RECEIVABLES SALE AND SERVICING AGREEMENT

Exhibit 10.1

EXECUTION COPY

RECEIVABLES SALE AND SERVICING AGREEMENT

Dated as of September 26, 2007

by and among

EACH OF THE ENTITIES PARTY HERETO FROM TIME TO TIME

AS ORIGINATORS,

REXNORD FUNDING LLC,

as Buyer,

and

REXNORD INDUSTRIES, LLC,

as Servicer

 

Receivables Sale and Servicing Agreement

TABLE OF CONTENTS

 

 

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THIS RECEIVABLES SALE AND SERVICING AGREEMENT (as amended, restated, supplemented or otherwise modified and in effect from time to time, this “ Agreement ”) is entered into as of September 26, 2007, by and among each of the persons signatory hereto from time to time as Originators, each an “ Originator ” and, collectively, the “ Originators ”), REXNORD INDUSTRIES, LLC (“ Rexnord ”), a Delaware limited liability company, in its capacity as servicer hereunder (in such capacity, the “ Servicer ”) and REXNORD FUNDING LLC, a Delaware limited liability company (“ Buyer ”).

RECITALS

A. The Buyer is a special purpose limited liability company, the sole member of which is the Member.

B. Buyer has been formed for the sole purposes of purchasing all Receivables originated by each Originator and financing such Receivables under the Funding Agreement.

C. Each Originator intends to sell, and Buyer intends to purchase, such Receivables, from time to time, as described herein.

D. In order to effectuate the purposes of this Agreement and the Funding Agreement, Buyer desires to appoint Rexnord to service, administer and collect the Receivables securing the Advances and Reimbursement Obligations pursuant to this Agreement and Rexnord is willing to act in such capacity as Servicer hereunder on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.01. Definitions . Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in Annex X .

Section 1.02. Rules of Construction . For purposes of this Agreement, the rules of construction set forth in Annex X shall govern. All Appendices hereto, or expressly identified to this Agreement, are incorporated herein by reference and, taken together with this Agreement, shall constitute but a single agreement.

 

Receivables Sale and Servicing Agreement

ARTICLE II

TRANSFERS OF RECEIVABLES

Section 2.01. Agreement to Transfer .

(a) Receivables Transfers . Subject to the terms and conditions hereof, each Originator agrees to sell (without recourse except to the limited extent specifically provided herein) to Buyer on the Effective Date and on each Business Day thereafter (each such date, a “ Transfer Date ”) all Receivables owned by it on each such Transfer Date, and Buyer agrees to purchase all such Receivables on each such Transfer Date. All such Transfers by an Originator to Buyer shall collectively be evidenced by a certificate of assignment substantially in the form of Exhibit 2.01(a) (each, a “ Receivables Assignment ,” and collectively, the “ Receivables Assignments ”), and each Originator and Buyer shall execute and deliver a Receivables Assignment on or before the Effective Date.

(b) Determination of Sold Receivables . On and as of each Transfer Date, each Receivable then owned by each Originator and not previously acquired by Buyer shall be sold immediately upon its creation (each such Receivable sold immediately upon its creation pursuant to clauses (i)  and (ii)  above, individually, a “ Sold Receivable ” and, collectively, the “ Sold Receivables ”).

(c) Payment of Sale Price . (i) In consideration for each Sale of Sold Receivables hereunder, Buyer shall pay to the Originator thereof on the Transfer Date therefor the applicable Sale Price therefor (x) in Dollars in immediately available funds, (y) upon the request of an Originator, by causing an L/C Issuer to issue a Letter of Credit for the benefit of such Originator as more fully described in clause (iii)  below, or (z) with the proceeds of a Subordinated Loan as provided in clause (ii) below. All cash payments by Buyer under this Section 2.01(c)(i) shall be effected by means of a wire transfer or Automatic Clearinghouse (ACH) on the day when due to such account or accounts as the Originators may designate from time to time.

(ii) To the extent that the Sale Price of Sold Receivables exceeds the amount of cash then available to Buyer (and is not otherwise paid through the issuance of a Letter of Credit and an advance under the related L/C Note), the applicable Originator hereby agrees to make a subordinated loan (each, a “ Subordinated Loan ”) to Buyer in an amount not to exceed the lesser of (i) the amount of such excess in satisfaction of the equivalent portion of the Sale Price not paid in cash and (ii) the maximum Subordinated Loan that could be borrowed without rendering Buyer’s Net Worth less than the Required Capital Amount. The Subordinated Loans of an Originator shall be evidenced by a subordinated promissory note substantially in the form of Exhibit 2.01(c)(ii) hereto (a “ Subordinated Note ”) executed by Buyer and payable to such Originator. The Subordinated Loans shall bear interest and be payable as provided in the Subordinated Note.

(iii) If an Originator so requests, Buyer shall pay all or part of the Sale Price of Sold Receivables of such Originator to be paid by causing the Administrative Agent to arrange for the issuance by an L/C Issuer of a Letter of Credit in favor of one or more beneficiaries selected by such Originator. In the event that an Originator requests that all or any portion of the Sale Price of Sold Receivables be paid for by issuance of a Letter of Credit, such Originator shall on a timely basis provide Buyer with such information as is

 

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necessary for Buyer to obtain such Letter of Credit from the applicable L/C Issuer (pursuant to the terms of the Funding Agreement). Such Originator shall reimburse Buyer for its expenses incurred in connection with obtaining such Letter of Credit and shall also pay to Buyer a fee in an amount equal to .125% of the face amount thereof for procuring such Letter of Credit; provided that such fee may be offset against the outstanding principal amount of the Subordinated Note payable to such Originator. No Originator shall have any reimbursement obligations in respect of any Letter of Credit. The face amount of each Letter of Credit shall be applied (x) as a deduction from the applicable Sale Price otherwise payable by Buyer, (y) to the extent such face amount exceeds such Sale Price, as a reduction in the aggregate outstanding principal amount of the Subordinated Note of the related Originator and (z) to the extent the aggregate outstanding principal amount of the Subordinated Note has been reduced to zero, as a credit against the Sale Price payable for future purchases of Receivables. The aggregate deductions, reductions and credits under clauses (x) , (y)  and (z)  of the preceding sentence shall be evidenced by a note in the form of Exhibit 2.01(c)(iii) hereto (a “ L/C Note ”), and shall be payable in accordance with the terms and provisions of the L/C Note and this Agreement. The principal amount of each L/C Note shall be reduced by the amount of any draws on the related Letters of Credit. In the event that a Letter of Credit (as the same may be extended, replaced or renewed and after giving effect to any partial draws) expires undrawn, the remaining principal amount of the related L/C Note shall be payable within 10 Business Days thereafter and, upon giving effect to such payment, the principal amount of such L/C Note shall be reduced by an amount equal to such payment.

(d) Election Notices . If on any Transfer Date any Originator does not sell all of its then owned Receivables to Buyer, such Originator shall deliver to Buyer not later than 5:00 p.m. (New York time) on the Business Day immediately preceding such Transfer Date a notice of election thereof (each such notice, an “ Election Notice ”).

(e) Ownership of Transferred Receivables . On and after each Transfer Date and after giving effect to the Transfers to be made on each such date, Buyer shall own the Transferred Receivables and no Originator shall take any action inconsistent with such ownership nor shall any Originator claim any ownership interest in such Transferred Receivables.

(f) Reconstruction of General Trial Balance . If at any time any Originator fails to generate its General Trial Balance, Buyer shall have the right to reconstruct such General Trial Balance so that a determination of the Sold Receivables can be made pursuant to Section 2.01(b) . Each Originator agrees to cooperate with such reconstruction, including by delivery to Buyer, upon Buyer’s request, of copies of all Records.

(g) Servicing of Receivables . So long as no Event of Servicer Termination shall have occurred and be continuing and no Successor Servicer has assumed the responsibilities and obligations of the Servicer pursuant to Section 9.02 , the Servicer shall (i) conduct the servicing, administration and collection of the Transferred Receivables and shall take, or cause to be taken, all such actions as may be necessary or advisable to service, administer and collect the Transferred Receivables, all in accordance with (A) the terms of this Agreement, (B) customary and prudent servicing procedures for trade receivables of a similar type and (C) all applicable laws, rules and regulations, and (ii) hold all Contracts and other documents and incidents relating

 

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to the Transferred Receivables in trust for the benefit of Buyer, as the owner thereof, and for the sole purpose of facilitating the servicing of the Transferred Receivables in accordance with the terms of this Agreement. Buyer hereby instructs the Servicer, and the Servicer hereby acknowledges, that the Servicer shall hold all Contracts and other documents relating to such Transferred Receivables in trust for the benefit of the Buyer and the Servicer’s retention and possession of such Contracts and documents shall at all times be solely in a custodial capacity for the benefit of the Buyer and its assigns and pledgees.

(h) Returned Items . To the extent (i) any items in respect of Collections of Transferred Receivables credited to a Collection Account are subsequently returned or otherwise not collected by the related Collection Account Bank (collectively, “ Returned Items ”) and (ii) an Originator makes a payment to the related Collection Account Bank to reimburse such Collection Account Bank for such Returned Items in accordance with the terms of the related Collection Account Agreement, then (x) such Originator shall be deemed to have made a Subordinated Loan to the Buyer in an amount equal to the amount paid by such Originator in accordance with the terms of the related Collection Account Agreement to such Collection Account Bank in respect of such Returned Items and (y) the outstanding principal balance of the related Subordinated Note shall be increased by an amount equal to such amount.

Section 2.02. Grant of Security Interest . The parties hereto intend that each Transfer shall be absolute and shall constitute a purchase and sale and not a loan. Notwithstanding the foregoing, in addition to and not in derogation of any rights now or hereafter acquired by Buyer under Section 2.01 hereof, the parties hereto intend that this Agreement shall constitute a security agreement under applicable law and if a court of competent jurisdiction determines that any transaction provided for herein constitutes a loan and not a sale that each Originator shall be deemed to have granted, and each Originator does hereby grant, to Buyer a continuing security interest in all of such Originator’s right, title and interest in, to and under the Receivables whether now owned or hereafter acquired by such Originator to secure the obligations of such Originator to Buyer hereunder (including, if and to the extent that any Transfer is recharacterized as a transfer for security under applicable law, the repayment of a loan deemed to have been made by Buyer to the applicable Originator in the amount of the Sale Price with respect thereto, including interest thereon at the Index Rate).

Section 2.03. Originators Remain Liable . It is expressly agreed by the Originators that, anything herein to the contrary notwithstanding, each Originator shall remain liable to the Obligor (and any other party to the related Contract) under any and all of the Receivables originated by it and under the Contracts therefor to observe and perform all the conditions and obligations to be observed and performed by it thereunder. Buyer shall not have any obligation or liability to the Obligor or any other party to the related Contract under any such Receivables or Contracts by reason of or arising out of this Agreement or the granting herein of a Lien thereon or the receipt by Buyer of any payment relating thereto pursuant hereto. The exercise by Buyer of any of its rights under this Agreement shall not release any Originator from any of its respective duties or obligations under any such Receivables or Contracts. Buyer shall not be required or obligated in any manner to perform or fulfill any of the obligations of any Originator under or pursuant to any such Receivable or Contract, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any such Receivable or Contract, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.

 

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Section 2.04. Sale Price Credits . If on any day the Outstanding Balance of a Receivable is reduced or canceled as a result of any Dilution Factor then, in such event, the Buyer shall be entitled to a credit (each, a “ Sale Price Credit ”) against the Sale Price otherwise payable hereunder in an amount equal to the amount of such reduction or cancellation. If such Sale Price Credit exceeds the Sale Price of the Receivables being sold by the applicable Originator on any such day, then such Originator shall pay the remaining amount of such Sale Price Credit in cash promptly thereafter, provided that if the Commitment Termination Date has not occurred, the applicable Originator shall be allowed to deduct the remaining amount of such Sale Price Credit from any indebtedness owed to it under a Subordinated Note to the extent permitted thereunder.

ARTICLE III

CONDITIONS PRECEDENT

Section 3.01. Conditions Precedent to Initial Transfer . The initial Transfer hereunder shall be subject to satisfaction of each of the following conditions precedent:

(a) Sale Agreement; Other Documents . This Agreement or counterparts hereof shall have been duly executed by, and delivered to, each Originator, the Servicer and Buyer, and Buyer shall have received such information, documents, instruments, agreements and legal opinions as Buyer shall request in connection with the transactions contemplated by this Agreement, including all those identified in the Schedule of Documents, each in form and substance satisfactory to Buyer.

(b) Governmental Approvals . Buyer shall have received (i) satisfactory evidence that the Originators and the Servicer have obtained all required consents and approvals of all Persons, including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Related Documents and the consummation of the transactions contemplated hereby and thereby or (ii) an Officer’s Certificate from each Originator and the Servicer in form and substance satisfactory to Buyer affirming that no such consents or approvals are required.

(c) Compliance with Laws . Each Originator shall be in compliance with all applicable foreign, federal, state, provincial and local laws and regulations, including, without limitation, those specifically referenced in Section 4.02(f) , except to the extent noncompliance could not reasonably be expected to have a Material Adverse Effect.

(d) Funding Agreement Conditions . Each of those conditions precedent set forth in Section 3.01 of the Funding Agreement shall have been satisfied or waived in writing as provided therein.

Section 3.02. Conditions Precedent to all Transfers . Each Transfer hereunder (including the initial Transfer) shall be subject to satisfaction of the following further conditions precedent as of the Transfer Date therefor:

(a) the representations and warranties of each Originator contained herein or in any other Related Document shall be true and correct in all material respects as of such Transfer Date, both before and after giving effect to such Transfer and to the application of the Sale Price therefor, except to the extent that any such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted by this Agreement;

 

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(b) (i) the Administrative Agent shall not have declared the Commitment Termination Date to have occurred following the continuance of a Termination Event, and (ii) the Commitment Termination Date shall not have automatically occurred, in either event, in accordance with Section 9.01 of the Funding Agreement; and

(c) each Originator shall have taken such other action, including delivery of approvals, consents, opinions, documents and instruments to Buyer as Buyer may reasonably request.

The acceptance by any Originator of the Sale Price for any Sold Receivables on any Transfer Date shall be deemed to constitute, as of any such Transfer Date, a representation and warranty by such Originator that the conditions precedent set forth in this Article III have been satisfied. Upon any such acceptance, title to the Transferred Receivables sold on such Transfer Date shall be vested absolutely in Buyer, whether or not such conditions were in fact so satisfied.

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 4.01. Representations and Warranties . To induce Buyer to purchase the Sold Receivables, each Transaction Party, as applicable, and, except to the extent otherwise expressly provided below, as of each Transfer Date, each of which shall survive the execution and delivery of this Agreement.

(a) Corporate Existence; Compliance with Law . Each Transaction Party (i) is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (ii) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to so qualify could not reasonably be expected to result in a Material Adverse Effect; (iii) has the requisite corporate power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business, in each case, as now, heretofore and proposed to be conducted; (iv) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct, except where the failure to do any of the foregoing could not reasonably be expected to result in a Material Adverse Effect; (v) is in compliance with its articles or certificate of incorporation or certificate of formation and by-laws, operating agreement or limited liability agreement, as applicable; and (vi) subject to specific representations set forth herein regarding ERISA, Environmental Laws, tax laws and other laws, is in compliance with all applicable provisions of law, except where the failure to so comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

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(b) Jurisdiction of Organization; Executive Offices; Collateral Locations; Corporate or Other Names; FEIN . Each Originator is a registered organization of the type and is organized under the laws of the State set forth in Schedule 4.01(b) (which is its only jurisdiction of organization) and each such Originator’s organizational identification number (if any), the current location of such Originator’s chief executive office, principal place of business, other offices, the warehouses and premises within which any records relating to the Receivables is stored or located, and the locations of its records concerning the Receivables are set forth in Schedule 4.01(b) and none of such locations has changed within the past 12 months. During the prior five years, except as set forth in Schedule 4.01(b) , no Originator has been known as or used any corporate, legal, limited liability company, fictitious or trade name. In addition, Schedule 4.01(b) lists the federal employer identification number of each Originator.

(c) Corporate Power, Authorization, Enforceable Obligations . The execution, delivery and performance by each Transaction Party of this Agreement and the other Related Documents to which it is a party and the creation and perfection of all Transfers and Liens provided for herein and therein and, solely with respect to clause (vii)  below, the exercise by Buyer, or its assigns of any of its rights and remedies under any Related Document to which it is a party: (i) are within such Person’s powers; (ii) have been duly authorized by all necessary or proper corporate, limited liability company and shareholder and/or member action; (iii) do not contravene any provision of such Person’s articles or certificate of incorporation, certificate of formation, by-laws or operating agreement, as applicable; (iv) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (v) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (vi) do not result in the creation or imposition of any Adverse Claim upon any of the property of such Person; and (vii) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in Section 3.01(b) , all of which will have been duly obtained, made or complied with prior to the Effective Date. On or prior to the Effective Date, each of the Related Documents shall have been duly executed and delivered by each Transaction Party that is a party thereto and on the Closing Date each such Related Document shall then constitute a legal, valid and binding obligation of such Transaction Party, enforceable against it in accordance with its terms.

(d) No Litigation . No Litigation is now pending or, to the knowledge of any Transaction Party, overtly threatened in writing against any Transaction Party or any other Subsidiary of the Parent that (i) challenges such Transaction Party’s right or power to enter into or perform any of its obligations under the Related Documents to which it is a party, or the validity or enforceability of any Related Document or any action taken thereunder, (ii) seeks to prevent the Transfer or pledge of any Receivable or the consummation of any of the transactions contemplated under this Agreement or the other Related Documents or (iii) is reasonably likely to be adversely determined and, if adversely determined, could reasonably be expected to have a Material Adverse Effect.

 

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(e) Solvency . After giving effect to (i) the transactions contemplated by this Agreement and the other Related Documents and (ii) the payment and accrual of all transaction costs in connection with the foregoing, each Transaction Party is and will be Solvent. After giving effect to the sale of Receivables and other payments and transactions contemplated on such Transfer Date, each Transaction Party is and will be Solvent.

(f) Material Adverse Effect . Since March 31, 2007, (i) no Transaction Party has incurred any obligations, contingent or non-contingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (ii) no contract, lease or other agreement or instrument has been entered into by any Transaction Party or has become binding upon any Transaction Party’s assets and no law or regulation applicable to any Transaction Party has been adopted that has had or could reasonably be expected to have a Material Adverse Effect and (iii) no Transaction Party is in default and no third party is in default under any material contract, lease or other agreement or instrument to which such Transaction Party is a party, the result of which, alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Since March 31, 2007, no event has occurred that alone or together with other events could reasonably be expected to have a Material Adverse Effect.

(g) Ownership of Receivables; Liens . Each Originator owns each Receivable originated or acquired by it free and clear of any Adverse Claim and, from and after each Transfer Date, Buyer will acquire valid and properly perfected title to and the sole record and beneficial ownership interest in each Transferred Receivable purchased or otherwise acquired on such date, free and clear of any Adverse Claim or restrictions on transferability. Each Originator has received all assignments, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Originator’s right, title and interest in and to the Receivables originated or acquired by it and its other properties and assets. Each Originator has rights in and full power to transfer its Receivables hereunder. No effective financing statements or other similar instruments are of record in any filing office listing any Originator as debtor and purporting to cover the Transferred Receivables except (i) with respect to the Liens granted to Buyer hereunder or (ii) that names “Credit Suisse, as Administrative Agent” as secured party.

(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock and Debt . Except as set forth in Schedule 4.01(h) , as of the Closing Date, no Originator has any Subsidiaries, is engaged in any joint venture or partnership with any other Person or is an Affiliate of any Person. All of the issued and outstanding Stock of each Originator is directly or indirectly owned by the Parent. As of the Closing Date, there are no outstanding rights to purchase options, warrants or similar rights or agreements pursuant to which any Originator may be required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any Stock or other equity securities of its Subsidiaries. All outstanding Debt of each Originator as of the Closing Date is described on Schedule 4.01(h) .

(i) Taxes . All tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by or on behalf of any Transaction Party have been filed with the appropriate Governmental Authority and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for

 

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nonpayment thereof (or any such fine, penalty, interest, late charge or loss has been paid), excluding Charges or other amounts being contested in accordance with Section 4.02(k) , unless the failure to file any such return, report or statement, or the failure to pay any such charges or fine, penalty, interest, late charge or loss, could reasonably not be expected to have a Material Adverse Effect. As of the Closing Date, no Transaction Party has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, that would have a Material Adverse Effect.

(j) Intellectual Property . As of the Closing Date, to its knowledge each Originator owns or has rights to use all material intellectual property necessary to continue to conduct its business as now or heretofore conducted by it or proposed as of such date to be conducted by it. To its knowledge, each Originator conducts its business and affairs without the legally prohibited use of any intellectual property of any other Person, except such use, if any, that would not reasonably be expected to have a Material Adverse Effect. As of the Effective Date, except as set forth in Schedule 4.01(j) , no Originator is aware of any infringement or overt written claim of infringement by others of any material intellectual property of any Originator.

(k) Full Disclosure . All information contained in this Agreement, any of the other Related Documents, or any other written statement or information furnished by or on behalf of any Transaction Party to Buyer relating to this Agreement, the Sold Receivables or any of the other Related Documents, in each case, is true and accurate in every material respect, and none of this Agreement, any of the other Related Documents, or any other written statement or information furnished by or on behalf of any Transaction Party to Buyer relating to this Agreement or any of the other Related Documents, in each case, taken as a whole, is misleading as a result of the failure to include therein a material fact. All information contained in this Agreement, any of the other Related Documents, or any written statement furnished to Buyer has been prepared in good faith by management of the applicable Transaction Party, as the case may be, with the exercise of reasonable diligence.

(l) Notices to Obligors . Each Transaction Party has directed all Obligors of Transferred Receivables originated by it to remit all payments with respect to such Receivables for deposit in a Collection Account.

(m) ERISA .

(i) Schedule 4.01(m) lists all Plans and separately identifies all Pension Plans, including all Title IV Plans, Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare Plans. Each Qualified Plan has been determined by the IRS to qualify under Section 401(a) of the IRC, the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and, except as set forth on Schedule 4.01(m) , nothing has occurred that could reasonably be expected to cause the loss of such qualification or tax-exempt status. Except as otherwise provided in Schedule 4.01(m) , (x) each Plan is in compliance with the applicable provisions of ERISA and the IRC, including the timely filing of all reports required under the IRC or ERISA, except such noncompliance, if any, that would not reasonably be expected to have a Material Adverse Effect, (y) no Transaction Party or any of their respective ERISA Affiliates has failed to make any contribution or pay any amount due as required

 

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by either Section 412 of the IRC or Section 302 of ERISA or the terms of any Plan, subject to such sections, except such noncompliance, if any, that would not reasonably be expected to have a Material Adverse Effect and (z) no Transaction Party or any of their respective ERISA Affiliates has engaged in a “prohibited transaction,” as defined in Section 4975 of the IRC, in connection with any Plan that could reasonably be expected to subject any Transaction Party to a material tax on prohibited transactions imposed by Section 4975 of the IRC.

(ii) Except as set forth in Schedule 4.01(m) : (A) no Title IV Plan has any Unfunded Pension Liability in excess of $1,000,000; (B) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred within the past three years or is reasonably expected to occur except such ERISA Events that could not reasonably be expected to have a Material Adverse Effect; (C) there are no pending or, to the knowledge of any Transaction Party, claims overtly threatened in writing (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan which are reasonably probable to be determined adversely and if so are reasonably likely to have a Material Adverse Effect; (D) no Transaction Party or any of their respective ERISA Affiliates has incurred or reasonably expects to incur any material liability as a result of a complete or partial withdrawal from a Multiemployer Plan; (E) within the last five years no Title IV Plan with Unfunded Pension Liabilities has been transferred outside of the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of any Transaction Party or their respective ERISA Affiliates; (F) Stock of all Transaction Parties and their respective ERISA Affiliates makes up, in the aggregate, no more than 10% of the assets of any Plan subject to Title I of ERISA, measured on the basis of fair market value as of the last valuation date of any Plan; and (G) no liability under any Title IV Plan has been satisfied with the purchase of a contract from an insurance company that is not rated AAA by S&P or an equivalent rating by another nationally recognized rating agency.

(n) Brokers . No broker or finder acting on behalf of any Transaction Party was employed or utilized in connection with this Agreement or the other Related Documents or the transactions contemplated hereby or thereby and no Transaction Party has any obligation to any Person in respect of any finder’s or brokerage fees in connection herewith or therewith.

(o) Margin Regulations . No Transaction Party is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin security” as such terms are defined in Regulations T, U or X of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as “ Margin Stock ”). No Transaction Party owns any Margin Stock, and no portion of the proceeds of the Sale Price from any Sale will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Debt that was originally incurred to purchase or carry any Margin Stock or for any other purpose that might cause any portion of such proceeds to be considered a “purpose credit” within the meaning of Regulations T, U or X of the Federal Reserve Board. No Transaction Party will take or permit to be taken any action that might cause any Related Document to violate any regulation of the Federal Reserve Board.

 

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(p) Nonapplicability of Bulk Sales Laws . No transaction contemplated by this Agreement or any of the other Related Documents requires compliance with any bulk sales act or similar law.

(q) Investment Company Act Exemptions . Each purchase of Transferred Receivables under this Agreement constitutes a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act.

(r) Government Regulation . No Transaction Party is an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act. No Transaction Party is subject to regulation under the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Debt or to perform its obligations hereunder or under any other Related Document. The purchase or acquisition of the Transferred Receivables by Buyer hereunder, the application of the Sale Price therefor and the consummation of the transactions contemplated by this Agreement and the other Related Documents will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission.

(s) Books and Records; Minutes . The by-laws, limited liability agreement or the certificate or articles of incorporation or organization of each Originator require it to maintain (i) books and records of account and (ii) minutes of the meetings and other proceedings of its Stockholders and board of directors (or an analogous governing body).

(t) Deposit and Disbursement Accounts . Schedule 4.01(t) lists all banks and other financial institutions at which any Originator or the Servicer maintains deposit accounts established for the receipt of collections on accounts receivable, including any Collection Accounts, and such schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor.

(u) Representations and Warranties in Other Related Documents . Each of the representations and warranties of each Transaction Party contained in the Related Documents (other than this Agreement) is true and correct in all material respects and such Transaction Party hereby makes each such representation and warranty to, and for the benefit of, the Buyer as if the same were set forth in full herein. Each Transaction Party consents to the assignment of Buyer’s rights with respect to all such representations and warranties to the Administrative Agent and the Lenders (and their respective successors and assigns) pursuant to the Funding Agreement as more fully described in Section 6.03 below.

(v) Receivables . With respect to each Transferred Receivable acquired by the Buyer hereunder:

(i) Each Receivable included in any Borrower Base Certificate as an Eligible Receivable, as of the applicable Transfer Date therefor, satisfied the criteria for an Eligible Receivable;

 

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(ii) immediately prior to its transfer to Buyer, such Receivable was owned by the Originator thereof free and clear of any Adverse Claim, and such Originator had the full right, power and authority to sell, assign, transfer and pledge its interest therein as contemplated under this Agreement and the other Related Documents and, upon such Transfer, Buyer will acquire valid and properly perfected title to and the sole record and beneficial ownership interest in such Receivable, free and clear of any Adverse Claim and, following such Transfer, such Receivable will not be subject to any Adverse Claim as a result of any action or inaction on the part of such Originator;

(iii) the Transfer of each such Receivable pursuant to this Agreement and the Receivables Assignment executed by the Originator thereof constitutes, as applicable, a valid sale, transfer, assignment, setover and conveyance to Buyer of all right, title and interest of such Originator in and to such Receivable; and

(iv) the Originator of such Receivable has no knowledge of any fact (including Dilution Factors and any defaults by the Obligor thereunder on any other Receivable) that would cause it or should have caused it to expect that any payments on such Receivable will not be paid in full when due.

(w) Fair Value . With respect to each Transferred Receivable acquired by the Buyer hereunder, (i) the consideration received from the Buyer in respect of such Transferred Receivable represents adequate consideration and fair and reasonably equivalent value for such Transferred Receivable as of the applicable Transfer Date and (ii) such consideration is not less than the fair market value of such Transferred Receivables, in each case, as of the applicable Transfer Date and taking into account any increase in the outstanding balance of the Subordinated Note and any L/C Note.

(z) Supplementary Representations .

(i) Receivables; Collection-Accounts .

(A) Each Receivable constitutes an “account” or a “general intangible” within the meaning of the applicable UCC.

(B) Each Account constitutes a “deposit account” within the meaning of the applicable UCC.

(ii) Creation of Security Interest . The Originators own and have good and marketable title to the Receivables, the Accounts and the Collections free and clear of any Adverse Claim. The Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Receivables, the Accounts and the Collections in favor of the Buyer, which security interest is prior to all other Adverse Claims and is enforceable as such as against any creditors of and purchasers from the Originators.

(iii) Perfection . Within 10 days of the Effective Date, the Originators have caused the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law and entered into Account Agreements in order to perfect the sale of the Receivables from the Originators to the Buyer pursuant to this Agreement.

 

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(iv) Priority .

(A) Other than (1) the transfer of the Receivables by the Originators to the Borrower pursuant to this Agreement and (2) security interests which shall be released upon the transfer of the Receivables hereunder, no Originator has pledged, assigned, sold, conveyed, or otherwise granted a security interest in any of the Receivables, the Accounts or the Lockboxes to any other Person.

(B) No Originator has authorized, or is aware of, any filing of any financing statement against any Originator that includes a description of collateral covering the Transferred Receivables or all other assets transferred to the Buyer hereunder, other than any financing statement (i) filed pursuant to this Agreement and the Funding Agreement, (ii) that has been validly terminated on or prior to the date hereof or (iii) that names “Credit Suisse, as Administrative Agent” as secured party.

(C) As of the Closing Date, no Originator is aware of any judgment, ERISA or tax lien filings against any Originator.

(D) None of the Accounts or any of the Lockboxes are in the name of any Person other than the Borrower or the Administrative Agent. No Originator has consented to any Bank complying with instructions of any Person other than the Administrative Agent.

(v) Survival of Supplemental Representations . Notwithstanding any other provision of this Agreement or any other Related Document, the representations contained in this Section 4.01(z) shall be continuing, and remain in full force and effect until the Termination Date.

The representations and warranties described in this Section 4.01 shall survive the Transfer of the Transferred Receivables to Buyer, any subsequent assignment of the Transferred Receivables by Buyer, and the termination of this Agreement and the other Related Documents and shall continue until the indefeasible payment in full of all Transferred Receivables.

Section 4.02. Affirmative Covenants of the Originators . Each Originator covenants and agrees that, unless otherwise consented to by Buyer and the Administrative Agent, from and after the Effective Date and until the Termination Date:

(a) Offices and Records . Each Originator shall maintain its jurisdiction of organization, principal place of business and chief executive office and the office at which it keeps its Records at the respective locations specified in Schedule 4.01(b) or, upon 30 days’ prior written notice to Buyer and the Administrative Agent, at such other location in a jurisdiction where all action requested by Buyer, any Lender or the Administrative Agent pursuant to Section 6.13 shall have been taken with respect to the Transferred Receivables. Each Originator shall at its own cost and expense, for not less than three years from the date on which

 

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each Transferred Receivable was originated, or for such longer period as may be required by law, maintain adequate Records with respect to such Transferred Receivable, including records of all payments received, credits granted and merchandise returned with respect thereto. Upon the request of Buyer, each Originator shall (i) if any Termination Event shall have occurred, mark each Contract (other than invoices) evidencing each Transferred Receivable with a legend, acceptable to Buyer, evidencing that Buyer has purchased such Transferred Receivable and that the Administrative Agent, for the benefit of the Lenders, has a security interest in and lien thereon, and (ii) mark its master data processing records evidencing such Transferred Receivables with such a legend.

(b) Access . Each Originator shall, at its own expense, during normal business hours, from time to time upon one Business Day’s prior notice and as frequently as Buyer or the Servicer determines to be appropriate: (i) provide Buyer, the Servicer and any of their respective officers, employees, agents and representatives reasonable access to the properties of such Originator utilized in connection with the collection, processing or servicing of the Transferred Receivables and facilities, advisors and employees (including officers) of each Originator related thereto, (ii) permit Buyer and the Servicer and any of their respective officers, employees, agents and representatives to inspect, audit and make extracts from such Originator’s books and records relating to the Transferred Receivables, including all Records maintained by such Originator, (iii) permit Buyer, the Servicer and their respective officers, employees, agents and representatives, to inspect, review and evaluate the Transferred Receivables of such Originator, and (iv) permit Buyer, the Servicer and their respective officers, employees, agents and representatives to discuss matters relating to the Transferred Receivables or such Originator’s performance under this Agreement or the affairs, finances and accounts of such Originator with any of its officers, directors, employees, representatives or agents (in each case, with those Persons having knowledge of such matters) and, if a Termination Event has occurred and is continuing, with its independent certified public accountants (subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract). If an Incipient Termination Event or a Termination Event shall have occurred and be continuing, or the Buyer, in good faith, notifies any Originator that an Incipient Termination Event or a Termination Event may have occurred, is imminent or deems its rights or interests in the Transferred Receivables insecure, each such Originator shall provide such access at all times and without advance notice and shall provide Buyer and the Servicer with access to its customers who are Obligors. Each Originator shall make available to Buyer and the Servicer and their respective counsel, as quickly as is possible under the circumstances, originals or copies of all books and records relating to the Transferred Receivables, including Records maintained by such Originator, as Buyer or the Servicer may request. Each Originator shall deliver any document or instrument necessary for Buyer or the Servicer, as they may from time to time request, to obtain records relating to the Transferred Receivables from any service bureau or other Person that maintains records for such Originator relating to the Transferred Receivables, and shall maintain duplicate records or supporting documentation relating to the Transferred Receivables on media, including computer tapes and discs owned by such Originator.

(c) Delivery of Records . If any Termination Event shall have occurred and be continuing, each Originator shall, promptly upon request therefor, deliver to Buyer or its designee all Records reflecting activity through the close of business on the Business Day immediately preceding the date of such request.

 

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(d) Compliance With Credit and Collection Policies . Each Originator shall comply with the Credit and Collection Policies applicable to each Transferred Receivable and the Contracts therefor, and with the terms of such Receivables and Contracts.

(e) Assignment . Each Originator agrees that, to the extent permitted under the Funding Agreement, Buyer may assign all of its right, title and interest in, to and under the Transferred Receivables and this Agreement, including its right to exercise the remedies set forth in Section 4.04 . Each Originator agrees that, upon any such assignment, the assignee thereof may enforce directly, without joinder of Buyer, all of the obligations of such Originator hereunder, including any obligations of such Originator set forth in Sections 4.04 , 5.01 and 6.14 and that such assignees are third party beneficiaries of the Buyer’s rights hereunder.

(f) Compliance with Agreements and Applicable Laws . Each Originator shall perform each of its obligations under this Agreement and the other Related Documents and comply with all federal, state, provincial and local laws and regulations applicable to it and the Receivables, including those relating to truth in lending, retail installment sales, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices, privacy, licensing, securities laws, margin regulations, taxation, ERISA and labor matters and environmental laws and environmental permits, except where the failure to so comply could not reasonably be expected to result in a Material Adverse Effect. Each Originator shall pay all Charges, including any stamp duties, which may be imposed as a result of the transactions contemplated by this Agreement and the other Related Documents, except to the extent such Charges are being contested in accordance with Section 4.01(m) .

(g) Maintenance of Existence and Conduct of Business . Each Originator shall: (i) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate or limited liability company existence and its rights and franchises; (ii) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder and in accordance with the terms of its certificate or articles of incorporation, certificate of formation, by-laws, limited liability company agreement and/or operating agreement, as applicable; (iii) at all times maintain, preserve and protect all of its material assets and properties which are necessary in the conduct of its business, including all material licenses, permits, charters and registrations, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices; and (iv) transact business only in such corporate, legal and trade names as are set forth in Schedule 4.02(g) or, upon 30 days’ prior written notice to Buyer, in such other corporate, limited liability company, legal or trade names with respect to which all action requested by Buyer pursuant to Section 6.13 shall have been taken with respect to the Transferred Receivables.

(h) Notice of Material Event . Each Originator shall promptly inform Buyer in writing of the occurrence of any of the following, in each case setting forth the details thereof, any notices or other correspondence relating thereto, and what action, if any, such Originator proposes to take with respect thereto:

(i) (A) any Litigation commenced or overtly threatened in writing against the Parent, the Member, any Originator or the Servicer (1) in connection with all or any portion of the Transferred Receivables and that seeks damages or penalties in an uninsured amount in excess of $1,000,000 in the aggregate or seeks injunctive relief with respect thereto, (2) is asserted or instituted against any Plan, its fiduciaries (in their capacity as a fiduciary of any such Plan) or its assets or against the Servicer, any Originator or any of their respective ERISA Affiliates in connection with any Plan, or (3) if determined adversely, could reasonably be expected to have a Material Adverse Effect; or (B) any criminal proceeding is commenced against the Servicer or any Originator;

 

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(ii) the commencement of a case or proceeding by or against the Parent, the Member, any Originator, the Servicer or any Subsidiary (other than an Immaterial Subsidiary) of any Originator or the Servicer seeking a decree or order in respect of any such Person under the Bankruptcy Code or any other applicable federal, state, provincial or foreign bankruptcy or other similar law, (A) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any such Person or for any substantial part of such Person’s assets, or (B) ordering the winding-up or liquidation of the affairs of any such Person;

(iii) the receipt of notice that (A) the Parent, the Member, any Originator, the Servicer or any Subsidiary (other than an Immaterial Subsidiary) of any Originator or the Servicer is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of the Parent’s, the Member’s, any Originator’s, the Servicer’s or any Subsidiary (other than an Immaterial Subsidiary) of any Originator’s or the Servicer’s business is to be, or may be, suspended or revoked, or (C) the Parent, the Member, any Originator, the Servicer or any Subsidiary (other than an Immaterial Subsidiary) of any Originator or the Servicer is to cease and desist any practice, procedure or policy employed by the Parent, the Member, such Originator, the Servicer or any Subsidiary (other than an Immaterial Subsidiary) of any Originator or the Servicer in the conduct of its business if such cessation could reasonably be expected to have a Material Adverse Effect;

(iv) (A) any Adverse Claim made or overtly asserted in writing against any of the Transferred Receivables of which it becomes aware or (B) any determination that a Transferred Receivable was not an Eligible Receivable at the time sale to Buyer or has ceased to be an Eligible Receivable on account of any matter giving rise to indemnification under Section 5.01 ;

(v) each infringement or overt written claim of infringement by any Person of any material intellectual property of any Originator which if adversely determined would reasonably be expected to have a Material Adverse Effect;

(vi) the execution or filing with the IRS or any other Governmental Authority of any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any material Charges which if adversely determined would reasonably be expected to have a Material Adverse Effect;

 

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(vii) the establishment of any Plan, Pension Plan, Title IV Plan or undertaking to make contributions to any Multiemployer Plan, ESOP, Welfare Plan or Retiree Welfare Plan in an amount in excess of $1,000,000 and not listed on Schedule 4.01(m) ; or

(viii) any other event, circumstance or condition that has had or could reasonably be expected to have a Material Adverse Effect.

(i) Separate Identity .

(i) Each Originator shall, and shall cause each other member of the Parent Group to, maintain records and books of account separate from those of Buyer.

(ii) The financial statements of the Parent and it