a).
"Series 1997-1 Trustee's Account" shall have the meaning
specified in Section 4.04(a).
"Servicing Fee Rate" shall mean, with respect to Series
1997-1, 0.50% per annum.
"Servicing Reserve Percentage" shall mean, as of any
Determination Date, the percentage of equivalent of a fraction,
the numerator of which shall be an amount equal to the product of
(i) the Servicing Fee Rate, (ii) the Pool Balance as of the last
day of the immediately preceding Collection Period, (iii) 2,
(iv) Turnover Days divided by 365, and the denominator of which
shall be the Available Receivables determined as of such
Determination Date.
<PAGE> 15
"Subsidiary" shall mean, at any particular time, any Person
which could be included as a consolidated subsidiary of Federal-Mogul
in the financial statements prepared and filed with
Federal-Mogul's annual reports on Form 10-K under the Securities
Exchange Act of 1934, as amended, if such financial statements
were prepared at, and as of, such time. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries"
in this Series Supplement shall refer to a Subsidiary or
Subsidiaries of Federal-Mogul.
"Termination Date" shall mean February 28, 2000, which is
the date on which the last payment of principal and interest on
the Series 1997-1 Certificates will be due and payable.
"Termination Proceeds" shall mean any termination proceeds
arising out of a sale of Receivables (or interests therein)
pursuant to Section 12.02(c) of the Agreement with respect to
Series 1997-1.
"Transaction Documents" shall mean the Fee Letter, the
Agreement, this Series Supplement, the Class A Certificates, the
Receivable Purchase Agreement, the Escrow Deposit Agreement and
the Certificate Purchase Agreement.
"Turnover Days" shall mean, as of any Determination Date, an
amount equal to the Pool Balance as of the last day of the
immediately preceding Collection Period divided by Collections
relating to the immediately preceding Collection Period times 30.
"Undivided Fractional Interest" shall mean the undivided
fractional interest in the Class A or Class B Invested Amount, as
applicable, evidenced by a Class A or Class B Certificate, the
numerator being the principal amount of such Class A or Class B
Certificate at the time of determination and the denominator
being the Class A or Class B Invested Amount at such time.
(b) All capitalized terms used herein and not otherwise
defined herein have the meanings ascribed to them in the
Agreement. Each capitalized term defined herein shall relate
only to the Series 1997-1 Certificates and no other Series of
Certificates issued by the Trust. The definitions in Section
2.01 are applicable to the singular as well as the plural forms
of such terms and to the masculine as well as to the feminine and
neuter genders of such terms.
(c) The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Series Supplement shall refer
to this Series Supplement as a whole and not to any particular
provision of this Series Supplement; references to any Article,
Section or Exhibit are references to Articles, Sections and
Exhibits in or to this Series Supplement unless otherwise
specified; and the term "including" means "including without
limitation".
<PAGE> 16
(d) As used in this Agreement and in any certificate or
other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Agreement or in any such
certificate or other document, and accounting terms partly
defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting
terms in this Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other
document shall control.
ARTICLE III
Servicing Fee
SECTION 3.01 Servicing Compensation. The monthly
servicing fee (the "Monthly Servicing Fee") shall be payable to
the Servicer, either (a) through withdrawals from Collections as
provided in Section 4.03(b) of the Agreement or (b) shall be
payable in arrears, on each Distribution Date in respect of any
Collection Period (or portion thereof) occurring prior to the
earlier of the first Distribution Date following the Termination
Date and the first Distribution Date on which the Invested Amount
is zero. The Monthly Servicing Fee shall be an amount equal to
the product of (a) the Servicing Fee Rate and (b) the Pool
Balance and (c) a fraction, the numerator of which is the actual
number of days in the preceding Collection Period and the
denominator of which is 360; provided, however, that with respect
to the first Distribution Date, the Monthly Servicing Fee shall
be equal to $67,160.00. The Monthly Servicing Fee shall be
payable to the Servicer solely to the extent amounts are
available for distribution in accordance with the terms of this
Series Supplement.
<PAGE> 17
ARTICLE IV
Rights of Series 1997-1 Certificateholders and
Allocation and Application of Collections
SECTION 4.01 Allocations; Payments to Seller.
(a) So long as no amounts are allocable to the Series 1992-1 or
the Series 1993-1 Certificates, as hereinafter described, all
Collections, Adjustment Payments, any payment by the Seller
pursuant to Section 2.03 of the Agreement, any Transfer Deposit
Amount, any Insolvency Proceeds, any Termination Proceeds and any
other amount received in connection with the Receivables by any
party or Person (collectively, the "Series 1997-1 Collections")
shall be allocated to the Series 1997-1 Certificates.
(b) The Servicer shall (a) instruct the Trustee and the
Trustee shall withdraw from the Collection Account and pay to the
Seller on the dates set forth below the following amounts and
(b) on each Distribution Date notify the Trustee of the
applicable Class A Certificate Rate for the next succeeding
Distribution Date; provided, that in so instructing the Trustee,
the Servicer shall satisfy itself that funds on deposit in the
Collection Account following any such payments will be sufficient
to pay the Class A Monthly Interest, the Class B Monthly
Interest, Class A Additional Interest, Optional Repayment Amount,
Coverage Amount, Escrow Account Amount and Class A Monthly
Principal on the next succeeding Distribution Date:
(i) On each Deposit Date with respect to the Revolving
Period, the Servicer shall instruct the Trustee in writing to
withdraw from the Collection Account and pay to the Seller
certain amounts on deposit in the Collection Account ("Available
Collections"); provided, however, that no Early Amortization
Event has occurred and no event or condition has occurred that
with notice or the lapse of time or both would constitute an
Early Amortization Event; provided, further, that in so
instructing the Trustee, the Servicer shall satisfy itself that
funds on deposit in the Collection Account following any such
payment of Available Collections to the Seller will be sufficient
to pay, on the next succeeding Distribution Date, the sum of (a)
Class A Monthly Interest, any Class A Monthly Interest previously
due but not paid and any Class A Additional Interest and (b) all
accrued and unpaid fees, as specified in the Fee Letter, that are
due on such Distribution Date; provided, further, if the report
delivered pursuant to paragraphs 5 and 11 of the Escrow Deposit
Agreement indicates that there will be a Prior Series Deficiency
on such succeeding Distribution Date, Available Collections in an
amount up to the full amount of such Prior Series Deficiency
shall be retained in the Collection Account to pay the Prior
Series Deficiency. During the Revolving Period, funds on deposit
<PAGE> 18
in the Collection Account following payments of Available
Collections to the Seller should include the amounts, if any,
specified in Section 5.01(a)(i), Breakage Costs, and amounts
specified in Section 5.01(iii)(A) and (B) and during the
Amortization Period, the amounts specified in Sections
5.01(b)(i), 5.01(b)(ii), 5.01(b)(iii)(B), 5.01(b)(iv) and
5.01(b)(v). On each Deposit Date on which Available Collections
are paid to the Seller, the Seller shall be deemed to have
represented and warranted to the Trustee and the Class A
Certificateholders that no Early Amortization Event has occurred
and no condition or event has occurred that with notice or the
lapse of time or both would constitute an Early Amortization
Event.
(ii) On each Transfer Date, the Seller may use Available
Collections to purchase Receivables pursuant to the Receivables
Purchase Agreement. In connection with any such purchase of
Receivables on a Transfer Date, the Seller is hereby deemed to
represent to the Trust and the Trustee that:
(A) No Early Amortization Event has occurred and no event
or condition has occurred that with notice or the lapse of time
or both would constitute an Early Amortization Event.
(B) With respect to the Receivables purchased, the
representations and warranties set forth in Section 2.04 of the
Agreement are true and correct as of such Transfer Date.
(iii) In allocating and distributing Collections on any
Deposit Date pursuant to this Section 4.01(b), the Trustee
conclusively may rely on the information and direction received
from the Servicer delivered to it by the Servicer, and the
Trustee shall not under any circumstance be required or obligated
to verify the information set forth therein or to make inquiry of
the Servicer as to the continued accuracy thereof.
(c) On any Distribution Date, if amounts due to the Holders
of the Series 1992-1 Certificates and Holders of the Series 1993-1
Certificates pursuant to the Series 1992-1 Supplement and the
Series 1993-1 Supplement, respectively, exceed the amounts on
deposit in the Escrow Account and available for distribution (a
"Prior Series Deficiency"), the Trustee shall, prior to making
any payments pursuant to Article V, withdraw funds from the
Series 1997-1 Trustee's Account up to the amount of such Prior
Series Deficiency and apply such amounts to the payment of such
Prior Series Deficiency in the manner provided in the Series
1992-1 Supplement or Series 1993-1 Supplement, as applicable. If
on any Distribution Date, amounts on deposit in the Series 1997-1
Trustee's Account are not sufficient to reduce any Prior Series
Deficiency to zero, all such amounts will be allocated, first, to
<PAGE> 19
pay in full all outstanding amounts then owed to the Holders of
the Series 1992-1 Certificates and Holders of the Series 1993-1
Certificates for all amounts due and owing under the Series 1992-1
Supplement and Series 1993-1 Supplement, respectively, and then
shall be paid to the Holders of the Series 1997-1 Certificates as
provided in Section 5.01 herein.
(d) If, on any Distribution Date, there are no funds
available in the Escrow Account to pay amounts then due and owing
to the Holders of the Series 1992-1 and Holders of the Series
1993-1 Certificates, all amounts on deposit in the Series 1997-1
Trustee's Account will be allocated, first, to pay in full all
outstanding amounts then owed to the Holders of the Series 1992-1
Certificates and the Holders of the Series 1993-1 Certificates
for all amounts due and owing under the Series 1992-1 Supplement
and Series 1993-1 Supplement, respectively, and then shall be
paid to the Series 1997-1 Certificateholders as provided in
Section 5.01 herein.
(e) Notwithstanding any provision in this Series Supplement
or the Agreement to the contrary, upon the occurrence of an Early
Amortization Event or any event or condition that with notice or
the lapse of time or both would constitute an Early Amortization
Event and provided that all amounts due to the Holders of the
Series 1992-1 Certificates and the Series 1993-1 Certificates
have been paid in full in accordance with the terms of the Series
1992-1 Supplement and the Series 1993-1 Supplement, respectively,
upon written notice delivered by the Program Agent to the Seller,
the Servicer and the Trustee, the Program Agent, and not the
Servicer, shall be authorized to direct the Trustee to make
withdrawals and payments from the Collection Account and the
Series 1997 Trustee's Account and to give directions to the
Trustee to invest funds in Eligible Investments.
SECTION 4.02. Monthly Interest. The amount of monthly
interest ("Class A Monthly Interest") with respect to the Class A
Certificates on any Distribution Date shall be an amount
determined by the Program Agent in accordance with the
Certificate Purchase Agreement and the Program Agent shall give
notice thereof to the Seller and the Servicer at least two
Business Days prior to the related Determination Date.
On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Class A
Interest Shortfall"), of (x) the aggregate Class A Monthly
Interest for the Interest Period applicable to such Distribution
Date over (y) the amount that will be available in the Series
1997-1 Trustee's Account on such Distribution Date in respect
thereof pursuant to this Series Supplement. If, on any
Distribution Date there exists a Class A Interest Shortfall, then
<PAGE> 20
an additional amount ("Class A Additional Interest") determined
by the Program Agent in accordance with the Certificate Purchase
Agreement shall be payable as provided herein with respect to the
Class A Certificates on each Distribution Date following such
Distribution Date to and including the Distribution Date on which
such Class A Interest Shortfall is paid or deposited in the
Series 1997-1 Trustee's Account. Notwithstanding anything to the
contrary herein, the Servicer shall instruct the Trustee to pay
Class A Additional Interest to Class A Certificateholders only to
the extent permitted by applicable law.
SECTION 4.03. Determination of Monthly Principal. (a) The
amount of monthly principal ("Class A Monthly Principal")
distributable with respect to the Class A Certificates on each
Distribution Date (i) with respect to the Revolving Period shall
be equal to 0, (ii) with respect to an Early Amortization Period
shall be equal to the Class A Invested Amount with respect to
such Distribution Date; and (iii) with respect to the Controlled
Amortization Period, Class A Monthly Principal shall be an amount
equal to the Class A Controlled Distribution Amount for such
Distribution Date; provided, however, that Class A Monthly
Principal shall not exceed the outstanding principal balance of
the Class A Certificates.
(b) The amount of monthly principal ("Class B Monthly
Principal") distributable with respect to the Class B
Certificates on each Distribution Date, (i) with respect to the
Revolving Period shall be equal to 0 and (ii) beginning with the
Distribution Date on which the Class A Invested Amount is paid in
full with respect to the Amortization Period or an Early
Amortization Period, shall be equal to all amounts on deposit in
the Series 1997-1 Trustee's Account with respect to such
Distribution Date.
SECTION 4.04. Establishment of Series Accounts. (a) The
Servicer, for the benefit of the Series 1997-1 Certificateholders,
shall establish and maintain an Eligible Deposit Account
in the name of the Trustee, on behalf of the Trust (the "Series
1997-1 Trustee's Account"), which shall be identified as the
"Series 1997-1 Trustee's Account for the Federal-Mogul Trade
Receivables Master Trust, Series 1997-1" and shall bear a
designation clearly indicating that the funds deposited therein
are held for the benefit of the Series 1997-1 Certificateholders.
The Series 1997-1 Trustee's Account initially shall be
established as a segregated trust account at The Chase Manhattan
Bank.
(b) At the direction of the Servicer (which may be a
standing direction), funds on deposit in the Series 1997-1
Trustee's Account shall be invested by the Trustee in Eligible
<PAGE> 21
Investments selected by the Servicer. All such Eligible
Investments shall be held by the Trustee for the benefit of the
Series 1997-1 Certificateholders. On each Distribution Date, all
interest and other investment earnings (net of losses and investment
expenses) on funds on deposit in the Series 1997-1 Trustee's
Account shall be applied as set forth in Section 4.05 of this
Series Supplement. Funds on deposit in the Series 1997-1
Trustee's Account shall be invested at the written direction of
the Servicer in Eligible Investments that will mature so that
such funds will be available on or before the close of business
on the Business Day next preceding the following Distribution
Date. Funds deposited in the Series 1997-1 Trustee's Account on
a Business Day which immediately precedes a Distribution Date
upon the maturity of any Eligible Investments are not required to
be invested overnight.
(c) (i) The Trustee shall possess all right, title and
interest in and to all funds on deposit from time to time in, and
all Eligible Investments credited to, the Series 1997-1 Trustee's
Account and in all proceeds thereof. The Series 1997-1 Trustee's
Account shall be under the sole dominion and control of the
Trustee for the benefit of the Series 1997-1 Certificateholders.
If, at any time, the Series 1997-1 Trustee's Account is held by
an institution other than an Eligible Institution, the Trustee
(or the Servicer, at the direction of the Trustee and on its
behalf) shall within 10 Business Days establish a new Series
1997-1 Trustee's Account meeting the conditions specified in
paragraph (a) above, as applicable, and shall transfer any cash
and/or any investments to such new Series 1997-1 Trustee's
Account. Neither the Seller, the Servicer nor any Person or
entity claiming by, through or under the Seller, the Servicer or
any such Person or entity shall have any right, title or interest
in, or any right to withdraw any amount from, the Series 1997-1
Trustee's Account, except as expressly provided herein.
Schedule I attached hereto identifies the Series 1997-1 Trustee's
Account by setting forth the account number of such account, the
account designation of such account and the name and location of
the institution with which such account has been established. If
a substitute Series 1997-1 Trustee's Account is established
pursuant to this Section 4.04, the party establishing such
substitute Series 1997-1 Trustee's Account shall promptly provide
to the Servicer or the Trustee, as applicable, an amended
Schedule I, setting forth the relevant information for such
substitute Series 1997-1 Trustee's Account.
(ii) Notwithstanding anything herein to the contrary,
the Servicer shall have the power, revocable by the Trustee at
the direction of Investor Certificateholders evidencing more than
50% of the aggregate principal amount of the Holders of the
Series 1997-1 Certificates, to instruct the Trustee to make
<PAGE> 22
withdrawals and payments from the Series 1997-1 Trustee's Account
for the purposes of carrying out the Servicer's or Trustee's
duties hereunder.
(d) Any request by the Servicer to invest funds on deposit
in the Series 1997-1 Trustee's Account shall be in writing, or by
telephone, confirmed promptly in writing, and shall certify that
the requested investment is an Eligible Investment which matures
at or prior to the time required hereby.
(e) The Trustee is hereby authorized, unless otherwise
directed by the Servicer, to effect transactions in Eligible
Investments through a capital markets affiliate of the Trustee.
SECTION 4.05. Application of Series 1997-1 Collections and
Investment Proceeds. The Servicer shall instruct the Trustee by
a Distribution Date Statement delivered to the Trustee, on each
Determination Date, to withdraw from the Collection Account an
amount equal to the amount to be distributed on the next
Distribution Date pursuant to Section 5.01 with respect to such
Distribution Date and deposit such amount into the Series 1997-1
Trustee's Account.
SECTION 4.06. Distributions to Series 1997-1
Certificateholders. (a) The Servicer shall instruct the Trustee
in writing, together with each Distribution Date Statement
delivered to the Trustee, to distribute from the Series 1997-1
Trustee's Account on each Distribution Date all amounts on
deposit in the Series 1997-1 Trustee's Account pursuant to
Section 5.01.
(b) The distributions to be made pursuant to this Section
are subject to the provisions of Sections 2.03, 9.02 and 12.02 of
the Agreement and Sections 9.01 and 9.02 of this Series
Supplement.
SECTION 4.07. Payment of Optional Repayment Amount.
At least five Business Days prior to any Distribution Date
during the Revolving Period, the Seller may direct the Trustee to
use funds on deposit in the Series 1997-1 Trustee's Account,
after payment of amounts due pursuant to Sections 5.01(a)(i)
through 5.01 (a)(iii)(A) on such Distribution Date, as an
Optional Repayment Amount. The Seller shall provide the Program
Agent with ten Business Days prior written notice of the payment
of any Optional Repayment Amount on a Distribution Date;
provided, however, if the Series 1992-1 Certificates or the
Series 1993-1 Certificates are outstanding, the Seller may not
direct the Trustee to make an Optional Repayment Amount pursuant
to this Section 4.07.
<PAGE> 23
ARTICLE V
Distributions and Reports to
Series 1997-1 Certificateholders
SECTION 5.01. Distributions. (a) During the Revolving
Period, on the Distribution Date with respect to each Collection
Period, the Trustee shall distribute the funds on deposit in the
Series 1997-1 Trustee's Account (including amounts deposited
pursuant to Section 4.07 and Section 8.01) on such Distribution
Date, in the following order of priority, in accordance with the
Distribution Date Statement delivered pursuant to Section
5.02(a):
(i) to the Servicer (if the Servicer is other
than Federal-Mogul) the accrued and unpaid Monthly Servicing Fee
and any Service Transfer expenses incurred by a Successor
Servicer which have not been paid by Federal-Mogul as the initial
Servicer;
(ii) to the Class A Certificateholders, ratably in
accordance with their respective Undivided Fractional Interests:
(A) for payment of accrued and unpaid Program
Fees, Administration Fees and Other Fees other than Breakage
Costs;
(B) for payment of the Class A Monthly Interest,
any Class A Monthly Interest previously due but not paid and any
Class A Additional Interest; and
(C) for payment of accrued and unpaid Breakage
Costs;
provided, however, if remaining funds on deposit in the
Series 1997-1 Trustee's Account are not sufficient to fund all
amounts due pursuant to clauses (a)(ii) (A), (B) and (C), the
Class A Certificateholders shall apply such remaining funds pro
rata to the amounts due pursuant to clauses (a)(ii)(A), (B) and
(C);
(iii) to the Class A Certificateholders:
(A) for the payment of the Escrow Account Amount,
if any, and the Coverage Amount, if any, and such amount shall be
applied to reduce the Class A Invested Amount;
(B) If the Class A Invested Amount is greater than
the Class A Purchase Limit on such Distribution Date, remaining
funds in the Series 1997-1 Trustee's Account shall be applied to
reduce the Class A Invested Amount until the Class A Invested
Amount equals the Class A Purchase Limit; and
<PAGE> 24
(C) If the Seller elects to make an Optional
Repayment pursuant to Section 4.07, the Optional Repayment Amount
deposited to the Series 1997-1 Trustee's Account shall be applied
to reduce the Class A Invested Amount.
(iv) so long as Federal-Mogul is the Servicer, any
remaining available funds up to the accrued and unpaid Monthly
Servicing Fee to Federal-Mogul; and
(v) the remainder to the Class B
Certificateholders.
(b) On each Distribution Date during the Amortization
Period, the Trustee shall distribute the funds on deposit in the
Series 1997-1 Trustee's Account on such Distribution Date, in the
following order of priority, in accordance with the Distribution
Date Statement delivered pursuant to Section 5.02(a):
(i) to the Class A Certificateholders any enforcement
expenses due to the Class A Certificateholders;
(ii) to the Servicer (if the Servicer is other than
Federal-Mogul) the accrued and unpaid Monthly Servicing Fee and
Service Transfer expenses incurred by a Successor Servicer which
have not been paid by the initial Servicer;
(iii) to the Class A Certificateholders ratably in
accordance with their respective Undivided Fractional Interests:
(A) for payment of the Class A Monthly Interest,
any Class A Monthly Interest previously due but not paid and any
Class A Additional Interest;
(B) for payment of accrued and unpaid Breakage
Costs;
provided, however, if remaining funds on deposit
in the Series 1997-1 Trustee's Account are not sufficient to fund
all amounts due pursuant to clauses (b)(iii) (A) and (B), the
Class A Certificateholders shall apply such remaining funds pro
rata to the amounts due pursuant to clauses to clauses
(b)(iii)(A) and (B);
(iv) to the Class A Certificateholders for the
payment of the Coverage Amount, if any, and such amount shall be
applied to reduce the Class A Invested Amount;
(v) to the Class A Certificateholders, ratably
in accordance with their respective Undivided Fractional
Interests, the Class A Controlled Amortization Amount in
reduction of the Class A Invested Amount and any other amounts
due the Class A Certificateholders under the Transaction
Documents;
<PAGE> 25
(vi) to the Class A Certificateholders for
payment of accrued and unpaid Program Fees, Administration Fees
and Other Fees (other than Breakage Costs);
(vii) so long as Federal-Mogul is the Servicer,
any remaining available funds up to the accrued and unpaid
Monthly Servicing Fee to Federal-Mogul; and
(viii) the remainder to the Class B
Certificateholder.
(c) On each Distribution Date during an Early Amortization
Period and on the Distribution Dates referred to in Sections
9.01(b) and 9.02(a) hereof the Trustee shall distribute the funds
on deposit in the Series 1997-1 Trustee's Account on such
Distribution Date in the following order of priority in
accordance with the Distribution Date Statement delivered
pursuant to Section 5.02(a):
(i) to the Servicer (if the Servicer is other
than Federal-Mogul) the accrued and unpaid Monthly Servicing Fee
and any Service Transfer expenses incurred by a Successor
Servicer which have not been paid by Federal-Mogul as the initial
Servicer;
(ii) to the Class A Certificateholders any
enforcement expenses due to the Class A Certificateholders;
(iii) to the Class A Certificateholders, ratably
in accordance with their respective Undivided Fractional
Interests
(A) for payment of accrued and unpaid Purchaser
Fees, Administration Fees and Other Fees other than Breakage
Costs,
(B) for payment of Class A Monthly Interest, any
Class A Monthly Interest previously due but not paid and any
Class A Additional Interest; and
(C) for payment of accrued and unpaid Breakage
Costs;
<PAGE> 26
If remaining funds on deposit in the Series 1997-1
Trustee's Account are not sufficient to fund all amounts due
pursuant to clauses (c)(iii)(A), (B) and (C), the remaining funds
shall be distributed to the Class A Certificateholders and the
Class A Certificateholders shall apply such funds pro rata to the
amounts due pursuant to clauses (c)(iii)(A), (B) and (C);
(iv) to the reduction of the Class A Invested
Amount until such Class A Invested Amount has been reduced to
zero; and
(v) the remainder, to the Class B
Certificateholder until such Class B Invested Amount has been
reduced to zero.
Upon payment in full to all of the Series 1997-1
Certificateholders of the Invested Amount, all accrued and unpaid
interest thereon and all other amounts due the Series 1997-1
Certificateholders under the Transaction Documents, payment in
full to the Servicer of the Monthly Servicing Fee, and provided
that no amounts are then due and unpaid to the Holders of any
other outstanding Series, all amounts remaining on deposit in the
Series 1997-1 Trustee's Account shall be distributed by the
Trustee to the Holder of the Class B Certificate, and all
amounts, if any, remaining in the Collection Account shall be
distributed by the Trustee to the Holder of the Class B
Certificate; provided, however, that if at any time after the
payment that would have otherwise resulted in such payment in
full, such payment is rescinded or must otherwise be returned for
any reason, effective upon such rescission or return such payment
in full shall automatically be deemed, as between the Series
1997-1 Certificateholders and the Class B Certificateholder,
never to have occurred, and the Class B Certificateholder shall
be required, to the extent it received any amounts under this
Section 5.01, to remit to the Trustee an amount equal to the
rescinded or returned payment.
(d) Except as provided in Section 12.02 of the Agreement
with respect to a final distribution, distributions to Series
1997-1 Certificateholders hereunder shall be made by check mailed
to each Series 1997-1 Certificateholder at such Certificateholder's
address appearing in the Certificate Register without
presentation or surrender of any Series 1997-1 Certificate or the
making of any notation thereon; provided, however, that
distributions will be made by wire transfer of immediately
available funds to the account of the Certificateholder entitled
thereto at a bank or other entity located in the United States of
America having appropriate facilities therefor if such
Certificateholder shall have so notified the Trustee in writing
by the Record Date immediately prior to such Distribution Date
and is the registered owner of Certificates in the initial
aggregate principal amount equal to or in excess of $2,000,000.
<PAGE> 27
SECTION 5.02. Reports and Statements to Series 1997-1
Certificateholders. (a) On or prior to the Determination Date,
the Servicer will provide to the Trustee a Distribution Date
Statement substantially in the form of Exhibit B and on each
Distribution Date the Trustee shall forward to each Series 1997-1
Certificateholder the statement substantially in the form of
Exhibit B prepared by the Servicer setting forth certain
information relating to the Trust and the Series 1997-1
Certificates.
(b) A copy of each statement provided pursuant to paragraph
(a) will be made available for inspection at the Corporate Trust
Office.
(c) On or before January 31 of each calendar year,
beginning with January 31, 1998, the Servicer shall provide to
the Trustee and the Trustee shall forward or cause to be
forwarded to each Person who at any time during the preceding
calendar year was a Certificateholder, a statement prepared by
the Servicer containing the information which is required to be
contained in the Determination Date Statements provided to
Certificateholders pursuant to Section 3.05(b) of the Agreement,
aggregated for such calendar year or the applicable portion
thereof during which such Person was a Certificateholder,
together with other information as is required to be provided
under the Internal Revenue Code and such other customary
information as is necessary to enable the Certificateholders to
prepare their tax returns. The obligation of the Servicer to
provide such other information and such other customary
information shall be deemed to have been satisfied to the extent
that information substantially comparable to such other
information and such other customary information shall be
provided by the Trustee pursuant to any requirements of the
Internal Revenue Code as from time to time in effect.
SECTION 5.03. Quarterly Servicer's Certificate. The
Servicer shall deliver to the Program Agent on or prior to the
Determination Date occurring in the month immediately succeeding
each of the first three calendar quarters of each year, an
Officers' Certificate substantially in the form of Exhibit E
stating that (a) a review of the activities of the Servicer
during the preceding calendar quarter and of its performance
under the Agreement and this Series Supplement was made under the
supervision of the officer signing such certificate and (b) to
the best of such officer's knowledge, based on such review, the
Servicer has performed in all material respects its obligations
under the Agreement and this Series Supplement throughout such
quarter, or, if there has been a material default in the
performance of any such obligation, specifying each such default
known to such officer and the nature and status thereof.
<PAGE> 28
SECTION 5.04. Weekly Report and Distribution.
Notwithstanding any other provisions in the Agreement or this
Series Supplement, upon the occurrence of an Early Amortization
Event, the Program Agent, at its sole option, may provide a
written notice to the Seller, the Servicer and the Trustee to the
effect that the Servicer shall deliver a weekly report (the
"Weekly Report") and distributions shall be made to the Class A
Certificateholders on a weekly basis, in each case, as described
below; provided, however, this Section 5.04 shall not apply if
the Series 1992-1 Certificates or the Series 1993-1 Certificates
are outstanding. Upon receipt of such notice, on Friday of each
week, or if such day is not a Business Day, the next succeeding
Business Day, the Servicer shall deliver the Weekly Report to the
Trustee and the Program Agent. Each Weekly Report shall provide
the following information: (i) the aggregate Collections
deposited in the Collection Account during the current week, or
the preceding week, as applicable, (ii) the aggregate amount of
Receivables as of the date of the Weekly Report, and (iii) the
amount to be distributed on the second Business Day immediately
succeeding the date of such report (the "Weekly Distribution
Date") for each line item in Section 5.01(c). On each Weekly
Distribution Date the Trustee, in accordance with the Weekly
Report delivered by the Servicer, shall make a distribution to
the Class A Certificateholders pursuant to Section 5.01(c). The
amounts to be distributed on each Weekly Distribution Date shall
be a pro rata portion of the amounts specified in the Transaction
Documents based upon the actual number of days in the preceding
week and a 30-day month.
<PAGE> 29
ARTICLE VI
Amortization Events
SECTION 6.01. Additional Early Amortization Events. The
occurrence of any of the following events (each, an "Additional
Early Amortization Event") and the expiration of any applicable
grace period shall, immediately upon the occurrence thereof
without notice or other action on the part of the Trustee or the
Series 1997-1 Certificateholders, be deemed to be an Early
Amortization Event solely with respect to Series 1997-1:
(a) failure on the part of the Seller or the Servicer to
make any transfer, deposit or payment required by the terms of
the Agreement, this Series Supplement, the Certificate Purchase
Agreement or any Receivables Purchase Agreement or to give notice
to the Trustee to make such transfer, deposit or payment on or
before the date such payment or deposit is due;
(b) failure on the part of the Seller or the Servicer to
observe or perform in any respect any material terms, covenants
or agreements of the Seller or the Servicer under the Agreement,
this Series Supplement, any Receivables Purchase Agreement, the
Certificate Purchase Agreement or the Escrow Deposit Agreement,
which failure continues unremedied for a period of ten Business
Days after the earlier of (x) the date on which the Seller or the
Servicer, as applicable, becomes aware of such failure and (y)
the date on which written notice of such failure, requiring the
same to be remedied, shall have been received by the Seller or
the Servicer, as applicable;
(c) any representation, warranty, certification or
statement made by the Seller or the Servicer in the Agreement,
this Series Supplement, any Receivables Purchase Agreement, the
Certificate Purchase Agreement or the Escrow Deposit Agreement or
which is contained in any Distribution Date Statement,
certificate, document or financial or other statement furnished
at any time under any of the foregoing agreements shall prove to
have been incorrect in any material respect when made or deemed
made and which continues for a period of 10 days;
(d) [Confidential Treatment Requested];
(e) [Confidential Treatment Requested];
(f) [Confidential Treatment Requested];
<PAGE> 30
(g) the Coverage Amount, if any, or the Escrow Account
Amount, if any, relating to any Distribution Date is not paid to
the Class A Certificateholders on the applicable Distribution
Date;
(h) the Class A Monthly Principal during the Amortization
Period is not paid to the Class A Certificateholders on the
applicable Distribution Date;
(i) if on any Distribution Date either (A) a Prior Series
Deficiency exists pursuant to Section 4.01(c) hereof or (B) if
there are no funds available in the Escrow Account to pay amounts
then due and owing to the Series 1992-1 Certificates and Series
1993-1 Certificates as described in Section 4.01(d);
(j) [Confidential Treatment Requested];
(k) for so long as the Funding Adjustment is equal to an
amount greater than zero, the Servicer, for so long as Federal-Mogul
is the Servicer, or any of its Subsidiaries shall
(i) default in any payment or payments of principal or interest
in an aggregate amount of more than $5,000,000 (or its equivalent
in another currency) at any one time on any Indebtedness or in
the payment of any Guaranty, beyond the period of grace (not to
exceed 30 days), if any, provided in the instrument or agreement
under which such Indebtedness or Guaranty was created; or
(ii) default in the observance or performance of any other
agreement or condition relating to any Indebtedness the principal
amount of which exceeds $5,000,000 or any Guaranty guarantying
Indebtedness the principal amount of which exceeds $5,000,000 or
contained in any instrument or agreement evidencing, securing or
relating to any such Indebtedness or Guaranty, beyond any
applicable period of grace (not to exceed 30 days), or any other
event shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the holder
or holders of such Indebtedness or beneficiary or beneficiaries
of such Guaranty (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due
prior to its stated maturity or such Guaranty to become payable.
<PAGE> 31
ARTICLE VII
Additional Covenants
SECTION 7.01. Covenants of the Servicer. The Servicer
hereby covenants that, until the earlier of the termination of
the Amortization Period or the Early Amortization Period:
(a) The Servicer will furnish the report required pursuant
to Section 5.02.
(b) The Servicer will furnish to the Program Agent, for the
benefit of the Class A Certificateholders and the Liquidity
Providers, all other periodic reports, opinions and statements
required to be delivered pursuant to the Agreement.
(c) Financial Reporting. The Servicer, for so long as
Federal-Mogul is the Servicer, shall maintain, for itself and
each of its Subsidiaries, a system of accounting established and
administered in accordance with generally accepted accounting
principles, and furnish to the Program Agent:
(i) Annual Reporting. Within 95 days after the
close of each fiscal year of the Servicer an audit report not
qualified for anything under the control of the Servicer,
certified by independent public accountants acceptable to the
Program Agent (which until the Program Agent notifies the
Servicer in writing to the contrary may be Ernst & Young llp,
public accounts), prepared in accordance with generally accepted
accounting principles on a consolidated basis for the Servicer
and its Subsidiaries including consolidated balance sheets as of
the end of such period, and related profit and loss and
reconciliation of the surplus statements.
(ii) Quarterly Reporting. Within 50 days after
the close of the first three quarterly periods of each fiscal
year of the Servicer, for the Servicer and its Subsidiaries,
consolidated unaudited balance sheets as at the close of each
such period and consolidated profit and loss and reconciliation
of surplus statements for the period beginning from the beginning
of such fiscal year to the end of such quarter.
(ii) Securities and Exchange Commission Filings.
Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular
reports which the Servicer or any of its Subsidiaries files with
the Securities and Exchange Commission.
<PAGE> 32
(d) Notices. The Servicer shall promptly notify the
Program Agent and the Trustee in writing of any of the following
immediately upon learning of the occurrence thereof, describing
the same, and if applicable, the steps being taken with respect
thereto; (i) the occurrence of each Servicer Default, or any
event or condition with notice or the lapse of time or both would
constitute a Servicer Default, by a statement of the corporate
comptroller or senior financial officer of the Servicer, and
(ii) the entry of any judgment or decree against the Servicer or
any of its Subsidiaries if the aggregate amount of all judgments
and decrees therein outstanding against the Servicer exceeds
$1,000,000.
SECTION 7.02. Confidentiality. The Seller, Federal-Mogul,
the Trustee, and the Series 1997-1 Certificateholders agree to
use their best efforts, and shall cause their agents or
representatives to use their best efforts, to hold in confidence
all Confidential Information; provided that nothing herein shall
prevent the Trustee or any Series 1997-1 Certificateholder from
delivering copies of any financial statements and other documents
constituting Confidential Information, or disclosing any other
Confidential Information, to (i) such Series 1997-1
Certificateholder's, Falcon's or any Liquidity Provider's
directors, officers, employees, agents, accountants, professional
consultants and enhancement providers, (ii) any other Series
1997-1 Certificateholder, (iii) Falcon, any Liquidity Provider,
Enhancement Provider or any Person to which such Series 1997-1
Certificateholder offers to sell or assign or sells or assigns
such Series 1997-1 Certificate or any part thereof or any rights
associated therewith, provided that Falcon, such Liquidity
Provider, Enhancement Provider or Person shall have agreed to
hold in confidence all Confidential Information, (iv) any federal
or state regulatory authority having jurisdiction over such
Series 1997-1 Certificateholder, Falcon or any Liquidity
Provider, (v) the National Association of Insurance Commissioners
or any similar organization or any nationally recognized rating
agency that requires access to such Series 1997-1
Certificateholder's investment portfolio, Falcon's investment
portfolio and any Liquidity Provider's investment portfolio, or
(vi) any other Person to which such delivery or disclosure may be
necessary or appropriate (a) in compliance with any law, rule,
regulation or order applicable to such Series 1997-1
Certificateholder, Falcon or any Liquidity Provider, (b) in
response to any subpoena or other legal process or (c) in
connection with any litigation to which such Series 1997-1
Certificateholder, Falcon or any Liquidity Provider is a party or
(vii) if any Early Amortization Event has occurred and is
continuing, to the extent such Series 1997-1 Certificateholder
may reasonably determine that such delivery and disclosure is
necessary or appropriate in the enforcement or for the protection
of the rights and remedies under the Series 1997-1 Certificates,
this Series Supplement or the Agreement. The Trustee and the
<PAGE> 33
Series 1997-1 Certificateholders agree to allow the Seller to
inspect their security and confidentiality arrangements from time
to time during normal business hours. The Trustee and the Series
1997-1 Certificateholders shall provide written notice to the
Seller whenever any such disclosure is made. The Trustee and the
Series 1997-1 Certificateholders shall use their best efforts to
provide the Seller with five day's advance notice of any
disclosure pursuant to clause (vi) of this Section 7.02.
SECTION 7.03. Receivables Purchase Agreement. (a) The
Seller agrees to provide the Program Agent with copies of the
following documents:
(i) the Seller shall promptly provide the
Program Agent with a copy of the written notice specified in
Section 2.02 and 2.03(b) of each Receivables Purchase Agreement;
(ii) the Seller shall promptly provide the
Program Agent with a copy of the written notice specified in
Section 2.03(c) of each Receivables Purchase Agreement;
(iii) the Seller shall promptly provide the
Program Agent with a copy of the Officer's Certificate and the
Opinion of Counsel specified in Section 5.01(b) of each
Receivables Purchase Agreement;
(iv) the Seller shall promptly provide the
Program Agent with a copy of the written notice specified in the
penultimate sentence of Article VI of each Receivables Purchase
Agreement;
(v) the Seller shall promptly provide the Program
Agent with a copy of the Opinion of Counsel specified in Section
7.01(a) and 7.01(b) of each Receivables Purchase Agreement;
(vi) the Seller shall promptly give the Program
Agent the notice specified in Section 7.02(b) of each Receivables
Purchase Agreement and shall promptly deliver to the Program
Agent copies of stamped receipt financing statements or
amendments, as applicable, specified in such Section 7.02(b); and
(vii) the Seller shall promptly provide the
Program Agent with a copy of the written notice specified in
Section 7.02(c) of each Receivables Purchase Agreement and shall
promptly deliver to the Program Agent copies of the stamped
receipt financing statements or amendments, as applicable,
specified in such Section 7.02(c).
(b) the Seller shall not amend any Receivables
Purchase Agreement without the prior written consent of the
Program Agent.
<PAGE> 34
(c) The Seller shall not (i) cancel or terminate any
Receivables Purchase Agreement or consent to or accept any
cancellation or termination thereof, (ii) give any consent,
waiver or approval under any Receivables Purchase Agreement,
(iii) waive any default under or breach of any Receivables
Purchase Agreement or (iv) take any other action under any
Receivables Purchase Agreement not required by the terms thereof,
in each case, to the extent that it would impair the value of any
Trust Asset or adversely affect the rights or interests of the
Seller thereunder without the prior written consent of the
Program Agent.
(d) In connection with an amendment to any Receivables
Purchase Agreement pursuant to Section 7.01(a) or 7.01(b) of each
Receivables Purchase Agreement, the Seller shall promptly provide
a copy of such amendment to the Program Agent.
(e) The Trustee shall not consent to a Receivables
Seller's assignment of its rights under any Receivables Purchase
Agreement pursuant to Section 7.08 thereof without the prior
written consent of the Program Agent.
(f) The Seller shall not enter into any new
Receivables Purchase Agreement on or after the Closing Date
without the prior written consent of the Program Agent.
SECTION 7.04. Pooling and Servicing Agreement. (a) The
Seller agrees to promptly provide the Program Agent with the
following information and copies of the following documents (all
references to Sections in this Section 7.04 refer to Sections in
Agreement):
(i) notice of Liens as specified to Section
2.05(c);
(ii) the Termination Notice specified in Section
2.07(b)(i);
(iii) the Officer's Certificate specified in
Section 6.03(c)(i);
(iv) the written notice specified in the first
sentence of Section 9.02(a);
(v) the Opinion of Counsel specified in Sections
11.01(g), 13.01(a), 13.01(b) and 13.01(g); and
(vi) copies of stamped receipt financing
statements or amendments, as applicable, that have been filed
pursuant to Section 13.02(b) and 13.02(c).
<PAGE> 35
(b) The Servicer agrees to promptly provide the
Program Agent with copies of the following documents;
(i) the Distribution Date Statement specified in
Section 3.04(a) for each Distribution Date;
(ii) the Officer's Certificate and Opinion of
Counsel specified in Section 8.02(b);
(iii) the Opinion of Counsel specified in Section
8.05; and
(iv) copies of stamped receipt financing
statements or amendments, as applicable, that have been filed
pursuant to Section 13.02(b) and 13.02(c).
(c) The Trustee agrees to promptly provide the Program
Agent with copies of the following documents:
(i) the written notice specified in Section
2.04(c), 3.03(b), 3.03(c), 9.01(c), 9.01(d), 10.01(b) and
10.01(c); and
(ii) the Termination Notice specified in Section
10.01.
(d) The following actions shall not be taken by the
Seller, the Servicer or the Trustee, as applicable, without the
prior written consent of the Program Agent:
(i) engage in any activity specified in Section
2.05(e)(vi);
(ii) terminate the sale to the Trust of
Receivables relating to any Obligor pursuant to Section 2.07;
(iii) take any of the action specified under
Section 2.05(f) through 2.05(j);
(iv) delegate the duties of the Servicer pursuant
to Section 3.01(a);
(v) surrender the FMFC Certificate in exchange
for a Supplemental Certificate pursuant to Section 6.03(c);
(vi) delegate the duties of the Servicer pursuant
to Section 8.07;
<PAGE> 36
(vii) enter into an intercreditor agreement
pursuant to Section 11.01(g); and
(viii) enter into any amendments pursuant to
Section 13.01(a) or 13.01(b).
(e) The Trustee shall promptly provide the Program
Agent with a copy of any amendment entered into pursuant to
Section 13.01(a) or 13.01(b).
(f) For so long as Federal-Mogul is acting in its
capacity as Servicer, the Servicer shall provide the Program
Agent and the Trustee, promptly after the same are available,
copies of all proxy statements, financial statements and reports
as the Servicer shall send or make available generally to any of
its public security holders, and copies of all regular and period
reports and of all registration statements which the Servicer may
file with the Securities and Exchange Commission or with any
securities exchange.
SECTION 7.05. Inspection Rights. Each of the Seller and
the Servicer shall provide the Program Agent, and any of its
agents and representatives, with access to (x) any books,
records, files and documents (including, without limitation,
computer tapes and discs) relating to the Receivables Purchase
Agreement, the Receivables and the servicing of the Receivables
and the Program Agent and such representatives and agents shall
be permitted to make copies of and abstracts from the foregoing
and (y) the officers, directors and auditors of the Seller and
Servicer, as applicable, to discuss the business and operations
of the Seller and the Servicer, as applicable, relating to the
Receivables Purchase Agreement and the Receivables and the
Seller's and Servicer's, as applicable, performance under this
Series Supplement and the Agreement, but only (i) upon reasonable
request, (ii) during normal business hours, (iii) subject to the
Seller's or the Servicer's normal security and confidentiality
procedures and (iv) at reasonably accessible offices designated
by the Seller or the Servicer.
SECTION 7.06. Final Payment with respect to Series 1997-1
Certificates. Notwithstanding any provisions in this Series
Supplement or the Agreement to the contrary, the Class A
Certificateholders that are the Program Agent, insurance
companies or institutional investors shall not be required to
present and surrender their Class A Certificates prior to
receiving final payments on such Certificates; provided, however,
that by acceptance of such final payment, the Class A
Certificateholders shall be deemed to represent, warrant and
covenant to the Seller, the Trustee and the Trust that it has not
transferred, sold or assigned, and shall not transfer, sell or
assign, such Class A Certificate or any interest therein to
another Person and that it shall deliver such Certificate to the
Trustee upon the request of the Trustee or the Seller.
<PAGE> 37
SECTION 7.07. Covenants of the Seller. The Seller hereby
covenants that:
(a) Preservation of Corporate Existence. The Seller
shall preserve and maintain its corporate existence other than as
permitted in the Agreement, rights, franchises and privileges in
the jurisdiction of its formation, and qualify and remain
qualified in good standing as a foreign corporation in each
jurisdiction where the failure to maintain such qualification
would materially adversely affect (i) the interests of the
Trustee or of the Series 1997-1 Certificateholders hereunder or
in the Trust Assets, (ii) the collectibility of the Receivables
or (iii) the ability of the Seller to perform its obligations
hereunder or under any Receivables Purchase Agreement in any
material respect.
(b) Keeping of Records and Books of Account. The
Seller shall (i) keep proper books of record and accounts, which
shall be maintained or caused to be maintained by the Seller, and
in which full correct entries shall be made of all financial
transactions and the assets and business of the Seller in
accordance with generally accepted accounting principles
consistently applied, and (ii) maintain and implement
administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing the
Receivables in the event of the destruction of the originals
thereof) and keep and maintain all documents, books, records and
other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new
Receivable and all Collections on Receivables and the monthly
identification of adjustments to each existing Receivable). The
Seller shall give the Program Agent notice of any material change
in the administrative and operating procedures referred to in the
preceding sentence.
(c) Payment of Taxes, Etc. The Seller shall pay
promptly when due all taxes, assessments and governmental charges
or levies imposed upon it or any Trust Asset, or in respect of
its income or profits therefrom, and any and all claims of any
kind (including, without limitation, claims for labor, materials
and supplies), except that no such amount need be paid if (i)
such nonpayment is not reasonably likely to subject the Trustee,
the Trust or any Series 1997-1 Certificateholder to civil or
criminal penalty or liability or involve any material risk of the
sale, forfeiture or loss of any of the property, rights or
<PAGE> 38
interests covered hereunder or under any Receivables Purchase
Agreement, (ii) the charge or levy is being contested in good
faith and by proper proceedings and (iii) the obligation to pay
such amount is adequately reserved against in accordance with and
to the extent required by generally accepted accounting
principles.
(d) Reporting Requirements. The Seller shall furnish
to the Trustee and the Program Agent:
(i) as soon as possible and in any event (A)
within two Business Days after becoming aware of the occurrence
of each Early Amortization Event, and each event which, with the
giving of notice or lapse of time or both, would constitute an
Early Amortization Event, the statement of the chief
administrative and credit officer of the Seller setting forth
details of such Early Amortization Event commencement or event
and the action which the Seller has taken and proposes to take
with respect thereto, and (B) within two Business Days after the
occurrence thereof, notice of any other event, development or
information which is reasonably likely to materially adversely
effect the ability of the Seller to perform its obligations under
this Series Supplement, the Agreement or any Receivables Purchase
Agreement; and
(ii) promptly, from time to time, such other
information, documents, records or reports with respect to the
Receivables, the other Trust Assets or the condition or
operations, financial or otherwise, of the Seller as the Trustee
or the Program Agent may from time to time reasonably request.
(e) Activities of the Seller. The Seller shall not
engage in, enter into or be a party to any business, activity or
transaction of any kind other than the business, activities and
transactions contemplated and authorized by this Series
Supplement, the Agreement or any Receivables Purchase Agreement
or any document related hereto or thereto.
(f) Indebtedness. Except as provided in this Series
Supplement, the Agreement or in any Receivables Purchase
Agreement, the Seller shall not create, incur or assume any
indebtedness (other than operating expenses incurred in the
performance of its obligations under this Series Supplement, the
Agreement or any Receivables Purchase Agreement) or sell or
transfer any receivables to a trust or other Person which issues
securities in respect of any such receivables.
(g) Investments. The Seller shall not make or suffer
to exist any loans or advances to, or extend any credit to, or
make any investments (by way of transfer of property,
<PAGE> 39
contributions to capital, purchase of stock or securities or
evidences of indebtedness, acquisition of the business or assets
or otherwise) in, any Affiliate or any other Person except for
purchase of Receivables pursuant to the terms of the Receivables
Purchase Agreement and investments in Eligible Investments in
accordance with the terms of the Agreement.
(h) Organization. The Seller shall not amend its
amended and restated articles of incorporation or bylaws without
the prior written consent of the Program Agent.
(i) Marking Books and Records. The Seller shall on or
prior to the date hereof, at its own expense, mark its master
date processing records and other books and records relating to
the Receivables to indicate that the Receivables have been
transferred to the Trust pursuant to the Agreement for the
benefit of the Investor Certificateholders.
SECTION 7.08. Credit Policies. The Seller and the Servicer
shall timely and fully (i) perform and comply with all provisions
and covenants and other promises required to be observed by it
under terms of such Receivable and (ii) comply in all material
respects with the credit and collection policies and procedures
in effect on the date hereof (the "Credit Policies") with respect
to the Receivables, a copy of which is attached hereto as
Exhibit F. Neither the Seller nor the Servicer shall amend,
modify or supplement the Credit Policies in any material adverse
respect without the prior written consent of the Program Agent,
which consent shall not be unreasonably withheld. Upon any
amendment, modification or supplement to the Credit Policies
consented to by the Program Agent, the Seller shall deliver to
the parties hereto and the Class A Certificateholders such
amendment, modification or supplement and Exhibit F shall be
deemed to be amended by such amendment, modification or
supplement.
SECTION 7.09. New Series Issued. The Seller shall not
cause to be issued any new Series of Investor Certificates
pursuant to Section 6.03 of the Agreement without the prior
written consent of the Program Agent.
ARTICLE VIII
Termination
SECTION 8.01. Optional Repurchase. In addition to the
payment of any Optional Repayment Amounts pursuant to Section
4.07, the Seller shall have the option, on any Distribution Date
on which the Class A Invested Amount is $10,000,000 or less, to
<PAGE> 40
purchase the entire Class A Certificateholders' Interest, by
depositing to the Series 1997-1 Trustee's Account on such
Distribution Date in immediately available funds not later than
12:00 noon, New York City time, a purchase price (determined
after giving effect to any payment of principal and interest on
such Distribution Date) equal to the sum of (i) the Class A
Invested Amount on such Distribution Date, plus (ii) the amount
of Class A Monthly Interest relating to such Distribution Date
and any Class A Monthly Interest previously due and not paid and
any Class A Additional Interest, plus (iii) the amount of any
accrued and unpaid Program Fees, Administration Fees, Other Fees
and Breakage Costs, plus (iv) the amount of accrued and unpaid
Monthly Servicing Fee as of such Distribution Date, plus (v) all
other amounts owing to the Class A Certificateholders under any
Transaction Document (such purchase price being the "Repurchase
Price"); provided, however, if the Series 1992-1 Certificates or
the Series 1993-1 Certificates are outstanding, the Seller may
not make such Optional Repurchase pursuant to this Section 4.07.
The Seller shall give the Servicer, the Trustee and the Class A
Certificateholders at least ten days prior written notice of the
date on which the Seller intends to exercise such option to
purchase. The funds deposited to the Series 1997-1 Trustee's
Account as payment of the Repurchase Price shall be allocated and
distributed pursuant to Article V with the other Series 1997-1
Collections received during the Collection Period preceding such
Distribution Date.
ARTICLE IX
Final Distributions
SECTION 9.01. Sale of Certificateholders, Interest Pursuant
to Section 2.03 of the Agreement; Distributions Pursuant to
Section 2.03 or 12.02(c) of the Agreement. (a) The amount to be
paid by the Seller to the Collection Account with respect to
Series 1997-1 in connection with a purchase of the
Certificateholders' Interest pursuant to Section 2.03 of the
Agreement shall equal the Reassignment Amount for the
Distribution Date on which such repurchase occurs.
(b) With respect to the Reassignment Amount deposited into
the Collection Account pursuant to this Section 9.01 of this
Series Supplement or Section 2.03 of the Agreement or any
Termination Proceeds deposited into the Collection Account
pursuant to Section 12.02(c) of the Agreement, the Trustee shall,
not later than 12:00 noon, New York City time, on the
Distribution Date on which such amounts are deposited (or, if
such date is not a Distribution Date, on the immediately
following Distribution Date) (in accordance with the Distribution
Date Statement delivered pursuant to Section 5.02 and in the
priority set forth below) deposit the Reassignment Amount or the
Termination Proceeds into the Series 1997-1 Trustee's Account and
distribute such amounts on the applicable Distribution Date in
accordance with Section 5.01(c) hereof
<PAGE> 41
(c) Notwithstanding anything to the contrary in this Series
Supplement or the Agreement, the entire amount deposited in the
Series 1997-1 Trustee's Account pursuant to Section 9.01 and all
other amounts on deposit therein shall be distributed in full to
the Series 1997-1 Certificateholders on such date and any
distribution made pursuant to paragraph (b) above shall be deemed
to be a final distribution pursuant to Section 12.02 of the
Agreement with respect to Series 1997-1.
SECTION 9.02. Distribution of Proceeds of Sale, Disposition
or Liquidation of the Receivables Pursuant to Section 9.02 of the
Agreement. (a) Not later than 12:00 noon, New York City time,
on the Distribution Date following the date on which the
Insolvency Proceeds are deposited into the Collection Account
pursuant to Section 9.02(b) of the Agreement, the Trustee shall
deposit the Insolvency Proceeds into the Series 1997-1 Trustee's
Account and distribute such amount on the applicable Distribution
Date in accordance with Section 5.01(c) hereof.
(b) Notwithstanding anything to the contrary in this Series
Supplement or the Agreement, the entire amount deposited in the
Series 1997-1 Trustee's Account pursuant to this Section and all
other amounts on deposit therein shall be distributed in full to
the Series 1997-1 Certificateholders on the Distribution Date on
which funds are deposited pursuant to this Section (or, if not so
deposited on a Distribution Date, on the immediately following
Distribution Date) and any distribution made pursuant to this
Section shall deemed to be a final distribution pursuant to
Section 12.02 of the Agreement with respect to Series 1997-1.
<PAGE> 42
ARTICLE X
Miscellaneous Provisions
SECTION 10.01. Ratification of Agreement. As supplemented
by this Series Supplement, the Agreement is in all respects
ratified and confirmed and the Agreement as so supplemented by
this Series Supplement shall be read, taken and construed as one
and the same instrument.
SECTION 10.02. Counterparts. This Series Supplement may be
executed in two or more counterparts (and by different parties on
separate counterparts), each of which shall be an original, but
all of which together shall constitute one and the same
instrument.
SECTION 10.03. GOVERNING LAW. THIS SERIES SUPPLEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF
LAW PROVISIONS, THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 10.04. The Trustee. The Trustee is hereby
authorized to execute and deliver the Escrow Deposit Agreement
and to perform the obligations thereunder. The Trustee shall not
be responsible in any manner whatsoever for or in respect of the
validity or sufficiency of this Series Supplement, or for or in
respect of the recitals contained herein, all of which recitals
are made solely by the Seller and the Servicer.
SECTION 10.05. Amendment. This Supplement may be amended
from time to time by the Servicer, the Seller and the Trustee,
with the prior written consent of all Class A Certificateholders;
provided, however, if all amounts owing to the Holders of the
Series 1992-1 and the Holders of the Series 1993-1 Certificates
have not been paid in full, the Rating Agency rating such
Investor Certificates shall be notified of such proposed
amendment and in no event shall any amendment to Articles I or IV
herein that affects distributions to the Series 1992-1 or Series
1993-1 Certificateholders be entered into unless the Rating
Agency Condition is satisfied.
SECTION 10.06. The Certificates. Each Certificate shall be
executed by manual or facsimile signature by the Trustee by an
authorized officer. Certificates bearing the manual or facsimile
signature of the individual who was, at the time when such
signature was affixed, authorized to sign on behalf of the
Trustee shall not be rendered invalid, notwithstanding that such
individual ceased to be so authorized prior to the authentication
and delivery of such Certificates or does not hold such office at
the date of such Certificates.
<PAGE> 43
SECTION 10.07. Indemnities by the Servicer. Without
limiting any other rights which the Program Agent or any
Purchaser may have hereunder or under applicable law, the
Servicer hereby agrees to indemnify the Program Agent and each
Purchaser and their respective officers, directors, agents and
employees (each an "Indemnified Party") from and against any and
all damages, losses, claims, taxes, liabilities, costs, expenses
and for all other amounts payable, including reasonable
attorneys' fees (which attorneys may be employees of the Program
Agent or such Purchaser) and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts") awarded
against or incurred by any of them arising out of or as a result
of Transaction Documents, excluding, however:
(i) Indemnified Amounts to the extent that final
judgment of a court of competent jurisdiction holds such
Indemnified Amounts resulted from gross negligence or willful
misconduct on the part of the Indemnified Party seeking
indemnification; or
(ii) Indemnified Amounts to the extent the same
includes losses in respect of Eligible Receivables which are
wholly or partially uncollectible on account of the insolvency,
bankruptcy or lack of credit worthiness of the related Obligor or
the failure of such Collections to cover interest and principal
owed to a Class A Certificateholder;
provided, however, that nothing contained in this sentence shall
limit the liability of the Servicer or limit the recourse of the
Purchasers to the Servicer for amounts otherwise specifically
provided to be paid by the Servicer under the terms of the
Transaction Documents. Without limiting the generality of the
foregoing indemnification, the Servicer shall indemnify the
Program Agent and the Purchasers for Indemnified Amounts
resulting from:
(i) any representation or warranty made by the
Servicer (or any officers of the Servicer) under or in connection
with any Transaction Document or any other information or report
delivered by the Servicer pursuant thereto, having been false or
incorrect in any material respect when made or deemed made;
(ii) the failure by the Servicer to comply with
any applicable law, rule or regulation with respect to any
Receivable related thereto, or the nonconformity of any
Receivable included therein with any such applicable law, rule or
regulation;
<PAGE> 43
(iii) any material failure of the Servicer to
perform its duties or obligations in accordance with the
provisions of any Transaction Document;
(iv) any offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of
any Receivable (including, without limitation, a defense based on
such Receivable not being a legal, valid and binding obligation
of such Obligor enforceable against it in accordance with its
terms), or any Credit Memo granted (other than for credit losses)
or any products liability or warranty claim arising out of or in
connection with the sale of merchandise which gave rise to the
Receivable, or any other claim relating to the furnishing or
failure to furnish such merchandise;
(v) the commingling of Collections of Receivables
at any time with other funds;
(vi) any investigation, litigation or proceeding
brought by a third party related to or arising from any
Transaction Document and the transactions contemplated thereby,
or any other investigation, litigation or proceeding brought by a
third party relating to the Servicer in which any Indemnified
Party becomes involved as a result of any of the transactions
contemplated thereby other than any investigation or proceeding
arising from (i) the gross negligence or wilful misconduct of the
Program Agent and/or one or more of the Purchasers or (ii) the
unlawful conduct of the Program Agent and/or one or more of the
Purchasers; and
(vii) any Servicer Default.
Notwithstanding the foregoing, the Servicer shall not under
any circumstances indemnify the Program Agent or any Purchaser
for any Indemnified Amounts that result from any delay in the
collection of any Receivables or any default by an Obligor with
respect to any Receivables unless such delay or default is caused
by the Servicer or arises by reason of any breach or alleged
breach of any representation or warranty of the Servicer.
SECTION 10.08. Net Pool Balance/Required Participation
Amount. The parties hereto agree that, solely for purposes of
the Series 1997-1 Supplement, notwithstanding any provision in
the Agreement to the contrary, any reference to the Net Pool
Balance being compared to the Required Participation Amount shall
be deemed to mean that the Minimum Enhancement Amount is greater
than the sum of (i) Contractual Dilution and (ii) Aggregate
Reserves.
<PAGE> 44
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee
have caused this Series Supplement to be duly executed by their
respective officers as of the day and year first above written.
FEDERAL-MOGUL FUNDING CORPORATION,
Seller
By: -------------------------------
Name:
Title:
FEDERAL-MOGUL CORPORATION,
Servicer
By: -------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, Trustee
By: -------------------------------
Name:
Title:
<PAGE> 1
This AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
dated as of February 28, 1997, amends and restates the
RECEIVABLES PURCHASE AGREEMENT, dated as of June 1, 1992, between
FEDERAL-MOGUL FUNDING CORPORATION, a Michigan corporation, as
Buyer (the "Buyer"), and FEDERAL-MOGUL CORPORATION, a Michigan
corporation, as Seller (the "Seller").
W I T N E S S E T H :
WHEREAS the Seller in the ordinary course of its business
manufactures and sells various types of precision parts thereby
generating accounts receivable;
WHEREAS the Seller wishes to sell certain of such existing
and future accounts receivable from time to time to the Buyer;
and
WHEREAS the Buyer desires to sell such accounts receivable
to the Federal-Mogul Trade Receivables Master Trust, pursuant to
an Amended and Restated Pooling and Servicing Agreement dated as
of February 1, 1997 (as the same may from time to time be
amended, supplemented or otherwise modified, the "Pooling and
Servicing Agreement"), among Federal-Mogul Funding Corporation,
as seller, Federal-Mogul Corporation, as servicer, and The Chase
Manhattan Bank, as trustee (the "Trustee").
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I.
Definitions
Section 1.01 Definitions. Capitalized terms used herein
but not otherwise defined shall have the meanings set forth in
the Pooling and Servicing Agreement. In addition, the term
"Agreement" means this Amended and Restated Receivables Purchase
Agreement, as the same may from time to time be amended,
supplemented or otherwise modified.
Section 1.02. Other Definitional Provisions. (a) The
words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement;
Article, Section and Exhibit references are references to
Sections and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without
limitation".
(b) The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such terms.
<PAGE> 2
ARTICLE II.
Conveyance of Receivables
Section 2.01. Conveyance of Receivables. By execution of
this Agreement, the Seller does hereby sell, transfer, assign,
set over and otherwise convey to the Buyer on the first Closing
Date all of its right, title and interest in, to and under the
Receivables and all Collateral Security with respect thereto, if
any, owned by the Seller at the close of business on the Cut-Off
Date and all monies due or to become due and all amounts received
with respect thereto and all proceeds (including "proceeds" as
defined in Section 9-306 of the UCC as in effect in the State of
Michigan and Recoveries) thereof. Subject to Article VI, as of
each Business Day prior to the earlier of (x) the occurrence of
an Early Amortization Event specified in Section 9.01(b), (c),
(d), or (e) of the Pooling and Servicing Agreement and (y) the
Trust Termination Date, on which Receivables are created (a
"Transfer Date"), the Seller does hereby sell, transfer, assign,
set over and otherwise convey to the Buyer, all of its right,
title and interest in, to and under the Receivables and all
Collateral Security with respect thereto, if any, owned by the
Seller at the close of business on such Transfer Date and not
theretofore conveyed to the Buyer, all monies due or to become
due and all amounts received with respect thereto and all
proceeds (including "proceeds" as defined in Section 9-306 of the
UCC as in effect in the State of Michigan and Recoveries)
thereof. The foregoing sale, transfer, assignment, set-over and
conveyance and any subsequent sales, transfers, assignments,
set-overs and conveyances do not constitute, and are not intended
to result in, the creation or an assumption by the Buyer of any
obligation of the Servicer, the Seller or any other Person in
connection with the Receivables or under any agreement or
instrument relating thereto, including any obligation to any
Obligors.
In connection with such sales, the Seller agrees to record
and file, at its own expense, a financing statement on form UCC-1
(and continuation statements when applicable) naming the Seller
as "seller" and the Buyer as "buyer" thereon with respect to the
Receivables now existing and hereafter created for the sale of
"accounts" or "general intangibles" (as defined in Section 9-106
of the UCC as in effect in any state where the Seller's or the
Servicer's chief executive offices or books and records relating
to the Receivables are located) meeting the requirements of
applicable state law in such manner and in such jurisdictions as
are necessary to perfect the sale and assignment of the
Receivables to the Buyer, and to deliver a filestamped copy of
such financing statements or other evidence of such filing to the
<PAGE> 3
Buyer on or prior to the first Closing Date. In addition, the
Seller shall cause to be timely filed in the appropriate filing
office any UCC-1 financing statement and continuation statement
necessary to perfect any sale of Receivables to the Buyer. The
Buyer shall be under no obligation whatsoever to file such
financing statement, or a continuation statement to such
financing statement, or to make any other filing under the UCC in
connection with such sales. The parties hereto intend that the
transfers of Receivables effected by this Agreement be sales.
It is the intention of the parties hereto that the transfer
(the "Transfer") of the property described in the first paragraph
of this Section 2.01 be characterized as a sale. If, however,
such Transfer is not characterized as a sale, the Seller hereby
grants to the Buyer a security interest in the property subject
to the Transfer.
In connection with such sales, the Seller further agrees, at
its own expense, on or prior to the first Closing Date, to cause
the Seller to indicate in its computer files that the Receivables
have been sold to the Buyer pursuant to this Agreement and sold
to the Trust pursuant to the Pooling and Servicing Agreement for
the benefit of the Certificateholders and the other
Beneficiaries.
In consideration for the sale of $89,045,072 of the
Receivables, transferred to the Buyer on the first Closing Date,
the Buyer shall pay to the Seller $42,737,177.50 in cash. The
remaining $58,450,404.50 of Receivables transferred to the Buyer
on the first Closing Date is a capital contribution to the Buyer.
Subject to Article VI, the purchase price for the Receivables
sold by the Seller to the Buyer on each Transfer Date thereafter
shall be a price agreed to by the Buyer and the Seller at the
time of acquisition by the Buyer, which price shall not, in the
opinion of the Buyer, be materially less favorable to the Buyer
than prices for transactions of a generally similar character at
the time of the acquisition taking into account the quality of
such Receivables and other pertinent factors; provided that such
consideration shall in any event not be less than reasonably
equivalent value therefor.
Section 2.02. Representations and Warranties of the Seller
Relating to the Seller and the Agreement. The Seller hereby
represents and warrants to the Buyer as of each Closing Date
that:
(a) Organization and Good Standing. The Seller is a
corporation duly organized and validly existing and in good
standing under the law of the State of Michigan and has, in all
material respects, full corporate power, authority and legal
right to own its properties and conduct its business as such
properties are presently owned and such business is presently
conducted, and to execute, deliver and perform its obligations
under this Agreement.
<PAGE> 4
(b) Due Qualification. The Seller is duly qualified
to do business and, where necessary, is in good standing as a
foreign corporation (or is exempt from such requirement) and has
obtained all necessary licenses and approvals in each
jurisdiction in which the conduct of its business requires such
qualification except where the failure to so qualify or obtain
licenses or approvals would not have a material adverse effect on
its ability to perform its obligations hereunder.
(c) Due Authorization. The execution and delivery of
this Agreement and the consummation of the transactions
provided for or contemplated by this Agreement have been duly
authorized by the Seller by all necessary corporate action on
the part of the Seller.
(d) No Conflict. The execution and delivery of this
Agreement, the performance of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof and
thereof, will not conflict with, result in any breach of any of
the material terms and provisions of, or constitute (with or
without notice or lapse of time or both) a material default
under, any indenture, contract, agreement, mortgage, deed of
trust, or other instrument to which the Seller is a party or by
which it or its properties are bound.
(e) No Violation. The execution and delivery of this
Agreement, the performance of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof and
thereof applicable to the Seller, will not conflict with or
violate any material Requirements of Law applicable to the
Seller.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Seller,
threatened against the Seller, before any Governmental Authority
(i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated
by this Agreement, (iii) seeking any determination or ruling
that, in the reasonable judgment of the Seller, would materially
and adversely affect the performance by the Seller of its
obligations under this Agreement, (iv) seeking any determination
or ruling that would materially and adversely affect the validity
or enforceability of this Agreement or (v) seeking to affect
adversely the income tax attributes of the Trust under the United
States federal or any State income, single business or franchise
tax systems.
(g) All Consents Required. All appraisals,
authorizations, consents, orders, approvals or other actions of
any Person or of any governmental body or official required in
connection with the execution and delivery of this Agreement, the
performance of the transactions contemplated by this Agreement,
and the fulfillment of the terms hereof or thereof, have been
obtained.
<PAGE> 5
(h) Enforceability. This Agreement constitutes a
legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect affecting the enforcement of creditors'
rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a
suit at law or in equity).
(i) Valid Transfer. This Agreement constitutes a valid
sale, transfer and assignment to the Buyer of all right, title
and interest of the Seller in the Receivables and the proceeds
thereof. Except as otherwise provided in the Pooling and
Servicing Agreement, neither the Seller nor any Person claiming
through or under the Seller has any claim to or interest in the
Trust Assets.
(j) Investment Company Act. The Seller is not an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended (the "1940 Act") that is required to
register under the 1940 Act.
(k) Locations. The chief place of business and chief
executive office of the Seller, and the office where the Seller
keeps all of its books, records and documents evidencing
Receivables are located at the addresses specified in Schedule I
hereto (or at such other locations, identified to the Buyer in
accordance with Section 7.06 hereof, in jurisdictions with
respect to which all applicable action required by Section
7.02(b) or 7.02(c) hereof has been taken and completed).
(l) Information. Each certificate, report,
information, exhibit, financial statement, document, book, record
or report furnished by the Seller to the Buyer in connection with
this Agreement is accurate in all material respects as of its
date, when considered as a whole with all other such documents,
and no such document contains any material misstatement of fact
or omits to state a material fact or any fact necessary to make
the statements contained therein not materially misleading.
(m) Solvency. This Seller is solvent and will not
become insolvent after giving effect to the transactions
contemplated by this Agreement; the Seller is currently repaying
all of its indebtedness as such indebtedness becomes due; and,
after giving effect to the transactions contemplated by this
Agreement, the Seller will have adequate capital to conduct its
business.
<PAGE> 6
The representations and warranties set forth in this Section
2.02 shall survive the transfer and assignment of the Receivables
to the Buyer. Upon discovery by the Seller or the Buyer of a
breach of any of the foregoing representations and warranties,
the party discovering such breach shall give prompt written
notice to the other party.
In the event of any breach of any of the representations and
warranties set forth in this Section 2.02 and if, in connection
therewith, the Buyer shall be obligated to purchase the
Certificateholders' Interest pursuant to Section 2.03 of the
Pooling and Servicing Agreement, the Seller shall repurchase the
Receivables and shall pay to the Buyer on the Business Day
preceding the Distribution Date on which such purchase of the
Certificateholders' Interest is to be made an amount equal to the
purchase price for the Certificateholders' Interest as specified
in the Pooling and Servicing Agreement. The obligation of the
Seller to purchase the Receivables pursuant to this Section 2.02
shall constitute the sole remedy against the Seller respecting an
event of the type specified in the first sentence of this
paragraph available to the Buyer and to the Investor Certificate
holders (or the Trustee on behalf of the Investor
Certificateholders).
Section 2.03. Representations and Warranties of the Seller
Relating to the Receivables.
(a) Representations and Warranties. The Seller hereby
represents and warrants to the Buyer that:
(i) Each Receivable existing on the first Closing
Date and each Receivable on each Transfer Date, has been conveyed
to the Buyer free and clear of any Lien (other than the Lien
created by the Pooling and Servicing Agreement in favor of the
Trustee on behalf of the Trust).
(ii) With respect to each Receivable existing on
the first Closing Date and on each Transfer Date, all consents,
licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required to be
obtained, effected or given by the Seller in connection with the
conveyance of such Receivable to the Buyer have been duly
obtained, effected or given and are in full force and effect.
(iii) On the first Closing Date and on each
Transfer Date, each Receivable conveyed to the Buyer on such date
is an Eligible Receivable (as defined in the Series 1997-1
Supplement, dated as of February 1, 1997 (the "Series 1997-1
Supplement"), by and among Federal-Mogul Funding Corporation, as
<PAGE> 7
Seller, Federal-Mogul Corporation, as Servicer, and The Chase
Manhattan Bank, as trustee) or, if such Receivable is not an
Eligible Receivable (as defined in the Series 1997-1 Supplement),
such Receivable is conveyed to the Trust in accordance with
Section 2.06 of the Pooling and Servicing Agreement.
(b) Notice of Breach. The representations and warranties
set forth in this Section 2.03 shall survive the transfer and
assignment of the Receivables to the Buyer. Upon discovery by
the Seller or the Buyer of a breach of any of the representations
and warranties set forth in this Section 2.03, the party
discovering such breach shall give prompt written notice to the
other party.
(c) Repurchase. In the event any representation or
warranty under Section 2.03(a) is not true and correct as of the
date specified therein with respect to any Receivable and the
Buyer is, in connection therewith, required to purchase such
Receivable or all Receivables pursuant to Section 2.04(c) of the
Pooling and Servicing Agreement, then, within 30 days (or such
longer period as may be agreed to by the Buyer) of the earlier to
occur of the discovery of any such event by the Seller or the
Buyer, or receipt by the Seller or the Buyer of written notice of
any such event given by the Trustee or any Enhancement Providers,
the Seller shall repurchase the Receivable or Receivables of
which the Buyer is required to accept reassignment pursuant to
the Pooling and Servicing Agreement on the Business Day preceding
the Determination Date on which such reassignment is to occur.
The Seller shall purchase each such Receivable by making a
payment to the Buyer in immediately available funds on the
Business Day preceding the Distribution Date on which such
reassignment is to occur in an amount equal to the Purchase Price
for such Receivable. Upon payment of the Purchase Price, the
Buyer shall automatically and without further action be deemed to
sell, transfer, assign, set over and otherwise convey to the
Seller, without recourse, representation or warranty, all the
right, title and interest of the Buyer in and to such Receivable
and all monies due or to become due with respect thereto and all
proceeds thereof. The Buyer shall execute such documents and
instruments of transfer or assignment and take such other actions
as shall reasonably be requested by the Seller to effect the
conveyance of such Receivables pursuant to this Section. The
obligation of the Seller to repurchase any such Receivable shall
constitute the sole remedy respecting the event giving rise to
such obligation available to the Buyer and to the
Certificateholders (or the Trustee on behalf of
Certificateholders).
<PAGE> 8
(d) Adjustment Payment. In the event that the Buyer is
required to make any Adjustment Payment pursuant to Section 3.09
of the Pooling and Servicing Agreement, the Seller under this
Agreement shall have an obligation to make a payment to the Buyer
in an amount equal to such Adjustment Payment on the Business Day
on which the Seller makes such Adjustment Payment.
Section 2.04. Covenants of the Seller. The Seller hereby
covenants that:
(a) No Liens. Except for the conveyances hereunder,
the Seller will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to
exist any Lien on, any Receivable, whether now existing or
hereafter created, or any interest therein, and the Seller
shall defend the right, title and interest of the Buyer and the
Trust in, to and under the Receivables, whether now existing or
hereafter created, against all claims of third parties claiming
through or under the Seller.
(b) Delivery of Collections. In the event that the
Seller receives Collections, the Seller agrees to pay the
Servicer or any Successor Servicer all payments received by the
Seller in respect of the Receivables as soon as practicable after
receipt thereof by the Seller, but in no event later than two
Business Days after the receipt by the Seller thereof.
(c) Notice of Liens. The Seller shall notify the
Buyer and the Trustee promptly after becoming aware of any Lien
on any Receivable other than the conveyances hereunder or under
the Pooling and Servicing Agreement.
(d) Compliance with Law. The Seller hereby agrees to
comply in all material respects with all Requirements of Law
applicable to the Seller.
(e) Preservation of Corporate Existence. Except as
otherwise permitted by Section 5.01 hereof, the Seller shall
preserve and maintain its corporate existence, rights, franchises
and privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to maintain
such qualification would materially adversely affect (i) the
interests of the Buyer hereunder or in the Receivables, (ii) the
collectibility of any Receivable or (iii) the ability of the
Seller to perform its obligations hereunder.
(f) Keeping of Records and Books of Account. The
Seller shall maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing the Receivables, in the event of the
destruction of the originals thereof), and keep and maintain, all
documents, books, records and other information reasonably
necessary or advisable for the collection of all Receivables
<PAGE> 9
(including, without limitation, records adequate to permit the
daily identification of each new Receivable and all Collections
of and adjustments to each existing Receivable).
(g) Credit Policies. The Seller shall comply in
all material respects with the credit and collection policies and
procedures in effect on the date hereof (the "Credit Policies")
with respect to the Receivables a copy of which is attached
hereto as Exhibit B. The Seller shall not amend, modify or
supplement the Credit Policies in any material adverse respect
without the prior written consent of the Program Agent. Upon any
amendment, modification or supplement to the Credit Policies with
the prior written consent of the Program Agent, the Seller shall
deliver to the Buyer, the Trustee and the Program Agent a copy of
such amendment, modification or supplement and Exhibit B shall be
deemed to be amended by such amendment, modification or
supplement.
(h) Inspection Rights. The Seller shall provide
the Program Agent, and any of its agents and representatives,
with access to (x) any books, records, files and documents
(including, without limitation, computer tapes and discs)
relating to this Agreement and the Receivables and (y) the
officers, directors and auditors of the Seller to discuss the
business and operations of the Seller relating to this Agreement
and the Receivables and the Seller's performance under this
Agreement, but only (i) upon reasonable request, (ii) during
normal business hours, (iii) subject to the Seller's normal
security and confidentiality procedures and (iv) at reasonably
accessible offices in the continental United States as designated
by the Seller.
ARTICLE III.
Administration and Servicing of Receivables
Section 3.01. The Receivables will be administered and
serviced in accordance with the Pooling and Servicing Agreement.
ARTICLE IV.
Rights of Certificateholders and
Allocation and Application of Collections
Section 4.01. Allocations and Applications of Collections
and Other Funds. The Servicer will apply all Collections with
respect to the Receivables and all funds on deposit in the
Collection Account as described in Article IV of the Pooling and
Servicing Agreement.
<PAGE> 10
ARTICLE V.
Other Matters Relating
to the Seller
Section 5.01. Merger or Consolidation of, or Assumption, of
the Obligations of the Seller. The Seller shall not consolidate
with or merge into any other corporation or convey or transfer
its properties and assets substantially as an entirety to any
Person, unless:
(a) the corporation formed by such consolidation or
into which the Seller is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Seller
substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America or any
State or the District of Columbia and, if the Seller is not the
surviving entity, such corporation shall assume, without the
execution or filing of any paper or any further act on the part
of any of the parties hereto, the performance of every covenant
and obligation of the Seller hereunder; and
(b) the Seller has delivered to the Buyer and the
Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger, conveyance or transfer
comply with this Section 5.01 and that all conditions precedent
herein provided for relating to such transaction have been
complied with.
Section 5.02. Seller Indemnification of the Buyer. The
Seller shall indemnify and hold harmless the Buyer, from and
against any loss, liability, expense, claim, damage or injury
suffered or sustained by reason of any acts, omissions or alleged
acts or omissions arising out of activities of the Seller
pursuant to this Agreement arising out of or based on the
arrangement created by this Agreement and the activities of the
Seller taken pursuant thereto, including any judgment, award,
settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided, however, that
the Seller shall not indemnify the Buyer if such acts, omissions
or alleged acts or omissions constitute fraud, gross negligence
or wilful misconduct by the Buyer; and provided further, that the
Seller shall not indemnify the Buyer for any liabilities, cost or
expense of the Buyer with respect to any federal, state or local
income or franchise taxes or the Michigan Single Business tax (or
any interest or penalties with respect thereto) required to be
paid by the Buyer in connection herewith to any taxing authority.
Any indemnification under this Article V shall survive the
termination of the Agreement.
<PAGE> 11
ARTICLE VI.
Termination
This Agreement will terminate immediately after the Trust
terminates pursuant to the Pooling and Servicing Agreement. In
addition, the Buyer shall not purchase Receivables if the Seller
shall become an involuntary party to (or be made the subject of)
any proceeding provided for by any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Seller or relating to all or
substantially all of its property (an "Involuntary Case") and
such Involuntary Case shall have continued for a period of ten
Business Days from and including the day of receipt by the Seller
at its principal corporate office of notice of such Involuntary
Case; provided, that during such ten Business Day period, the
Buyer shall suspend its purchase of Receivables and shall hold
all Principal Collections that would have been available to
purchase Receivables in the Collection Account and (a) if by the
first Business Day after such ten Business Day period, the Buyer
has not obtained an order from the court having jurisdiction of
such case or filing which order approves the continuation of the
sale of Receivables by the Seller to the Buyer and which provided
that the Buyer and any of its transferees (including the Trustee)
may rely on such order for the validity and non-avoidance of such
transfer (the "Order"), the Buyer shall hold such Collections in
the Collection Account until such time as they may be paid as
elsewhere provided herein and shall not purchase Receivables
thereafter or (b) if by such first Business Day, the Buyer has
obtained such Order, the Seller may continue selling Receivables,
and the Buyer may continue purchasing Receivables, pursuant to
the terms hereof, as modified by the immediately succeeding
sentence. During the period after the ten Business Day period
described above and before the end of the 60-day period described
below, the purchase price of the Receivables transferred during
such period, notwithstanding anything in this Agreement to the
contrary, shall be paid to the Seller by the Buyer in cash not
later than the same Business Day of any sale of Receivables.
During such period, Receivables will be considered transferred to
the Buyer only to the extent that the purchase price therefor has
been paid in cash on the same Business Day. If an Order is
obtained but subsequently is reversed or rescinded or expires,
the Seller shall immediately cease selling Receivables to the
Buyer and the Buyer shall immediately cease buying Receivables.
The Seller shall give prompt written notice to each of the Buyer
and the Trustee immediately upon becoming a party to an
Involuntary Case. If by the first Business Day after the 60-day
period after such involuntary filing, such Involuntary Case has
not been dismissed, the Buyer shall not purchase thereafter
Receivables.
<PAGE> 12
ARTICLE VII.
Miscellaneous Provisions
Section 7.01 Amendment. (a) This Agreement may be amended
from time to time by the Seller and the Buyer; provided, however,
that such action shall not, as evidenced by an Opinion of Counsel
for the Seller addressed and delivered to the Trustee, adversely
affect in any material respect the interests of any Investor
Certificateholder.
(b) This Agreement may also be amended from time to time
by the Buyer and Seller with the consent of the Holders of
Investor Certificates evidencing not less than 66-2/3% of the
aggregate unpaid principal amount of the Investor Certificates of
all materially adversely affected Series, for the purpose of
adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any
manner the rights of the Seller; provided, however, that no such
amendment shall (i) reduce in any manner the amount of or delay
the timing of any distributions to be made to Investor
Certificateholders or deposits of amounts to be so distributed
with the amount available under any Enhancement without the
consent of each affected Investor Certificateholder, (ii) change
the definition of or the manner of calculating the interest of
any Investor Certificateholders without the consent of each
affected Certificateholder or (iii) reduce the aforesaid
percentage required to consent to any such amendment without the
consent of each Certificateholder. Any amendment to be effected
pursuant to this paragraph shall be deemed to materially
adversely affect all outstanding Series, other than any Series
with respect to which such action shall not, as evidenced by an
Opinion of Counsel for the Seller, addressed and delivered to the
Trustee, adversely affect in any material respect the interests
of any Investor Certificateholder of such Series. The Trustee
may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's rights, duties or immunities under
this Agreement or otherwise.
(c) Promptly after the execution of any such amendment or
consent (other than an amendment pursuant to paragraph (a)), the
seller shall furnish notification of the substance of such
amendment to each Investor Certificateholder, each Enhancement
provider, each Agent and each Rating Agency.
(d) It shall not be necessary for the consent of Investor
Certificateholders under this Section to approve the particular
form of any proposed amendment, but it shall be sufficient if
such consent shall approve the substance thereof. The manner of
obtaining such consents and of evidencing the authorization of
the execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may
prescribe.
<PAGE> 13
(e) Notwithstanding anything in this Section to the
contrary, no amendment may be made to this Agreement which would
adversely affect in any material respect the interests of any
Enhancement Provider without the consent of such Enhancement
Provider.
Section 7.02 Protection of Right, Title and Interest to
Receivables. (a) The Seller shall cause this Agreement, all
amendments hereto and/or all financing statements and
continuation statements and any other necessary documents
covering the Buyer's right, title and interest to the Receivables
to be promptly recorded, registered and filed, and at all times
to be kept recorded, registered and filed, all in such manner and
in such places as may be required by law fully to preserve and
protect the right, title and interest of the Buyer hereunder.
The Seller shall deliver to the Buyer file-stamped copies of, or
filing receipts for, any document recorded, registered or filed
as provided above, as soon as available following such recording,
registration or filing. The Buyer shall cooperate fully with the
Seller in connection with the obligations set forth above and
will execute any and all documents reasonably required to fulfill
the intent of this Section 7.02(a).
(b) Within 30 days after the Seller makes any change in its
name, identity or corporate structure which would make any
financing statement or continuation statement filed in accordance
with Section 7.02(a) seriously misleading within the meaning of
Section 9-402(7) of the UCC as in effect in the State of
Michigan, the Seller shall give the Buyer and any Agent notice of
any such change and shall file such financing statements or
amendments as may be necessary to continue the perfection of the
Buyer's security interest in the Receivables and the proceeds
thereof.
(c) The Seller will give the Buyer prompt written notice of
any relocation of any office at which it keeps records concerning
the Receivables or of its principal executive office and whether,
as a result of such relocation, the applicable provisions of the
UCC would require the filing of any amendment of any previously
filed financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments
as may be necessary to perfect or to continue the perfection of
the Buyer's security interest in the Receivables and the proceeds
thereof. The Seller will at all times maintain its principal
executive office within the United States of America.
(d) The Seller will deliver to the Buyer, upon the
execution and delivery of each amendment of this Agreement, an
Opinion of Counsel to the effect specified in Exhibit A.
<PAGE> 14
Section 7.03 Limited Recourse. Notwithstanding anything to
the contrary contained herein, the obligations of the Buyer
hereunder shall not be recourse to the Buyer (or any person or
organization acting on behalf of the Buyer or any affiliate,
officer or director of the Buyer), other than to (a) the portion
of the Seller's Interest on any date of determination which is in
excess of the Required Participation Amount and (b) any other
assets of the Buyer not pledged to third parties or otherwise
encumbered in a manner permitted by the Seller's Certificate of
Incorporation; provided, however, that any payment by the Buyer
made in accordance with this Section 7.03 shall be made only
after payment in full of any amounts that the Buyer is obligated
to deposit in the Collection Account pursuant to the Pooling and
Servicing Agreement; provided further that the Investor
Certificateholders shall be entitled to the benefits of the
subordination of the Collections allocable to the Seller's
Interest to the extent provided in the Supplements.
Section 7.04 No Petition. The Seller hereby covenants and
agrees that it will not at any time institute against the Buyer
any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law.
Section 7.05 GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 7.06. Notices. All demands, notices and
communications hereunder shall be in writing and shall be deemed
to have been duly given if personally delivered at or mailed by
registered mail, return receipt requested, to the parties at such
addresses specified in the Pooling and Servicing Agreement.
Section 7.07 Severability of Provisions. If any one or
more of the covenants, agreements, provisions or terms of this
Agreement shall for any reason whatsoever be held invalid, then
such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or
terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of
the Certificates or rights of the Certificateholders.
Section 7.08. Assignment. Notwithstanding anything to the
contrary contained herein, this Agreement may not be assigned by
the Seller (other than as provided in Section 5.01 hereof)
without the prior consent of the Buyer and the Trustee. The
Buyer may assign its rights, remedies, powers and privileges
under this Agreement to the Trust pursuant to the Pooling and
Servicing Agreement.
<PAGE> 15
Section 7.09. Further Assurances. The Seller agrees to do
and perform, from time to time, any and all acts and to execute
any and all further instruments required or reasonably requested
by the Buyer more fully to effect the purposes of this Agreement,
including the execution of any financing statements or
continuation statements relating to the Receivables for filing
under the provisions of the UCC of any applicable jurisdiction.
Section 7.10 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Buyer,
any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under this
Agreement preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.
Section 7.11 Counterparts. This Agreement may be executed
in two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.
Section 7.12. Third-Party Beneficiaries. This Agreement
will inure to the benefit of and be binding upon the parties
hereto, the Certificateholders and the other Beneficiaries and
their respective successors and permitted assigns. Except as
otherwise provided in this Agreement, no other Person will have
any right or obligation hereunder.
Section 7.13. Merger and Integration. Except as
specifically stated otherwise herein, this Agreement sets forth
the entire understanding of the parties relating to the subject
matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided
herein.
Section 7.14. Headings. The headings herein are for
purposes of reference only and shall not otherwise affect the
meaning or interpretation of any provision hereof.
<PAGE> 17
IN WITNESS WHEREOF, the Seller and the Buyer have caused
this Receivables Purchase Agreement to be duly executed by their
respective officers as of the day and year first above written.
FEDERAL-MOGUL FUNDING
CORPORATION, Buyer
By-------------------------
Name:
Title:
FEDERAL-MOGUL CORPORATION,
Seller
By----------------------------
Name:
Title:
<PAGE> 1
CERTIFICATE PURCHASE AGREEMENT dated February 28, 1997
(this "Agreement") among FEDERAL-MOGUL FUNDING CORPORATION, a
Michigan corporation, as Seller (the "Seller"), FALCON ASSET
SECURITIZATION CORPORATION, Delaware corporation ("Falcon"), THE
FINANCIAL INSTITUTIONS LISTED FROM TIME TO TIME ON THE SIGNATURE
PAGES HERETO AS LIQUIDITY PROVIDERS (individually, a "Liquidity
Provider" and collectively, the "Liquidity Providers"), and THE
FIRST NATIONAL BANK OF CHICAGO, as agent (the "Program Agent")
for Falcon and the Liquidity Providers.
W I T N E S S E T H:
WHEREAS, the Federal-Mogul Trade Receivables Master
Trust may issue the Series 1997-1 Certificates (as hereinafter
defined) at the direction of the Seller;
WHEREAS, subject to the terms and conditions of this
Agreement and of the Series 1997-1 Supplement, the Seller may
sell the Class A Certificates to the Program Agent for the
benefit of Falcon and/or the Liquidity Providers (Falcon and the
Liquidity Providers, each a "Purchaser" and collectively, the
"Purchasers");
WHEREAS, subject to the terms and conditions of this
Agreement, Falcon may and the Liquidity Providers shall fund from
time to time Increases in the Class A Invested Amount; and
WHEREAS, the Class A Certificates will be held by the
Program Agent for the benefit of the applicable Purchaser(s);
NOW THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto hereby
agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this
Agreement, terms defined in the foregoing paragraphs shall have
their defined meanings when used herein and the following terms
shall have the following meanings:
"Acquisition Amount" means, on the date of any purchase
from Falcon of Class A Certificates Interests pursuant to Section
2.07, (i) with respect to each Liquidity Provider other than
First Chicago, the lesser of (a) such Liquidity Providers's
Liquidity Provider Commitment Percentage of the Falcon Transfer
Price and (b) such Liquidity Provider's unused Liquidity Provider
Commitment and (ii) with respect to First Chicago, the difference
between (a) the Falcon Transfer Price and (b) the aggregate
amount payable by all other Liquidity Providers on such date
pursuant to clause (i) above.
"Adjusted Liquidity Price" means, in determining the
Falcon Transfer Price for any Class A Certificate Interest, an
amount equal to
PI x (i)DC + (ii) NDR
ARD
where:
PI = the undivided percentage interest in the Trust
Assets evidenced by such Class A Certificate
Interest.
DC = the Deemed Collections.
NDR = the outstanding balance of all Receivables that
are not Defaulted Receivables.
ARD = 1 + (.50 x Aggregate Reserves)
Each of the foregoing shall be determined from the most
recent Distribution Date Statement received from the
Trustee.
"Affected Liquidity Provider" shall have the meaning
assigned to such term in Section 6.01(c).
"Affected Person" shall have the meaning assigned to
such term in Section 3.02.
"Affiliate" means any Person directly or indirectly
<PAGE> 3
controlling, controlled by, or under direct or indirect common
control with, another Person or any subsidiary of such other
Person. A Person shall be deemed to control another Person if
the controlling Person owns 10% or more of any class of voting
securities of the controlled Person or possesses, directly or
indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through
ownership of stock, by contract or otherwise.
"Aggregate Unpaids" means, at any time, an amount equal
to the sum of all accrued and unpaid Class A Monthly Interest,
Class A Additional Interest, Class A Invested Amount, and all
amounts (whether owed or accrued) hereunder, under the Series
1997-1 Supplement or under the Fee Letter to the Program Agent
and the Purchasers at such time.
"Assignment and Acceptance" shall mean an assignment
and acceptance in substantially the form of Exhibit A pursuant to
which a Liquidity Provider assigns all or a portion of its rights
and obligations under this Agreement in accordance with the terms
of Section 6.01.
"Base Rate" means, (i) prior to the occurrence of a
Servicer Default, a rate per annum equal to the corporate base
rate, prime rate or base rate of interest, as applicable,
announced by the Reference Bank from time to time, changing when
and as such rate changes, and (ii) at all times after the
occurrence of an Early Amortization Event, such rate plus 2.00%
per annum.
"Class A Certificate Interest" shall mean each
undivided percentage interest in the Class A Certificates
acquired by Falcon or any Liquidity Provider in connection with
the Purchase or any Increase in the Class A Invested Amount.
"Class A Certificateholder" shall mean the Program
Agent.
"Closing Date" shall mean February 28, 1997.
"Commercial Paper" means promissory notes of Falcon
issued by Falcon in the commercial paper market.
"CP Rate" means, the rate, requested by the Seller and
agreed to by Falcon, equivalent to the rate (or if more than one
rate, the weighted average of the rates) at which Commercial
Paper having a term equal to the relevant Tranche Period may be
sold by any placement agent or commercial paper dealer reasonably
selected by Falcon, as agreed between each such dealer or agent
and Falcon plus any and all applicable issuing and paying agent
<PAGE> 4
fees and commissions of placement agents and commercial paper
dealers in respect of such Commercial Paper; provided, however,
that if the rate (or rates) as agreed between any such agent or
dealer and Falcon is a discount rate (or rates), the "CP Rate"
for such Tranche Period shall be the rate (or if more than one
rate, the weighted average of the rates) resulting from Falcon's
converting such discount rate (or rates) to an interest-bearing
equivalent rate per annum.
"Deemed Collections" means, in connection with the
transfer by Falcon of one or more Class A Certificate Interests
to the Liquidity Providers pursuant to Section 2.07 hereof, the
aggregate of all amounts owing to the Program Agent on behalf of
Falcon pursuant to Sections 2.03, 2.04(c), 3.03(c) and 3.09 of
the Pooling and Servicing Agreement and Section 8.01 hereof
relating to the Class A Certificate Interests which are the
subject of such transfer.
"Defaulting Liquidity Provider" shall have the meaning
assigned to such term in Section 2.11.
"Discount" means, for each Class A Certificate Interest
for any Tranche Period:
DR x C X AD
360
where:
DR = the Discount Rate for such Class A
Certificate Interest for such Tranche
Period;
C = the Class A Invested Amount of such
Class A Certificate Interest during
such Tranche Period; and
AD = the actual number of days elapsed
during such Tranche Period;
provided that no provision of this Agreement shall require the
payment or permit the collection of Discount in excess of the
maximum rate permitted by applicable law; and provided, further,
that Discount for any Tranche Period shall not be considered paid
by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be
returned for any reason.
"Discount Rate" means the LIBO Rate, the CP Rate or the
Base Rate, as applicable.
<PAGE> 5
"Extension Term" shall have the meaning assigned to
such term in Section 2.12.
"Falcon" shall mean Falcon Asset Securitization
Corporation and its successors and assigns, but shall not include
the Liquidity Providers as assignees under Section 2.07.
"Falcon Residual" shall mean the sum of the Falcon
Transfer Price Reductions.
"Falcon Transfer Price" means, with respect to the
assignment by Falcon of one or more Class A Certificate Interests
to the Liquidity Providers, the sum of (i) the lesser of (a) the
Class A Invested Amount allocated to each Class A Certificate
Interest and (b) the Adjusted Liquidity Price of each Class A
Certificate Interest and (ii) all accrued and unpaid Discount for
such Class A Certificate Interest(s).
"Falcon Transfer Price Deficit" shall have the meaning
assigned to such term in Section 2.11.
"Falcon Transfer Price Reduction" shall mean in connection
with the assignment of a Class A Certificate Interest by
Falcon to the Liquidity Providers, the positive difference
between (i) the Class A Invested Amount allocated to such Class A
Certificate Interest and (ii) the Adjusted Liquidity Price for
such Class A Certificate Interest.
"Federal Funds Effective Rate" shall mean, for any
period, a fluctuating interest rate per annum equal for each day
during such period equal to (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 such day (or, if such day is not a Business Day,
for the preceding Business Day) by the Federal Reserve Bank of
New York in the Composite Closing Quotations for U.S. Government
Securities; or (b) if such rate is not so published for any day
which is a Business Day, the average of the quotations at
approximately 10:30 a.m. (Chicago time) for such day on such
transactions received by the Reference Bank from three federal
funds brokers of recognized standing selected by it.
"Federal-Mogul" shall mean Federal-Mogul Corporation, a
Michigan corporation, and its successors in interest to the
extent permitted hereunder, as amended, modified or supplemented
and in effect from time to time.
"Fee Letter" shall mean the letter agreement dated the
date hereof by and between the Program Agent and the Seller.
<PAGE> 6
"First Chicago" means The First National Bank of
Chicago in its individual capacity and its successors.
"First Chicago Roles" shall have the meaning assigned
to such term in Section 5.07.
"Indemnified Amounts" shall have the meaning assigned
to such term in Section 8.01.
"Indemnified Party" shall have the meaning assigned to
such term in Section 8.01.
"Initial Term" shall mean, with respect to each
Liquidity Provider Commitment, the period which commences on the
date such Liquidity Provider enters into this Agreement and ends
on the date which is 364 days from the date of this Agreement.
"LIBO Rate" means the rate per annum equal to the sum
of (i) (a) the rate at which deposits in U.S. Dollars are offered
by the Reference Bank to first-class banks in the London
interbank market at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of the relevant Tranche
Period, such deposits being in the approximate amount of the
Class A Invested Amount of the Class A Certificate Interest to be
funded or maintained plus (ii) 0.75% per annum. The LIBO Rate
shall be rounded, if necessary, to the next higher 1/16 of 1%.
"Liquidity Provider Commitment" shall mean, as to any
Liquidity Provider, the obligation of such Liquidity Provider to
(i) make the Purchase pursuant to Section 2.01, (ii) purchase the
Class A Certificate Interests of Falcon pursuant to Section 2.07
and (iii) fund Increases in the Class A Invested Amount, in each
instance up to the amount set forth opposite such Liquidity
Provider's name on the signature pages hereto, subject to Section
2.02, or as otherwise set forth in an Assignment and Acceptance
in connection with an assignment from a Liquidity Provider of its
obligations hereunder in accordance with the terms of Section
6.01, as such amount may be reduced from time to time pursuant to
Section 2.04.
"Liquidity Provider Commitment Percentage" shall mean,
on any day and as to any Liquidity Provider, a fraction, the
numerator of which is such Liquidity Provider's Liquidity
Provider Commitment and the denominator of which is the Class A
Purchase Limit on such day, as such percentage may be modified by
assignments made from time to time pursuant to Section 6.01.
"Liquidity Providers" shall mean the banks and
financial institutions party hereto from time to time as
<PAGE> 7
"Liquidity Providers" hereunder, as their names appear on the
signature pages hereto under the heading "Liquidity Providers" or
as otherwise set forth in an Assignment and Acceptance in
connection with an assignment from a Liquidity Provider of its
rights and obligations hereunder in accordance with the terms of
Section 6.01.
"Majority of Class A Certificate Interests" shall mean
the Program Agent and holders of Class A Certificate Interests
evidencing 66 2/3% or more of the aggregate Class A Certificate
Interests; provided that, solely for purposes of this
computation, (i) Liquidity Providers shall be deemed to hold
Class A Certificate Interests equal to their respective Liquidity
Provider Commitment Percentages of such aggregate Class A
Certificate Interests, whether or not they have made the Purchase
or funded any Increases, and (ii) Falcon's Class A Certificate
Interest will be reduced by the amount set forth in clause (i).
"Non-Defaulting Liquidity Provider" shall have the
meaning assigned to such term in Section 2.11.
"Obligations" shall mean all obligations of the Seller,
the Servicer or Federal-Mogul to the Trustee, the Trust, the
Program Agent, any Purchaser, any Enhancement Provider, the other
Indemnified Parties and their respective successors, permitted
transferees and assigns, arising under or in connection with the
Transaction Documents, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due.
"Person" means an individual, partnership, limited
liability company, corporation (including a business trust),
joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political
subdivision or agency thereof.
"Pooling and Servicing Agreement" shall mean the
Amended and Restated Pooling and Servicing Agreement, dated as of
February 1, 1997, among the Seller, as seller, the Servicer and
the Trustee, as amended, supplemented or otherwise modified from
time to time.
"Purchase" shall mean the purchase of the Class A
Certificates on the Purchase Date, whether by Falcon or the
Liquidity Providers.
"Purchase Date" shall mean the Closing Date.
"Purchase Notice" shall have the meaning set forth in
Section 2.05.
<PAGE> 8
"Purchase Price" shall mean the price specified in the
notice from the Seller (substantially in the form of Exhibit B)
delivered pursuant to Section 2.05.
"Purchaser" shall have the meaning assigned to such
term in the second recital hereof.
"Purchasing Liquidity Provider" shall have the meaning
assigned to such term in Section 6.01(b).
"Reduction Percentage" shall mean, for any Class A
Certificate Interest acquired by the Liquidity Providers from
Falcon for less than the Class A Invested Amount allocated to
such Class A Certificate Interest, a percentage equal to (i) one,
minus (ii) a fraction the numerator of which is the Falcon
Transfer Price Reduction for such Class A Certificate Interest
and the denominator of which is the Class A Invested Amount
allocated to such Class A Certificate Interest.
"Reference Bank" means NBD Bank or such other bank as
the Program Agent shall designate with the consent of the Seller.
"Required Notice Date" shall mean, with respect to the
date of the funding of any Increase, by 11:00 a.m. (Chicago time)
(i) at least three Business Days prior to such date if the LIBO
Rate is being requested as the Discount Rate relating to such
Increase, (ii) at least three Business Days prior to such date if
the CP Rate is being requested as the Discount Rate relating to
such Increase and (iii) at least one Business Day prior to such
date if the Base Rate is being requested as the Discount Rate
relating to such Increase.
"Series 1997-1 Supplement" shall mean the Series 1997-1
Supplement to the Pooling and Servicing Agreement, dated as of
February 1, 1997, among the Seller, the Servicer and the Trustee.
"Servicer Default" shall mean one of the events set
forth in Section 10.01 of the Pooling and Servicing Agreement.
"Taxes" shall have the meaning set forth in Section
3.03.
"Term" shall mean, with respect to each Liquidity
Provider Commitment, the Initial Term and each Extension Term as
provided in Section 2.12.
"Termination Date" shall be the last day of the Term.
"Tranche Period" means, with respect to any Class A
Certificate Interest:
<PAGE> 9
(a) if Discount for such Class A Certificate Interest
is calculated with respect to the CP Rate, a period of days not
to exceed 270 days commencing on a Business Day requested by the
Seller and agreed to by Falcon;
(b) if Discount for such Class A Certificate Interest
is calculated on the basis of the LIBO Rate, a period of one, two
or three months, or such other period as may be mutually
agreeable to the Program Agent and the Seller, commencing on a
Business Day selected by the Seller or the Program Agent pursuant
to this Agreement. Such Tranche Period shall end on the day in
the applicable succeeding calendar month which corresponds
numerically to the beginning day of such Tranche Period,
provided, however, that if there is no such numerically
corresponding day in such succeeding month, such Tranche Period
shall end on the last Business Day of such succeeding month; and
(c) if Discount for such Class A Certificate Interest
is calculated on the basis of the Base Rate, a period of 30 days
commencing on a Business Day selected by the Seller.
If any Tranche Period would end on a day which is not a Business
Day, such Tranche Period shall end on the next succeeding
Business Day, provided, however, that in the case of Tranche
Periods corresponding to the LIBO Rate, if such next succeeding
Business Day falls in a new month, such Tranche Period shall end
on the immediately preceding Business Day. In the case of any
Tranche Period for any Class A Certificate Interest which
commences before the last day of the Revolving Period and would
otherwise end on a date occurring after the last day of the
Revolving Period, such Tranche Period shall end on the last day
of the Revolving Period. The duration of each Tranche Period
which commences after the last day of the Revolving Period shall
be of such duration as selected by the Program Agent.
"Transaction Documents" means, collectively, this
Agreement all other instruments, documents and agreements
executed and delivered by the Seller in connection herewith, the
Fee Letter, the Pooling and Servicing Agreement, the Series 1997-1
Supplement, the Class A Certificates and the Receivable
Purchase Agreement.
"Withholding Tax" shall have the meaning assigned to
such term in Section 9.16.
SECTION 1.02. Other Definitional Provisions. (a) All
capitalized terms not otherwise defined herein are defined in the
Pooling and Servicing Agreement and the Series 1997-1 Supplement.
(b) As used herein, in the Class A Certificates and in
<PAGE> 10
any certificate or other document made or delivered pursuant
hereto, accounting terms not defined in Section 1.01 and
accounting terms partly defined in Section 1.01 to the extent not
defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect in the
United States from time to time.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and Section, subsection, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of
such terms.
<PAGE> 11
ARTICLE II
THE PURCHASE; INCREASES
SECTION 2.01. The Purchase. (a) Falcon may, in its
sole discretion, make the Purchase. Falcon's election to make
the Purchase is subject to the satisfaction of the conditions
precedent set forth in Section 4.01.
(b) If Falcon shall elect not to make the Purchase on
the Purchase Date, the Liquidity Providers shall, subject to the
satisfaction of the conditions precedent set forth in Section
4.01, make the Purchase. Each Liquidity Provider shall make the
Purchase in an amount equal to its Liquidity Provider Commitment
Percentage of the Purchase Price.
(c) Under no circumstances shall Falcon or the
Liquidity Providers make the Purchase if, as a result thereof,
the Class A Invested Amount would exceed the Class A Purchase
Limit or, in the case of a Liquidity Provider, if such Liquidity
Provider's Liquidity Provider Commitment Percentage of the
Purchase Price would exceed such Liquidity Provider's Liquidity
Provider Commitment.
SECTION 2.02. Increases. (a) Falcon may, in its sole
discretion, from time to time during the period from the date of
this Agreement to the last day of the Revolving Period, upon the
request of the Seller and subject to the satisfaction of the
conditions precedent set forth in Section 4.01, fund Increases,
and, upon so funding an Increase, shall acquire Class A
Certificate Interests representing a portion of the Class A
Invested Amount equal to the amount of such Increase.
(b) If Falcon elects not to fund a requested Increase,
each Liquidity Provider shall, upon the request of the Seller and
subject to the satisfaction of the conditions precedent set forth
in Section 4.01, fund such Increase in an amount equal to its
Liquidity Provider Commitment Percentage of the amount of such
requested Increase. All Increases funded by the Liquidity
Providers shall be at the LIBO Rate and shall be made on a pro
rata basis in accordance with the Liquidity Provider Commitments.
(c) Under no circumstances shall Falcon or any
Liquidity Provider fund any Increase to the extent that, after
giving effect to such Increase and the other Increases to be
funded by the other Liquidity Providers concurrently therewith,
(i) the Class A Invested Amount would exceed the Class A Purchase
Limit or (ii) with respect to any Liquidity Provider, the funding
of such Increase would exceed its Liquidity Provider Commitment.
<PAGE> 12
SECTION 2.03. Class A Certificates. On the Purchase
Date, on each date an Increase in the Class A Invested Amount is
funded hereunder and on each date the Class A Invested Amount is
reduced, a duly authorized agent of the Program Agent shall make
appropriate notations in its books and records of the Purchase
Price, the amount of such Increase and the amount of such reduction,
as applicable. Each of the Servicer, the Seller and the
Trustee hereby authorizes each duly authorized agent of the
Program Agent to make such notations on the books and records as
aforesaid and every such notation made in accordance with the
foregoing authority shall be prima facie evidence of the accuracy
of the information so recorded and shall be binding on the Seller
and the Trustee absent manifest error. All Increases in the
Class A Invested Amount shall be subject to reduction in
accordance with the provisions of this Agreement and the Series
1997-1 Supplement.
SECTION 2.04. Reductions to the Class A Purchase
Limit. The Seller may, from time to time, upon at least 30 days'
prior written notice to the Program Agent, elect to reduce the
Class A Purchase Limit by an amount up to the difference between
the Class A Purchase Limit at such time and the Class A Invested
Amount at such time; provided that such partial reduction in the
Class A Purchase Limit shall be in a minimum amount equal to
$2,000,000 and integral multiples of $1,000,000 in excess of such
minimum. Any such reduction shall be permanent and shall reduce
the Liquidity Provider Commitments of the Liquidity Providers
hereunder ratably in accordance with the Liquidity Provider
Commitment Percentages.
SECTION 2.05. Procedures for Making the Purchase and
Increases. (a) Notice of the Purchase and Increases. The
Purchase and each Increase shall occur on a Business Day and
shall be made or funded on notice (the "Purchase Notice") from
the Seller (substantially in the form of Exhibit B, in the case
of the Purchase, or Exhibit C, in the case of an Increase) to the
Program Agent received by the Program Agent not later than 12:00
noon (New York City time) on, in the case of the Purchase, the
first Business Day immediately preceding the Purchase Date or, in
the case of an Increase, on the Required Notice Date (with a copy
provided to the Trustee). Each notice shall, except as set forth
below, be irrevocable and specify the Purchase Price, the amount
of the Increase (in each case, not to be less than $2,000,000 and
integral multiples of $1,000,000 in excess of such minimum), the
Purchase Date or date of the Increase, the initial Tranche Period
and the initial Discount Rate related thereto. The Program Agent
shall promptly notify, and in any event on or prior to 10:00
a.m., Chicago time, on the date of the funding of the Purchase or
any Increase, the Seller and each Liquidity Provider if Falcon
elects in its discretion not to make the Purchase or fund an
<PAGE> 13
Increase. If Falcon declines to make a proposed Purchase or fund
an Increase, the Seller may cancel the Purchase Notice or the
Purchase or Increase will be made by the Liquidity Providers.
(b) Delivery of the Class A Certificates. On the
Purchase Date, the Seller will deliver to the Program Agent, on
behalf of the Purchaser(s), one Class A Certificate, dated the
Purchase Date, registered in the name of the Program Agent and
duly authenticated in accordance with the provisions of the
Pooling and Servicing Agreement against delivery by the Program
Agent, on behalf of the Purchaser(s), to the Seller of the
Purchase Price.
(c) Funding of the Purchase and Increases. On the
Purchase Date and any date on which an Increase is funded, Falcon
or the Liquidity Providers, as applicable, shall, upon
satisfaction of the applicable conditions set forth in Article
IV, deposit, the Purchase Price or amount of the Increase (in the
case of Falcon) or its Liquidity Provider Commitment Percentage
of the Purchase Price or of the Increase (in the case of each
Liquidity Provider) in immediately available funds in the
following Accounts: in the case of the Purchase, deposit of the
Purchase Price to the Escrow Account, held by The Chase Manhattan
Bank, as escrow agent, account number 507-871731 and identified
as the "Federal-Mogul Trade Receivables Master Trust, Series
1992-1 and Series 1993-1 Escrow Account"; if Falcon is funding an
Increase, a deposit shall be made to an account of the Seller at
Bank of America, account number 73-63613; if the Liquidity
Providers are funding an Increase, a deposit shall be made to the
FMSD Clearing Account, number 7521-7683, at The First National
Bank of Chicago. The Program Agent to use its best efforts to
cause such deposits to be made by not later than 12:00 noon
(Chicago time).
Section 2.06. Selection of Tranche Periods and Discount
Rates. (a) Each Class A Certificate Interest shall at all times
have an associated amount of Class A Invested Amount, a Discount
Rate and Tranche Period applicable to it. Not less than
$2,000,000 of Invested Amount may be allocated to any single
Class A Certificate Interest. The Seller shall request Discount
Rates and Tranche Periods for the Class A Certificate Interests.
The Seller may select the CP Rate, with the concurrence of the
Program Agent, or the Base Rate for the Class A Certificate
Interests of Falcon and the LIBO Rate or the Base Rate for the
Class A Certificate Interests of the Liquidity Providers. The
Seller shall by 11:00 a.m. (Chicago time), (i) at least three
Business Days prior to the expiration of any then existing
Tranche Period with respect to which the LIBO Rate is being
requested as a new Discount Rate, (ii) at least three Business
Days prior to the expiration of any then existing Tranche Period
<PAGE> 14
with respect to which the CP Rate is being requested as a new
Discount Rate and (iii) at least one Business Day prior to the
expiration of any Tranche Period with respect to which the Base
Rate is being requested as a new Discount Rate, give the Program
Agent irrevocable notice of the new Tranche Period and Discount
Rate for the Receivable Interest associated with such expiring
Tranche Period.
(b) If any Liquidity Provider notifies the Program
Agent that it has determined that funding its Liquidity Provider
Commitment Percentage of the Class A Certificate Interests of the
Liquidity Providers at a LIBO Rate would violate any applicable
law, rule, regulation, or directive, whether or not having the
force of law, or that (i) deposits of a type and maturity
appropriate to match fund its Class A Certificate Interests at
such LIBO Rate are not available or (ii) such LIBO Rate does not
accurately reflect the cost of acquiring or maintaining Class A
Certificate Interests at such LIBO Rate, then the Program Agent
shall suspend the availability of such LIBO Rate and require the
Seller to select a new Discount Rate for any Class A Certificate
Interest accruing Discount at such LIBO Rate.
SECTION 2.07. Assignments by Falcon to Liquidity Providers.
(a) On any date during the Term (including, without
limitation, any date on which Falcon has elected in its
discretion not to fund an Increase hereunder pursuant to Section
2.02), Falcon may, in its own discretion, upon written notice
given to the Program Agent and the Seller, assign to the
Liquidity Providers (in accordance with their respective
Liquidity Provider Commitment Percentages) and the Liquidity
Providers shall purchase a portion of or all of the right and
title to and interest in the Class A Certificate Interests which
are then owned by Falcon. Such assignment of Class A Certificate
Interests shall be made upon receipt of consideration (in cash)
from the Liquidity Providers equal to the applicable Acquisition
Amount; provided that no Liquidity Provider shall be required to
purchase any Class A Certificate Interest to the extent that,
after giving effect thereto, its Liquidity Provider Commitment
Percentage of the then outstanding Class A Invested Amount would
exceed its Liquidity Provider Commitment.
(b) Upon the assignment described in subsection (a)
above, (i) the applicable Class A Certificate Interests
previously owned by Falcon and so assigned shall become Class A
Certificate Interests owned by the Liquidity Providers and (ii)
the Program Agent shall, to the extent provided under the Series
1997-1 Supplement, pay to Falcon on the date of such assignment
if such assignment occurs on a Distribution Date, or on the next
succeeding Distribution Date, out of Collections available for
such payments as provided in the Series 1997-1 Supplement, (A) to
<PAGE> 15
the extent Falcon received the amount described in Section
2.05(c) above, all accrued and unpaid interest with respect to
the Class A Invested Amount related to the Class A Certificate
Interests so assigned and (B) any Breakage Costs.
(c) The assignment of Class A Certificate Interests
from Falcon to the Liquidity Providers pursuant to this Section
2.07 shall be without recourse or warranty, express or implied,
except that such Class A Certificate Interests are free and clear
of adverse claims created by or arising as a result of claims
against the Program Agent or Falcon. Nothing in this Section
2.07 shall be deemed to limit any rights of Falcon under any
other provisions of this Agreement to assign its right, title to
and interest in and to any portion of the Class A Certificate
Interests owned by it.
SECTION 2.08. Transfer Price Reduction Discount. If the
Adjusted Liquidity Price is included in the calculation of the
Falcon Transfer Price for any Class A Certificate Interest, each
Liquidity Provider agrees that the Program Agent shall pay to
Falcon the Reduction Percentage of any Discount received by the
Program Agent with respect to such Class A Certificate Interest.
SECTION 2.09. Payments to Falcon. In consideration for the
reduction of the Falcon Transfer Prices by the Falcon Transfer
Price Reductions, effective only at such time as the aggregate
amount of the Class A Invested Amount allocated to the Class A
Certificate Interests of the Liquidity Providers equals the
Falcon Residual, each Liquidity Provider hereby agrees that the
Program Agent shall not distribute to the Liquidity Providers and
shall immediately remit to Falcon any Discount, Class A Monthly
Interest, Class A Additional Interest, Class A Monthly Principal
or other payments received by it to be applied pursuant to the
terms hereof or otherwise to reduce the Class A Invested Amount
allocated to the Class A Certificate Interests of the Liquidity
Providers.
SECTION 2.10. Limitation on Commitment to Purchase from
Falcon. Notwithstanding anything to the contrary in this
Agreement, no Liquidity Provider shall have any obligation to
purchase any Class A Certificate Interest from Falcon, pursuant
to Section 2.07 hereof or otherwise, if:
(a) Falcon shall have voluntarily commenced any
proceeding or filed any petition under any bankruptcy, insolvency
or similar law seeking the dissolution, liquidation or
reorganization of Falcon or taken any corporate action for the
purpose of effectuating any of the foregoing; or
(b) involuntary proceedings or an involuntary petition
<PAGE> 16
shall have been commenced or filed against Falcon by any Person
under any bankruptcy, insolvency or similar law seeking the
dissolution, liquidation or reorganization of Falcon and such
proceeding or petition shall have not been dismissed.
SECTION 2.11. Defaulting Liquidity Providers. If one or
more Liquidity Providers defaults in its obligation to pay its
Acquisition Amount pursuant to Section 2.07 (each such Liquidity
Provider shall be called a "Defaulting Liquidity Provider" and
the aggregate amount of such defaulted obligations being herein
called the "Falcon Transfer Price Deficit"), then upon notice
from the Program Agent, each Liquidity Provider other than the
Defaulting Liquidity Providers (a "Non-Defaulting Liquidity
Provider") shall promptly pay to the Program Agent, in
immediately available funds, an amount equal to the lesser of (x)
such Non-Defaulting Liquidity Provider's proportionate share
(based upon the relative Liquidity Provider commitments of the
Non-Defaulting Liquidity Providers) of the Falcon Transfer Price
Deficit and (y) the unused portion of such Non-Defaulting
Liquidity Provider's Commitment. A Defaulting Liquidity Provider
shall forthwith upon demand pay to the Program Agent for the
account of the Non-Defaulting Liquidity Providers all amounts
paid by each Non-Defaulting Liquidity Provider on behalf of such
Defaulting Liquidity Provider, together with interest thereon,
for each day from the date a payment was made by a Non-Defaulting
Liquidity Provider until the date such Non-Defaulting Liquidity
Provider has been paid such amounts in full, at a rate per annum
equal to the Federal Funds Effective Rate plus 2%. In addition,
without prejudice to any other rights that Falcon may have under
applicable law, each Defaulting Liquidity Provider shall pay to
Falcon forthwith upon demand, the difference between such
Defaulting Liquidity Provider's unpaid Acquisition Amount and the
amount paid with respect thereto by the Non-Defaulting Liquidity
Providers, together with interest thereon, for each day from the
date of the Program Agent's request for such Defaulting Liquidity
Provider's Acquisition Amount pursuant to Section 2.07 until the
date the requisite amount is paid to Falcon in full, at a rate
per annum equal to the Federal Funds Effective Rate plus 2%.
SECTION 2.12. Term. The "Initial Term" of each Liquidity
Provider Commitment hereunder shall be for a period commencing on
the date such Liquidity Provider enters into this Agreement and
ending on the date that is 364 days after the date of this
Agreement. Prior to the expiration of the Initial Term or any
Extension Term, the Program Agent may request an extension of
such Term (such extended period being an "Extension Term") and
each Liquidity Provider may, in its sole and absolute discretion,
extend its Liquidity Provider Commitment by delivering to the
Program Agent a written notice of such Liquidity Provider's
commitment to extend, provided, however, that any such extension
<PAGE> 17
shall be ineffective if an Early Amortization Event has occurred
and is continuing at the time of the proposed commencement of
such Extension Term. Failure of a Liquidity Provider to deliver
a notice of such Liquidity Provider's intent to grant an
Extension Term shall be deemed to be an election by such
Liquidity Provider not to grant an Extension Term. If less than
all of the Liquidity Providers have elected to grant an Extension
Term and the Program Agent has been unable (a) to replace any
Liquidity Provider which has declined to grant an Extension Term
or (b) to obtain the agreement of one or more Liquidity Providers
to assume the Liquidity Provider's Commitment Percentage who have
so declined to grant the Extension Term (such replacement or
assumption being subject to the Seller's review and approval,
which such approval shall not be unreasonably withheld), such
request for an Extension Term shall be deemed automatically
withdrawn and the Program Agent will so notify the Liquidity
Providers prior to the day on which the Term expires.
<PAGE> 18
ARTICLE III
FEES AND INTEREST PROTECTION
SECTION 3.01. Fees. The Seller shall pay to the
Program Agent such fees for its own account and for the account
of Falcon and the Liquidity Providers in such amounts and at such
times as set forth in the Fee Letter.
SECTION 3.02 Increased Costs and Reduced Returns.
(a) If any Liquidity Provider (each, an "Affected Person")
determines that compliance with any law or regulation or any
guideline or request from any central bank or other governmental
authority (whether or not having the force of law) affects or
would affect the amount of capital required or expected to be
maintained by such Affected Person and such Affected Person
determines that the amount of such capital is increased by or
based upon the existence of any commitment to make the Purchase
or fund Increases or otherwise to maintain its investment in the
Class A Certificates or Class A Certificate Interests, then, upon
demand by such Affected Person (with a copy to the Program Agent
and the Seller), the Seller shall immediately pay to the Program
Agent, for the account of such Affected Person (as a third party
beneficiary), additional amounts sufficient to compensate such
Affected Person, in light of the circumstances, for such increase
in capital. A certificate as to such amounts submitted to the
Seller and the Program Agent by such Affected Person shall be
conclusive and binding for all purposes, absent manifest error.
(b) If, due to either (i) the introduction or any
change in or in the interpretation of any law or regulation or
(ii) compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the
force of law), there shall be an increase in the cost to any
Liquidity Provider of any commitment to make the Purchase or to
fund Increases or otherwise to maintain the investment in the
Class A Certificates or Class A Certificate Interests, then, upon
demand by such Liquidity Provider (with a copy to the Program
Agent and the Seller), the Seller shall immediately pay to the
Program Agent, for the account of such Liquidity Provider (as a
third party beneficiary), additional amounts sufficient to
compensate such Liquidity Provider for such increase in cost. A
certificate as to such amounts submitted to the Seller and the
Program Agent by such Affected Person, shall be conclusive and
binding for all purposes, absent manifest error.
(c) Each Liquidity Provider will promptly notify the
Seller and the Program Agent of any event of which it has
knowledge which is reasonably likely to entitle such Liquidity
Provider to compensation pursuant to this Section 3.02; provided,
however, that no failure to give or delay in giving such
<PAGE> 19
notification shall adversely affect the rights of any Liquidity
Provider to such compensation.
SECTION 3.03. Taxes. (a) Any and all payments and
deposits required to be made hereunder or under any other
Transaction Document by the Seller or the Trustee to or for the
benefit of Falcon or any Liquidity Provider shall be made free
and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding
taxes imposed on, or measured by reference to, the net income of,
franchise taxes imposed on, and taxes (other than withholding
taxes) imposed on the receipts or gross receipts that are imposed
on Falcon or such Liquidity Provider by any of (i) the United
States or any State thereof, (ii) the state jurisdiction under
the laws of which Falcon or such Liquidity Provider is organized
or in which it is otherwise doing business or (iii) any political
subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Seller or the
Trustee shall be required by law to deduct any Taxes from or in
respect of any sum required to be paid or deposited hereunder or
under any instrument delivered hereunder to or for the benefit of
Falcon or any Liquidity Provider, (A) such sum shall be increased
as may be necessary so that after making all required deductions
(including deductions applicable to additional sums required to
be paid or deposited under this Section 3.03) the amount received
by Falcon or the relevant Liquidity Provider, or otherwise
deposited hereunder or under such instrument, shall be equal to
the sum which would have been so received or deposited had no
such deductions been made, (B) the Seller or the Trustee (as
appropriate) shall make such deductions and (C) the Seller or the
Trustee (as appropriate) shall pay the full amount of such
deductions to the relevant taxation authority or other authority
in accordance with applicable law.
(b) The Seller will indemnify Falcon and each
Liquidity Provider for the full amount of Taxes (including,
without limitation, any Taxes imposed by any jurisdiction on
amounts payable under this Section 3.03) paid by Falcon or such
Liquidity Provider and any liability (including penalties,
interest and expenses) arising therefrom or required to be paid
with respect thereto. Falcon and each Liquidity Provider agrees
to promptly notify the Seller of any payment of Taxes made by it
and, if practicable, any request, demand or notice received in
respect thereof prior to such payment. Falcon and each Liquidity
Provider shall be entitled to payment of this indemnification, as
owner of Class A Certificate Interests pursuant to the terms of
the Series 1997-1 Supplement, within 30 days from the date Falcon
or such Liquidity Provider makes written demand therefor to the
<PAGE> 20
Program Agent and the Seller. A certificate as to the amount of
such indemnification submitted to the Seller and the Program
Agent by Falcon or such Liquidity Provider, setting forth the
calculation thereof, shall (absent manifest error) be conclusive
and binding for all purposes.
(c) Within 30 days after the date of any payment of
Taxes, the Seller or the Trustee (as the case may be) will
furnish to the Program Agent the original or a certified copy of
a receipt evidencing payment thereof.
(d) Notwithstanding the foregoing and any other
provisions of this Section 3.03, the obligations of the Trustee
under this Section 3.03 shall be payable only out of the Trust
Assets.
(e) Each Liquidity Provider that is organized under
the laws of a jurisdiction other than the United States or a
state thereof hereby agrees to complete, execute and deliver to
the Trustee from time to time prior to the initial Distribution
Date on which the Program Agent, acting on behalf of such
Liquidity Provider, will be entitled to receive distributions
pursuant to the Series 1997-1 Supplement and this Agreement,
Internal Revenue Service Forms 1001 or 4224 (or any successor
form), as applicable, or such other forms or certificates as may
be required under the laws of any applicable jurisdiction in
order to permit the Seller or the Trustee to make payments to,
and deposit funds to or for the account of, the Program Agent,
acting on behalf of such Liquidity Provider, hereunder and under
the other Transaction Documents without any deduction or
withholding for or on account of any tax or with such withholding
or deduction at a reduced rate.
SECTION 3.04. Sharing of Payments. If Falcon or any
Liquidity Provider shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of set-off or
otherwise) on account of any Obligation (other than pursuant to
Section 3.02 of this Agreement) which is in excess of its pro
rata share of the sum of payments then or theretofore obtained by
Falcon and the Liquidity Providers, Falcon or any such Liquidity
Provider shall purchase from the Liquidity Providers or Falcon,
as applicable, such participations in Obligations held by them as
shall be necessary to cause such purchaser to share the excess
payment or other recovery ratably with each of them; provided,
however, that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing
Liquidity Provider or Falcon, as the case may be, the purchase of
such participations shall be rescinded and the seller of such
participation shall repay to such purchaser the purchase price of
such participation to the ratable extent of such recovery
<PAGE> 21
together with an amount equal to such Liquidity Provider's or
Falcon's ratable share (according to the proportion of the amount
of such seller's required repayment to such purchaser to the
total amount so recovered from such purchaser) of any interest or
other amount payable by such purchaser in respect of the total
amount so recovered.
ARTICLE IV
CONDITIONS PRECEDENT TO THE PURCHASE AND ALL INCREASES
SECTION 4.01. Conditions Precedent to the Purchase.
1. The making of the Purchase is subject to the following
conditions precedent:
(i) the Seller shall have furnished to the Program
Agent an opinion or opinions of Brown & Wood LLP, counsel for the
Seller, dated the Purchase Date and satisfactory in form and
substance to the Program Agent, as to certain corporate and
bankruptcy matters and such matters as the Program Agent may
reasonably require;
(ii) the Seller shall have furnished to the Program
Agent an opinion of Brown & Wood LLP, counsel for the Seller,
dated the Purchase Date and satisfactory in form and substance to
the Program Agent, as to federal income tax consequences with
respect to the Class A Certificates and the Trust;
(iii) the Seller shall have furnished to the Program
Agent an opinion of Dykema Gossett, counsel for the Seller, dated
the Purchase Date and satisfactory in form and substance to the
Program Agent, as to the Michigan state income tax consequences
with respect to the Class A Certificates and the Trust;
(iv) the Seller shall have furnished to the Program
Agent an opinion of in-house counsel for the Seller, the Servicer
and the Receivables Sellers, dated the Purchase Date and
satisfactory in form and substance to the Purchaser, as to such
matters as the Program Agent may reasonably require;
(v) the Seller shall have furnished to the Program
Agent an opinion of Baker & McKenzie, Canadian counsel for
Federal-Mogul Canada Limited, dated the Purchase Date and
satisfactory in form and substance to the Purchaser, as to such
matters as the Program Agent may reasonably require;
(vi) the Program Agent shall have received an
opinion of counsel for the Trustee, dated the Purchase Date and
satisfactory in form and substance to the Program Agent, as to
such matters as the Program Agent may reasonably require;
(vii) the Program Agent shall have received a
certificate, dated the Purchase Date, of the Chairman of the
Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the principal financial officer or the
<PAGE> 22
principal accounting officer of the Seller, which such
certificate shall state, among other things, that the
representations and warranties of the Seller contained in this
Agreement and the other Transaction Documents are true and
correct, and the Seller has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
under such agreements at or prior to such date, and such
certificate shall have attached thereto organizational documents
and resolutions and shall include specimen signatures;
(viii) the Program Agent shall have received a
certificate, dated the Purchase Date, of the Chairman of the
Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the principal financial officer or the
principal accounting officer of each Receivables Seller, which
such certificate shall state, among other things, that the
representations and warranties of such Receivables Seller
contained in the applicable Receivables Purchase Agreement are
true and correct, and the Receivables Seller has complied with
all agreements and satisfied all conditions on its part to be
performed or satisfied under such agreements at or prior to such
date, and such certificate shall have attached thereto
organizational documents and resolutions and shall include
specimen signatures;
(ix) the Purchaser shall have received evidence
satisfactory to it that, on or before the Purchase Date, (a)
amended UCC-1 financing statements have been or are being filed
in the office of the Secretary of State of the State of Michigan
reflecting the grant of the security interest in the Receivables
by the Sellers named in the Receivable Purchase Agreements to the
Seller and the grant of the security interest by the Seller in
the Trust Assets to the Trustee, for the benefit of the Class A
Certificateholders and (b) UCC-1 continuation statements have
been filed in the applicable jurisdictions;
(x) no Early Amortization Event or Servicer Default,
and no event that (a) if notice of such event were given or (b)
after a specified amount of time had elapsed would become an
Early Amortization Event or Servicer Default, shall have occurred
and be continuing;
(xi) the Revolving Period shall not have ended and an
Early Amortization Period shall not have occurred and be
continuing;
(xii) any and all representations and warranties made
by the Seller and by the Servicer in this Agreement, the Pooling
and Servicing Agreement and the Series 1997-1 Supplement shall be
true and correct in all material respects, as if repeated on such
date with respect to the facts and circumstances then existing;
<PAGE> 23
(xiii) any and all representations and warranties made
by each Receivables Seller in the applicable Receivables Purchase
Agreement shall be true and correct in all material respects, as
if repeated on such date with respect to the facts and
circumstances then existing;
(xiv) the Pooling and Servicing Agreement, Series
1997-1 Supplement and Receivables Purchase Agreements shall be in
full force and effect;
(xv) after making the Purchase or funding such
Increase, the Class A Invested Amount shall not exceed the Class
A Purchase Limit; and
(xvi) the Program Agent shall have received by 12:00
noon (New York City time), on the Business Day immediately
preceding the Purchase Date or the date of such Increase (a) in
the case of the Purchase, the Distribution Date Statement
relating to the Distribution Date in February 1997 and (b) in the
case of any Increase, a certificate of the Servicer delivered
pursuant to Section 5.03 of the Series 1997-1 Supplement dated as
of such Business Day, which shall be prepared on a pro forma
basis and shall show that the Servicer is in compliance with the
Pooling and Servicing Agreement and the Series 1997-1 Supplement
(after giving effect to the Purchase or such Increase).
(b) If Falcon is the Purchaser, the making of the
Purchase and the funding of Increases are subject to the
following additional conditions precedent:
(i) the Program Agent shall not have given notice that
Falcon will not make the Purchase or fund an Increase; and
(ii) the Liquidity Provider Commitments shall be in full
force and effect.
SECTION 4.02. Conditions Precedent to All Increases.
The funding of all Increases is subject to the conditions
precedent specified in subsections (x)-(xvi) of Section 4.01 and
to the condition precedent that such Increase of the Class A
Invested Amount shall be a minimum of $2,000,000 or in integral
multiples of $1,000,000 in excess of such minimum.
SECTION 4.03. Representations and Warranties of the
Seller Relating to the Seller and the Transaction Documents. The
Seller hereby represents and warrants to the Program Agent,
Falcon and the Liquidity Providers as the Closing Date that:
(a) Organization and Good Standing. The Seller is a
corporation duly organized and validly existing and in good
standing under the law of the State of Michigan and has, in all
material respects, full corporate power, authority and legal
<PAGE> 24
right to own its properties and conduct its business as such
properties are presently owned and such business is presently
conducted, and to execute, deliver and perform its obligations
under this Agreement and the Transaction Documents.
(b) Due Qualification. The Seller is duly qualified
to do business and, where necessary, is in good standing as a
foreign corporation (or is exempt from such requirement) and has
obtained all necessary licenses and approvals in each
jurisdiction in which the conduct of its business requires such
qualification except where the failure to so qualify or obtain
licenses or approvals would not have a material adverse effect on
its ability to perform its obligations hereunder and under the
Transaction Documents.
(c) Due Authorization. The execution and delivery of
this Agreement and the Transaction Documents by the Seller and
the consummation of the transactions provided for or contemplated
by this Agreement and the Transaction Documents, have been duly
authorized by the Seller by all necessary corporate action on the
part of the Seller.
(d) No Conflict. The execution and delivery of this
Agreement and the Transaction Documents, the performance of the
transactions contemplated by this Agreement and the Transaction
Documents and the fulfillment of the terms hereof and thereof,
will not conflict with, result in any breach of any of the
material terms and provisions of, or constitute (with or without
notice or lapse of time or both) a material default under, any
indenture, contract, agreement, mortgage, deed of trust, or other
instrument to which the Seller is a party or by which it or its
properties are bound.
(e) No Violation. The execution and delivery of this
Agreement and the Transaction Documents, the performance of the
transactions contemplated by this Agreement and the Transaction
Documents and the fulfillment of the terms hereof and thereof
applicable to the Seller, will not conflict with or violate any
material Requirements of Law applicable to the Seller.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Seller,
threatened against the Seller before any Governmental Authority
(i) asserting the invalidity of this Agreement or any of the
Transaction Documents, (ii) seeking to prevent the issuance of
the Class A Certificates or the consummation of any of the
transactions contemplated by this Agreement and the applicable
Transaction Documents, (iii) seeking any determination or ruling
that, in the reasonable judgment of the Seller, would materially
and adversely affect the performance by the Seller of its
<PAGE> 25
obligations under this Agreement and the applicable Transaction
Documents, (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of
this Agreement and the applicable Transaction Documents or (v)
seeking to affect adversely the income tax attributes of the
Trust under the United States Federal or any State income, single
business or franchise tax systems.
(g) All Consents Required. All appraisals,
authorizations, consents, orders, approvals or other actions of
any Person or of any governmental body or official required in
connection with the execution and delivery of this Agreement and
the Transaction Documents and the performance of the transactions
contemplated by this Agreement and any of the Transaction
Documents, and the fulfillment of the terms hereof and thereof,
have been obtained.
(h) Enforceability. This Agreement and the applicable
Transaction Documents each constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in
equity).
<PAGE> 26
ARTICLE V
THE PROGRAM AGENT
SECTION 5.01. Authorization and Action of the Program
Agent. (a) Falcon and each Liquidity Provider hereby appoints
and authorizes the Program Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and
the other Transaction Documents as are delegated to the Program
Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto.
(b) The Program Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in
any other Transaction Document, or any fiduciary relationship
with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part
of the Program Agent shall be read into this Agreement or any
other Transaction Document or otherwise exist for the Program
Agent. In performing its functions and duties hereunder and
under the other Transaction Documents, the Program Agent shall
act solely as agent for the Purchasers and does not assume nor
shall be deemed to have assumed any obligation or relationship of
trust or agency with or for the Seller or any of its successors
or assigns. The Program Agent shall not be required to take any
action which exposes the Program Agent to personal liability or
which is contrary to this Agreement, any other Transaction
Document or applicable law. The appointment and authority of the
Program Agent hereunder shall terminate upon the indefeasible
payment in full of all Aggregate Unpaids.
SECTION 5.02. The Program Agent's Reliance, Etc.
Neither the Program Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or
omitted to be taken by it or the Program Agent under or in
connection with the Transaction Documents, except for its or
their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, the Program Agent (a)
may consult with independent legal counsel (including counsel for
the Trust, the Seller or the Servicer), independent certified
public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel,
accountants or experts, (b) makes no representation or warranty
to Falcon, any Liquidity Provider or any such other holder of any
interest in the Trust Assets and shall not be responsible to
Falcon, any Liquidity Provider or any other holder for any
statements, representations or warranties made in or in
connection with the Transaction Documents, (c) shall not have any
duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of the
<PAGE> 27
Transaction Documents on the part of the Trust, the Trustee, the
Seller or the Servicer or to inspect the property (including the
books and records) of the Trust, the Trustee, the Seller or the
Servicer, (d) shall not be responsible to Falcon, any Liquidity
Provider or any other holder of any interest in Trust Assets for
the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Transaction Document
(except for the execution by the Program Agent of, and legality,
validity and enforceability against the Program Agent of its
obligations under, the Transaction Documents to which the Program
Agent is a party), and (e) shall incur no liability under or in
respect of the Transaction Documents by acting upon any notice
(including notice by telephone), consent, certificate or other
instrument or writing (which may be by facsimile or telex)
believed by it to be genuine and signed or sent by the proper
party or parties; except in each case for gross negligence or
wilful misconduct on the part of the Program Agent.
SECTION 5.03. Non-Reliance on Program Agent and Other
Purchasers. Each Purchaser expressly acknowledges that neither
the Program Agent, nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the
Program Agent hereafter taken, including, without limitation, any
review of the affairs of the Seller, shall be deemed to
constitute any representation or warranty by the Program Agent.
Each Purchaser represents and warrants to the Program Agent that
it has and will, independently and without reliance upon the
Program Agent or any other Purchaser and based on such documents
and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations,
property, prospects, financial and other conditions and
creditworthiness of the Seller and the Trust Assets and made its
own decision to enter into this Agreement, the other Transaction
Documents and all other documents related hereto or thereto.
SECTION 5.04. Reimbursement and Indemnification. The
Liquidity Providers agree to reimburse and indemnify the Program
Agent and its officers, directors, employees, representatives and
agents ratably according to their respective Liquidity Provider
Commitment Percentages, to the extent not paid or reimbursed by
the Seller (i) for any amounts for which the Program Agent,
acting in its capacity as Program Agent, is entitled to
reimbursement by the Seller hereunder and (ii) for any other
expenses incurred by the Program Agent, in its capacity as
Program Agent and acting on behalf of the Purchasers, in
connection with the administration and enforcement of this
Agreement and the other Transaction Documents.
<PAGE> 28
SECTION 5.05. Program Agent in its Individual Capacity.
The Program Agent and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with
the Seller or any Affiliate of the Seller as though the Program
Agent were not the Program Agent hereunder. With respect to the
acquisition of Class A Certificate Interests pursuant to this
Agreement, the Program Agent shall have the same rights and
powers under this Agreement as any Purchaser and may exercise the
same as though it were not the Program Agent, and the terms
"Liquidity Provider," "Purchaser," "Liquidity Providers" and
"Purchasers" shall include the Program Agent in its individual
capacity.
SECTION 5.06. Successor Program Agent. The Program Agent
may, upon ten days' notice to the Seller and the Purchasers, and
the Program Agent will, upon the direction of all of the
Purchasers (other than the Program Agent, in its individual
capacity) resign as Program Agent. If the Program Agent shall
resign, then the Majority of Class A Certificate Interests during
such ten-day period shall appoint from among the Purchasers a
successor agent. If for any reason no successor Program Agent is
appointed by the Majority of Class A Certificate Interests during
such ten-day period, then effective upon the termination of such
ten day period, the Purchasers shall perform all of the duties of
the Program Agent hereunder and under the other Transaction
Documents and the Seller shall make all payments in respect of
the Aggregate Unpaids directly to the applicable Purchasers and
for all purposes shall deal directly with the Purchasers. After
the effectiveness of any retiring Program Agent's resignation
hereunder as Program Agent, the retiring Program Agent shall be
discharged from its duties and obligations hereunder and under
the other Transaction Documents and the provisions of this
Article V and Article VIII shall continue in effect for its
benefit with respect to any actions taken or omitted to be taken
by it while it was Program Agent under this Agreement and under
the other Transaction Documents.
SECTION 5.07. First Chicago Roles. Each of the Liquidity
Providers acknowledges that First Chicago acts, or may in the
future act, (i) as administrative agent for Falcon, (ii) as
issuing and paying agent for the Commercial Paper, (iii) to
provide credit or liquidity enhancement for the timely payment
for the Commercial Paper and (iv) to provide other services from
time to time for Falcon (collectively, the "First Chicago
Roles"). Without limiting the generality of this Section 5.07,
each Liquidity Provider hereby acknowledges and consents to any
and all First Chicago Roles and agrees that in connection with
any First Chicago Role, First Chicago may take, or refrain from
taking, any action which it, in its discretion, deems
appropriate, including, without limitation, in its role as
<PAGE> 29
administrative agent for Falcon, the giving of notice to the
Program Agent of a mandatory purchase pursuant to Section 2.01
(b) or Section 2.07.
SECTION 5.08. Amendments, Waivers and Consents.
Falcon and the Program Agent each reserves the right, in its sole
discretion (subject to the next following sentence), to exercise
any rights and remedies available to the Purchasers or the
Program Agent under the Transaction Documents or pursuant to
applicable law, and also to agree to any amendment, modification
or waiver of any Transaction Document, to the extent such
Transaction Document provides for, or requires, the Purchasers'
or the Program Agent's agreement, modification or waiver.
Notwithstanding the foregoing, each of Falcon and the Program
Agent agrees for the benefit of the Liquidity Providers that it
shall not, subject to the terms of the Transaction Documents:
(a) without the prior written consent of each of the
Liquidity Providers,
(i) reduce in any manner the amount of, or delay the
timing of, distributions to be made to any Class A
Certificateholder or any Purchaser or deposits of amounts to be
so distributed, or
(ii) reduce any fees payable to the Program Agent or
Falcon which relate to payments to Liquidity Providers or delay
the dates on which such fees are payable, or
(iii) amend or waive any Early Amortization Event or
Servicer Default under any Transaction Document relating to the
bankruptcy of the Seller, the Servicer or Federal-Mogul, or
(iv) amend the definition of Class A Certificate Rate or
Amortization Commencement Date.
(b) without the prior written consent of the Majority
of Class A Certificate Interests,
(i) amend, modify or waive any provision of any Transaction
Document which would impair any rights expressly granted
to an assignee or participant, or
(ii) change the definitions of Eligible Receivable,
Liquidity Provider Commitment, Liquidity Provider Commitment
Percentage and Aggregate Reserves, or
(iii) amend any Early Amortization Event or Servicer
Default, or
<PAGE> 30
(iv) waive violations of the maximum permitted levels
for the Delinquency Ratio, the Loss-to-Liquidation Ratio and the
Dilution Ratio.
SECTION 5.09. Direction by Liquidity Providers to
Program Agent. The majority of the Liquidity Providers holding
Class A Certificate Interests shall have the right to direct the
Program Agent as to exercise by the Program Agent, as the Class A
Certificateholder, of any of its rights and/or remedies under the
Pooling and Servicing Agreement and the Series 1997-1 Supplement;
provided, however, the Program Agent shall have the right to
decline to follow any such direction if the Program Agent being
advised by counsel determines that the action so directed may not
be lawfully taken or would involve the Program Agent in any
personal liability.
<PAGE> 31
ARTICLE VI
ASSIGNMENTS
SECTION 6.01. Assignment. (a) The Seller and each
Liquidity Provider hereby agree and consent to the complete or
partial assignment by Falcon of all of its rights under, interest
in, title to and obligations under this Agreement to the
Liquidity Providers pursuant to Section 2.07 or to any other
Person, and upon such assignment, Falcon shall be released from
its obligations so assigned. Further, the Seller and Falcon
hereby agree that any assignee of a Liquidity Provider of this
Agreement or all or any of the Class A Certificate Interests of
such Liquidity Provider shall have all of the rights and
benefits under this Agreement as if the term "Liquidity Provider"
explicitly referred to such party, and no such assignment shall
in any way impair the rights and benefits of such Liquidity
Provider hereunder. The Seller shall not have the right to
assign its rights or obligations under this Agreement.
(b) Any Liquidity Provider may at any time and from time to
time assign to one or more Persons ("Purchasing Liquidity
Provider") all or any part of its rights and obligations under
this Agreement pursuant to the Assignment and Acceptance,
executed by such Purchasing Liquidity Provider and such selling
Liquidity Provider. The written consent of Falcon and the Seller
shall be required prior to the effectiveness of any such
assignment. Each assignee of a Liquidity Provider must have a
short-term debt rating of A-1 or better by Standard & Poor's
Ratings Group and P-1 by Moody's Investors Service, Inc. and must
agree to deliver to the Program Agent, promptly following any
request therefor by the Program Agent or Falcon, an
enforceability opinion in form and substance satisfactory to the
Program Agent and Falcon. Upon delivery of the executed
Assignment and Acceptance to the Program Agent, such selling
Liquidity Provider shall be released from its obligations
hereunder to the extent of such assignment. Thereafter, the
Purchasing Liquidity Provider shall for all purposes be a
Liquidity Provider party to this Agreement and shall have all the
rights and obligations of a Liquidity Provider under this
Agreement to the same extent as if it were an original party
hereto and no further consent or action by the Seller, the
Purchasers or the Program Agent shall be required.
(c) Each of the Liquidity Providers agree that in the event
that it shall cease to have a short-term debt rating of A-1 or
better by Standard & Poor's Ratings Group and P-1 by Moody's
Investors Service, Inc. (an "Affected Liquidity Provider"), such
Affected Liquidity Provider shall be obliged, at the request of
Falcon or the Program Agent, to assign promptly all of its rights
and obligations hereunder to (x) another Liquidity Provider or
<PAGE> 32
(y) another financial institution nominated by the Program Agent
and acceptable to Falcon and the Seller, and willing to
participate in this Agreement through the Termination Date in the
place of such Affected Liquidity Provider; provided that the
Affected Liquidity Provider receives payment in full, pursuant to
an Assignment and Acceptance, of an amount equal to such
Liquidity Provider's Liquidity Provider Commitment Percentage of
the Class A Invested Amount and Discount owing to the Liquidity
Providers and all accrued but unpaid fees and other costs and
expenses payable in respect of its Liquidity Provider Commitment
Percentage of the Class A Certificate Interests.
SECTION 6.02. Rights of Assignee. Upon any assignment
in accordance with this Article VI, (a) the assignee receiving
such assignment shall have all of the rights of such assignor
hereunder with respect to the Class A Certificate Interest (or
portion thereof) or rights associated therewith being assigned,
(b) the assignor shall be released from the obligations so
assigned and (c) all references to such assignor in the
Transaction Documents shall be deemed to apply to such assignee
to the extent of its interest in the related Collections.
SECTION 6.03. Notice of Assignment. Each assignor
shall provide notice to the Seller, the Program Agent and the
Trustee of any assignment of any Class A Certificate Interest (or
portion thereof) or rights associated therewith by such assignor
to any assignee.
ARTICLE VII
PARTICIPATIONS
SECTION 7.01 Participations. Each Liquidity Provider
may in the ordinary course of business sell participations, in
minimum amounts of $1,000,000, to one or more banks or other
entities in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a
portion of its Liquidity Provider Commitment and the Class A
Certificate Interests owned by it); provided, however, that (i)
such Liquidity Provider's obligations under this Agreement
(including, without limitation, its Liquidity Provider
Commitment) shall remain unchanged, (ii) such Liquidity Provider
shall remain solely responsible to the other parties hereto for
the performance of such obligations and (iii) the sale of such
participations shall be subject to the review and approval of the
Seller, which such approval shall not be unreasonably withheld.
The Seller, the Program Agent and the other Liquidity Providers
shall continue to deal solely and directly with such Liquidity
Provider in connection with such Liquidity Provider's rights and
obligations under this Agreement.
<PAGE> 33
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Seller. Without limiting
any other rights which the Program Agent or any Purchaser may
have hereunder or under applicable law, the Seller hereby agrees
to indemnify the Program Agent and each Purchaser and their
respective officers, directors, agents and employees (each an
"Indemnified Party") from and against any and all damages,
losses, claims, taxes, liabilities, costs, expenses and for all
other amounts payable, including reasonable attorneys' fees
(which attorneys may be employees of the Program Agent or such
Purchaser) and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded
against or incurred by any of them arising out of or as a result
of Transaction Documents or the acquisition, either directly or
indirectly, by a Purchaser of an interest in the Class A
Certificates or Class A Certificate Interests, excluding,
however:
(i) Indemnified Amounts to the extent that final
judgment of a court of competent jurisdiction holds such
Indemnified Amounts resulted from gross negligence or willful
misconduct on the part of the Indemnified Party seeking
indemnification; or
(ii) Indemnified Amounts to the extent the same
includes losses in respect of Eligible Receivables which are
wholly or partially uncollectible on account of the insolvency,
bankruptcy or lack of creditworthiness of the related Obligor or
the failure of such Collections to cover interest and principal
owed to a Class A Certificateholder;
provided, however, that nothing contained in this sentence shall
limit the liability of the Seller or limit the recourse of the
Purchasers to the Seller for amounts otherwise specifically
provided to be paid by the Seller under the terms of the
Transaction Documents. Without limiting the generality of the
foregoing indemnification, the Seller shall indemnify the Program
Agent and the Purchasers for Indemnified Amounts (including,
without limitation, losses in respect of uncollectible
receivables, regardless of whether reimbursement therefor would
constitute recourse to the Seller) resulting from:
(i) any representation or warranty made by the Seller (or
any officers of the Seller) under or in connection with any
Transaction Document or any other information or report delivered
by the Seller pursuant thereto, having been false or incorrect in
any material respect when made or deemed made;
<PAGE> 34
(ii) the failure by the Seller to comply with any
applicable law, rule or regulation with respect to any Receivable
related thereto, or the nonconformity of any Receivable included
therein with any such applicable law, rule or regulation;
(iii) any material failure of the Seller to perform its
duties or obligations in accordance with the provisions of any
Transaction Document;
(iv) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable (including, without limitation, a
defense based on such Receivable not being a legal, valid and
binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the
sale of the merchandise or service related to such Receivable or
the furnishing or failure to furnish such merchandise or
services;
(v) the commingling of Collections of Receivables at any
time with other funds;
(vi) any investigation, litigation or proceeding related to
or arising from any Transaction Document, the transactions
contemplated thereby, the use of the proceeds of a purchase, the
ownership of the Class A Certificate Interests or any other
investigation, litigation or proceeding relating to the Seller in
which any Indemnified Party becomes involved as a result of any
of the transactions contemplated thereby other than (a)
litigation between the Seller on the one hand and the Program
Agent and/or one or more of the Purchasers on the other hand in
which the Seller shall prevail or (b) any investigation or
proceeding arising from (i) the gross negligence or wilful
misconduct of the Program Agent and/or one or more of the
Purchasers or (ii) the unlawful conduct of the Program Agent
and/or one or more of the Purchasers; and
(vii) any Servicer Default.
<PAGE> 35
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. Subject to Section
5.08, no amendment of any provision of this Agreement shall in
any event be effective unless the same shall be in writing and
signed by the parties hereto. Any waiver or consent shall be
effective only if signed by the party waiving any right, in the
specific instance and for the specific purpose for which given.
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including telex and facsimile
communication) and shall be personally delivered or sent by
certified mail, postage prepaid, or overnight courier or
facsimile, to the intended party at the address or facsimile
number of such party set forth under its name on the signature
pages hereof or at such other address or facsimile number as
shall be designated by such party in a written notice to the
other parties hereto. All such notices and communications shall
be effective (a) if personally delivered, when received, (b) if
sent by certified mail, four Business Days after having been
deposited in the mail, postage prepaid, (c) if sent by overnight
courier, two Business Days after having been given to such
courier, unless sooner received by the addressee and (d) if
transmitted by facsimile, when sent, upon receipt confirmed by
telephone or electronic means. Notices and communications sent
or transmitted hereunder on a day that is not a Business Day
shall be deemed to have been sent or transmitted on the following
Business Day.
SECTION 9.03. No Waiver; Remedies. No failure on the
part of the Program Agent, any Liquidity Provider, any
Indemnified Party, Falcon or any other holder of any Class A
Certificate Interest to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law. Without limiting the
foregoing, the Program Agent and each Liquidity Provider is
hereby authorized by the Seller at any time and from time to
time, to the fullest extent permitted by law, to set-off and
apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at
any time owing by the Program Agent and each Liquidity Provider
to or for the credit or the account of the Seller, now or
hereafter existing under this Agreement, to the Program Agent,
any Liquidity Provider, any Indemnified Party or Falcon, or their
respective successors and assigns; provided, however, that no
<PAGE> 36
such Person shall exercise any such right of set-off without the
prior written consent of the Program Agent. Each set-off by
Falcon or any Liquidity Provider under this Section 9.03 against
the Class A Invested Amount shall reduce the Class A Invested
Amount accordingly.
SECTION 9.04. Binding Effect; Survival. This
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, and
the provisions of Section 3.02 shall inure to the benefit of the
Liquidity Providers and their respective successors and assigns;
provided, however, that nothing in the foregoing shall be deemed
to authorize any assignment not permitted by Section 6.01. This
Agreement shall create and constitute the continuing obligation
of the parties hereto in accordance with its terms, and shall
remain in full force and effect until one year and one day after
the earlier of the date on which all Obligations are paid in full
or the Trust shall terminate in accordance with the Pooling and
Servicing Agreement. The provisions of Sections 3.02, 3.03(b),
5.04, 8.01 and 9.16 shall be continuing and shall survive any
termination of this Agreement.
SECTION 9.05. No Proceedings. The Seller (on its own
behalf and on behalf of its Affiliates), the Trustee, The First
National Bank of Chicago, individually and as Program Agent, and
each Liquidity Provider hereby agrees that it will not institute
against Falcon, or join any other Person in instituting against
Falcon, any insolvency proceeding (namely, any proceeding of the
type referred to in the definition of "Insolvency Event") so long
as any Commercial Paper issued by Falcon shall be outstanding or
there shall not have elapsed one year plus one day since the last
day on which any such Commercial Paper shall have been
outstanding. The foregoing shall not limit the right of the
Seller, the Trustee, The First National Bank of Chicago,
individually or as the Program Agent, or any Liquidity Provider
to file any claim in or otherwise take any action with respect to
any such insolvency proceeding that was instituted against Falcon
by any Person other than the Seller, the Trustee, The First
National Bank of Chicago, individually or as the Program Agent,
or any Liquidity Provider.
SECTION 9.06. Captions and Cross References. The
various captions (including, without limitation, the table of
contents) in this Agreement are provided solely for convenience
of reference and shall not affect the meaning or interpretation
of any provision of this Agreement.
SECTION 9.07. Integration. This Agreement, together
with the other Transaction Documents, contains a final and
complete integration of all prior expressions by the parties
<PAGE> 37
hereto with respect to the subject matter hereof and, together
with all the other Transaction Documents and the Fee Letter,
shall constitute the entire agreement among the parties hereto
with respect to the subject matter hereof, superseding all prior
oral or written understandings.
SECTION 9.08. Governing Law. THIS AGREEMENT,
INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF
LAW PROVISIONS EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE
INTERESTS OF FALCON OR THE LIQUIDITY PROVIDERS IN THE TRUST
ASSETS IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
SECTION 9.09. Submission to Jurisdiction. Each of the
parties hereto hereby irrevocably and unconditionally submits to
the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, and each
of the parties hereto hereby irrevocably and unconditionally (i)
agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or,
to the extent permitted by law, such federal court and (ii)
waives the defense of an inconvenient forum. Each of the parties
hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law.
SECTION 9.10. Consent to Service of Process. Each
party to this Agreement irrevocably consents to service of
process by personal delivery, certified mail, postage prepaid or
overnight courier. Nothing in this Agreement will affect the
right of any party to this Agreement to serve process in any
other manner permitted or required by law.
SECTION 9.11. Waiver of Jury Trial. Each party to
this Agreement waives any right to a trial by jury in any action
or proceeding to enforce or defend any rights under or relating
to this Agreement, any other Transaction Document, the Fee Letter
or any amendment, instrument, document or agreement delivered or
which may in the future be delivered in connection herewith or
therewith or arising from any course of conduct, course of
dealing, statements (whether verbal of written), actions of any
of the parties hereto and the Liquidity Providers or any other
relationship existing in connection with this Agreement of any
other Transaction Document or the Fee Letter, and agrees that any
such action or proceeding shall be tried before a court and not
before a jury.
<PAGE> 38
SECTION 9.12. Execution in Counterparts. This
Agreement 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 when taken together shall constitute one and the same
Agreement.
SECTION 9.13. Replacement of Liquidity Providers. The
Program Agent shall have the right, in its sole discretion, to
terminate the rights and obligations of the Liquidity Providers
to make the Purchase or fund Increases in the event that the
applicable rating described in Sections 6.01(b) and 6.01(c) shall
be downgraded. Such termination shall be effective upon written
notice to such effect delivered by the Program Agent to such
Liquidity Provider, whereupon the Term of such Liquidity
Provider's Commitment shall be deemed to have terminated. Upon
such termination, the Liquidity Provider shall cease to have any
rights or obligations with respect to future Increases under this
Agreement but shall continue to have the rights and obligations
of a Liquidity Provider with respect to any Increases funded by
it under this Agreement prior to such termination.
SECTION 9.14. Reimbursement of Program Agent. Each
Liquidity Provider will on demand reimburse the Program Agent its
Liquidity Provider Commitment Percentage of any and all
reasonable costs and expenses (including, without limitation,
reasonable fees and disbursements of counsel) which may be
incurred in connection with collecting amounts owed with respect
to any Class A Certificate in which such Liquidity Provider
purchases Class A Certificate Interests for which the Program
Agent is not promptly reimbursed by the Seller or otherwise.
Should the Program Agent later be reimbursed by the Seller or
Falcon for any such amount, the Program Agent shall immediately
pay to each Liquidity Provider its Liquidity Provider Commitment
Percentage of such amount.
SECTION 9.15. No Conflict of Interest. The Program
Agent and its Affiliates may accept deposits from, lend money or
otherwise extend credit to, act as trustee under indentures of,
and generally engage in any kind of business with, the Seller and
any of its Affiliates and any Person who may do business with or
own securities of the Seller or any of its Affiliates, all as
though this Agreement had not been entered into and without any
duty to account therefor to Falcon or any Liquidity Provider.
SECTION 9.16. Withholding Taxes. Each Liquidity
Provider warrants that it is not subject to any taxes, charges,
levies or withholdings with respect to payments under this
<PAGE> 39
Agreement that are imposed by means of withholding by any
applicable taxing authority ("Withholding Tax"). Each Liquidity
Provider agrees to provide the Program Agent, from time to time
upon the Program Agent's request, completed and signed copies of
any documents that may be required by any applicable taxing
authority to certify such Liquidity Provider's exemption from
Withholding Tax with respect to payments to be made to such
Liquidity Provider under this Agreement. Each Liquidity Provider
agrees to hold the Program Agent and the Seller harmless from any
Withholding Tax imposed due to such Liquidity Provider's failure
to establish that it is not subject to Withholding Tax.
IN WITNESS WHEREOF, the parties hereto have caused this
Certificate Purchase Agreement to be duly executed by their
respective officers thereunto duly authorized as of the date
first above written.
FEDERAL-MOGUL FUNDING CORPORATION,
as Seller
By----------------------------------
Name:
Title:
FALCON ASSET SECURITIZATION CORPORATION,
a Purchaser
By-----------------------------------
Name:
Title: Authorized Signatory
THE FIRST NATIONAL BANK OF CHICAGO,
as Program Agent
By----------------------------------
Name:
Title: Authorized Agent
<PAGE> 40
Liquidity Providers:
Liquidity Provider
Commitment: $100,000,000
Liquidity Provider
Commitment Percentage: 100%
NBD Bank,
a Liquidity Provider and a
Potential Purchaser
By----------------------------
Name:
Title:
<PAGE> 1
<TABLE>
EXHIBIT 11.1 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
FOR THE THREE MONTHS ENDED PRIMARY FULLY DILUTED
-------------- ---------------
MARCH 31 1997 1996 1997 1996
- ------------------------------------------ ------ ------ ------ ------
<S>
EARNINGS: (In Millions)
<C> <C> <C> <C>
Net earnings $ 13.9 $ 10.6 $ 13.9 $ 10.6
Series C preferred dividend requirements (.6) (.6) - -
Series D preferred dividend requirements (1.5) (1.6) (1.6) (1.6)
Additional required ESOP contribution <F1> - - (.5) (.5)
----- ----- ----- -----
Net earnings available for common
and equivalent shares $ 11.8 $ 8.4 $ 11.9 $ 8.5
===== ===== ===== =====
WEIGHTED AVERAGE SHARES: (In Millions)
Common shares outstanding 35.1 35.0 35.1 35.0
Dilutive stock options outstanding .1 - .2 -
Conversion of Series C preferred stock <F3> - - 1.6 1.8
Contingent issuance of common stock to
satisfy the redemption price guarantee <F2><F4> - - .3 .6
----- ----- ----- -----
Common and equivalent shares outstanding 35.2 35.0 37.2 37.4
===== ===== ===== =====
PER COMMON AND EQUIVALENT SHARE:
Net earnings $ .33 $ .24 $ .32 $ .23
===== ===== ===== =====
</TABLE>
[FN]
<F1> Amount represents the additional after-tax contribution that would be
necessary to meet the ESOP debt service requirements under an assumed
conversion of the Series C preferred stock.
<F2> Calculations consider the March 31, 1997 common stock market price in
accordance with Emerging Issues Task Force Abstract No. 89-12.
<F3> Amount represents the weighted average number of common shares issued
assuming conversion of preferred stock outstanding.
<F4> Amount represents the additional number of common shares that would be
issued in order to satisfy the Series C preferred stock redemption price
guarantee. This calculation considers only the number of preferred
shares Held by the ESOP that have been allocated to participants'
accounts as of March 31 of the respective years.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 33,000
<SECURITIES> 0
<RECEIVABLES> 273,100
<ALLOWANCES> 17,600
<INVENTORY> 385,700
<CURRENT-ASSETS> 757,200
<PP&E> 525,900
<DEPRECIATION> 200,600
<TOTAL-ASSETS> 1,419,700
<CURRENT-LIABILITIES> 639,600
<BONDS> 206,900
<COMMON> 175,300
0
128,100
<OTHER-SE> 6,800
<TOTAL-LIABILITY-AND-EQUITY> 1,419,700
<SALES> 485,600
<TOTAL-REVENUES> 485,600
<CGS> 373,500
<TOTAL-COSTS> 78,400
<OTHER-EXPENSES> 1,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,800
<INCOME-PRETAX> 22,500
<INCOME-TAX> 8,600
<INCOME-CONTINUING> 13,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,900
<EPS-PRIMARY> .33
<EPS-DILUTED> .32
</TABLE>
