EXHIBIT 10.14
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RECEIVABLES SALE AND CONTRIBUTION AGREEMENT
DATED AS OF NOVEMBER 20, 1998
BETWEEN
FEDERAL-MOGUL CORPORATION,
CARTER AUTOMOTIVE COMPANY, INC. AND
FEDERAL-MOGUL CANADA LIMITED
AS THE ORIGINATORS
AND
FEDERAL-MOGUL FUNDING CORPORATION,
AS THE BUYER
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TABLE OF CONTENTS
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Page
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ARTICLE I. AMOUNTS AND TERMS OF THE PURCHASES...............................................................2
Section 1.1. Purchases of Receivables.......................................................................2
Section 1.2. Payment for the Purchases......................................................................3
Section 1.3. Purchase Price Credit Adjustments..............................................................5
Section 1.4. Payments and Computations, Etc.................................................................5
Section 1.5. Transfer of Records............................................................................6
Section 1.6. Characterization...............................................................................6
ARTICLE II. REPRESENTATIONS AND WARRANTIES..................................................................7
Section 2.1. Originators' Representations and Warranties....................................................7
ARTICLE III. CONDITIONS OF PURCHASES.......................................................................10
Section 3.1. Conditions Precedent to Initial Purchase......................................................10
Section 3.2. Conditions Precedent to All Purchases.........................................................11
ARTICLE IV. COVENANTS......................................................................................11
Section 4.1. Affirmative Covenants of Originators..........................................................11
Section 4.2. Negative Covenants of Originators.............................................................16
ARTICLE V. ADMINISTRATION AND COLLECTION...................................................................17
Section 5.1. Designation of Sub-Servicer...................................................................17
ARTICLE VI. EVENTS OF PURCHASE AND SALE TERMINATION........................................................17
Section 6.1. Events of Purchase and Sale Termination.......................................................17
Section 6.2. Remedies......................................................................................19
ARTICLE VII. INDEMNIFICATION...............................................................................19
Section 7.1. Indemnities by the Originators................................................................19
Section 7.2. Other Costs and Expenses......................................................................21
ARTICLE VIII. MISCELLANEOUS................................................................................21
Section 8.1. Waivers and Amendments........................................................................21
Section 8.2. Notices.......................................................................................21
Section 8.3. Protection of Buyer's Interests...............................................................22
Section 8.4. Confidentiality...............................................................................22
Section 8.5. Bankruptcy Petition...........................................................................23
Section 8.6. Limitation of Liability.......................................................................23
SECTION 8.7. CHOICE OF LAW.................................................................................23
SECTION 8.8. CONSENT TO JURISDICTION.......................................................................24
SECTION 8.9. WAIVER OF JURY TRIAL..........................................................................24
Section 8.10. Binding Effect; Assignability................................................................24
Section 8.11. Subordination................................................................................25
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Section 8.12. Integration; Survival of Terms..............................................................25
Section 8.13. Counterparts; Severability..................................................................25
EXHIBIT I DEFINITIONS....................................................................................28
EXHIBIT II CHIEF EXECUTIVE OFFICE OF THE ORIGINATORS; LOCATIONS OF RECORDS; TRADE NAMES; FEDERAL
EMPLOYER IDENTIFICATION NUMBER...........................................................................36
EXHIBIT III COLLECTION ACCOUNTS..........................................................................37
EXHIBIT IV [RESERVED]....................................................................................38
EXHIBIT V FORM OF COLLECTION ACCOUNT AGREEMENT...........................................................39
EXHIBIT VI CREDIT POLICIES...............................................................................40
EXHIBIT VII [RESERVED]...................................................................................41
EXHIBIT VIII FORM OF SETTLEMENT STATEMENT................................................................42
EXHIBIT IX FORM OF SUBSCRIPTION AGREEMENT................................................................43
EXHIBIT X FORM OF SUBORDINATED NOTE......................................................................49
SCHEDULE A DOCUMENTS AND RELATED ITEMS TO BE DELIVERED ON OR PRIOR TO THE INITIAL PURCHASE...............54
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THIS RECEIVABLES SALE AND CONTRIBUTION AGREEMENT, dated as of November
20, 1998, is by and among FEDERAL-MOGUL CORPORATION, a Michigan corporation
("FEDERAL-MOGUL"), CARTER AUTOMOTIVE COMPANY, INC., a Delaware corporation
("CARTER"), and FEDERAL-MOGUL CANADA LIMITED, a Canadian corporation ("FEDERAL-
MOGUL CANADA", and each of Federal-Mogul, Carter and Federal-Mogul Canada an
"ORIGINATOR" and collectively, the "ORIGINATORS"), and FEDERAL-MOGUL FUNDING
CORPORATION, a Michigan corporation (the "BUYER"). Unless defined elsewhere
herein, capitalized terms used in this Agreement shall have the meanings
assigned to such terms in EXHIBIT I hereto.
PRELIMINARY STATEMENTS
The Originators now own, and from time to time hereafter will own,
Receivables. Each Originator wishes to sell and assign to the Buyer, and
the Buyer wishes to purchase from such Originator, all of such Originator's
right, title and interest in and to its Receivables now owned and existing
and hereafter arising.
Each Originator and the Buyer believe that it is in their mutual best
interests for such Originator to sell its Receivables to the Buyer and for
the Buyer to purchase such Receivables.
The Buyer shall, on each applicable Purchase Date, purchase all of
each Originator's right, title and interest in and to its Receivables
existing on such date and all Related Security and Collections associated
therewith.
Each Originator and the Buyers intend the transactions contemplated
hereby to be true sales of its Receivables from such Originator to the
Buyer, providing the Buyer with the full benefits of ownership of such
Receivables, and each Originator and the Buyer do not intend these
transactions to be, or for any purpose to be characterized as, loans from
the Buyer to such Originator.
Upon each purchase of Receivables from the Originators, the Buyer will
sell undivided interests therein and in the associated Related Security and
Collections pursuant to that certain Receivable Interest Purchase Agreement
dated as of November 20, 1998 (as the same may from time to time hereafter
be amended, supplemented, restated or otherwise modified, the "PURCHASE
AGREEMENT") among the Buyer, Federal-Mogul, as Servicer, Falcon Asset
Securitization Corporation ("FALCON"), the financial institutions from time
to time party thereto as "INVESTORS" and The First National Bank of Chicago
or any successor agent appointed under Article X of the Purchase Agreement,
as agent for Falcon and such Investors (in such capacity, the "AGENT").
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchases of Receivables.
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(a) Effective on the date of the initial Purchase hereunder, in
consideration for the Purchase Price and upon the terms and subject to the
conditions set forth herein, each Originator does hereby sell, assign, transfer,
set-over and otherwise convey to the Buyer, without recourse (except to the
extent expressly provided herein), and the Buyer does hereby purchase from each
Originator, all of such Originator's right, title and interest in and to all
Receivables existing as of the date of such initial Purchase and all Receivables
thereafter arising, together, in each case, with all Related Security relating
thereto and all Collections and other proceeds thereof; PROVIDED, HOWEVER, that
in no event shall the Buyer be obligated to purchase, or any Originator be
obligated to sell, any Receivable arising after the Termination Date; PROVIDED,
FURTHER, that in no event shall the Buyer be obligated to purchase from an
Originator (other than Federal-Mogul), or such Originator be obligated to sell
to the Buyer, any Receivable arising on or after the date that such Originator
ceases to be a wholly-owned subsidiary of Federal-Mogul. On the date of the
initial Purchase, the Buyer shall acquire all of each Originator's right, title
and interest in and to all Receivables existing as of the close of business on
the Business Day immediately prior to such Purchase, together with all Related
Security relating thereto and all Collections and other proceeds thereof. On
each Business Day thereafter through and including the Termination Date, the
Buyer shall acquire all of each Originator's right, title and interest in and to
all Receivables which were not previously purchased by the Buyer hereunder upon
the creation of such Receivables (together with all Related Security relating
thereto and all Collections and other proceeds thereof), PROVIDED THAT the
acquisition by the Buyer of such right, title and interest of any Originator in
connection with each Purchase hereunder is conditioned upon and subject to such
Originator's receipt of the Purchase Price therefor in accordance with SECTION
1.2 below. In connection with consummation of any Purchase hereunder, the Buyer
may request that an Originator deliver, and such Originator shall deliver, such
approvals, opinions, information, reports or documents as the Buyer and/or the
Agent (as the Buyer's assignee) may reasonably request.
(b) It is the intention of the parties hereto that each Purchase of
Receivables made hereunder shall constitute a "sale of accounts" (as such term
is used in Article 9 of the UCC), which sales are absolute and irrevocable and
provide the Buyer with the full benefits of ownership of the Receivables.
Except for the Purchase Price Credits owed pursuant to SECTION 1.3 hereof, each
sale of Receivables hereunder is made without recourse to any Originator;
PROVIDED, HOWEVER, that (i) an Originator shall be liable to the Buyer for all
representations, warranties and covenants made by such Originator individually,
and in the case of Federal-Mogul, as the Sub-Servicer, pursuant to the terms of
the Transaction Documents to which such Originator and the Sub-Servicer is a
party, and (ii) such sale does not constitute and is not intended to result in
an assumption by the Buyer or any assignee thereof of any obligation of any
Originator or any other Person arising in connection with the Receivables, the
related Contracts and/or other Related Security or any other obligations of any
Originator. In view of the intention
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of the parties hereto that the Purchases of Receivables made hereunder shall
constitute sales of such Receivables rather than loans secured thereby, each
Originator agrees on or prior to the date hereof to mark its master data
processing records relating to the Receivables with a legend acceptable to the
Buyer and to the Agent (as the Buyer's assignee), evidencing that the Buyer has
purchased such Receivables as provided in this Agreement and to note in its
financial statements that its Receivables have been assigned to the Buyer. Upon
the request of the Buyer or the Agent (as the Buyer's assignee), an Originator
will execute and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary or appropriate to perfect and maintain the perfection of the Buyer's
ownership interest in the Purchased Assets, or as the Buyer or the Agent (as the
Buyer's assignee) may reasonably request.
Section 1.2. Payment for the Purchases.
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(a) The Purchase Price for the initial Purchase of Receivables shall
be payable in full by the Buyer to the applicable Originator on the date of such
initial Purchase, and shall be paid to such Originator in the following manner:
(i) by delivery of immediately available funds, to the extent of
funds made available to the Buyer in connection with its subsequent sale of
an interest in such Receivables to the Purchasers under the Purchase
Agreement; PROVIDED THAT, with respect to only Federal-Mogul, a portion of
such funds shall be offset by amounts owed by Federal-Mogul to the Buyer on
account of the issuance of equity in the manner contemplated in the
Subscription Agreement and having a total value of not less than
$4,500,000, and
(ii) the balance, with respect to Federal-Mogul and Carter, with the
proceeds of a Subordinated Loan.
The Purchase Price for each Purchase after the initial Purchase shall become due
and owing in full by the Buyer to an Originator or its designee on the date of
such Purchase (EXCEPT THAT the Buyer may, with respect to any such Purchase,
offset against such Purchase Price any amounts owed by such Originator to the
Buyer hereunder and which have become due but remain unpaid) and shall be paid
to such Originator in the manner provided in the following paragraphs (b), (c)
and (d).
(b) With respect to any Purchase after the initial Purchase
hereunder, on each Settlement Date, the Buyer shall pay to the Sub-Servicer the
Sub-Servicer Fee and to each Originator the Purchase Price for each Purchase
during the preceding Collection Period as follows:
FIRST, by delivery of immediately available funds, to the extent of
funds available to the Buyer from its subsequent sale of an interest in
such Receivables to the Agent for the benefit of the Purchasers under the
Purchase Agreement or otherwise; provided that Buyer shall make such
payments of such Sub-Servicer Fee and Purchase Price by
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delivery of immediately available funds, first, to Originators other than
Federal-Mogul and, second, to Federal-Mogul;
SECOND, by borrowing from such Originator a subordinated revolving
loan (each, a "SUBORDINATED LOAN") from such Originator (other than
Federal-Mogul Canada) in an amount not to exceed the lesser of (i) the
remaining unpaid portion of such Purchase Price and (ii) the maximum
Subordinated Loan that could be borrowed without rendering the Buyer's Net
Worth less than the Required Capital Amount; and
THIRD, with respect to only Federal-Mogul, unless Federal-Mogul has
declared the Termination Date to have occurred, by accepting a contribution
to its capital pursuant to the Subscription Agreement in an amount equal to
the remaining unpaid balance of its Purchase Price.
Subject to the limitations set forth in the preceding clause SECOND, each
Originator irrevocably agrees to advance each Subordinated Loan requested by the
Buyer on or prior to the Termination Date. The Subordinated Loans shall be
evidenced by, and shall be payable in accordance with the terms and provisions
of, the Subordinated Notes and shall be payable solely from funds which the
Buyer is not required under the Purchase Agreement to set aside for the benefit
of, or otherwise pay over to, the Purchasers.
(c) From and after the Termination Date, each Originator shall not be
obligated to (but may, at its option): (i) sell Receivables to the Buyer, or
(ii) with respect to only Federal-Mogul, contribute Receivables to the Buyer's
capital pursuant to clause THIRD in SECTION 1.2(B) unless Federal-Mogul
reasonably determines that the Purchase Price therefor will be satisfied with
funds available to the Buyer from sales of interests in the Receivables pursuant
to the Purchase Agreement, Collections, proceeds of Subordinated Loans or
otherwise.
(d) On each Business Day during a Collection Period after the date of
the initial Purchase, all Collections received shall be applied by each
Originator as payments toward the Purchase Price of Receivables sold or to be
sold by the Originator to the Buyer during such Collection Period. Although
amounts shall be paid directly to an Originator on a daily basis in accordance
with the first sentence of this paragraph, settlement of the Purchase Price
between the Buyer and an Originator shall be effected on a monthly basis on
Settlement Dates with respect to all Purchases within the same Collection Period
and based on the information contained in the Settlement Statement for the
Collection Period then most recently ended. In addition to such other
information as may be included therein, each Settlement Statement shall set
forth the following with respect to the related Collection Period: (i) the
aggregate Outstanding Balance of Receivables created and conveyed in Purchases
during such Collection Period, as well as the Net Receivables Balance (as
defined in the Purchase Agreement) included therein, (ii) the aggregate Purchase
Price payable to such Originator in respect of such Purchases, specifying the
Discount Factor in effect for such Collection Period and the aggregate Purchase
Price Credits deducted in calculating such aggregate Purchase Price, (iii) the
aggregate amount of funds received by such Originator during such Collection
Period which are to be applied toward the aggregate Purchase Price owing for
such Collection Period pursuant to the first sentence of this paragraph, (iv)
the
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increase or decrease in the amount outstanding under the applicable Subordinated
Note as of the end of such Collection Period after giving effect to the
application of funds toward the aggregate Purchase Price and the restrictions on
Subordinated Loans set forth in paragraph (b) above, and (v) with respect to
only Federal-Mogul, the amount of any capital contribution made by Federal-Mogul
to the Buyer as of the end of such Collection Period pursuant to paragraph (c)
above. Although settlement shall be effected on Settlement Dates, increases or
decreases in the amount owing under any Subordinated Note made pursuant to
paragraph (b) above and any contribution of capital by Federal-Mogul to the
Buyer made pursuant to paragraph (c) above shall be deemed to have occurred and
shall be effective as of the last Business Day of the Collection Period to which
such settlement relates.
Section 1.3. Purchase Price Credit Adjustments. If on any day the
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Outstanding Balance of a Receivable is:
(a) reduced as a result of any defective or damaged goods or
services, any cash discount or any adjustment by the applicable Originator
(whether individually or in its performance of its duties as Sub-Servicer),
(b) reduced or canceled as a result of a setoff in respect of any
claim by any Person (whether such claim arises out of the same or a related
transaction or an unrelated transaction and whether such claim relates to
an Originator or any Affiliate thereof), or
(c) is otherwise reduced as a result of any of the factors set forth
in the definition of "Dilutions,"
then, in such event, the Buyer shall be entitled to a credit (each, a "PURCHASE
PRICE CREDIT") against the Purchase Price otherwise payable hereunder equal to
the full amount of such reduction or cancellation. If such Purchase Price
Credit exceeds the Original Balance of the Receivables to be sold hereunder on
any Purchase Date, then the applicable Originator shall pay the remaining amount
of such Purchase Price Credit in cash within 5 Business Days thereafter;
PROVIDED THAT if the Termination Date has not occurred, the applicable
Originator shall be allowed to deduct the remaining amount of such Purchase
Price Credit from any indebtedness owed to it under the applicable Subordinated
Note.
Section 1.4. Payments and Computations, Etc. All amounts to be paid
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or deposited by the Buyer hereunder shall be paid or deposited in accordance
with the terms hereof on the day when due in immediately available funds to the
account of the applicable Originator designated from time to time by such
Originator or as otherwise directed by such Originator. In the event that any
payment owed by any Person hereunder becomes due on a day which is not a
Business Day, then such payment shall be made on the next succeeding Business
Day. Any amount due hereunder which is not paid when due hereunder shall bear
interest at the Base Rate as in effect from time to time until paid in full;
PROVIDED, HOWEVER, that such interest rate shall not at any time exceed the
maximum rate permitted by applicable law. All computations of interest payable
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first but excluding the last day) elapsed; provided,
however, that all computations of interest payable hereunder with respect to
Federal-Mogul Canada shall be made
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on the basis of a year of 365 days for the actual number of days (including the
first but excluding the last day) elapsed.
Section 1.5. Transfer of Records.
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(a) In connection with the Purchases of Receivables hereunder, each
Originator hereby sells, transfers, assigns and otherwise conveys to the Buyer
all of its right and title to and interest in the Records relating to all of its
Receivables sold hereunder, without the need for any further documentation in
connection with any Purchase. In connection with such transfer, each Originator
hereby grants to each of the Buyer, the Agent and the Servicer an irrevocable,
non-exclusive license to use, without royalty or payment of any kind, all
software used by such Originator to account for its Receivables, to the extent
necessary to administer its Receivables, whether such software is owned by such
Originator or is owned by others and used by such Originator under license
agreements with respect thereto, PROVIDED THAT should the consent of any
licensor of such Originator to such grant of the license described herein be
required, such Originator hereby agrees that upon the request of the Buyer (or
the Agent as the Buyer's assignee), such Originator will use its reasonable
efforts to obtain the consent of such third-party licensor. The license granted
hereby shall be irrevocable, and shall terminate on the date this Agreement
terminates in accordance with its terms.
(b) Each Originator (i) shall take such action requested by the Buyer
and/or the Agent (as the Buyer's assignee), from time to time hereafter, that
may be necessary or appropriate to ensure that the Buyer and its assigns under
the Purchase Agreement have an enforceable ownership interest in the Records
relating to the Receivables purchased from such Originator hereunder, and (ii)
shall use its reasonable efforts to ensure that the Buyer, the Agent and the
Servicer each has an enforceable right (whether by license or sublicense or
otherwise) to use all of the computer software used to account for the
Receivables and/or to recreate such Records.
Section 1.6. Characterization. If, notwithstanding the intention of
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the parties expressed in SECTION 1.1(B), any sale or contribution by an
Originator to the Buyer of Receivables hereunder shall be characterized as a
secured loan and not a sale, then this Agreement shall be deemed to constitute a
security agreement under the UCC and other applicable law. Without being in
derogation of the parties' intention that each sale of Receivables hereunder
shall constitute a true sale thereof, each Originator hereby grants to the Buyer
a duly perfected security interest in all of such Originator's right, title and
interest in, to and under the Purchased Assets, which security interest shall be
prior to all other Adverse Claims thereto. After an Event of Purchase and Sale
Termination, the Buyer and its assignees shall have, in addition to the rights
and remedies which they may have under this Agreement, all other rights and
remedies provided to a secured creditor after default under the UCC and other
applicable law, which rights and remedies shall be cumulative.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Section 2.1. Originators' Representations and Warranties. Each
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Originator hereby represents and warrants, individually and, in the case of
Federal-Mogul, in its capacity as the Sub-Servicer, to the Buyer and its assigns
that:
(a) Corporate Existence and Power. With respect to Federal-Mogul and
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Carter, such Originator is a corporation duly organized and validly existing and
in good standing under the laws of the State of its incorporation and, with
respect to Federal-Mogul Canada Limited, such Originator is a corporation duly
organized and validly existing and in good standing under the laws of the
Province of Ontario, and with respect to Federal-Mogul, Carter and Federal-Mogul
Canada, 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 the Transaction Documents to which it
is a party.
(b) Due Qualification. Such Originator is duly qualified to do
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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, be in good standing
or obtain licenses or approvals would not have a Material Adverse Effect.
(c) Due Authorization; No Conflict. The execution and delivery of the
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Transaction Documents to which such Originator is a party, the performance of
the transactions contemplated thereby and the fulfillment of the terms 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 such Originator is a party or by which it or
its properties are bound. The execution and delivery of the Transaction
Documents to which such Originator is a party, the performance of the
transactions contemplated thereby and the fulfillment of the terms thereof which
are applicable to such Originator, will not conflict with or violate any
material Requirements of Law applicable to such Originator.
(d) No Consents. Other than the filing of the financing statements
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required hereunder, no authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or regulatory body is
required for the due execution, delivery and performance by such Originator of
the Transaction Documents to which it is a party, other than authorizations,
approvals, actions, notices or filings the failure to obtain or perform would
not reasonably be expected to have a Material Adverse Effect.
(e) Binding Effect. The Transaction Documents to which such
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Originator is a party have been duly executed and delivered by such Originator
and constitute the legal, valid and binding obligations of such Originator
enforceable against such Originator in accordance with their respective terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting creditors' rights
in general
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and except as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(f) No Proceedings. There are no actions, suits or proceedings
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pending, or to the best of such Originator's knowledge, threatened, against or
affecting the Buyer or any Originator, or any of the respective properties of
the Buyer or any Originator, in or before any court, arbitrator or other body,
which are reasonably likely to have a Material Adverse Effect. Such Originator
is not in default with respect to any order of any court, arbitrator or
Governmental Authority.
(g) Accuracy of Information. All information heretofore furnished by
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such Originator or any of its Affiliates to the Buyer, the Agent or the
Purchasers for purposes of or in connection with this Agreement, any of the
other Transaction Documents or any transaction contemplated hereby or thereby
is, and all such information hereafter furnished by such Originator or any of
its Affiliates to the Buyer, the Agent and/or the Purchasers will be, true and
accurate in every material respect, on the date such information is stated or
certified and does not and will not contain any material misstatement of fact or
omit to state a material fact or any fact necessary to make the statements
contained therein not misleading.
(h) Use of Proceeds. No proceeds of any Purchase hereunder will be
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used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G and Regulation U of the
Board of Governors of the United States Federal Reserve System as now and from
time to time hereafter in effect or for any purpose which violates the
provisions of the Regulations of such Board of Governors (including but not
limited to the provisions of Regulation G, Regulation U and Regulation X) or any
similar rule of any other Governmental Authority.
(i) Good Title; Perfection. Immediately prior to each Purchase
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hereunder, such Originator shall be the legal and beneficial owner of the
Receivables and Related Security with respect thereto, free and clear of any
Adverse Claim, except as created by the Transaction Documents. This Agreement
is effective to, and shall, upon each Purchase hereunder, irrevocably transfer
to the Buyer all legal and equitable title to, with the legal right to sell and
encumber, such Receivable, its Collections and the Related Security, free and
clear of any Adverse Claim, except as created by the Transaction Documents.
Without limiting the foregoing, there has been duly filed all financing
statements or other similar instruments or documents necessary under the UCC of
all appropriate jurisdictions (or any comparable law) to provide the Buyer with
a first priority perfected ownership interest in such Receivables and the other
Purchased Assets.
(j) Places of Business. The principal places of business and chief
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executive office of such Originator and the offices where such Originator keeps
all its Records are located at the address(es) listed on EXHIBIT II or such
other locations notified to the Buyer and the Agent (as the Buyer's assignee) in
accordance with SECTION 4.2(A) in jurisdictions where all action required by
SECTION 4.2(A) has been taken and completed. Such Originator's Federal Employer
Identification Number is correctly set forth on EXHIBIT II.
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(k) Collection Banks; etc. Except as otherwise notified to the Buyer
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and the Agent (as the Buyer's assignee) in accordance with SECTION 4.2(B):
(i) such Originator has instructed all Obligors to pay all
Collections directly to a segregated lock-box identified on EXHIBIT III
hereto,
(ii) in the case of all proceeds remitted to any such lock-box which
is now or hereafter established, such proceeds will be deposited directly
by the applicable Collection Bank into a concentration account or a
depository account listed on EXHIBIT III,
(iii) the names and addresses of all Collection Banks, together with
the account numbers of the Collection Accounts of the Originator at each
Collection Bank, are listed on EXHIBIT III, and
(iv) each lock-box and Collection Account to which Collections are
remitted shall be subject to a Collection Account Agreement that is then in
full force and effect.
In the case of lock-boxes and Collection Accounts identified on EXHIBIT III,
exclusive dominion and control thereof has been transferred to the Buyer. Such
Originator has not granted any Person, other than the Buyer as contemplated by
this Agreement, dominion and control of any lock-box or Collection Account, or
the right to take dominion and control of any lock-box or Collection Account at
a future time or upon the occurrence of a future event.
(l) Names. In the past five years, such Originator has not used any
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corporate names, trade names or assumed names other than the name or names set
forth on EXHIBIT II.
(m) Credit Policies. With respect to each Receivable, such Originator
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and the Sub-Servicer has complied in all material respects with the Credit
Policies.
(n) Payments to Originator. With respect to each Receivable sold to
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the Buyer under this Agreement, the Buyer has given reasonably equivalent value
to such Originator in consideration for the transfer of such Receivable and the
Related Security with respect thereto under this Agreement and such transfer was
not made for or on account of an antecedent debt. No sale by such Originator to
the Buyer of any Receivable is or may be voidable under any section of the
Federal Bankruptcy Reform Act of 1978 (11 U.S.C. (S)(S) 101 et seq.), as
amended.
(o) Ownership of the Buyer. Federal-Mogul directly owns 100% of the
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issued and outstanding capital stock of the Buyer. Such capital stock is
validly issued, fully paid and nonassessable and there are no options, warrants
or other rights to acquire securities of the Buyer.
(p) Not an Investment Company. Such Originator is not an "investment
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company" within the meaning of the Investment Company Act of 1940, as amended
from time to time, or any successor statute.
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(q) Purpose. Such Originator has determined that, from a business
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viewpoint, the sale of Receivables to the Buyer contemplated hereby is in the
best interest of such Originator.
(r) Financial Statements; Material Adverse Effect. The consolidated
---------------------------------------------
financial statements of the Originator and its consolidated Subsidiaries dated
June 30, 1998 furnished by such Originator to the Buyer and the Agent are
complete and correct in all material respects, and such financial statements
have been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the consolidated financial condition and
results of operations of the Originator and its consolidated Subsidiaries as of
such date and for the period ended on such date. Since June 30, 1998, no event
has occurred which would have a Material Adverse Effect.
(s) ERISA. No fact or circumstance, including but not limited to any
-----
Reportable Event, exists in connection with any Plan which would constitute
grounds for the termination of any Plan by the PBGC or for the appointment by
the appropriate United States District Court of a trustee to administer any such
Plan and which would result in the termination of a Plan and the incurrence of
material liability by the Originator or any ERISA Affiliate to the Plan, the
PBGC, participants, beneficiaries or a trustee. No Plan has an accumulated
funding deficiency as defined in Section 412(a) of the Code or Section 302(a) of
ERISA, and no lien exists with respect to any Plan for failure to make required
contributions as described under 412(n) of the Code or Section 302(f) of ERISA.
For the purposes of this representation and warranty, such Originator shall be
deemed to have knowledge of all facts attributable to the Plan administrator
designated pursuant to ERISA.
(t) Year 2000 Problem. Such Originator has reviewed its operations
-----------------
with a view to assessing whether its business will, in the receipt,
transmission, processing, manipulation, storage, retrieval, retransmission, or
other utilization of data be vulnerable to a Year 2000 Problem that could
reasonably be expected to have a Material Adverse Effect. Based on such review,
such Originator has no reason to believe that a Material Adverse Effect will
occur with respect to its business or operations resulting from a Year 2000
Problem.
ARTICLE III.
CONDITIONS OF PURCHASES
Section 3.1. Conditions Precedent to Initial Purchase. The initial
----------------------------------------
Purchase under this Agreement is subject to the conditions precedent that (i)
the Buyer shall have received on or before the date of such Purchase those
documents listed on SCHEDULE A hereto and (ii) all conditions precedent to the
initial purchase under the Purchase Agreement shall have been satisfied and/or
waived.
Section 3.2. Conditions Precedent to All Purchases. Each Purchase
-------------------------------------
shall be subject to the further conditions precedent that (a) on the date of
each such Purchase, the following statements shall be true both before and after
giving effect to such Purchase (and acceptance of the proceeds of such Purchase
shall be deemed a representation and warranty by the applicable Originator that
such statements are then true):
10
(i) the representations and warranties set forth in ARTICLE II are
correct on and as of the date of such Purchase as though made on and as of
such date;
(ii) no event has occurred, or would result from such Purchase, that
will constitute an Event of Purchase and Sale Termination, and no event has
occurred and is continuing, or would result from such Purchase, that would
constitute a Potential Event of Purchase and Sale Termination; and
(iii) the Termination Date shall not have occurred;
and (b) the Buyer and/or the Agent (as the Buyer's assignee) shall have received
such other approvals, opinions or documents as it may reasonably request.
Notwithstanding the foregoing conditions precedent, upon payment of
the Purchase Price for any Purchase (whether by payment of cash, through an
increase in the amounts outstanding under the Subordinated Notes, by offset of
amounts owed to the Buyer and/or by offset of capital contributions to be made
under the Subscription Agreement), title to the Receivables and related assets
included in such Purchase shall vest in the Buyer, whether or not the conditions
precedent to such Purchase were in fact satisfied.
ARTICLE IV.
COVENANTS
Section 4.1. Affirmative Covenants of Originators. Until the date
------------------------------------
this Agreement shall terminate in accordance with its terms, each Originator
hereby covenants, individually and in its capacity as Sub-Servicer, that:
(a) Financial Reporting and other Information. Such Originator will
-----------------------------------------
maintain a system of accounting established and administered in accordance with
generally accepted accounting principles, and furnish to the Buyer and the Agent
(as assignee of the Buyer):
(i) Annual Reporting. As soon as available, but in any event within
----------------
120 days after the close of each fiscal year of such Originator, an audit
report not qualified for anything under the control of such Originator,
certified by independent public accountants acceptable to the Buyer and
Agent (which until the Buyer and/or the Agent (as the Buyer's assignee)
notifies such Originator in writing to the contrary may be Ernst & Young
LLP, public accountants), prepared in accordance with generally accepted
accounting principles on a consolidated basis for such Originator 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. As soon as available, but in any event
-------------------
within 60 days after the close of the first three quarterly periods of each
fiscal year of such Originator, for such Originator and its Subsidiaries,
consolidated unaudited balance sheets as at the close of each such period
and consolidated profit and loss and
11
reconciliation of surplus statements for the period beginning from the
beginning of such fiscal year to the end of such quarter; and
(iii) Securities and Exchange Commission Filings. Such Originator
------------------------------------------
shall provide the Buyer and the Agent (as the Buyer's Assignee), promptly
after the same are available, copies of all proxy statements, financial
statements and reports as such Originator 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 such Originator
may file with the Securities and Exchange Commission or with any securities
exchange.
(iv) Notices under Transaction Documents. Forthwith upon its receipt
-----------------------------------
of any notice, request for consent, financial statements, certification,
report or other communication under or in connection with any Transaction
Document from any Person other than the Buyer, the Agent or any Purchaser,
copies of the same.
(v) Change in Credit Policies. At least 30 days prior to the
-------------------------
effectiveness of any material change in or amendment to the Credit
Policies, a copy of the Collection Policies then in effect and a notice
indicating such change or amendment.
(vi) Other Information. Such other information (including non-
-----------------
financial information) as the Buyer (or any of its assignees) may from time
to time reasonably request.
Notwithstanding the other provisions of this Section 4.1(a), (x) such
Originator shall not be required to provide the financial information set forth
in Sections 4.1(a)(i) and 4.1(a)(ii) if Federal-Mogul provides to the Buyer and
the Agent (as assignee of the Buyer) such financial information on a
consolidated basis and such Originator is included in the financial information
provided by Federal-Mogul, and (y) such Originator shall not be required to
provide to the Buyer and the Agent (as assignee of the Borrower) the documents
and/or other information set forth in Section 4.1(a)(iii) through (and
including) 4.1(a)(vi) if Federal Mogul provides to the Buyer and the Agent (as
assignee of Borrower) such documents and information.
(b) Notices. Such Originator will notify the Buyer and the Agent 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) Actual and Potential Events of Purchase and Sale Termination.
------------------------------------------------------------
The occurrence of each Event of Purchase and Sale Termination or Potential
Event of Purchase and Sale Termination of which the Originator becomes
aware.
(ii) Litigation. The institution of any litigation, arbitration
----------
proceeding or governmental proceeding against such Originator or any of its
Subsidiaries, or to which such Originator or any of its Subsidiaries
becomes party, in either case which (A) remains unsettled for a period of
90 days from the commencement thereof and involves claims for damages or
relief in an amount which could reasonably be expected to have a Material
12
Adverse Effect, or (B) has resulted in a final judgment or judgments for
the payment of money in an amount which has a Material Adverse Effect.
(iii) ERISA. The occurrence of any Reportable Event under Section
-----
4043(c)(5), (6) or (9) of ERISA with respect to any Plan, any decision to
terminate or withdraw from a Plan, any finding made with respect to a Plan
under Section 4041(c) or (e) of ERISA, the commencement of any proceeding
with respect to a Plan under Section 4042 of ERISA, the failure to make any
required installment or other required payment under Section 41 2 of the
Code or Section 302 of ERISA on or before the date for such installment or
payment, or any material increase in the actuarial present value of
unfunded vested benefits under all Plans over the preceding year.
(iv) Downgrade. Any downgrade in the rating of any Indebtedness of
---------
Federal-Mogul by Standard & Poor's Ratings Group or by Moody's Investors
Service, Inc., setting forth the Indebtedness affected and the nature of
such change.
(v) Labor Strike, Walkout, Lockout or Slowdown. The commencement or
------------------------------------------
threat of any labor strike, walkout, lockout or concerted labor slowdown
which could reasonably be expected to have a Material Adverse Effect
(collectively, "LABOR ACTIONS").
(c) Compliance with Laws. Such Originator will comply in all
--------------------
material respects with all applicable laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject.
(d) Audits. Such Originator will furnish to the Buyer (and/or the
------
Agent on behalf of the Buyer) from time to time such information with respect to
it and the Receivables as the Buyer or the Agent may reasonably request. Such
Originator shall, from time to time during regular business hours as requested
by Buyer (or the Agent on its behalf) upon reasonable notice, permit the Buyer
or the Agent, or their respective agents or representatives, (i) to examine and
make copies of and abstracts from all Records in the possession or under the
control of such Originator relating to Receivables and the Related Security,
including, without limitation, the related Contracts, and (ii) to visit the
offices and properties of such Originator for the purpose of examining such
materials described in clause (i) above, and to discuss matters relating to such
Originator's financial condition or the Receivables and the Related Security or
such Originator's performance hereunder or such Originator's performance under
the Contracts with any of the officers or employees of such Originator having
knowledge of such matters.
(e) Keeping and Marking of Records and Books.
----------------------------------------
(i) Such Originator will maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing 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 immediate identification of each new Receivable and all
13
Collections of and adjustments to each existing Receivable). Such
Originator will give the Buyer and the Agent (as the Buyer's assignee)
notice of any material change in the administrative and operating
procedures referred to in the previous sentence.
(ii) Such Originator will (a) on or prior to the date hereof, mark its
master data processing records and other books and records relating to the
Receivables with a legend, acceptable to the Buyer and to the Agent (as the
Buyer's assignee), describing the ownership interest of the Buyer therein
and further describing the Receivable Interests sold by the Buyer to the
Purchasers pursuant to the Purchase Agreement and (b) upon the request of
the Buyer or the Agent (as the Buyer's assignee) following the occurrence
of an Event of Purchase and Sale Termination: (x) mark each Contract with a
legend describing Buyer's interest therein and further describing the
Receivable Interests of the Purchasers and (y) deliver to the Buyer or its
designee all Contracts (including, without limitation, all multiple
originals of any such Contract).
(f) Compliance with Contracts and Credit Policies. Such Originator
---------------------------------------------
will timely and fully, (i) perform and comply with all provisions, covenants and
other promises required to be observed by it under the Contracts related to the
Receivables, and (ii) comply in all material respects with the Credit Policies.
Such Originator will pay when due any taxes payable in connection with the
Receivables.
(g) Ownership Interest. Such Originator shall take all necessary
------------------
action to establish and maintain in favor of the Buyer a valid and perfected
first priority ownership interest in the Purchased Assets to the fullest extent
contemplated herein, including, without limitation, taking such action to
perfect, protect or more fully evidence the interest of the Buyer hereunder as
the Buyer or its assignees may reasonably request.
(h) Purchasers' Reliance. Such Originator acknowledges that the Agent
--------------------
and the Purchasers are entering into the transactions contemplated by the
Purchase Agreement in reliance upon the Buyer's identity as a separate legal
entity from such Originator. Therefore, from and after the date of execution and
delivery of this Agreement, such Originator shall take all reasonable steps,
including, without limitation, all steps that the Buyer or any assignee of the
Buyer may from time to time reasonably request, to maintain the Buyer's identity
as a separate legal entity and to make it manifest to third parties that the
Buyer is an entity with assets and liabilities distinct from those of such
Originator and any Affiliates thereof and not just a division of such
Originator. Without limiting the generality of the foregoing and in addition to
the other covenants set forth herein, such Originator (i) shall not hold itself
out to third parties as liable for the debts of the Buyer nor purport to own the
Receivables and other assets acquired by the Buyer, (ii) shall take all other
actions necessary on its part to ensure that the Buyer is at all times in
compliance with the "separateness" covenants set forth in SECTION 6.01(J) of the
Purchase Agreement and (iii) shall cause all tax liabilities arising in
connection with the transactions contemplated herein or otherwise to be
allocated between such Originator and the Buyer on an arm's-length basis and in
a manner consistent with the procedures set forth in U.S. Treasury Regulations
(S)(S) 1.1502-33(d) and 1.1552-1.
14
(i) Collections. Such Originator shall instruct all Obligors to pay
-----------
all Collections directly to a segregated lock-box or other Collection Account
listed on EXHIBIT III, each of which is subject to a Collection Account
Agreement. In the case of payments remitted to any such lock-box, such
Originator shall cause all proceeds from such lock-box to be deposited directly
by a Collection Bank into a Collection Account on EXHIBIT III. Pursuant to
SECTION 5.3 hereof and the Collection Account Agreements, such Originator has
transferred and assigned to the Buyer all of its right, title and interest in
and to, and exclusive ownership, dominion and control (subject to the terms of
this Agreement) to each such lock-box, concentration account and depositary
account. In the case of any Collections received by such Originator, such
Originator shall remit such Collections to a Collection Account not later than
the Business Day immediately following the date of receipt of such Collections,
and, at all times prior to such remittance, such Originator shall itself hold
such Collections in trust, for the exclusive benefit of the Buyer and its
assigns. In the case of any remittances received by such Originator in any such
Collection Account that shall have been identified, to the satisfaction of the
Servicer, to not constitute Collections or other proceeds of the Receivables or
the Related Security, such Originator shall promptly remit such items to the
Person identified to it as being the owner of such remittances. From and after
the date the Agent delivers to any of the Collection Banks a Collection Notice
pursuant to SECTION 7.3 of the Purchase Agreement, the Agent, as assignee of the
Buyer, may request that such Originator, and such Originator thereupon promptly
shall, direct all Obligors on Receivables to remit all payments thereon to a new
depositary account (the "NEW CONCENTRATION ACCOUNT") specified by the Agent and,
at all times thereafter, such Originator shall not deposit or otherwise credit
to the New Concentration Account any cash or payment item other than
Collections. Alternatively, the Agent may request that such Originator, and
such Originator thereupon promptly shall, direct all Persons then making
remittances to any account listed on EXHIBIT III which remittances are not
payments on Receivables to deliver such remittances to a location other than an
account listed on EXHIBIT III.
(j) ERISA. Such Originator shall make all required installments or
-----
other required payments under Section 412 of the Code or Section 302 of ERISA on
or before the due date for such installment or other payment.
(k) Year 2000 Problems. Such Originator shall take all reasonable
------------------
actions to ensure that its computer-based system are able to effectively process
data, including dates on and after January 1, 2000, without any Year 2000
Problem which could reasonably be expected to have a Material Adverse Effect.
At the request of Agent, as the assignee of the Buyer, such Originator shall
provide Agent with substantiation reasonably acceptable to Agent as to such
Originator's capability to process data on and after, or otherwise with respect
to dates occurring on or after, January 1, 2000 without any Year 2000 Problem.
Section 4.2. Negative Covenants of Originators. Until the date this
---------------------------------
Agreement shall terminate in accordance with its terms, each Originator hereby
covenants, individually and in its capacity as Sub-Servicer, that:
(a) Name Change, Offices, Records and Books of Accounts. Such
---------------------------------------------------
Originator will not change its name, identity or corporate structure (within the
meaning of Section 9-402(7)
15
of any applicable enactment of the UCC) or relocate its chief executive office
or any office where Records are kept unless it shall have: (i) given the Buyer
and the Agent at least 45 days prior notice thereof and (ii) delivered to the
Buyer all financing statements, instruments and other documents requested by the
Buyer (or the Agent on behalf of the Buyer) in connection with such change or
relocation.
(b) Change in Payment Instructions to Obligors. Such Originator will
------------------------------------------
not add or terminate any bank as a Collection Bank from those listed in EXHIBIT
III, or make any change in its instructions to Obligors regarding payments to be
made to such Originator or payments to be made to any lock-box, Collection
Account or Collection Bank, unless the Buyer and the Agent shall have received,
at least fifteen (15) Business Days before the proposed effective date therefor:
(i) written notice of such addition, termination or change, and
(ii) with respect to the addition of a lock-box, Collection Account or
Collection Bank, an executed account agreement and an executed Collection
Account Agreement from such Collection Bank relating thereto;
PROVIDED, HOWEVER, that such Originator may make changes in instructions to
Obligors regarding payments if such new instructions require such Obligor to
make payments to another existing lock-box or other Collection Account that is
subject to a Collection Agreement then in effect.
(c) Modifications to Contracts and Credit Policies. Such Originator
----------------------------------------------
will not make any material change in the character of its business or any change
to the Credit Policies which would be reasonably likely to, in either case,
adversely affect the collectibility of any material portion of the Receivables
or decrease the credit quality of any newly created Receivables. Except as
provided in SECTION 5.2(C), such Originator, acting as Sub-Servicer or
otherwise, will not extend, amend or otherwise modify the terms of any
Receivable or any Contract related thereto other than in accordance with the
Credit Policies.
(d) Sales, Liens, Etc. Such Originator shall not sell, assign (by
-----------------
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, or create or suffer to exist any Adverse Claim upon (including,
without limitation, the filing of any financing statement) or with respect to,
any of the Purchased Assets or assign any right to receive income in respect
thereof (other than, in each case, the creation of the interests therein in
favor of the Buyer provided for herein and the Agent and the Purchasers provided
for in the Purchase Agreement), and such Originator shall defend the right,
title and interest of the Buyer in, to and under any of the foregoing property,
against all claims of third parties claiming through or under such Originator.
(e) Accounting for Purchases. Such Originator will not, and shall not
------------------------
permit any Affiliate to, account for or treat (whether in financial statements
or otherwise) the transactions contemplated hereby in any manner other than the
sale of the Receivables and Related Security by such Originator to the Buyer or
in any other respect account for or treat the transactions contemplated hereby
in any manner other than as a sale of the Receivables and
16
Related Security by such Originator to the Buyer except to the extent that such
transactions are not recognized on account of consolidated financial reporting
in accordance with generally accepted accounting principles.
(f) Restricted Junior Payments. Such Originator shall not request or
--------------------------
require the Buyer to make any Restricted Junior Payment if an Amortization Event
or a Potential Amortization Event exists or would result therefrom.
ARTICLE V.
ADMINISTRATION AND COLLECTION
Section 5.1. Designation of Sub-Servicer. (a) The servicing,
---------------------------
administration and collection of the Receivables shall be conducted by the
Servicer so designated from time to time in accordance with SECTION 7.01 of the
Purchase Agreement. Federal-Mogul is hereby designated as, and hereby agrees to
act as, sub-servicer (the "SUB-SERVICER") for the Servicer. The Sub-Servicer
covenants and agrees to service the Receivables in accordance with the terms of
the Purchase Agreement.
(b) On or prior to the Report Date, the Sub-Servicer shall prepare and
forward to the Buyer and the Agent (as the Buyer's assignee) a Settlement
Statement for the related Collection Period.
ARTICLE VI.
EVENTS OF PURCHASE AND SALE TERMINATION
Section 6.1. Events of Purchase and Sale Termination. The occurrence
---------------------------------------
of any one or more of the following events shall constitute an "EVENT OF
PURCHASE AND SALE TERMINATION":
(a) An Insolvency Event shall occur with respect to an Originator or
the Sub-Servicer, and, in the case of an Involuntary Insolvency Event concerning
an Originator or the Sub-Servicer, shall have continued undischarged or unstayed
for a period of 60 days;
(b) Failure on the part of an Originator or the Sub-Servicer, as
applicable, to make any payment or deposit required by the terms of any of the
Transaction Documents;
(c) Failure on the part of the Sub-Servicer to deliver a Settlement
Statement within five Business Days of the day such item is due to be delivered
under any of the Transaction Documents;
(d) Failure on the part of an Originator or the Sub-Servicer, as
applicable, to duly observe or perform in any material respect any of their
other respective covenants or agreements set forth in the Transaction Documents,
which failure continues unremedied for a period of ten days after the earlier of
(i) the date on which such Originator or the Sub-Servicer, as applicable,
becomes aware of such failure and (ii) the date on which written notice of such
17
failure, requiring the same to be remedied, shall have been received by the
Originator or Sub-Servicer, as applicable;
(e) Any representation or warranty made by an Originator or the Sub-
Servicer in any Transaction Document to which it is a party: (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 10 days after the earlier to
occur of (A) the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to such Originator or such Sub-
Servicer by the Buyer or the Agent, or (B) the date on which such Originator or
such Sub-Servicer becomes aware of such failure, and (ii) as a result of such
incorrectness, a Material Adverse Effect occurs;
(f) One or more final judgments shall be entered against the
Originator or any of its Subsidiaries for the payment of money in the aggregate
amount of $30,000,000, or the equivalent thereof in another currency, or more on
claims not covered by insurance or as to which the insurance carrier has denied
its responsibility, and such judgment shall continue unsatisfied and in effect
for thirty (30) consecutive days without a stay of execution;
(g) Any Plan of any Originator or any of its Subsidiaries shall be
terminated within the meaning of Title IV of ERISA except as permitted by
Section 4044(d) of ERISA, or a trustee shall be appointed by the appropriate
U.S. District Court to administer any Plan of such Originator or any of its
Subsidiaries, or the PBGC shall institute proceedings to terminate any Plan of
such Originator or any of its Subsidiaries or to appoint a trustee to administer
any such Plan and each such event, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect;
(h) A Change of Control shall occur; and/or
(i) Failure of any Originator or any of its Subsidiaries to pay any
Indebtedness in excess of $10,000,000 in aggregate principal amount ("MATERIAL
DEBT") when due; or the default by any Originator or any of its Subsidiaries in
the performance of any term, provision or condition contained in any agreement
under which any Material Debt was created or is governed, the effect of which is
to cause, or to permit the holder or holders of such Material Debt to cause,
such Material Debt to become due prior to its stated maturity; or any Material
Debt of any Originator or any of its Subsidiaries shall be declared to be due
and payable or required to be prepaid (other than by a regularly scheduled
payment) prior to the date of maturity thereof.
Section 6.2. Remedies. Upon the occurrence and during the
--------
continuation of an Event of Purchase and Sale Termination, the Buyer may (i)
remove any Sub-Servicer as Sub-Servicer (to the extent such Event of Purchase
and Sale Termination was caused by, or arose as a result of the activities of,
such Sub-Servicer), and/or (ii) declare the Termination Date to have occurred,
whereupon the Termination Date shall forthwith occur, without demand, protest or
further notice of any kind, all of which are hereby expressly waived by each
Originator; PROVIDED, HOWEVER, that upon the occurrence of an Event of Purchase
and Sale Termination described in Section 6.1(a) above or of an actual or deemed
entry of an order for relief with
18
respect to any Originator under the Federal Bankruptcy Code, the Termination
Date shall automatically occur, without demand, protest or any notice of any
kind, all of which are hereby expressly waived by each Originator. Upon the
occurrence of the Termination Date for any reason whatsoever, the Buyer and its
assigns shall have, in addition to all other rights and remedies under this
Agreement or otherwise, all other rights and remedies provided under the UCC,
which rights shall be cumulative.
ARTICLE VII.
INDEMNIFICATION
Section 7.1. Indemnities by the Originators. Without limiting any
------------------------------
other rights which the Buyer may have hereunder or under applicable law, each
Originator and each Sub-Servicer hereby agrees to indemnify the Buyer and its
assignees (including the 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 and
expenses and for all other amounts payable, including reasonable attorneys' fees
(which attorneys may be employees of the Buyer, the 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 any of the following:
(i) any representation or warranty made by such Originator or such
Sub-Servicer (or any officers of such Originator or such Sub-Servicer)
under or in connection with this Agreement, any other Transaction Document,
any Settlement Statement or any other information or report delivered by
such Originator or such Sub-Servicer pursuant hereto or thereto, which
shall have been false or incorrect when made or deemed made;
(ii) the failure by such Originator or such Sub-Servicer to comply
with any applicable law, rule or regulation with respect to any Receivable
or Contract sold by it to the Buyer or serviced by it hereunder, as
applicable, or the nonconformity of such Receivable or Contract with any
such applicable law, rule or regulation;
(iii) any failure of such Originator or such Sub-Servicer to perform
its duties or obligations in accordance with the provisions of this
Agreement or any other Transaction Document;
(iv) [RESERVED];
(v) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of any Obligor to the payment of any Receivable
(including, without limitation, a defense based on such Receivable or the
related Contract 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;
19
(vi) the commingling by such Originator or such Sub-Servicer of
Collections of Receivables sold by it to the Buyer or serviced by it
hereunder, as applicable, at any time with other funds;
(vii) any investigation, litigation or proceeding related to or
arising from this Agreement or any other Transaction Document, the
transactions contemplated hereby or thereby, the use of the proceeds of a
Purchase, the ownership of the Receivables or any other investigation,
litigation or proceeding relating to such Originator in which any
Indemnified Party becomes involved as a result of any of the transactions
contemplated hereby or thereby;
(viii) any inability to litigate any claim against any Obligor in
respect of any Receivable sold by such Originator to the Buyer as a result
of such Obligor being immune from civil and commercial law and suit on the
grounds of sovereignty or otherwise from any legal action, suit or
proceeding; or
(ix) the reference in any Settlement Statement to any Receivable
sold by such Originator or serviced by the Sub-Servicer hereunder, as
applicable, as an Eligible Receivable, which Receivable as of the date it
was sold by such Originator to the Buyer and as of the date of the
Settlement Statement is not an Eligible Receivable and such Eligible
Receivable is used in determining (x) the Net Receivables Balance and (y)
whether the Net Receivables Balance as of any date of determination equals
or exceeds the product of (A) 100% plus the Aggregate Reserve Percentage
----
multiplied by (B) the aggregate Capital outstanding.
----------
EXCLUDING, HOWEVER, the following:
(a) Indemnified Amounts to the extent 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;
(b) Indemnified Amounts to the extent the same includes losses in
respect of Receivables that prove to be uncollectible on account of the
insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or
(c) taxes imposed by the jurisdiction in which such Indemnified
Party's principal executive office is located, on or measured by the overall net
income of such Indemnified Party to the extent that the computation of such
taxes is consistent with (i) the characterization of the Purchases as true sales
and (ii) the characterization of the transactions under the Purchase Agreement
as creating indebtedness of the Buyer for purposes of taxation.
Section 7.2. Other Costs and Expenses. Each Originator shall pay to
------------------------
the Buyer on demand any and all costs and expenses of the Buyer, if any,
including reasonable counsel fees and expenses in connection with the
enforcement of this Agreement and the other documents delivered hereunder and in
connection with any restructuring or workout of this Agreement or
20
such documents, or the administration of this Agreement following an Event of
Purchase and Sale Termination.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. Waivers and Amendments.
----------------------
(a) No failure or delay on the part of the Buyer (or any of its
assignees) or any Originator in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other further exercise
thereof or the exercise of any other power, right or remedy. The rights and
remedies herein provided shall be cumulative and nonexclusive of any rights or
remedies provided by law. Any waiver of this Agreement shall be effective only
in the specific instance and for the specific purpose for which given.
(b) No provision of this Agreement may be amended, supplemented,
modified or waived except in writing signed by the Originators and the Buyer
and, to the extent required under the Purchase Agreement, the Agent, the
Investors and/or the Required Investors.
Section 8.2. Notices.
-------
Except as otherwise expressly provided herein, all communications and
notices provided for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party hereto at its respective address or telecopy number set
forth on the signature pages hereof. All such communications and notices shall,
when mailed, telecopied, telegraphed, telexed or cabled, be effective when
received through the mails, transmitted by telecopy, delivered to the telegraph
company, confirmed by telex answerback or delivered to the cable company,
respectively.
Section 8.3. Protection of Buyer's Interests.
-------------------------------
(a) Each Originator agrees that from time to time, at its expense, it
will promptly execute and deliver all instruments and documents, and take all
actions, that may be necessary or desirable, or that the Buyer (or its
assignees) may reasonably request, to perfect, protect or more fully evidence
the Buyer's ownership of the Receivables, or to enable the Buyer (or its
assignees) to exercise and enforce their rights and remedies hereunder. The
Buyer (or its assignees) may, or the Buyer (or its assignees,) may direct an
Originator to, notify the Obligors of Receivables, at any time following the
replacement of such Originator as Sub-Servicer and at such Originator's expense,
of the Buyer's (or its assignees') ownership of the Receivables and may also
direct that payments of all amounts due or that become due under any or all
Receivables be made directly to the Buyer or its designee.
(b) If an Originator or a Sub-Servicer fails to perform any of its
obligations hereunder, the Buyer (or any of its assignees) may (but shall not be
required to) perform, or cause the performance of, such obligation; and the
Buyer's (and any of its assignee's) costs and expenses incurred in connection
therewith shall be payable by such Originator or such Sub-
21
Servicer, as applicable, on demand. Each Originator and each Sub-Servicer
irrevocably authorizes the Buyer at any time and from time to time in the sole
discretion of the Buyer, and appoints the Buyer as its attorney-in-fact, to act
on behalf of such Originator and such Sub-Servicer (i) to execute on behalf of
such Originator as seller/debtor and to file financing statements necessary or
desirable in the Buyer's sole discretion to perfect and to maintain the
perfection and priority of the Buyer's ownership interest in the Purchased
Assets and (ii) to file a carbon, photographic or other reproduction of this
Agreement or any financing statement with respect to the Receivables as a
financing statement in such offices as the Buyer in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of
the Buyer's ownership interest in the Purchased Assets. This appointment is
coupled with an interest and is irrevocable.
Section 8.4. Confidentiality.
---------------
(a) Each Originator and each Sub-Servicer shall maintain and shall
cause each of its employees and officers to maintain the confidentiality of this
Agreement and the Purchase Agreement and the other confidential proprietary
information with respect to the Agent and Falcon and their respective businesses
obtained by it or them in connection with the structuring, negotiating and
execution of the transactions contemplated herein and therein, except that each
Originator, each Sub-Servicer and their respective officers and employees may
disclose such information to such Originator's or such Sub-Servicer's external
accountants and attorneys and as required by any applicable law or order of any
judicial or administrative proceeding. In addition, each Originator and each
Sub-Servicer may disclose any such nonpublic information pursuant to any law,
rule, regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings (whether or not having the force or effect
of law).
(b) Anything herein to the contrary notwithstanding, each Originator
and each Sub-Servicer hereby consents to the disclosure of any nonpublic
information with respect to it (i) to the Buyer, the Agent, the Investors or
Falcon by each other, (ii) by the Buyer, the Agent or the Purchasers to any
prospective or actual assignee or participant of any of them or (iii) by the
Agent to any rating agency, commercial paper dealer or provider of a surety,
guaranty or credit or liquidity enhancement to Falcon or any entity organized
for the purpose of purchasing, or making loans secured by, financial assets for
which First Chicago acts as the administrative agent and to any officers,
directors, employees, outside accountants and attorneys of any of the foregoing,
provided each such Person is informed of the confidential nature of such
information in a manner consistent with the practice of the Agent for the making
of such disclosures generally to Persons of such types. In addition, the Buyer,
the Purchasers and the Agent may disclose any such nonpublic information
pursuant to any law, rule, regulation, direction, request or order of any
judicial, administrative or regulatory authority or proceedings (whether or not
having the force or effect of law).
Section 8.5. Bankruptcy Petition.
-------------------
(a) Each Originator and each Sub-Servicer hereby covenants and agrees
that, prior to the date which is one year and one day after the payment in full
of all outstanding senior
22
indebtedness of Falcon, it will not institute against, or join any other Person
in instituting against, Falcon any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States.
(b) Each Originator and each Sub-Servicer hereby covenants and agrees
that, prior to the date which is one year and one day after all Aggregate
Unpaids (under and as defined in the Purchase Agreement) have been paid, it will
not institute against, or join any other Person in instituting against, the
Buyer any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States.
Section 8.6. Limitation of Liability. Except with respect to any
-----------------------
claim arising out of the willful misconduct or gross negligence of Falcon, the
Agent or any Investor, no claim may be made by any Originator, the Sub-Servicer
or any other Person against Falcon, the Agent or any Investor or their
respective Affiliates, directors, officers, employees, attorneys or agents for
any special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and each Originator hereby waives,
releases, and agrees not to sue upon any claim for any such damages, whether or
not accrued and whether or not known or suspected to exist in its favor.
SECTION 8.7. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
NEW YORK.
SECTION 8.8. CONSENT TO JURISDICTION. EACH ORIGINATOR HEREBY
-----------------------
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED
BY SUCH ORIGINATOR PURSUANT TO THIS AGREEMENT AND SUCH ORIGINATOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE BUYER (OR THE RIGHTS OF THE AGENT OR
ANY PURCHASER AS THE BUYER'S ASSIGNEES) TO BRING PROCEEDINGS AGAINST ANY
ORIGINATOR IN THE COURTS OF ANY OTHER JURISDICTION WHEREIN ANY ASSETS OF SUCH
ORIGINATOR MAY BE LOCATED. ANY JUDICIAL PROCEEDING BY ANY ORIGINATOR AGAINST THE
BUYER, THE AGENT OR ANY PURCHASER, ANY AFFILIATE OF THE AGENT OR A PURCHASER, OR
ANY OTHER OF THE BUYER'S ASSIGNEES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
23
AGREEMENT OR ANY DOCUMENT EXECUTED BY THE ORIGINATOR PURSUANT TO THIS AGREEMENT
SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
SECTION 8.9. WAIVER OF JURY TRIAL. EACH ORIGINATOR AND THE BUYER
--------------------
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT
EXECUTED BY ANY ORIGINATOR PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER.
Section 8.10. Binding Effect; Assignability. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the Originators, the Buyer and their
respective successors and permitted assigns (including any trustee in
bankruptcy). No Originator may assign any of its rights and obligations
hereunder or any interest herein without the prior written consent of the Buyer.
The Buyer may assign at any time its rights and obligations hereunder and
interests herein to any other Person without the consent of any Originator.
Without limiting the foregoing, each Originator acknowledges that the Buyer,
pursuant to the Purchase Agreement, shall assign to the Agent, for the benefit
of the Purchasers, its rights, remedies, powers and privileges hereunder and
that the Agent may further assign such rights, remedies, powers and privileges
to the extent permitted in the Purchase Agreement. Each Originator agrees that
the Agent, as the assignee of the Buyer, shall, subject to the terms of the
Purchase Agreement, have the right to enforce this Agreement and to exercise
directly all of the Buyer's rights and remedies under this Agreement (including,
without limitation, the right to give or withhold any consents or approvals of
the Buyer to be given or withheld hereunder) and each Originator agrees to
cooperate fully with the Agent and the Servicer in the exercise of such rights
and remedies. Each Originator further agrees to give to the Agent copies of all
notices it is required to give to the Buyer hereunder. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms and shall remain in full force and effect until such
time, after the Termination Date, as the Aggregate Unpaids shall be equal to
zero; PROVIDED, HOWEVER, that the rights and remedies with respect to (i) any
breach of any representation and warranty made by an Originator pursuant to
ARTICLE II, (ii) the indemnification and payment provisions of ARTICLE VII,
(iii) SECTION 8.4, and (iv) SECTION 8.5 shall be continuing and shall survive
any termination of this Agreement.
Section 8.11. Subordination. Each Originator agrees that any
-------------
indebtedness, obligation or claim it may from time to time hold or otherwise
have (other than any obligation or claim with respect to the fees payable by the
Buyer under SECTION 5.6) against the Buyer or any assets or properties of the
Buyer, whether arising hereunder or otherwise existing, shall be subordinate in
right of payment to the prior payment in full of any indebtedness or obligation
of the Buyer owing to the Agent or any Purchaser under the Purchase Agreement.
The subordination provision contained herein is for the direct benefit of, and
may be enforced by, the Agent and the Purchasers and/or any of their assignees
under the Purchase Agreement.
24
Section 8.12. Integration; Survival of Terms. This Agreement, the
------------------------------
Subordinated Notes, the Subscription Agreement and the Collection Account
Agreements contain the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof superseding all prior oral or written understandings.
Section 8.13. Counterparts; Severability. This Agreement may be
--------------------------
executed in any number of counterparts and by each party 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. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
25
EXHIBIT I
DEFINITIONS
AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE
FOLLOWING MEANINGS (SUCH MEANINGS TO BE EQUALLY APPLICABLE TO BOTH THE SINGULAR
AND PLURAL FORMS OF THE TERMS DEFINED):
"ADVERSE CLAIM" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such 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 other Person, whether
through ownership of voting securities, by contract or otherwise.
"AGENT" means First Chicago in its capacity as "Agent" under the
Purchase Agreement, and any successor Agent appointed under Article X of the
Purchase Agreement.
"AGGREGATE UNPAIDS" has the meaning set forth in the Purchase
Agreement.
"AGREEMENT" means this Receivables Sale and Contribution Agreement, as
it may be amended, restated or otherwise modified and in effect from time to
time.
"AMORTIZATION EVENT" shall have the meaning specified in the Purchase
Agreement.
"BASE RATE" means 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; PROVIDED,
HOWEVER, that from and after the occurrence of an Event of Purchase and Sale
Termination, and during the continuation thereof, the "BASE RATE" shall equal
the sum of the corporate base rate, prime rate or base rate of interest, as
applicable, announced by the Reference Bank from time to time, plus 2% per
annum, changing when and as such rate changes.
"BUSINESS DAY" means any day on which banks are not authorized or
required to close in New York, New York, Detroit, Michigan or Chicago, Illinois
and The Depository Trust Company of New York is open for business.
"CAPITAL" shall have the meaning set forth in the Purchase Agreement.
"CHANGE OF CONTROL" shall have the meaning set forth in the Purchase
Agreement.
"CODE" means the Internal Revenue Code of 1 986, as amended from time
to time.
"COLLECTION ACCOUNT" means each concentration account, depositary
account, lock-box account or similar account in which any Collections are
collected or deposited.
"COLLECTION ACCOUNT AGREEMENT" means, in the case of any actual or
proposed Collection Account, an agreement in substantially the form of EXHIBIT V
hereto.
"COLLECTION BANK" means, at any time, any of the banks or other
financial institutions holding one or more Collection Accounts.
"COLLECTION DATE" means that date following the Termination Date which
is one year and one day after the date which (i) the Outstanding Balance of all
Receivables sold hereunder has been reduced to zero and (ii) the Originator has
paid to the Buyer all indemnities, adjustments and other amounts which may be
owed hereunder in connection with the Purchases.
"COLLECTION PERIOD" shall have the meaning set forth in the Purchase
Agreement.
"COLLECTIONS" means, with respect to any Receivable, all cash
collections and other cash proceeds in respect of such Receivable, including,
without limitation, all cash proceeds of Related Security with respect to such
Receivable.
"CONTRACT" means, with respect to any Receivable, any and all Invoices
and other agreements pursuant to which goods or services are ordered from or
provided by an Originator.
"CREDIT POLICIES" means an Originator's credit and collection policies
and practices relating to Contracts and Receivables existing on the date hereof,
a copy of which is attached hereto as in EXHIBIT VI hereto, as modified from
time to time in accordance with this Agreement.
"DEFAULTED RECEIVABLE" means a Receivable: (i) as to which any
payment, or part thereof, remains unpaid for 90 days or more from the original
due date for such payment; (ii) an Insolvency Event has occurred with respect to
the Obligor thereof; (iii) as to which the Obligor thereof, if a natural person,
is deceased; or (iv) which has been identified by an Originator as
uncollectible.
"DILUTIONS" means, at any time, the aggregate amount of reductions in
the Outstanding Balances of the Receivables as a result of any setoff, discount,
adjustment or otherwise, other than (i) cash Collections on account of the
Receivables, and (ii) charge-offs.
"DISCOUNT FACTOR" means a percentage calculated to provide the Buyer
with a reasonable return on its investment in the Receivables after taking
account of (i) the time value of money based upon the anticipated dates of
collection of the Receivables and the cost to the Buyer of financing its
investment in the Receivables during such period, (ii) the risk of nonpayment by
the Obligors, and (iii) the costs of sub-servicing performed by an Originator.
Each Originator
and the Buyer may agree from time to time to change the Discount Factor based on
changes in one or more of the items affecting the calculation thereof, PROVIDED
THAT any change to the Discount Factor shall take effect as of the commencement
of a Collection Period, shall apply only prospectively and shall not affect the
Purchase Price payment in respect of Purchases which occurred during any
Collection Period ending prior to the Collection Period during which such
Originator and the Buyer agree to make such change.
"ELIGIBLE RECEIVABLE" shall have the meaning specified in the Purchase
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer with an Originator under
Section 414 of the Code.
"EVENT OF PURCHASE AND SALE TERMINATION" has the meaning assigned to
that term in SECTION 6.1.
"FACILITY TERMINATION DATE" has the meaning set forth in the Purchase
Agreement.
"FALCON" shall have the meaning assigned to that term in the preamble
to this Agreement and includes such entity's successors and assigns (but does
not include the Investors as assignees under Section 3.01 of the Purchase
Agreement).
"FINANCE CHARGES" means, with respect to a Contract, any finance,
interest, late payment charges or similar charges owing by an Obligor pursuant
to such Contract.
"FIRST CHICAGO" means The First National Bank of Chicago in its
individual capacity and its successors.
"GOVERNMENTAL AUTHORITY" shall have the meaning specified in the
Purchase Agreement.
"INDEBTEDNESS" shall have the meaning specified in the Purchase
Agreement.
"INDEPENDENT DIRECTOR" means, with respect to Federal-Mogul, any
Person: (i) who is not an officer, an employee, a pensioner, or a beneficial
owner, directly or indirectly, of 10% or more of any equity interest in Federal-
Mogul or any Affiliate thereof, and who is not related by blood, marriage or
adoption to any of the foregoing Persons; (ii) who has not been an employee of
Federal-Mogul or any Affiliate in the last five years; (iii) who is not
affiliated with, or employed by, any Person providing services to, any of
Federal-Mogul's significant customers or suppliers; (iv) who is not affiliated
with any tax exempt or other organization that receives significant
contributions from Federal-Mogul or any of its Affiliates; and (v) who has not
provided and is not providing directly or indirectly, whether or not through any
related
corporation, partnership, limited liability company, limited liability
partnership or other Person, legal, accounting or investment banking services
for Federal-Mogul or any Affiliate. In the case of an accountant, an accountant
will only be Independent for purposes hereof only where he or she also meets the
criteria of independence described in SEC Regulation S-X, Rule 2-01(B) and does
not otherwise provide any professional services directly or indirectly to
Federal-Mogul or its Affiliates and none of his or her professional affiliates
having managerial responsibilities participate in any such services.
"INSOLVENCY EVENT" shall have the meaning specified in the Purchase
Agreement.
"INVESTORS" has the meaning set forth in the Preliminary Statement of
this Agreement.
"INVOICE" means, collectively, with respect to any Receivable, any and
all instruments, bills of lading, invoices or other writings which evidence such
Receivable or the goods underlying such Receivable.
"INVOLUNTARY INSOLVENCY EVENT" shall have the meaning specified in the
Purchase Agreement.
"LABOR ACTIONS" has the meaning set forth in SECTION 4.1(B)(V).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
financial condition, business or operations of an Originator, (ii) the ability
of an Originator to perform its obligations under any Transaction Document,
(iii) the legality, validity or enforceability of this Agreement, any
Transaction Document or any Collection Account Agreement relating to a
Collection Account into which a material portion of Collections are deposited,
(iv) the Originator's, the Buyer's, the Agent's or any Purchaser's interest in
the Receivables generally or in any significant portion of the Receivables, the
Related Security or the Collections with respect thereto, or (v) the
collectibility of the Receivables generally or of any material portion of the
Receivables.
"NET WORTH" means, as of the last Business Day of each Collection
Period preceding any date of determination, the excess, if any, of (a) the
aggregate Outstanding Balance of the Receivables owned by the Buyer at such
time, OVER (b) THE SUM OF (i) the aggregate Capital outstanding at such time,
PLUS (ii) the aggregate outstanding principal balance of the Subordinated Loans
(including any Subordinated Loan proposed to be made on the date of
determination).
"OBLIGOR" means a Person obligated to make payments pursuant to a
Contract.
"ORIGINAL BALANCE" means, with respect to any Receivable, the
Outstanding Balance of such Receivable on the date it was purchased by the
Buyer.
"ORIGINATOR" means each of (a) Federal-Mogul, (b) Carter and (c)
Federal-Mogul Canada, and shall include any other wholly-owned Subsidiary of
Federal-Mogul which the Buyer, the Agent and the Purchasers unanimously approve.
"OUTSTANDING BALANCE" of any Receivable at any time means the then
outstanding principal balance thereof, and shall exclude any interest or finance
charges thereon, without regard to whether any of the same shall have been
capitalized.
"PBGC" means the Pension Benefit Guaranty Corporation created under
Section 4002(a) of ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, joint venture, association, trust, or any other entity or
organization, including a Governmental Authority or other government or
political subdivision or agent or instrumentality thereof.
"PLAN" means any defined benefit plan maintained or contributed to by
the Originator or any Subsidiary of the Originator or by any trade or business
(whether or not incorporated) under common control with the Originator or any
Subsidiary of the Originator as defined in Section 4001(b) of ERISA and insured
by the PBGC under Title IV of ERISA.
"POTENTIAL AMORTIZATION EVENT" shall have the meaning specified in the
Purchase Agreement.
"POTENTIAL EVENT OF PURCHASE AND SALE TERMINATION" means an event
which, with the passage of time or the giving of notice, or both, would
constitute an Event of Purchase and Sale Termination.
"PURCHASE" means a purchase by the Buyer of the Receivables and the
Related Security and all Collections and other proceeds thereof from the
Originator pursuant to SECTION 1.1 of this Agreement.
"PURCHASE AGREEMENT" has the meaning set forth in the Preliminary
Statement of this Agreement.
"PURCHASE DATE" means the date on which each Purchase occurs
hereunder.
"PURCHASE PRICE" means, with respect to any Purchase on any date, the
aggregate price to be paid to an Originator for such Purchase in accordance with
SECTION 1.2 of this Agreement for the Receivables and Related Security being
sold to the Buyer on such date, which price shall equal (i) the product of (x)
the Original Balance of such Receivables TIMES (y) one minus the Discount Factor
then in effect, MINUS (ii) any Purchase Price Credits to be credited against the
purchase price otherwise payable in accordance with SECTION 1.3 hereof.
"PURCHASE PRICE CREDIT" has the meaning set forth in SECTION 1.3.
"PURCHASED ASSETS" means, collectively, all Receivables existing on
the date of the initial Purchase hereunder, and all Receivables arising
thereafter through and including the Termination Date, all Collections and
Related Security associated therewith, all proceeds of the foregoing, and all
Collection Accounts and all balances, checks, money orders and other instruments
from time to time therein.
"PURCHASER" has the meaning set forth in the Purchase Agreement.
"RECEIVABLE" means all the U.S. dollar denominated and all the
Canadian dollar-denominated accounts receivable shown on the records of Federal-
Mogul or any subsidiary, 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 "Receivable" that includes a Stock Lift shall
-------- -------
be sold to Buyer net of any adjustment with respect to such Stock Lift.
Receivables which become Defaulted Receivables will cease to be included as
Receivables on the day on which they become Defaulted Receivables.
"RECEIVABLE INTERESTS" has the meaning set forth in the Purchase
Agreement.
"RECORDS" means, with respect to any Receivable, all Contracts and
other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Receivable, any
Related Security therefor and the related Obligor.
"REFERENCE BANK" means NBD Bank or such other bank as the Agent shall
designate with the consent of the Buyer.
"RELATED SECURITY" means, with respect to any Receivable:
(i) all of the Originator's interest, if any, in any goods the sale
of which gave rise to such Receivable,
(ii) all other security interests or liens and property subject
thereto from time to time, if any, purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable or
otherwise, together with all financing statements and security agreements
describing any collateral securing such Receivable,
(iii) all guaranties, insurance and other agreements or arrangements
of whatever character from time to time supporting or securing payment of
such Receivable whether pursuant to the Contract related to such Receivable
or otherwise,
(iv) all Records related to such Receivables,
(v) all of the Originator's right, title and interest in, to and
under each Contract executed in connection therewith in favor of or
otherwise for the benefit of the Originator; and
(vi) all proceeds of any of the foregoing.
"REPORT DATE" shall have the meaning specified in the Purchase
Agreement.
"REPORTABLE EVENT" has the meaning set forth in Section 4043 of ERISA.
"REQUIRED CAPITAL AMOUNT" means $4,500,000.
"REQUIRED INVESTORS" has the meaning set forth in the Purchase
Agreement.
"REQUIREMENT OF LAW" shall have the meaning specified in the Purchase
Agreement.
"RESTRICTED JUNIOR PAYMENT" shall have the meaning specified in the
Purchase Agreement.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SERVICER" means at any time the Person then authorized pursuant to
Article VII of the Purchase Agreement to service, administer and collect
Receivables.
"SETTLEMENT DATE" means, (a) prior to the earlier to occur of (i) an
Event of Purchase and Sale Termination or (ii) the Facility Termination Date,
the twentieth (20th) day of each month or, if such day is not a Business Day,
the next succeeding Business Day, and (b) from and after the earlier to occur of
(i) an Event of Purchase and Sale Termination or (ii) the Facility Termination
Date, the twentieth (20th) day of each month or, if such day is not a Business
Day, the next succeeding Business Day, and any other Business Day designated by
the Agent.
"SETTLEMENT STATEMENT" means a report substantially in the form of
Exhibit VIII hereto (appropriately completed) furnished by a Sub-Servicer to the
Buyer and the Agent (as the Buyer's Assignee) pursuant to Section 5.5.
"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.
"SUBORDINATED LOAN" has the meaning set forth in SECTION 1.2(B).
"SUBORDINATED NOTE" means a promissory note in substantially the form
of EXHIBIT X hereto as more fully described in SECTION 1.2, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"SUBSCRIPTION AGREEMENT" means the Stockholder and Subscription
Agreement in substantially the form of EXHIBIT IX hereto, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"SUB-SERVICER" means Federal-Mogul in its capacity as a sub-servicer
for the Servicer as described in SECTION 5.1 hereof.
"SUB-SERVICER FEE" means the fee described in SECTION 5.6 hereof.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, association, limited liability company, joint venture
or similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "SUBSIDIARY"
shall mean a Subsidiary of the Originator.
"TERMINATION DATE" means the earliest of (i) the Facility Termination
Date, (ii) the date of the declaration or automatic occurrence of the
Termination Date pursuant to SECTION 6.2, and (iii) the date designated by any
Originator as the Termination Date in a written notice delivered to the Buyer
not less than ten days prior to such designated date.
"TRANSACTION DOCUMENTS" means collectively, this Agreement, the
Purchase Agreement, the Subordinated Notes, the Subscription Agreement, each
Collection Agreement and all other instruments, documents and agreements
executed and delivered by the Originator in connection herewith.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
"YEAR 2000 PROBLEM" means any significant risk that computer hardware
or software used in the business or operations of any Originators will not, in
the case of dates or time periods occurring after December 31, 1999, function at
least as effectively and reliably as in the case of dates or time periods
occurring before January 1, 2000.
All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
EXHIBIT II
CHIEF EXECUTIVE OFFICE OF THE ORIGINATORS; LOCATIONS OF RECORDS;
TRADE NAMES; FEDERAL EMPLOYER IDENTIFICATION NUMBER
FEDERAL MOGUL CORPORATION
-------------------------
Chief Executive Office and Location of Records 26555 Northwestern Highway
Southfield, MI 48034
Trade Names and Assumed Names Federal Mogul Corporation
Federal Employer Identification Number 38-0533580
CARTER AUTOMOTIVE COMPANY, INC.
-------------------------------
Chief Executive Office and Location of Records 26555 Northwestern Highway
Southfield, MI 48034
Trade Names and Assumed Names Carter Automotive
Company, Inc.
Federal Employer Identification Number 43-1374271
FEDERAL-MOGUL CANADA LIMITED
----------------------------
Chief Executive Office and Location of Records 590 Barmac Drive
Toronto, Ontario
Canada M9L 2X8
Trade Names and Assumed Names Federal-Mogul Canada
Limited
Federal Employer Identification Number None
EXHIBIT III
COLLECTION ACCOUNTS
A. Lockbox number 67000, Department 148901
Comerica account number 1000013027, in the name of Federal-Mogul Funding
Corporation
B. Lockbox number 07922
Royal Bank of Canada account number 1113414, in the name of Federal-Mogul
Funding Corporation
EXHIBIT IV
[RESERVED]
EXHIBIT V
FORM OF COLLECTION ACCOUNT AGREEMENT
[See Exhibit B to Receivables Interest Purchase Agreement]
EXHIBIT VI
CREDIT POLICIES
CUSTOMER CREDIT
PURPOSE
- - -------
This policy outlines requirements for creation and monitoring customer credit.
CUSTOMER CREDIT LIMITS
- - ----------------------
The establishment and monitoring of a limit or maximum level of credit sales to
each individual customer serves to reduce the risk of a significant loss due to
uncollectible accounts. A credit limit represents the level of credit sales
(including previous outstanding accounts receivable) above which additional
credit will not be extended.
Credit limits should be established after consideration is given to the payment
history of each customer and an assessment of the customer's financial
condition. Independent outside sources of credit history available locally
(e.g. Dun & Bradstreet in the U.S.), credit references and or customer financial
statements should be evaluated to establish customer credit limits and for
updating credit limits on a periodic basis.
CREDIT HOLD ROUTINES
- - --------------------
Routines should be established to preclude shipping product to customers that
exceeds the customer credit limit. Specific approval by a designated
finance/customer credit individual of any deviation from the established
routines.
INTRODUCTION
CENTRALIZED SOUTHFIELD ENVIRONMENT
. SUPPORTING THE FOLLOWING
. OEM--United States
. Aftermarket--United States
. Aftermarket--Canada
. SPECIFIC RESPONSIBILITIES
. Credit approval
. Collection
. Receivable management
. Billing--NAA only
. Dispute resolution
. DEPARTMENT ORGANIZATION CHART
. 45 total employees
. 4 part-time/associate
. 41 full-time company employees (74% 4-year degrees)
. SOFTWARE UTILIZED
. CARMS--receivable management
. Lotus Notes--communication and dispute management
. Maxretriever--document management
. UPS--proof of deliveries
. PRC--scanner utilization
. Internally developed--AMS, MAPS, STRAP
. AGGRESSIVE REENGINEERING INITIATIVE
. Relentless pursuit of superior customer service
. Eliminate deductions
. Continuous investigation of electronic options in our daily operations
. Review of document delivery options for invoices and statements
. Resolve customer inquiries with one call methodology
. Investigation of order to cash possibilities at manufacturing plants
CREDIT POLICY AND PROCEDURE
. DETERMINATION OF CREDIT LIMITS
. Credit limits are set at approximately 2.5 times estimated month sales for
new accounts.
. Existing account credit limits are adjusted according to payment habits and
financial stability. An account that shows a pattern of paying their
account past due will have their credit limit adjusted downward to 1 - 1
1/2 times monthly sales.
. NEW ACCOUNT PROCEDURE
. The following information is requested for new open accounts:
- 3-trade credit references
- 1 bank credit reference
- Credit reporting agency report (optional)
- Verbal credit references from industry credit group members (optional)
. Requests for additional credit are evaluated by reviewing payment history
(prompt %/discount % vs. late %), review of current financial statements
and amount of additional credit requested compared to the current year high
credit.
. LEVELS OF CREDIT GRANTING APPROVAL
. Two step process for new credit approval, after Sales has requested the
account be given open account status. Review and approval/reject is given
first by the Credit Analyst, then by the Area Credit Manager.
. Increases in credit for current customers are reviewed by the Credit
Analyst.
. USE OF SECURITY DOCUMENTS AND PERSONAL GUARANTEES
. Personal guarantees are included in the customer's Credit Application.
While a personal guarantee is not required for all new accounts, it is
required in cases of higher than usual financial risk.
. UCC-1's, UCC-3's, and Purchase Money Security Agreements are taken (or
continued) on customers with large projected or current sales volumes
(*$150,000) or when a customer's financial condition is deteriorating.
. TRAINING OF CREDIT GRANTING PERSONNEL
. Each Credit Analyst undergoes a 5 day training schedule, reviewing a formal
training agenda with each of the Credit Analysts. Items covered include:
- A/R management software and systems (CARMS, MAPS & STRAP)
- New account/account maintenance procedures
- Special payment terms request approval and rejection
- Security documents
- Credit and collection procedures
. CREDIT FILES
. A file is kept for each customer account. An example of information in this
file is:
- Original credit application
- Notes from phone conversations and meeting with customers
- Copies of written correspondence
- Information from creditor discussion groups
- Personal guarantee (optional)
. These files are kept in a central location in the Customer Financial
Services Department
. Additionally, notes are kept concerning Credit Analyst discussions with the
customer on CARMS. Examples of this information are:
- Customer commitments to send checks
- Date customers are put on hold
- Miscellaneous comments noted by the Credit Analyst that may be of value
in future credit decisions
. PAYMENT TERMS
. Standard terms for OEM customers are either net 10/th/ and net 25/th/ prox
or net 30 days on the date in the month in which the product is shipped.
For net 10/th/ and
- - ---------------
* greater than
net 25/th/ prox, if the product is shipped in the first 15 days of the
month, payment is due by the 10/th/ day of the following month. If shipped
later in the month, payment is due by the 25/th/ day of the following
month. Customers are sent an invoice or an ASN for each shipment.
. Standard terms for the FM Aftermarket and Retail are based on a shipping
month of the 26/th/ to the 25/th/ and qualify for a 2% prompt payment
discount if the invoice is paid by the 10/th/ of the following month,
otherwise, full payment for the Aftermarket is due by the 25/th/ of the
following month and for Retail, full payment is due the 25/th/ of the 2/nd/
month following. Gasket terms in general are 2% 10/th/ net 25/th/ prox. In
addition, there are negotiated terms for Retailers and selected buying
groups which can range from 2% 2/nd/ 10/th/ to net 90 days.
. DETERMINANTS OF PRICE
. Prices for the Aftermarket are published on product line price sheets.
. Prices for Retail and OEM accounts are negotiated and specified on a
pricing agreement for a given period of time and are supported by a
purchase order or vendor agreement.
. CASH IN ADVANCE/CASH ON ACCOUNT
. Used at the Credit Analyst's discretion in the following situations:
- Account consistently pays past due and is judged to be a credit risk
- Bankruptcy
- New account with credit references judged unsatisfactory
. NOTES RECEIVABLE
. Used at the Credit Analyst's discretion and reviewed monthly for payment.
As of October, 1998 month end, there were 6 open Notes Receivable for a
total of $131,757.08.
CREDIT AND COLLECTION
. ACCOUNT MAINTENANCE
. The Credit and Accounts Receivable Management System (CARMS) produces an
action list on a daily basis, which lists accounts that require attention
due to a change in status (account over credit limit, account past due,
etc).
. Action lists are reviewed by credit analysts for resolution.
. Summary past due reports are generated on a monthly basis and are reviewed
by the analysts for credit restriction.
. Credit analysts continue follow up by making timely collection calls to
customers on past due invoices until payment is received.
. Sales is contacted to assist with collection of past due items and the
resolution of customer disputes.
. If payment is not received or a mutual payment arrangement cannot be made,
the customer is sent a final demand notice, which details the debt and
allows the customer ten working days to make acceptable payment
arrangements.
. If payment is still not received and no payment agreement has been made,
the account is referred to the Area Credit Manager for further disposition.
. COLLECTION AGENCIES / BANKRUPTCIES
. Accounts which are seriously past due may be referred to FM's legal counsel
for action or placed with an outside collection agency. Accounts are moved
to a separate credit manager code for follow-up.
. Accounts that have filed for bankruptcy are moved to a separate credit
manager code for follow-up and are written off quarterly.
AFTERMARKET - CUSTOMER BASE OVERVIEW
. NUMBER OF AFTERMARKET AND RETAIL ACCOUNTS
. 4,617 active Aftermarket accounts
. 39 active Retail accounts
. PRODUCT LINES PURCHASED
. Engine parts - pistons, piston rings, engine bearings, camshafts
. Chassis parts - rack & pinion, tie rods, ball joints, half-shafts
. Anti-friction - ball and roller bearings
. Sealing products - oil seals
. Fuel products - fuel pumps, carburetors, emission control products
. Lighting products - strobes, marker lights, reflective tape, wire harnesses
. METHOD OF ORDER PLACEMENT AND SHIPMENT
. Orders can be placed electronically via EDI or through Federal-Mogul's
Customer Service/Order Entry via phone or fax.
. Aftermarket orders are usually shipped from one of our Service Centers
located in the U.S. and Canada. Larger orders may be shipped from one of
three main Distribution Centers located in Jacksonville, AL, Maysville, KY
and Skokie, IL.
. CUSTOMER OPERATIONS
. Aftermarket customers consist mainly of warehouse distributors that buy
product for downstream sales to independent or warehouse owned auto parts
stores. Examples are NAPA, MAWDI and Pittsburgh Crankshaft.
. Retail customers buy product for resale in their own company owned store.
Examples are CSK Automotive, Advance and AutoZone.
ORIGINAL EQUIPMENT MARKET AND EXPORT OVERVIEW
. OE EXPORT CUSTOMER BASE
. 856 active OEM accounts
. 106 active Export accounts
. CUSTOMER OPERATIONS
. OE & Export customers consist primarily of automotive, heavy duty vehicle,
farm equipment and industrial equipment manufacturers.
. Major customers include Ford, General Motors and Chrysler.
. PRODUCT LINES PURCHASED
. Manufactured products include engine and transmission products, sealing
devices, lighting products and fuel systems.
. Aftermarket products sold in the OE market to the sales and service
operations of our OE customers for their dealers.
. ORDER PROCESS
. Decentralized customer service - one at each of our plant locations.
. Orders are scheduled in advance by large OEM Customers (such as Ford, GM,
Chrysler) and the accum's are adjusted as product is shipped, material
release forecasts updated weekly.
. Smaller OEM's send purchase orders in advance with date required. Purchase
orders reviewed at plant before orders are scheduled.
ACCOUNTS RECEIVABLE DILUTIONS
. CASH DISCOUNT
. 1.8% of NAA Sales
. DOUBTFUL ACCOUNTS
. Written off quarterly as approved by the department manager
. Continual follow up until financial conclusion
. CREDIT MEMOS
. Stocklift returns
. Obsolescence returns
. 30 day returns
. Warranty
. Price
. Policy allowance
. CHECKS ISSUED
. Rebates for volume incentives
. INVOICES/STATEMENTS
. The invoices generated from a plant sale can be mailed or sent
electronically through EDI.
. The Aftermarket invoices that are not sent via EDI are mailed at least
weekly.
. Monthly statements are sent to customers based on the 25/th/ or month-end
cutoff based on the customer.
. RECONCILIATIONS
. A monthly reconciliation is completed of CARMS to the General Ledger
balance.
. Typical reconciliation items can be cash or billings due to different
closing schedules.
EXHIBIT VII
[RESERVED]
EXHIBIT VIII
FORM OF SETTLEMENT DATE STATEMENT
[See Exhibit C to the Receivable Interest Purchase Agreement]
EXHIBIT IX
FORM OF SUBSCRIPTION AGREEMENT
_________
STOCKHOLDER AND SUBSCRIPTION AGREEMENT
THIS STOCKHOLDER AND SUBSCRIPTION AGREEMENT (this "AGREEMENT"), dated
as of November 20, 1998, is entered into by and between Federal-Mogul Funding
Corporation, a Michigan corporation ("SPC"), and Federal-Mogul Corporation, a
Michigan corporation ("PARENT"). Except as otherwise specifically provided
herein, capitalized terms used in this Agreement have the meanings ascribed
thereto in the Receivables Sale and Contribution Agreement dated as of even date
herewith among Parent, Carter Automotive Company, Inc., Federal-Mogul Canada
Limited and SPC (as amended, restated, supplemented or otherwise modified from
time to time, the "SALE AGREEMENT").
RECITALS
A. SPC has been organized under the laws of the State of Michigan for
the purpose of, among other things, purchasing, holding, financing,
receiving and transferring accounts receivable and related assets
originated or otherwise held by Parent.
B. Contemporaneously with the execution and delivery of this
Agreement: (i) Parent and SPC have entered into the Sale Agreement pursuant
to which Parent has, from and after the initial purchase date thereunder
and prior to the termination date specified therein, sold all of its
Receivables, Collections and Related Security to SPC; and (ii) SPC, Parent,
Falcon Asset Securitization Corporation, certain financial institutions
party thereto as "Investors," and The First National Bank of Chicago, as
the "Agent," have entered into a Receivables Interest Purchase Agreement
(as amended, restated, supplemented or otherwise modified from time to
time, the "Purchase Agreement") pursuant to which SPC will sell "RECEIVABLE
INTERESTS" to the Agent for the benefit of the Purchasers.
C. SPC desires to sell shares of its capital stock to Parent, and
Parent desires to purchase such shares, on the terms set forth in this
Agreement.
NOW, THEREFORE, SPC and Parent agree as follows:
1. Purchase and Sale of Capital Stock. Parent hereby purchases from
----------------------------------
SPC, and SPC hereby sells to Parent, 100 shares of common stock, par value $1.00
per share, of SPC (the "COMMON STOCK") for the Stock Purchase Price set forth in
Section 2.1. The shares of Common Stock being purchased under this Agreement
are referred to herein as the "SHARES." Within three (3) Business Days from the
date hereof, SPC shall deliver to Parent a certificate registered in Parent's
name representing the Shares.
2. Consideration for Shares and Capital Contributions.
--------------------------------------------------
2.1 Consideration for Shares. To induce SPC to enter into the Sale
------------------------
Agreement and to enable SPC to fund its obligations thereunder by consummating
the transactions contemplated by the Purchase Agreement, and in reliance upon
the representations and warranties set forth herein, Parent hereby pays to SPC
on the date hereof the sum of $4,500,000 (the "STOCK PURCHASE PRICE") in
consideration of the purchase of the Shares. The Stock Purchase Price shall
take the form of a transfer of cash, except that Parent may, in lieu of cash
payment of the Stock Purchase Price, offset the amount of the Stock Purchase
Price against the purchase price otherwise payable by SPC to Parent on the
initial purchase date pursuant to the Sale Agreement.
2.2 Contributions After Initial Closing Date. From time to time
----------------------------------------
Parent may make additional capital contributions to SPC. All such contributions
shall take the form of a cash transfer, except that SPC agrees to, in lieu of
cash payment thereof, offset the amount of such contributions against the
purchase price for Receivables otherwise payable by SPC to Parent on the date of
such capital contributions. All of the Receivables so paid for through such
offset shall constitute purchased Receivables within the meaning of the Sale
Agreement and shall be subject to all of the representations, warranties and
indemnities otherwise made thereunder. It is expressly understood and agreed
that Parent has no obligations under this Agreement or otherwise to make any
capital contributions from and after payment of the Stock Purchase Price.
3. Representations and Warranties of SPC. SPC represents and
-------------------------------------
warrants to Parent as follows:
(a) SPC is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Michigan, and has all
requisite corporate power and authority to carry on its business as
proposed to be conducted on the date hereof.
(b) SPC has all requisite legal and corporate power to enter into this
Agreement, to issue the Shares and to perform its other obligations under
this Agreement.
(c) Upon receipt by SPC of the Stock Purchase Price and the issuance
of the Shares to Parent, the Shares will be duly authorized, validly
issued, fully paid and nonassessable.
(d) SPC has taken all corporate action necessary for its
authorization, execution and delivery of, and, its performance under, this
Agreement.
(e) This Agreement constitutes a legally valid and binding obligation
of SPC, enforceable against SPC in accordance with its terms, except that
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(f) The issuance of the Shares by SPC hereunder is legally permitted
by all laws and regulations to which SPC is subject.
4. Representations and Warranties of Parent. Parent represents and
----------------------------------------
warrants to SPC as follows:
(a) Parent is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Michigan, and has all
requisite corporate power and authority to carry on its business as
conducted on the date hereof.
(b) Parent has all requisite legal and corporate power to enter into
this Agreement, to purchase the Shares and to perform its other obligations
under this Agreement.
(c) Parent has taken all corporate action necessary for its
authorization, execution and delivery of, and its performance under, this
Agreement.
(d) This Agreement constitutes a legally valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms, except
that enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or
at law.
(e) Parent is purchasing the Shares for investment for its own
account, not as a nominee or agent, and not with a view to any distribution
of any part thereof; Parent has no current intention of selling, granting a
participation in, or otherwise distributing, the shares.
(f) Parent understands that the Shares have not been registered under
the Securities Act of 1933, as amended, or under any other Federal or state
law, and that SPC does not contemplate such a registration.
(g) Parent has such knowledge, sophistication and experience in
financial and business matters that it is capable of evaluating the merits
and risks of the transactions contemplated by this Agreement, and has made
such investigations in connection herewith as have been deemed necessary or
desirable to make such evaluation.
(h) The purchase of the Shares by Parent is legally permitted by all
laws and regulations to which Parent is subject.
5. Restrictions on Transfer Imposed by the Act; Legend.
---------------------------------------------------
5.1 Legend. Each certificate representing any Shares shall be
------
endorsed with the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES ACT. SUCH SECURITIES SHALL NOT BE SOLD, PLEDGED,
HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED OR DISPOSED OF ABSENT
SUCH REGISTRATION, UNLESS, IN THE OPINION OF THE CORPORATION'S
COUNSEL, SUCH REGISTRATION IS NOT REQUIRED. IN ADDITION, THESE
SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON SECTION 4(2) OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO
AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
5.2 Registration of Transfers. SPC need not register a transfer of
-------------------------
any Shares unless the conditions specified in the legend set forth in Section
5.1 hereof are satisfied. SPC may also instruct its transfer agent (which may
be SPC) not to register the transfer of any Shares unless the conditions
specified in the legend set forth in Section 5.1 hereof are satisfied.
6. Agreement to Vote. Parent hereby agrees and covenants to vote
-----------------
all of the shares of Common Stock now or hereafter owned by it, whether
beneficially or otherwise, as is necessary at a meeting of stockholders of SPC,
or by written consent in lieu of any such meeting, to cause to be elected to,
and maintained on, SPC's board of directors at least one (1) person meeting the
qualifications of an Independent Director and selected in accordance with the
provisions of the Certificate of Incorporation and By-Laws of SPC.
7. Successors and Assigns. Each party agrees that it will not
----------------------
assign, sell, transfer, delegate, or otherwise dispose of, whether voluntarily
or involuntarily, or by operation of law, any right or obligation under this
Agreement except in connection with a transfer of Shares in compliance with the
terms and conditions hereof, as contemplated by Section 5.2 above, or otherwise
in accordance with the terms hereof. Any purported assignment, transfer or
delegation in violation of this Section 7 shall be null and void ab initio.
Subject to the foregoing limits on assignment and delegation and except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, legatees, executors,
administrators, assignees and legal successors.
8. Amendments and Waivers. Any term hereof may be amended and the
----------------------
observance of any term hereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of SPC and Parent. Any amendment or waiver so effected shall be binding
upon SPC and Parent.
9. Further Acts. Each party agrees to perform any further acts and
------------
execute and deliver any document which may be reasonably necessary to carry out
the provisions of this Agreement.
10. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and all of such counterparts together will be deemed one
instrument.
11. Notices. Any and all notices, acceptances, statements and other
-------
communications to Parent in connection herewith shall be in writing, delivered
personally, by facsimile or certified mail, return receipt requested, and shall
be addressed to the address of Parent indicated on the stock transfer register
of SPC or, if no address is so indicated, to the address provided to SPC
pursuant to the Sale Agreement unless changed by written notice to SPC or its
successor.
12. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
-------------
WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT AND TO THE
EXTENT THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE IS APPLICABLE.
13. Entire Agreement. This Agreement, together with the Sale
----------------
Agreement and documents expressly to be delivered in connection therewith,
constitute the entire understanding and agreement between the parties hereto
with subject matter hereof and thereof.
14. Severability of this Agreement. In case any provision of this
------------------------------
Agreement shall be invalid or unenforceable, the validity, legality and
enforceability of the remaining shall not in any way be affected or impaired
thereby.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
SPC PARENT
FEDERAL-MOGUL FUNDING FEDERAL-MOGUL CORPORATION,
CORPORATION, a Michigan corporation a Michigan corporation
By: _____________________________ By: ________________________
Name: Name:
Title: Title:
EXHIBIT X
FORM OF SUBORDINATED NOTE
_________
SUBORDINATED NOTE
November 20, 1998
1. Note. FOR VALUE RECEIVED, the undersigned, FEDERAL-MOGUL FUNDING
----
CORPORATION, a Michigan corporation ("SPC"), hereby unconditionally promises to
pay to the order of [ORIGINATOR NAME], a _________ corporation ("ORIGINATOR"),
in lawful money of the United States of America and in immediately available
funds, on the date following the Termination Date which is one year and one day
after the date which (i) the Outstanding Balance of all Receivables sold under
the "SALE AGREEMENT" referred to below has been reduced to zero and (ii) the
Originator has paid to the Buyer all indemnities, adjustments and other amounts
which may be owed hereunder in connection with the Purchases (the "COLLECTION
DATE"), the aggregate unpaid principal sum outstanding of all "Subordinated
Loans" made from time to time by Originator to SPC pursuant to and in accordance
with the terms of that certain Receivables Sale and Contribution Agreement dated
as of November 20, 1998 among Originator, _____________, ___________ and SPC (as
amended, restated, supplemented or otherwise modified from time to time, the
"SALE AGREEMENT"). Reference to SECTION 1.2 of the Sale Agreement is hereby
made for a statement of the terms and conditions under which the loans evidenced
hereby have been and will be made. All terms which are capitalized and used
herein and which are not otherwise specifically defined herein shall have the
meanings ascribed to such terms in the Sale Agreement.
2. Interest. SPC further promises to pay interest on the
--------
outstanding unpaid principal amount hereof from the date hereof until payment in
full hereof at a rate equal to the Base Rate; PROVIDED, HOWEVER, that if SPC
shall default in the payment of any principal hereof, SPC promises to, on
demand, pay interest at the rate of the Base Rate plus 2.00% on any such unpaid
amounts, from the date such payment is due to the date of actual payment.
Interest shall be payable on the first Business Day of each month in arrears;
PROVIDED, HOWEVER, that SPC may elect on the date any interest payment is due
hereunder to defer such payment and upon such election the amount of interest
due but unpaid on such date shall constitute principal under this Subordinated
Note. The outstanding principal of any loan made under this Subordinated Note,
together with all accrued and unpaid interest thereon, shall be due and payable
on the Collection Date and may be repaid or prepaid at any time without premium
or penalty.
3. Principal Payments. Originator is authorized and directed by SPC
------------------
to enter on the grid attached hereto, or, at its option, in its books and
records, the date and amount of each loan made by it which is evidenced by this
Subordinated Note and the amount of each payment of principal made by SPC, and
absent manifest error, such entries shall constitute PRIMA FACIE evidence of the
accuracy of the information so entered; PROVIDED THAT neither the failure of
Originator to make any such entry or any error therein shall expand, limit or
affect the obligations of SPC hereunder.
4. Subordination. The indebtedness evidenced by this Subordinated
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Note is subordinated to the prior payment in full of all of SPC's recourse
obligations under that certain Receivable Interest Purchase Agreement dated as
of November 20, 1998 by and among SPC, Federal-Mogul Corporation, Falcon Asset
Securitization Corporation, the financial institutions from time to time a party
thereto, and The First National Bank of Chicago, as the "AGENT" (as amended,
restated, supplemented or otherwise modified from time to time, the "PURCHASE
AGREEMENT"). The subordination provisions contained herein are for the direct
benefit of, and may be enforced by, the Agent and the Purchasers and/or any of
their respective assignees (collectively, the "SENIOR CLAIMANTS") under the
Purchase Agreement. Until the date on which all "Capital" outstanding under the
Purchase Agreement has been repaid in full and all other obligations of SPC
and/or the Servicer thereunder and under the "Fee Letter" referenced therein
(all such obligations, collectively, the "Senior Claim") have been indefeasibly
paid and satisfied in full, Originator shall not demand, accelerate, sue for,
take, receive or accept from SPC, directly or indirectly, in cash or other
property or by set-off or any other manner (including, without limitation, from
or by way of collateral) any payment or security of all or any of the
indebtedness under this Subordinated Note or exercise any remedies or take any
action or proceeding to enforce the same; PROVIDED, HOWEVER, that (i) Originator
hereby agrees that it will not institute against SPC any Insolvency Event unless
and until the Collection Date has occurred and (ii) nothing in this paragraph
shall restrict SPC from paying, or Originator from requesting, any payments
under this Subordinated Note so long as SPC is not required under the Purchase
Agreement to set aside for the benefit of, or otherwise pay over to, the funds
used for such payments to any of the Senior Claimants and further provided that
the making of such payment would not otherwise violate the terms and provisions
of the Purchase Agreement. Should any payment, distribution or security or
proceeds thereof be received by Originator in violation of the immediately
preceding sentence, Originator agrees that such payment shall be segregated,
received and held in trust for the benefit of, and deemed to be the property of,
and shall be immediately paid over and delivered to the Agent for the benefit of
the Senior Claimants.
5. Bankruptcy; Insolvency. Upon the occurrence of any Insolvency
----------------------
Event involving SPC as debtor, then and in any such event the Senior Claimants
shall receive payment in full of all amounts due or to become due on or in
respect of Capital and the Senior Claim (including "Discount" accruing under the
Purchase Agreement after the commencement of any such proceeding, whether or not
any or all of such Discount is an allowable claim in any such proceeding) before
Originator is entitled to receive payment on account of this Subordinated Note,
and, to that end, any payment or distribution of assets of SPC of any kind or
character, whether in cash, securities or other property, in any applicable
insolvency proceeding, which would otherwise be payable to or deliverable upon
or with respect to any or all indebtedness under this Subordinated Note, is
hereby assigned to and shall be paid or delivered by the Person making such
payment or delivery (whether a trustee in bankruptcy, a receiver, custodian or
liquidating trustee or otherwise) directly to the Agent for application to, or
as collateral for the payment of, the Senior Claim until such Senior Claim shall
have been paid in full and satisfied.
6. Amendments. This Subordinated Note shall not be amended or
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modified except in accordance with SECTION 8.1(B) of the Sale Agreement. The
terms of this Subordinated Note may not be amended or otherwise modified without
the prior written consent of the Agent for the benefit of the Purchasers.
7. Governing Law. This Subordinated Note has been made and
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delivered at the offices of Latham & Watkins, 885 Third Avenue, New York, New
York 10022, and shall be interpreted and the rights and liabilities of the
parties hereto determined in accordance with the laws and decisions of the State
of New York. Wherever possible each provision of this Subordinated Note shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Subordinated Note shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Subordinated Note.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
8. Waivers. All parties hereto, whether as makers, endorsers, or
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otherwise, severally waive presentment for payment, demand, protest and notice
of dishonor. Originator additionally expressly waives all notice of the
acceptance by any Senior Claimant of the subordination and other provisions of
this Subordinated Note and expressly waives reliance by any Senior Claimant upon
the subordination and other provisions herein provided.
9. Assignment. This Subordinated Note may not be assigned, pledged
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or otherwise transferred to any party other than Originator without the prior
written consent of the Agent, and any such attempted transfer shall be void.
FEDERAL-MOGUL FUNDING CORPORATION
By: ________________________________
Name:
Title:
SCHEDULE
TO
SUBORDINATED NOTE
SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL
--------------------------------------------
Amount Unpaid
Amount of of Principal Notation
Date Subordinated Loan Principal Paid Balance made by
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_______________ __________________ ________________ _______________ _____________
SCHEDULE A
DOCUMENTS AND RELATED ITEMS TO BE DELIVERED
ON OR PRIOR TO THE INITIAL PURCHASE
I. Receivables Sale Agreement
--------------------------
A. Receivables Sale and Contribution Agreement dated as of September __,
1998 (the "SALE AGREEMENT") by and among Federal-Mogul Corporation, a Michigan
corporation, Carter Automotive Company, Inc., a Delaware corporation, and
Federal-Mogul Canada Limited, a Canadian corporation (each, an "ORIGINATOR" and
collectively the "ORIGINATORS"), and Federal-Mogul Funding Corporation, a
Michigan corporation ("SPC"), with completed exhibits.
B. Subordinated Notes dated November __, 1998 executed by SPC in favor of
each Originator.
C. Stockholder and Subscription Agreement dated as of November ___, 1998
by and between the Federal-Mogul Corporation and SPC.
D. Certificate of each Originator's [Assistant] Secretary certifying:
1. An attached copy of such Originator's Articles of Incorporation
(certified within 60 days prior to closing by the Secretary of State
of the state of such Originator's incorporation)
2. An attached copy of such Originator's By-Laws
3. An attached copy of resolutions of such Originator's Board of
Directors authorizing such Originator's execution, delivery and
performance of the Sale Agreement and related documents
4. The names, titles and specimen signatures of such Originator's
officers authorized to execute and deliver the Sale Agreement and
related documents
E. Good standing certificates for each Originator from the following
states certified within 60 days prior to closing:
1. Michigan
2. ___________
F. Pre-filing state and federal tax lien, judgment lien and UCC lien
searches against each Originator from the following jurisdictions:
1. Michigan
2. As applicable for tax and judgment liens, ________ County, ______
3. _________________
G. UCC Financing Statements naming each Originator, as debtor, SPC, as
secured party, and The First National Bank of Chicago, as Agent, as assignee of
secured party, for filing in the following jurisdictions:
1. Secretary of State of Michigan
2. _____________
H. Post-filing UCC lien searches against the Originator from the
following jurisdictions: [post closing]
1. Secretary of State of Michigan
2. _____________
I. Opinions:
1. Corporate/UCC opinions
2. True Sale/Non-consolidation opinion
J. Each Originator's CFO's Certificate re no Event of Purchase and Sale
Termination or Potential Event of Purchase and Sale Termination, and absence of
Material Adverse Effect since June 30, 1998.
K. If applicable, irrevocable letters of direction to third-parties
storing Records, authorizing SPC and the Agent, as SPC's assignee, access to
each Originator's Records and the right to make copies thereof at such
Originator's expense.
L. Collection Agreements.
M. Copies of any Third-Party Consents.
II. Receivables Interest Purchase Agreement
---------------------------------------
A. Receivables Interest Purchase Agreement dated as of November ___, 1998
(the "INVESTOR AGREEMENT") by and among SPC, Federal-Mogul Corporation, Falcon
Asset Securitization Corporation, financial institutions from time to time a
party thereto and The First National Bank of Chicago, as Agent (in such
capacity, the "AGENT") with completed exhibits.
B. Fee Letter dated as of November
___, 1998 by and between SPC and the Agent.
C. Certificate of SPC's [Assistant] Secretary certifying:
1. An attached copy of SPC's Certificate of Incorporation (certified
within 30 days prior to closing by the Michigan Secretary of State)
2. An attached copy of SPC's By-Laws
3. An attached copy of resolutions of SPC's Board of Directors
authorizing SPC's execution, delivery and performance of the Investor
Agreement and related documents
4. The names, titles and specimen signatures of SPC's officers
authorized to execute and deliver the Investor Agreement and related
documents
D. Good standing certificates for SPC from the following states certified
within 30 days prior to closing:
1. Michigan
2. ____________
E. UCC Financing Statements naming SPC, as debtor, and the Agent, as
secured party, for filing in the following jurisdictions:
1. Secretary of State of Michigan
2. ____________
F. Post-filing UCC lien searches against SPC from the following
jurisdictions: [post closing]
1. Secretary of State of Michigan
2. ____________
G. Purchase Notice executed by SPC.
H. Opinion of SPC's counsel re _____________ [similar to last
transaction]
I. SPC's CFO's Certificate re no Amortization Event or Potential
Amortization Event and absence of Material Adverse Effect since June 30, 1998.
J. If applicable, irrevocable letters of direction to third-parties
storing Records, authorizing SPC and the Agent, as SPC's assignee, access to the
Originator's Records and the right to make copies thereof at the Originator's
expense.
K. Collection Account Agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date
hereof.
ORIGINATORS AND SUB-SERVICER:
FEDERAL-MOGUL CORPORATION,
as Originator and Sub-Servicer
By: _____________________________
Name:
Title:
Address for Notices:
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Ml 48034
Attention: Treasury Department
Phone: (248) 354-7700
Fax: (248) 354-6746
CARTER AUTOMOTIVE COMPANY, INC.,
as Originator
By: _____________________________
Name:
Title:
Address for Notices:
Carter Automotive Company, Inc.
26555 Northwestern Highway
Southfield, Ml 48034
Attention: Treasury Department
Phone: (248) 354-7700
Fax: (248) 354-6746
FEDERAL-MOGUL CANADA LIMITED,
as Originator
By: ___________________________
Name:
Title:
Address for Notices:
Federal-Mogul Canada Limited
26555 Northwestern Highway
Southfield, Ml 48034
Attention: Treasury Department
Phone: (248) 354-7700
Fax: (248) 354-6746
BUYER:
FEDERAL-MOGUL FUNDING CORPORATION
as Buyer
By: _______________________________
Name:
Title:
Address for Notices:
Federal-Mogul Funding Corporation
26555 Northwestern Highway
Southfield, Ml 48034
Attention: Treasury Department
Phone: (248) 354-770
Fax: (248) 354