SECOND AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Exhibit 10.1

SECOND AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

D ATED AS OF J ULY  28, 2008

A MONG

MOHAWK FACTORING, INC., AS B ORROWER ,

MOHAWK SERVICING, INC., AS S ERVICER ,

VICTORY RECEIVABLES CORPORATION,

THREE PILLARS FUNDING LLC,

SUNTRUST BANK,

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,

INDIVIDUALLY AND AS A C O -A GENT ,

AND

SUNTRUST ROBINSON HUMPHREY, INC., AS A C O -A GENT AND

A DMINISTRATIVE A GENT

TABLE OF CONTENTS

 

 

 

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E XHIBITS AND S CHEDULES

 

 

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SECOND AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

THIS SECOND AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT, dated as of July 28, 2008 is entered into by and among:

(a) Mohawk Factoring, Inc., a Delaware corporation ( “Borrower” ),

(b) Mohawk Servicing, Inc., a Delaware corporation ( “Mohawk Servicing” ), as initial Servicer (the Servicer together with Borrower, the “Loan Parties” and each, a “Loan Party” ),

(c) Victory Receivables Corporation, a Delaware corporation (together with its successors, “Victory” or a “Conduit” ) and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, in its capacity as a Liquidity Bank to Victory (together with its successors, “BTMU” and together with Victory, the “Victory Group” ),

(d) Three Pillars Funding LLC, a Delaware limited liability company (together with its successors, “TPF” or a “Conduit” ) and SunTrust Bank, in its capacity as a Liquidity Bank to TPF (together with its successors, “SunTrust” and together with TPF, the “TPF Group” ),

(e) The issuers of Commercial Paper from time to time party hereto (together with their respective successors, individually, a “Conduit” and collectively with Victory and TPF, the “Conduits” ) and the financial institutions acting in the capacity of a Liquidity Bank to such other Conduits (together with such financial institutions’, successors and such Conduit, a “Group” and collectively with the TPF Group and the Victory Group, the “Groups” ),

(f) The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, in its capacity as agent for the Victory Group (together with its successors and assigns in such capacity, the “Victory Agent” or a “Co-Agent” ), SunTrust Robinson Humphrey, Inc., in its capacity as agent for the TPF Group (together with its successors and assigns in such capacity, the “TPF Agent” or a “Co-Agent” ) and any other administrative agent for a Group from time to time party hereto (together with their respective successors, individually a “Co-Agent” and collectively with the Victory Agent and the TPF Agent the “Co-Agents” ), and

(g) SunTrust Robinson Humphrey, Inc., as agent for the Groups and the Co-Agents (together with its successors and assigns hereunder, the “Administrative Agent” and together with the Co-Agents, the “Agents” ),

and amends and restates in its entirety that certain Amended and Restated Credit and Security Agreement dated as of August 4, 2003, by and among Borrower, Mohawk Servicing, SunTrust Robinson Humphrey, Inc. (then known as SunTrust Capital Markets, Inc.), individually and as a co-agent, TPF (then known as Three Pillars Funding Corporation), Variable Funding Capital Company LLC as assignee of Blue Ridge Asset Funding Corporation ( “VFCC” ), and Wachovia Bank, National Association ( “Wachovia” ), individually, as a co-agent and as administrative agent thereunder, as amended from time to time prior to the effectiveness hereof (the “Existing Agreement” ).

Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I.

PRELIMINARY STATEMENTS

WHEREAS, immediately prior to the effectiveness of this Agreement, (i) Wachovia and VFCC assigned all of their respective rights and obligations under the Transaction Documents (other than Wachovia’s role as administrative agent) to BTMU and Victory, respectively, (ii) STRH was replaced by SunTrust Bank as TPF Liquidity Bank, and (iii) Wachovia was replaced by STRH, as Administrative Agent;

WHEREAS , pursuant to the Existing Agreement, the Groups committed to make loans to Borrower from time to time, secured by the Collateral, and Mohawk Servicing agreed to act as Servicer; and

WHEREAS, Borrower, the Servicer, the Victory Group, the TPF Group and the Administrative Agent wish to amend and restate the Existing Agreement in its entirety, on the terms and subject to the conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree that the Existing Agreement is amended and restated in its entirety as follows:

ARTICLE I.

THE ADVANCES

Section 1.1 Credit Facility .

(a) Upon the terms and subject to the conditions hereof, from time to time prior to the Facility Termination Date upon receipt of a copy of each Borrowing Notice from Borrower, each of the Co-Agents shall determine whether its Conduit will fund a Loan in an amount equal to its Group’s Percentage of the requested Advance specified in such Borrowing Notice. In the event that a Conduit elects not to make any such Loan to Borrower, the applicable Co-Agent shall promptly notify Borrower and, unless Borrower cancels its Borrowing Notice, each of such Conduit’s Liquidity Banks severally agrees to make its Pro Rata Share of its Group’s Percentage of such Loan to Borrower, on the terms and subject to the conditions hereof, provided that at no time may the aggregate principal amount of such Conduit’s and such Conduit’s Liquidity Banks’ Loans outstanding exceed the lesser of (i) the aggregate amount of such Conduit’s Liquidity Banks’ Commitments, and (ii) such Conduit’s Group’s Percentage of the Borrowing Base (such lesser amount, the “Conduit Allocation Limit” ).

Each of the Advances, and all other Obligations, shall be secured by the Collateral as provided in Article XIII.

(b) Borrower may, upon at least 10 Business Days’ notice to the Co-Agents, terminate in whole or reduce in part, ratably among the Liquidity Banks in each Group in accordance with such Group’s Percentage, the unused portion of the Aggregate Commitment;

 

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provided that each partial reduction of the Aggregate Commitment shall be in an amount equal to $5,000,000 per Group (or a larger integral multiple of $1,000,000 per Group if in excess thereof) and shall reduce the Commitments of the Liquidity Banks in each Group ratably in accordance with their respective Pro Rata Shares.

Section 1.2 Increases . Borrower shall provide the Co-Agents with at least one (1) Business Day’s prior notice in a form set forth as Exhibit II hereto of each Advance, provided such notice is received by each Co-Agent no later than 12:00 noon on such Business Day (each, a “Borrowing Notice” ). Each Borrowing Notice shall be subject to Section 6.2 hereof and, except as set forth below, shall be irrevocable and shall specify the requested increase in Aggregate Principal (which shall not be less than $1,000,000 per Group or a larger integral multiple of $100,000 per Group), the Borrowing Date (which, in the case of any Advance after the initial Advance hereunder, shall only be on a Settlement Date), and, in the case of an Advance which Borrower has been notified by the applicable Co-Agent will be funded by the applicable Group’s Liquidity Banks, the requested Interest Rate and Interest Period. If a Conduit declines to make its Group’s Percentage of a proposed Advance, Borrower may cancel the Borrowing Notice. On the date of each Advance, upon satisfaction of the applicable conditions precedent set forth in Article VI, the applicable Conduit or the applicable Conduit’s Liquidity Banks, as applicable, shall make the proceeds of its Loan comprising such Group’s Percentage of such requested Advance available to its Group’s Co-Agent in immediately available funds on the proposed date of borrowing. Upon receipt by a Co-Agent of such Loan proceeds, such Co-Agent shall deposit to the Facility Account, in immediately available funds, no later than 12:00 noon (New York City time), an amount equal to (i) in the case of a Conduit, such Conduit’s Group’s Percentage of the principal amount of the requested Advance or (ii) in the case of a Conduit’s Liquidity Bank, each such Liquidity Bank’s Pro Rata Share of such Liquidity Bank’s Group’s Percentage of the principal amount of the requested Advance.

Section 1.3 Decreases . Except as provided in Section 1.4, Borrower shall provide the Co-Agents with prior written notice in conformity with the Required Notice Period in the form attached hereto as Exhibit XI (a “Reduction Notice” ) delivered no later than 2:00 p.m. (New York City time) of any proposed reduction of Aggregate Principal. Such Reduction Notice shall designate (i) the date (the “Proposed Reduction Date” ) upon which any such reduction of Aggregate Principal shall occur (which date shall give effect to the applicable Required Notice Period), and (ii) the amount of Aggregate Principal to be reduced which shall be applied ratably to the Loans of the Conduits and the Liquidity Banks in accordance with the amount of principal (if any) owing to the Conduits (ratably, based on their Group’s Percentage of such reduction), on the one hand, and the amount of principal (if any) owing to the Liquidity Banks (ratably, based on their respective Pro Rata Shares of their Group’s Percentage of such reduction), on the other hand (the “Aggregate Reduction” ). Only one (1) Reduction Notice with respect to any Proposed Reduction Date shall be outstanding at any time.

Section 1.4 Deemed Collections; Borrowing Limit .

(a) If on any day:

(i) the Outstanding Balance of any Receivable is reduced by the Servicer as a result of any defective or rejected goods or services or any other adjustment (other than a Cash Discount) by any Originator or any Affiliate thereof, or as a result of any tariff or other governmental or regulatory charge, or

 

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(ii) the Outstanding Balance of any Receivable is reduced or canceled by the Servicer as a result of a setoff in respect of any claim by the Obligor thereof (whether such claim arises out of the same or a related or an unrelated transaction), or

(iii) the Outstanding Balance of any Receivable is reduced by the Servicer on account of the obligation of any Originator or any Affiliate thereof to pay to the related Obligor any rebate or refund, or

(iv) the Outstanding Balance of any Receivable is less than the amount included in calculating the Net Pool Balance for purposes of any Monthly Report (for any reason other than such Receivable becoming a Defaulted Receivable), or

(v) any of the representations or warranties of Borrower set forth in Section 5.1(i), (j), (r), (s), (t) or (u) were not true when made with respect to any Receivable,

then, on such day, Borrower shall be deemed to have received a Collection of such Receivable (A) in the case of clauses (i)-(iv) above, in the amount of such reduction or cancellation or the difference between the actual Outstanding Balance and the amount included in calculating such Net Pool Balance, as applicable; and (B) in the case of clause (v) above, in the amount of the Outstanding Balance of such Receivable and, effective as of the date on which the next succeeding Monthly Report is required to be delivered, the Borrowing Base shall be reduced by the amount of such Deemed Collection.

(b) Borrower shall ensure that the Aggregate Principal at no time exceeds the Borrowing Limit. If, on any Business Day, the aggregate outstanding principal amount of the Loans from any Group exceeds such Group’s Conduit Allocation Limit, or the aggregate principal amount of the Loans outstanding from such Group’s Conduit exceeds the Liquidity Commitments of such Group’s Liquidity Banks pursuant to such Group’s Liquidity Agreement divided by 102%, Borrower shall prepay such Loans by wire transfer to the applicable Co-Agent received not later than 12:00 noon (New York City time) on the next succeeding Settlement Date (it being understood that, in the case of a payment to or for the benefit of TPF, such noon deadline is required to comply with Section B(1)(a) of the DTC Operational Arrangements and the DTC Notice (B#2078-07) dated September 11, 2007) of an amount sufficient to eliminate such excess, together with accrued and unpaid interest on the amount prepaid (as allocated by the applicable Co-Agent), such that after giving effect to such payment the Aggregate Principal is less than or equal to the Borrowing Limit and the applicable Group’s Percentage of the Aggregate Principal is less than or equal to the applicable Group’s Conduit Allocation Limit.

Section 1.5 Payment Requirements . All amounts to be paid or deposited by any Loan Party pursuant to any provision of this Agreement shall be paid or deposited in accordance with the terms hereof no later than 12:00 noon (New York City time) on the day when due in immediately available funds (it being understood that, in the case of a payment to or for the benefit of TPF, such noon deadline is required to comply with Section B(1)(a) of the DTC Operational Arrangements and the DTC Notice (B#2078-07) dated September 11, 2007), and if

 

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not received before 12:00 noon (New York time) shall be deemed to be received on the next succeeding Business Day. If such amounts are payable to a Lender they shall be paid to the applicable Co-Agent Account, for the account of such Lender, until otherwise notified by such Co-Agent. All computations of CP Costs, Interest at the LIBO Rate, per annum fees calculated as part of any CP Costs, per annum fees hereunder and per annum fees under the Fee Letter shall be made on the basis of a year of 360 days for the actual number of days elapsed. All computation of Interest at the Alternate Base Rate or Default Rate shall be made on the basis of a year of 365 (or, when appropriate, 366) days for the actual number of days elapsed If any amount hereunder shall be payable on a day which is not a Business Day, such amount shall be payable on the next succeeding Business Day.

Section 1.6 Ratable Loans; Funding Mechanics; Liquidity Fundings .

(a) Each Advance hereunder shall consist of one or more Loans made by the Conduits and/or the applicable Liquidity Banks.

(b) Each Lender funding any Loan shall wire transfer the principal amount of its Loan to its Co-Agent in immediately available funds not later than 12:00 noon (New York City time) on the applicable Borrowing Date and, subject to such Co-Agent’s receipt of such Loan proceeds, such Co-Agent shall wire transfer such funds to the account specified by Borrower in its Borrowing Request not later than 2:00 p.m. (New York City time) on such Borrowing Date.

(c) While it is the intent of each Conduit to fund each requested Advance through the issuance of its respective Commercial Paper, the parties acknowledge that if any Conduit is unable, or determines that it is undesirable, to issue Commercial Paper to fund all or any portion of its Loans, or is unable to repay such Commercial Paper upon the maturity thereof, such Conduit shall put all or any portion of its Loans to its Liquidity Banks at any time pursuant to its applicable Liquidity Agreement to finance or refinance the necessary portion of its Loans through a Liquidity Funding to the extent available. The Liquidity Fundings may be Alternate Base Rate Loans or LIBO Rate Loans, or a combination thereof, selected by Borrower in accordance with Article IV and, in the case of LIBO Rate Loans, agreed to by the applicable Co-Agent. Regardless of whether a Liquidity Funding constitutes the direct funding of a Loan, an assignment of a Loan made by a Conduit or the sale of one or more participations in a Loan made by a Conduit, each Liquidity Bank in such Conduit’s Group participating in a Liquidity Funding shall have the rights of a “Lender” hereunder with the same force and effect as if it had directly made a Loan to Borrower in the amount of its Liquidity Funding.

(d) Nothing herein shall be deemed to commit any Conduit to make Loans.

 

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ARTICLE II.

PAYMENTS AND COLLECTIONS

Section 2.1 Payments . Borrower hereby promises to pay:

(a) the Aggregate Principal on and after the Facility Termination Date as and when Collections are received;

(b) the fees set forth in the Fee Letter on the dates specified therein;

(c) all accrued and unpaid Interest on the Alternate Base Rate Loans on each Settlement Date applicable thereto;

(d) all accrued and unpaid Interest on the LIBO Rate Loans on the last day of each Interest Period applicable thereto;

(e) all accrued and unpaid CP Costs on the CP Rate Loans on each Settlement Date; and

(f) all Broken Funding Costs and Indemnified Amounts upon demand.

Section 2.2 Collections Prior to Amortization; Demand for Payment of Certain Demand Advances .

(a) On each Settlement Date prior to the Amortization Date, the Servicer shall deposit to the applicable Co-Agent Account, for distribution to the applicable Lenders, the applicable Percentage of a portion of the Collections received by it during the preceding Settlement Period (after deduction of its Servicing Fee) equal to the sum of the following amounts for application to the Obligations in the order specified:

first, ratably to the payment of all invoiced accrued and unpaid CP Costs, Interest and Broken Funding Costs (if any) that are then due and owing to the applicable Conduit,

second, ratably to the payment of all accrued and unpaid fees under the Fee Letter (if any) that are then due and owing to the applicable Conduit or its Co-Agent,

third, if required under Section 1.3 or 1.4, to the ratable reduction of the applicable Conduit’s Percentage of the Aggregate Principal, and

fourth, for the ratable payment of all other unpaid Obligations, if any, that are then due and owing to such Conduit, its Co-Agent or the related Indemnified Parties.

The balance, if any, shall be transferred to Borrower or otherwise in accordance with Borrower’s instructions. Collections applied to the payment of Obligations shall be distributed in accordance with the aforementioned provisions, and, giving effect to each of the priorities set forth above in this Section 2.2(a), shall be shared ratably (within each priority) among the applicable Co-Agent and the Lenders in its Group in accordance with the amount of such Obligations owing to each of them in respect of each such priority.

 

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(b) If the Collections are insufficient to pay the Servicing Fee and the Obligations specified above on any Settlement Date, Borrower shall make demand for repayment of any outstanding Demand Advances in an aggregate amount equal to the lesser of (i) the amount of such shortfall in Collections, and (ii) the aggregate outstanding principal balance of the Demand Advances, together with all accrued and unpaid interest thereon.

Section 2.3 Demand for Payment of Demand Advances on the Amortization Date; Collections Following Amortization .

(a) On the Amortization Date, Borrower hereby agrees to make demand for payment of all Demand Advances, together with all accrued and unpaid interest thereon, in an amount up to the outstanding balances of such Demand Advances, but not to exceed the then outstanding Obligations.

(b) On the Amortization Date and on each day thereafter, to the extent the Obligations have not otherwise been paid, the Servicer shall set aside and hold in trust, for the Secured Parties, all Collections received on such day. On and after the Amortization Date, the Servicer shall, on each Settlement Date and on each other Business Day specified by the Administrative Agent at the direction of any Co-Agent (after deduction of any accrued and unpaid Servicing Fee as of such date): (i) remit to the applicable Co-Agent Account the applicable Group’s Percentage of the amounts set aside pursuant to the preceding two sentences, and (ii) apply such amounts to reduce the Obligations as follows:

first, to the reimbursement of the applicable Conduit’s Group’s Percentage Share of the Administrative Agent’s reasonable costs incurred in connection with the collection of amounts due under this Agreement and enforcement of this Agreement,

second, ratably to the payment of all accrued and unpaid CP Costs, Interest and Broken Funding Costs (if any) that are then due and owing to the applicable Conduit,

third, ratably to the payment of all accrued and unpaid fees under the Fee Letter,

fourth, to the ratable reduction of such Conduit’s Percentage of the Aggregate Principal,

fifth, for the ratable payment of all other unpaid Obligations that are then due and owing to such Conduit, its Co-Agent or the related Indemnified Parties, and

sixth, after the Obligations have been indefeasibly reduced to zero, to Borrower.

Collections applied to the payment of Obligations shall be distributed in accordance with the aforementioned provisions, and, giving effect to each of the priorities set forth above in this Section 2.3(b), shall be shared ratably (within each priority) among the Agent and the Lenders in accordance with the amount of such Obligations owing to each of them in respect of each such priority.

 

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Section 2.4 Payment Rescission . No payment of any of the Obligations shall be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application of law or judicial authority, or must otherwise be returned or refunded for any reason. Borrower shall remain obligated for the amount of any payment or application so rescinded, returned or refunded, and shall promptly pay to the applicable Co-Agent Account (in each case for application to the Person or Persons who suffered such rescission, return or refund) the full amount thereof, plus Interest on such amount at the Default Rate from the date of any such rescission, return or refunding.

ARTICLE III.

COMMERCIAL PAPER FUNDING

Section 3.1 CP Costs . Borrower shall pay CP Costs with respect to the principal balance of the Loans from time to time outstanding. Each Loan of a Pool-Funded Conduit that is funded substantially with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based upon the percentage share that the principal in respect of such Loan represents in relation to all assets held by such Pool-Funded Conduit and funded substantially with related Pooled Commercial Paper on such day.

Section 3.2 Calculation of CP Costs . As soon as practicable, and not later than the 3 ^rd Business Day immediately preceding each Monthly Reporting Date, each Conduit shall calculate the aggregate amount of CP Costs applicable to its CP Rate Loans for the Calculation Period then most recently ended and shall notify Borrower of such aggregate amount, which notice shall include a reasonably detailed description of such calculations.

Section 3.3 CP Costs Payments . On each Settlement Date, Borrower shall pay to the Co-Agents (for the benefit of their respective Conduit) an aggregate amount equal to all accrued and unpaid CP Costs in respect of the principal associated with all CP Rate Loans for the Calculation Period then most recently ended in accordance with Article II.

Section 3.4 Default Rate . From and after the occurrence of an Amortization Event, all Loans of the Conduits shall accrue Interest at the Default Rate and shall cease to be CP Rate Loans.

Section 3.5 Selection of Tranche Periods . At any time while TPF is not a Pool-Funded Conduit, Borrower may from time to time (after consultation with the TPF Agent) request specific maturity dates for the Related Commercial Paper. The TPF Agent shall accept such request unless it determines, in its sole discretion, that the related tranche period is unavailable or commercially undesirable.

 

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ARTICLE IV.

LIQUIDITY FUNDING

Section 4.1 Liquidity Funding . Prior to the occurrence of an Amortization Event, the outstanding principal balance of each Liquidity Funding shall accrue interest for each day during its Interest Period at either the LIBO Rate or the Alternate Base Rate in accordance with the terms and conditions hereof. Until Borrower gives notice to the applicable Co-Agent of another Interest Rate in accordance with Section 4.4, the initial Interest Rate for any Loan transferred to the Liquidity Banks by the applicable Conduit pursuant to the applicable Liquidity Agreement shall be the Alternate Base Rate (unless the Default Rate is then applicable). If the applicable Liquidity Banks acquire by assignment from the applicable Conduit any Loan pursuant to the applicable Liquidity Agreement, each Loan so assigned shall each be deemed to have an Interest Period commencing on the date of any such assignment.

Section 4.2 Interest Payments . On the Settlement Date for each Liquidity Funding, Borrower shall pay to the applicable Co-Agent (for the benefit of the Liquidity Banks in its Group) an aggregate amount equal to the accrued and unpaid Interest for the entire Interest Period of each such Liquidity Funding in accordance with Article II.

Section 4.3 Selection and Continuation of Interest Periods .

(a) With consultation from the applicable Co-Agent, Borrower shall from time to time request Interest Periods for the Liquidity Fundings, provided that if at any time any Liquidity Funding is outstanding, Borrower shall always request Interest Periods such that at least one Interest Period shall end on the date specified in clause (A) of the definition of Settlement Date and provided further that the decision as to whether to utilize Liquidity Fundings, in lieu of all or any portion of a funding by a Conduit, shall reside with the applicable Co-Agent and not with Borrower.

(b) Borrower or the applicable Co-Agent, upon notice to and consent by the other received at least three (3) Business Days prior to the end of an Interest Period (the “Terminating Tranche” ) for any Liquidity Funding, may, effective on the last day of the Terminating Tranche: (i) divide any such Liquidity Funding into multiple Liquidity Fundings, (ii) combine any such Liquidity Funding with one or more other Liquidity Fundings that have a Terminating Tranche ending on the same day as such Terminating Tranche or (iii) combine any such Liquidity Funding with a new Liquidity Funding to be made by the applicable Liquidity Banks on the day such Terminating Tranche ends.

Section 4.4 Liquidity Bank Interest Rates . Borrower may select the LIBO Rate or the Alternate Base Rate for each Liquidity Funding. Borrower shall by 12:00 noon (New York City time): (i) at least three (3) Business Days prior to the expiration of any Terminating Tranche with respect to which the LIBO Rate is being requested as a new Interest Rate and (ii) at least one (1) Business Day prior to the expiration of any Terminating Tranche with respect to which the Alternate Base Rate is being requested as a new Interest Rate, give the applicable Co-Agent irrevocable notice of the new Interest Rate for the Liquidity Funding associated with such Terminating Tranche. Until Borrower gives notice to the applicable Co-Agent of another

 

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Interest Rate, the initial Interest Rate for any Loan transferred to the applicable Liquidity Banks pursuant to the applicable Liquidity Agreement shall be the Alternate Base Rate (unless the Default Rate is then applicable).

Section 4.5 Suspension of the LIBO Rate .

(a) If any Liquidity Bank notifies its applicable Co-Agent that it has reasonably determined that funding its Pro Rata Share of its Group’s Percentage of the Liquidity Fundings at a LIBO Rate would violate any applicable law, rule, regulation, or directive of any governmental or regulatory authority, or that (i) deposits of a type and maturity appropriate to match fund its Liquidity Funding at such LIBO Rate are not available or (ii) such LIBO Rate does not accurately reflect the cost of acquiring or maintaining a Liquidity Funding at such LIBO Rate, then such Co-Agent shall suspend the availability of such LIBO Rate and require Borrower to select the Alternate Base Rate for any Liquidity Funding of such Liquidity Bank accruing Interest at such LIBO Rate.

(b) If less than all of the Liquidity Banks of any applicable Group give a notice to such Group’s Co-Agent pursuant to Section 4.5(a), each Liquidity Bank which gave such a notice shall be obliged, at the request of Borrower, the applicable Conduit or the applicable Co-Agent, to assign all of its rights and obligations hereunder to (i) another Liquidity Bank in its Group or (ii) another funding entity nominated by Borrower or the applicable Co-Agent that is an Eligible Assignee willing to participate in this Agreement through the Liquidity Termination Date in the place of such notifying Liquidity Bank; provided that (i) the notifying Liquidity Bank receives payment in full, pursuant to an Assignment Agreement, of all Obligations owing to it (whether due or accrued), and (ii) the replacement Liquidity Bank otherwise satisfies the requirements of Section 12.1(b).

Section 4.6 Default Rate . From and after the occurrence of an Amortization Event, all Liquidity Fundings shall accrue Interest at the Default Rate.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations and Warranties of the Loan Parties . Each Loan Party hereby represents and warrants to the Agents and the Lenders, as to itself, as of the date hereof, and except for representations and warranties that are limited to a certain date, as of the date of each Advance and as of each Settlement Date that:

(a) Existence and Power . Such Loan Party is duly organized, validly existing and in good standing under the laws of its state of organization. Such Loan Party is duly qualified to do business and is in good standing as a foreign entity, and has and holds all organizational power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted except where the failure to so qualify or so hold is not reasonably likely to have a Material Adverse Effect.

 

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(b) Power and Authority; Due Authorization, Execution and Delivery . The execution and delivery by such Loan Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and, in the case of Borrower, Borrower’s use of the proceeds of Advances made hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Agreement and each other Transaction Document to which such Loan Party is a party has been duly executed and delivered by such Loan Party.

(c) No Conflict . The execution and delivery by such Loan Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its certificate or articles of incorporation or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree applicable to it, and do not result in the creation or imposition of any Adverse Claim on assets of such Loan Party or its Subsidiaries (except as created hereunder), except, in any case, where such contravention or violation is not reasonably likely to have a Material Adverse Effect; and no transaction contemplated hereby requires compliance with any bulk sales act or similar law.

(d) Governmental Authorization . Other than the filing of the financing statements 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 and delivery by such Loan Party of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder.

(e) Actions, Suits . There are no actions, suits or proceedings pending, or to the best of such Loan Party’s knowledge, threatened in writing, before any court, arbitrator or other body, that is reasonably likely to have a Material Adverse Effect, except as set forth on Schedule 5.1(e) hereto. Such Loan Party is not in default with respect to any order of any court, arbitrator or governmental body which is reasonably likely to have a Material Adverse Effect.

(f) Binding Effect . This Agreement and each other Transaction Document to which such Loan Party is a party constitute the legal, valid and binding obligations of such Loan Party enforceable against such Loan Party 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 generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

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(g) Accuracy of Information . All written information heretofore furnished by such Loan Party or any of its Affiliates to the Agents or the Lenders 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 Loan Party or any of its Affiliates to the Agents or the Lenders, as of the date thereof does not and will not contain any material misstatement of fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

(h) Use of Proceeds . No proceeds of any Advance hereunder will be used for a purpose that violates, or would be inconsistent with, (i) Section 7.2(e) of this Agreement or (ii) Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time.

(i) Good Title . Borrower is the legal and beneficial owner of the Receivables and Related Security with respect thereto, free and clear of any Adverse Claim, except as created hereby. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC of all appropriate jurisdictions to perfect Borrower’s ownership interest in each Receivable and the Related Security to the extent such interest can be perfected by filing a financing statement under the UCC. !

(j) Perfection . This Agreement is effective to create a valid security interest in favor of the Administrative Agent for the benefit of the Secured Parties in the Collateral to secure payment of the Obligations, free and clear of any Adverse Claim except as created by the Transactions Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC of all appropriate jurisdictions to perfect the Administrative Agent’s (on behalf of the Secured Parties) security interest in the Collateral to the extent that a security interest therein may be perfected by filing a financing statement under the UCC.

(k) Places of Business and Locations of Collection Records . The principal places of business and chief executive office of such Loan Party and the offices where it keeps all of its Collection Records are located at the address(es) listed on Exhibit III or such other locations of which the Administrative Agent has been notified in accordance with Section 7.2(a) in jurisdictions where all action required by Section 14.4(a) has been taken and completed. Borrower’s Federal Employer Identification Number is correctly set forth on Exhibit III.

(l) Collections . The conditions and requirements set forth in Section 7.1(j) have at all times since the effective date of this Agreement been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of the Collection Accounts of Borrower at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit IV. Borrower has not granted any Person, other than the Administrative Agent as contemplated by and subject to this Agreement, dominion and control of any Lock-Box or Collection Account, or the right to take dominion and control of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event; provided, however, that nothing herein shall be deemed to preclude Borrower from granting Servicer access to the Lock-Boxes and Collection Accounts for purposes consistent with the terms of the Servicing Agreement and this Agreement prior to delivery of the Collection Notices and the appointment of a successor Servicer.

 

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(m) Material Adverse Effect . The initial Servicer and Borrower represent and warrant that since December 31, 2002, no event has occurred that would have a Material Adverse Effect.

(n) Names . In the past five (5) years ended on the date of this Agreement, Borrower has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement other than DT/Mohawk Funding, LLC which was merged into Borrower on or prior to the date of the Existing Agreement.

(o) Not an Investment Company . Such Loan Party is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or any successor statute.

(p) Compliance with Law . Each Receivable, together with the Invoice related thereto, does not violate any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), except where such violation is not reasonably likely to have a Material Adverse Effect.

(q) Compliance with Credit and Collection Policy . Such Loan Party has complied in all material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract, and since the Initial Cutoff Date (as defined in the Receivables Sale Agreement) has not made or consented to any material change to such Credit and Collection Policy, except such material change as to which the Administrative Agent has been notified and, if required under Section 7.1(b)(iii), granted its prior written consent.

(r) Payments to Applicable Originator . With respect to each Receivable transferred to Borrower under the Receivables Sale Agreement, Borrower has given reasonably equivalent value to the applicable Originator in consideration therefor and such transfer was not made for or on account of an antecedent debt.

(s) Enforceability of Receivables . Each Receivable represents a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of thereof and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

(t) Eligible Receivables . Each Receivable included in the Net Pool Balance as an Eligible Receivable on the date of any Monthly Report was an Eligible Receivable on such date.

(u) Borrowing Limit . Immediately after giving effect to each Advance and each settlement on any Settlement Date hereunder, the Aggregate Principal is less than or equal to the Borrowing Limit and each Group’s Percentage of the Aggregate Principal is less than or equal to such Group’s Conduit Allocation Limit.

 

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(v) Accounting . The manner in which Borrower accounts for the transactions contemplated by this Agreement and the Receivables Sale Agreement does not jeopardize the true sale analysis with respect to transfers between the Originators and Borrower pursuant to the Receivables Sale Agreement.

Section 5.2 Liquidity Bank Representations and Warranties . Each Liquidity Bank hereby represents and warrants to the Agents, the Conduits and the Loan Parties that:

(a) Existence and Power . Such Liquidity Bank is a banking association duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has all organizational power to perform its obligations hereunder and under the applicable Liquidity Agreement.

(b) No Conflict . The execution and delivery by such Liquidity Bank of this Agreement and the applicable Liquidity Agreement and the performance of its obligations hereunder and thereunder are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its certificate or articles of incorporation or association or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on its assets other than pursuant to the Transaction Documents.

(c) Governmental Authorization . 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 and delivery by such Liquidity Bank of this Agreement or the applicable Liquidity Agreement and the performance of its obligations hereunder or thereunder.

(d) Binding Effect . Each of this Agreement and the applicable Liquidity Agreement constitutes the legal, valid and binding obligation of such Liquidity Bank enforceable against such Liquidity Bank in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law). This Agreement and the applicable Liquidity Agreement have been duly authorized, executed and delivered by such Liquidity Bank, and is and will remain part of the permanent records of each Liquidity Bank.

ARTICLE VI.

CONDITIONS OF ADVANCES

Section 6.1 Conditions Precedent to Initial Advance . The initial Advance under this Agreement is subject to the conditions precedent that (a) the Administrative Agent shall have received on or before the date of such Advance those documents listed on Schedule A to the Receivables Sale Agreement and those documents listed on Schedule B to this Agreement, (b)

 

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the Rating Agency Condition shall have been satisfied, and (c) the Administrative Agent shall have received all fees and expenses required to be paid on such date pursuant to the terms of this Agreement, the Fee Letter and any engagement letter between Borrower or any of its Affiliates and BTMU.

Section 6.2 Conditions Precedent to All Advances . Each Advance and each rollover or continuation of any Advance shall be subject to the further conditions precedent that (a) the Servicer shall have delivered to the Co-Agents on or prior to the date thereof all Monthly Reports as and when due under Section 8.5; (b) the Facility Termination Date shall not have occurred; (c) in the event of a change in law that affects the validity, perfection or priority of the Administrative Agent’s security interest in the Collateral or a change in circumstances that materially and adversely affects the Receivables after the date of this Agreement, the Administrative Agent shall have received such other opinions or documents as it may reasonably request; and (d) on the date thereof, the following statements shall be true (and acceptance of the proceeds of such Advance shall be deemed a representation and warranty by Borrower that such statements are then true):

(i) the representations and warranties set forth in Section 5.1 (other than those contained in Sections 5.1(e) and (m), and if and to the extent incorporated herein, the representation and warranty contained in Section 6(d) of the Performance Undertaking) are true and correct on and as of the date of such Advance (or such Settlement Date, as the case may be) as though made on and as of such date; provided , that with respect to those contained in Sections 5.1(a), (c) and (p), the determination of whether any Material Adverse Effect has occurred as set forth therein shall be made solely by Borrower, in its reasonable, good faith judgment;

(ii) no event has occurred and is continuing, or would result from such Advance (or the continuation thereof), that will constitute an Amortization Event, and no event has occurred and is continuing, or would result from such Advance (or the continuation thereof), that would constitute an Unmatured Amortization Event; and

(iii) after giving effect to such Advance (or the continuation thereof), the Aggregate Principal will not exceed the Borrowing Limit.

ARTICLE VII.

COVENANTS

Section 7.1 Affirmative Covenants of the Loan Parties . Until the Final Payout Date, each Loan Party hereby covenants, as to itself, as set forth below:

(a) Financial Reporting . Servicer and Borrower will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish or cause to be furnished to the Administrative Agent:

(i) Annual Reporting . Promptly upon the filing thereof with the Securities Exchange Commission, if applicable, and, in any event, within 90 days after the close of each of its respective fiscal years: (A) audited, unqualified consolidated

 

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financial statements (which shall include balance sheets, statements of earnings, stockholder’s equity, and cash flows) of the Performance Guarantor for such fiscal year, accompanied by an opinion of independent public accountants of recognized national standing, and (B) analogous unaudited balance sheets and statements of earnings for Borrower, certified by one of its Responsible Financial Officers.

(ii) Quarterly Reporting . Promptly upon the filing thereof with the Securities Exchange Commission, if applicable, and, in any event, within 45 days after the close of the first three (3) quarterly periods of each of Performance Guarantor’s fiscal years consolidated balance sheets of the Performance Guarantor as at the close of each such period and consolidated statements of earnings, stockholder’s equity and cash flows for the Performance Guarantor for the period from the beginning of such fiscal year to the end of such quarter, all certified by one of its Responsible Financial Officers. Within 90 days after the close of the first three (3) quarterly periods of each of Borrower’s fiscal years balance sheets of Borrower as at the close of each such period and statements of earnings for Borrower for the period from the beginning of such fiscal year to the end of such quarter, all certified by one of its Responsible Financial Officers.

(iii) Compliance Certificate . Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit V signed by one of Borrower’s Responsible Financial Officers and dated the date of such annual financial statement or such quarterly financial statement, as the case may be.

(iv) Shareholders Statements and Reports . Promptly upon the furnishing thereof generally to the shareholders of Performance Guarantor copies of all financial statements, reports and proxy statements so furnished.

(v) S.E.C. Filings . Promptly upon the filing thereof, copies of all registration statements (other than registration statements on Forms S-8 or S-3 covering benefit or compensation plans, stock purchase or dividend reinvestment plans, or for purposes of resales of securities by holders) and annual, quarterly, monthly or other regular reports which any Loan Party or any of its Affiliates files with the Securities and Exchange Commission.

(vi) Other Information . Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or results of operations of such Loan Party as the Administrative Agent may from time to time reasonably request in order to protect the interests of the Agents and the Lenders under or as contemplated by this Agreement.

(b) Notices . Such Loan Party will notify the Administrative Agent in writing of any of the following within one (1) business day of learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto:

(i) Amortization Events or Unmatured Amortization Events . The occurrence of each Amortization Event and each Unmatured Amortization Event, by a statement of a Responsible Financial Officer of such Loan Party.

 

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(ii) Copies of Notices . Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other material communication under or in connection with any other Transaction Document from any Person other than any Agent or any Lender, a copy of the same.

(iii) Change in Credit and Collection Policy . At least thirty (30) days prior to the effectiveness of any material change in or material amendment to the Credit and Collection Policy, a copy of the Credit and Collection Policy then in effect and a notice (A) indicating such proposed change or amendment, and (B) requesting the Administrative Agent’s consent thereto if such proposed change or amendment is reasonably likely to adversely affect the collectibility of the Receivables generally or materially decrease the credit quality of newly created Receivables generally.

(iv) Termination Date . The occurrence of the “Termination Date” under and as defined in the Receivables Sale Agreement.

(v) Defaults Under Other Agreements . The occurrence of a default or an event of default under any other financing arrangement pursuant to which such Loan Party is a debtor or an obligor.

(vi) Downgrade of Performance Guarantor . Any downgrade in the rating of any Indebtedness of Performance Guarantor by S&P or Moody’s, setting forth the Indebtedness affected and the nature of such change.

(vii) Material Adverse Effect . The occurrence of any event or condition that has had, or is reasonably likely to have, a Material Adverse Effect.

(c) Compliance with Laws and Preservation of Corporate Existence . Such Loan Party will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply is not reasonably likely to have a Material Adverse Effect. Such Loan Party will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign entity in each jurisdiction where its business is conducted, except where the failure to so preserve and maintain or qualify is not reasonably likely to have a Material Adverse Effect.

(d) Audits . Such Loan Party will furnish to the Administrative Agent from time to time such information with respect to it and the Receivables as the Administrative Agent may reasonably request. Such Loan Party will, from time to time during regular business hours as requested by the Administrative Agent upon not less than two (2) Business Days’ prior written notice (unless an Amortization Event has occurred in which case the Administrative Agent may have access on demand without notice), permit the Administrative Agent, or its agents or representatives (and shall cause each Originator to permit the Administrative Agent or its agents or representatives): (i) to examine and make copies of and abstracts from all Collection Records and Other Records in the possession or under the control of such Person relating to the Collateral, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i)

 

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above, and to discuss matters relating to such Person’s financial condition or the Collateral or any Person’s performance under any of the Transaction Documents or any Person’s performance under the Contracts and, in each case, with any of the officers or employees of Borrower or the Servicer having knowledge of such matters (each of the foregoing examinations and visits, a “Review” ); provided, however, that, so long as no Amortization Event has occurred and is continuing, (A) the Loan Parties shall only be responsible for the out-of-pocket costs and expenses of one (1) Review in any one calendar year, and (B) the Administrative Agent will not request more than one (1) Review in any period of three consecutive calendar months. So long as no Amortization Event has occurred and is continuing, the Administrative Agent shall provide to the Loan Parties a written estimate of the costs and expenses of each Review for which the Loan Parties are responsible to pay not less than two (2) Business Days prior to the commencement of any such Review.

(e) Keeping and Marking of Records and Books .

(i) The Servicer 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 identification of each new Receivable and all Collections of and adjustments to each existing Receivable). The Servicer will (and will cause each Originator to) give the Agents notice of any material change in the administrative and operating procedures referred to in the previous sentence.

(ii) Borrower will: (A) on or prior to the date hereof, make appropriate notation in its computer files and other books and records relating to the Loans with a notation, reasonably acceptable to the Agents, describing the Administrative Agent’s security interest in the Collateral and (B) upon the request of the any of the Agents following the occurrence of an Amortization Event: (x) mark each Contract with a legend or code describing the Administrative Agent’s security interest relating to the Receivables.

(f) Compliance with Credit and Collection Policy . Such Loan Party will comply in all respects with the Credit and Collection Policy in regard to each Receivable and the related Contract.

(g) Performance and Enforcement of Receivables Sale Agreement . Borrower will perform each of its obligations and undertakings under and pursuant to the Receivables Sale Agreement, will purchase Receivables thereunder in compliance with the terms thereof, and will diligently enforce each Originator’s obligations under the Receivables Sale Agreement. Borrower will take all actions to perfect and enforce its rights and interests (and the rights and interests of the Agents and the Lenders as assignees of Borrower) under the Receivables Sale Agreement as any of the Agents may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Receivables Sale Agreement.

 

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(h) Ownership . Borrower will (or will cause each Originator to) (i) take all necessary action to establish and maintain, irrevocably, in Borrower all right, title and interest in and to Receivables purchased under the Receivables Sale Agreement together with the associated Related Security, in each case, free and clear of any Adverse Claims (other than Adverse Claims in favor of the Administrative Agent, for the benefit of the Secured Parties) including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC of all appropriate jurisdictions to perfect Borrower’s interest in such Receivables and the Related Security (to the extent such ownership interest therein can be perfected by filing UCC financing statements) and such other action to perfect, protect or more fully evidence the interest of Borrower therein as any of the Agents may reasonably request, and (ii) establish and maintain, in favor of the Administrative Agent, for the benefit of the Secured Parties, a valid and perfected first priority security interest in all Collateral, free and clear of any Adverse Claims, including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC of all appropriate jurisdictions to perfect the Administrative Agent’s (for the benefit of the Secured Parties) security interest in the Collateral and such other action to perfect, protect or more fully evidence the interest of the Administrative Agent for the benefit of the Secured Parties as any Agent may reasonably request, all to the extent such ownership can be perfected by filing UCC financing statements.

(i) Lenders’ Reliance . Borrower acknowledges that the Agents and the Lenders are relying upon Borrower’s identity as a legal entity that is separate from each Originator and its other Affiliates and agrees to take all reasonable steps to maintain Borrower’s identity as a separate legal entity and to make it manifest to third parties that Borrower is an entity with assets and liabilities distinct from those of each Originator and its other Affiliates (other than Borrower) and not just a division thereof. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, (i) Borrower will conduct its affairs in strict compliance with Sections 7.06 and 7.07 of its Amended and Restated Certificate of Incorporation as in effect on the date of the Existing Agreement and as thereafter amended with the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed), and (ii) Borrower will maintain at all times Net Worth greater than or equal to the Required Capital Amount and refrain from making any dividend, distribution, redemption of capital stock or payment of any subordinated indebtedness which would cause Net Worth to be less than the Required Capital Amount.

(j) Collections . Borrower will cause (1) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a Collection Account and (2) each Lock-Box and Collection Account to be subject at all times, to a Collection Account Agreement that is in full force and effect; provided, however, that Collection Account Agreements for the Lock-Boxes and Collection Accounts in Canada shall not be required to be in effect prior to October 27, 2008. If any new Lock-Boxes or Collection Accounts are established after the date of this Agreement, in addition to compliance with the foregoing clause (2), Borrower will promptly provide the Administrative Agent with copies of an updated Exhibit IV to this Agreement and an updated Exhibit III to the Receivables Sale Agreement (and upon such delivery both such Exhibits shall be deemed to be amended accordingly notwithstanding anything in Section 14.1 hereof or Section 7.1 of the Receivables Sale Agreement to the contrary). In the event any payments relating to the Collateral are remitted directly to any Loan Party or any Affiliate of such Loan Party, such Loan Party will remit (or will cause all such payments to be remitted)

 

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directly to a Collection Bank and deposited into a Collection Account within two (2) Business Days following receipt thereof, and, at all times prior to such remittance, such Loan Party will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of the Agents and the Lenders. Borrower will maintain exclusive ownership, dominion and control (subject to the terms of this Agreement) of each Lock-Box and Collection Account and shall not grant 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 to any Person, except to the Administrative Agent as contemplated by this Agreement; provided, however, that nothing herein shall be deemed to preclude Borrower from granting Servicer access to the Lock-Boxes and Collection Accounts for purposes consistent with the terms of the Servicing Agreement and this Agreement prior to delivery of the Collection Notices.

(k) Taxes . To the extent that such Loan Party’s tax returns are not lawfully consolidated with the returns of another Person, such Loan Party will file all tax returns and reports required by law to be filed by it and will promptly pay all taxes and governmental charges at any time owing, except any such taxes which are not yet delinquent or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. Borrower will pay when due any taxes payable by it in connection with the Receivables, exclusive of taxes on or measured by income or gross receipts of any Agent or any Lender.

(l) Payment to Applicable Originator . With respect to any Receivable purchased by Borrower from any Originator, such sale shall be effected under, and in accordance with the terms of, the Receivables Sale Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to such Originator in respect of the purchase price for such Receivable.

Section 7.2 Negative Covenants of the Loan Parties . Until the Final Payout Date, each Loan Party hereby covenants, as to itself, that:

(a) Name Change, Jurisdiction of Organization, Offices and Collection Records . Each of Borrower and Servicer will not and will not authorize any Originator to, change its name or jurisdiction of organization or relocate any office where Collection Records are kept unless it shall have: (i) given the Agents at least thirty (30) days’ prior written notice thereof and (ii) delivered to the Administrative Agent all financing statements, instruments and other documents requested by any Agent in connection with such change or relocation.

(b) Change in Payment Instructions to Obligors . Except as may be required by the Administrative Agent pursuant to Section 8.2(b), such Loan Party will not, and will not authorize any Originator to, add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless the Agents shall have received, at least ten (10) days (or two (2) Business Days in the case of the Lock-Boxes and Collection Accounts referred to in the second proviso of this Section 7.2(b)) before the proposed effective date therefor, (i) written notice of such addition, termination or change, and (ii) a Collection Account Agreement with respect to any new Lock-Box or Collection Account; provided, however, that the Servicer may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to

 

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make payments to another existing Collection Account that complies with this clause (ii); and provided further that not later than October 27, 2008, each of the Agents and the Lenders hereby authorizes and directs the Loan Parties to establish new Lock-Boxes and Collection Accounts in Canada which are subject to Collection Account Agreements.

(c) Modifications to Contracts and Credit and Collection Policy . Such Loan Party will not, and will not cause or authorize any Originator to, make any change to the Credit and Collection Policy that is reasonably likely to materially adversely affect the collectibility of the Receivables generally or materially decrease the credit quality of newly created Receivables generally. The Servicer will not, and will not permit any Originator to, extend, amend or otherwise modify the terms of any Receivable or any Contract related thereto other than in accordance with the Credit and Collection Policy.

(d) Sales, Liens . Borrower will 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, its interest in any of the Collateral, or assign any right to receive income with respect thereto (other than, in each case, the creation of a security interest therein in favor of the Administrative Agent as provided for herein), and Borrower will defend the right, title and interest of the Secured Parties in, to and under any of the foregoing property, against all claims of third parties claiming through or under Borrower or any Originator.

(e) Use of Proceeds . Borrower will not use the proceeds of the Advances for any purpose other than (i) paying for Receivables and Related Security under and in accordance with the Receivables Sale Agreement, (ii) making loans to Mohawk Resources or Mohawk Carpet at any time so long as no Amortization Event or Unmatured Amortization Event exists and is continuing, (iii) paying its ordinary and necessary operating expenses when and as due, and (iv) making Restricted Junior Payments to the extent permitted under this Agreement.

(f) Termination Date Determination . Borrower will not designate the Termination Date (as defined in the Receivables Sale Agreement), or send any written notice to any Originator in respect thereof prior to the Final Payout Date, without the prior written consent of the Agents, except with respect to the occurrence of such Termination Date arising pursuant to Section 5.1(d) of the Receivables Sale Agreement.

(g) Restricted Junior Payments . Borrower will not make any Restricted Junior Payment if after giving effect thereto, Borrower’s Net Worth would be less than the Required Capital Amount.

(h) Borrower Indebtedness . Borrower will not incur or permit to exist any Indebtedness or liability on account of deposits except: (i) the Obligations, and (ii) other current accounts payable arising in the ordinary course of business.

 

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ARTICLE VIII.

ADMINISTRATION AND COLLECTION

Section 8.1 Designation of Servicer .

(a) The servicing, administration and collection of the Receivables shall be conducted by such Person (the “Servicer” ) so designated from time to time in accordance with this Section 8.1. Mohawk Servicing is hereby designated as, and shall have the rights and agrees to perform the duties and obligations of, the initial Servicer pursuant to the terms of the Servicing Agreement, subject to the provisions of this Agreement. Borrower may, at any time upon thirty (30) days prior written notice to the Agents, designate any other direct or indirect Subsidiary of the Performance Guarantor as a successor Servicer, provided the Rating Agency Condition is satisfied. The Co-Agents may at any time following the occurrence of an Amortization Event designate as Servicer any Person to succeed Mohawk Servicing or any successor Servicer provided that the Rating Agency Condition is satisfied. To the extent that the Servicer’s obligations under this Agreement are inconsistent with its obligations under the Servicing Agreement, the terms of this Agreement shall govern and control.

(b) Mohawk Servicing may delegate, and Mohawk Servicing hereby advises the Lenders and the Agents that it has delegated, to the Originators, as sub-servicers of the Servicer and to the Performance Guarantor, certain of its duties and responsibilities as Servicer hereunder in respect of the Receivables originated by such Originator. Without the prior written consent of the Agents and the Required Liquidity Banks, Mohawk Servicing shall not be permitted to delegate any of its duties or responsibilities as Servicer to any Person other than (i) Borrower, (ii) the Originators, (iii) the Performance Guarantor, and (iv) with respect to certain Defaulted Receivables, outside collection agencies in accordance with its customary practices. Neither Borrower nor any Originator shall be permitted to further delegate to any other Person any of the duties or responsibilities of the Servicer delegated to it by Mohawk Servicing. If at any time the Co-Agents shall designate as Servicer any Person other than Mohawk Servicing, all duties and responsibilities theretofore delegated by Mohawk Servicing to Borrower or the Originators may, at the discretion of the Co-Agents, be terminated forthwith on notice given by the Co-Agents to Mohawk Servicing and to Borrower and the Originators.

(c) Notwithstanding the foregoing subsection (b): Mohawk Servicing shall be and remain primarily liable for the full and prompt performance of all duties and responsibilities of the Servicer pursuant to the Servicing Agreement and this Agreement. Mohawk Servicing, at all times that it is the Servicer, shall be responsible for providing any sub-servicer or other delegate of the Servicer with any notice given to the Servicer under this Agreement.

Section 8.2 Certain Duties of Servicer .

(a) [intentionally deleted].

(b) From and after the date the Administrative Agent delivers to any Collection Bank a Collection Notice pursuant to Section 8.3, any Agent may request that the Servicer, and the Servicer thereupon promptly shall instruct all Obligors with respect to the

 

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Receivables, to remit all payments thereon to a new depositary account specified by the Administrative Agent and, at all times thereafter, Borrower and the Servicer shall not deposit or otherwise credit, and shall not permit any other Person to deposit or otherwise credit to such new depositary account any cash or payment item other than Collections.

(c) The Servicer shall administer the Collections in accordance with the procedures described herein and in Article II. The Servicer shall set aside and hold in trust for the account of Borrower and the Lenders their respective shares of the Collections in accordance with Article II. The Servicer shall, upon the request of any Agent, segregate, in a manner acceptable to the Agents, all cash, checks and other instruments received by it from time to time constituting Collections from the general funds of the Servicer or Borrower prior to the remittance thereof in accordance with Article II. If the Servicer shall be required to segregate Collections pursuant to the preceding sentence, the Servicer shall segregate and deposit with a bank designated by the Administrative Agent such allocable share of Collections of Receivables set aside for the Lenders on the first Business Day following receipt by the Servicer of such Collections, duly endorsed or with duly executed instruments of transfer.

(d) The Servicer may, in accordance with the Credit and Collection Policy, extend the maturity of any Receivable or adjust the Outstanding Balance of any Receivable as the Servicer determines to be appropriate to maximize Collections thereof; provided, however, that such extension or adjustment shall not alter the status of such Receivable as a Delinquent Receivable or Defaulted Receivable or limit the rights of the Agents or the Lenders under this Agreement except to the extent payment is received thereon from the Originator pursuant to the Receivables Sale Agreement.

(e) If demanded by the Administrative Agent following an Amortization Event, the Servicer shall deliver or make available to the Administrative Agent all such Collection Records or duplicates thereof, at a place selected by the Administrative Agent, provided that such Collection Records will be available for use by Borrower, the Performance Guarantor and their Affiliates for reasonable use in their respective businesses. The Servicer shall, as soon as practicable following receipt thereof, turn over to Borrower any cash collections or other cash proceeds received not constituting Receivables. The Servicer shall, from time to time at the request of any Lender, furnish to the Lenders (promptly after any such request) a calculation of the amounts set aside for the Lenders pursuant to Article II.

(f) Any payment by an Obligor in respect of any indebtedness owed by it to Originator or Borrower shall, except as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Co-Agent, be applied as a Collection of any Receivable of such Obligor (starting with the oldest such Receivable) to the extent of any amounts then due and payable thereunder before being applied to any other receivable or other obligation of such Obligor.

Section 8.3 Collection Notices . The Administrative Agent is authorized at any time after the occurrence of an Amortization Event to date and to deliver to the Collection Banks the Collection Notices. Borrower hereby transfers to the Administrative Agent, for the benefit of the Agents and the Lenders, exclusive ownership and control of each Lock-Box and Collection Account; provided, however, that Borrower shall retain the right to direct the disposition of funds

 

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from each Lock-Box and Collection Account until the Administrative Agent delivers the applicable Collection Notice in accordance with the first sentence of this Section 8.3. In case any authorized signatory of Borrower whose signature appears on a Collection Account Agreement shall cease to have such authority before the delivery of such notice, such Collection Notice shall nevertheless be valid as if such authority had remained in force. Borrower hereby authorizes the Administrative Agent, and agrees that the Administrative Agent shall be entitled (i) at any time after delivery of the Collection Notices, to endorse Borrower’s name on checks and other instruments representing Collections, (ii) at any time after the occurrence of an Amortization Event, to enforce the Receivables and the Related Security, and (iii) at any time after the occurrence of an Amortization Event, to take such action as shall be necessary or desirable to cause all cash, checks and other instruments constituting Collections of Receivables to come into the possession of the Administrative Agent rather than Borrower and applied against the Obligations.

Section 8.4 Responsibilities of Borrower . Anything herein to the contrary notwithstanding, the exercise by the Administrative Agent on behalf of the Co-Agents and the Lenders of their rights hereunder shall not release the Servicer, any Originator or Borrower from any of their duties or obligations with respect to any Receivables or under the related Contracts. Neither the Agents nor the Lenders shall have any obligation with respect to any Receivable or related Contracts to perform the obligations of Borrower that give rise to such Receivable.

Section 8.5 Monthly Reports . The Servicer shall prepare and forward, or cause to be prepared and forwarded, to the Administrative Agent (i) on each Monthly Reporting Date, a Monthly Report and an electronic file of the data contained therein and (ii) at such times as the Co-Agents shall request, a listing by Obligor of all Receivables together with an aging of such Receivables; provided, however , that the Co-Agents may, in the exercise of their reasonable credit judgment, request that the Servicer prepare and forward a report similar to the Monthly Report more frequently than set forth above.

Section 8.6 Servicing Fee . As compensation for the Servicer’s servicing activities on their behalf, the Lenders hereby agree to pay the Servicer the Servicing Fee, which fee shall be paid in arrears on each Settlement Date. The Servicing Fee specified in this Section 8.6 shall be in lieu of the fee payable to Mohawk Servicing pursuant to the Servicing Agreement.

ARTICLE IX.

AMORTIZATION EVENTS

Section 9.1 Amortization Events . The occurrence of any one or more of the following events shall constitute an Amortization Event:

(a) Performance Guarantor or any Loan Party shall fail to make any payment or deposit required to be made by it under this Agreement or the Performance Undertaking when due and, for any such payment or deposit which is not in respect of principal, such failure continues for three (3) consecutive Business Days.

 

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(b) Any representation, warranty, certification or written statement made by Performance Guarantor or any Loan Party in any Transaction Document to which it is a party or in any other document delivered pursuant thereto shall prove to have been materially incorrect when made or deemed made; provided that the materiality threshold in the preceding clause shall not be applicable with respect to any representation or warranty which itself contains a materiality threshold.

(c) Any Loan Party shall fail to perform or observe any covenant contained in Section 7.2 or 8.5 when due, or any covenant contained in Section 7.1(b) (other than Section 7.1(b)(vi)) within three (3) Business Days after the same is due.

(d) Performance Guarantor, Borrower or Servicer shall fail to perform or observe any other covenant or agreement applicable to it under any Transaction Document to which it is party and such failure shall continue for thirty (30) consecutive days after notice of non-performance from any of the Agents.

(e) Failure of Borrower to pay any Indebtedness (other than the Obligations) when due (taking into account any grace or cure period) or the default by Borrower in the performance of any term, provision or condition contained in any agreement under which any such Indebtedness was created or is governed, the effect of which is to permit the holder or holders of such Indebtedness to cause such Indebtedness to become due prior to its stated maturity or results in the acceleration of such Indebtedness; or any such Indebtedness of Borrower 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.

(f) Failure of Performance Guarantor or any of its Subsidiaries other than Borrower to pay Indebtedness in excess of $25,000,000 in aggregate principal amount (hereinafter, “Material Debt” ) when due; or the default by Performance Guarantor or any of its Subsidiaries other than Borrower 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 permit the holder or holders of such Material Debt to cause such Material Debt to become due prior to its stated maturity or results in the acceleration of such Material Debt; or any Material Debt of Performance Guarantor or any of its Subsidiaries other than Borrower 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.

(g) An Event of Bankruptcy shall occur with respect to Performance Guarantor, any Loan Party or any of their respective Material Subsidiaries.

(h) As at the end of any Calculation Period:

(i) the three-month rolling average Delinquency Ratio shall exceed 4.15%,

(ii) the three-month rolling average Default Ratio shall exceed 2.80%, or

 

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(iii) the three-month rolling average Non-Contractual Dilution Ratio shall exceed 8.75%.

(i) A Change of Control shall occur.

(j)(i) One or more final judgments for the payment of money in an aggregate amount equal to or in excess of the amount set forth in Section 303(b)(2) of the Federal Bankruptcy Code shall be entered against Borrower and such judgment shall continue unsatisfied and in effect for thirty (30) consecutive days without a stay of execution or (ii) one or more final judgments for the payment of money in an amount in excess of $25,000,000, individually or in the aggregate, shall be entered against Performance Guarantor or any of its Material Subsidiaries (other than Borrower 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.

(k) The “Termination Date” under and as defined in the Receivables Sale Agreement shall occur under the Receivables Sale Agreement; or without the Administrative Agent’s prior written consent, Borrower shall consent to any assignment by an Originator of its rights or obligations under the Receivables Sale Agreement other than to any other Originator or to the surviving entity in a merger or consolidation of an Originator with any other Person who is or is to become an Originator after giving effect to such merger or consolidation; or any Originator shall for any reason cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to Borrower under the Receivables Sale Agreement.

(l) This Agreement shall terminate in whole or in part (except in accordance with its terms), or shall cease to be effective or to be the legally valid, binding and enforceable obligation of either Loan Party, or the Administrative Agent for the benefit of the Secured Parties shall cease to have a valid and perfected first priority security interest in the Collateral.

(m) On any Settlement Date, after giving effect to the turnover of Collections by the Servicer on such date and the application thereof to the Obligations in accordance with this Agreement, the Aggregate Principal shall exceed the Borrowing Limit after any payment of the Obligations by Borrower.

(n) The Performance Undertaking shall cease to be effective or to be the legally valid, binding and enforceable obligation of Performance Guarantor, or Performance Guarantor shall directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability of its obligations thereunder.

(o) The PBGC or Internal Revenue Service shall file any notice of lien on any of the Receivables or the Related Security and such lien shall not have been released within seven (7) days.

Section 9.2 Remedies . Upon the occurrence and during the continuation of an Amortization Event, the Administrative Agent may, or upon the direction of any of the Co-Agents or the Required Liquidity Banks shall, take any of the following actions: (i) declare the Amortization Date to have occurred, whereupon the Aggregate Commitment shall immediately

 

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terminate and the Amortization Date shall forthwith occur, all without demand, protest or further notice of any kind, all of which are hereby expressly waived by each Loan Party and the Person acting as Servicer may be replaced by the Co-Agents in their sole discretion; provided, however, that upon the occurrence of an Event of Bankruptcy with respect to any Loan Party, the Amortization Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each Loan Party, (ii) deliver the Collection Notices to the Collection Banks, (iii) exercise all rights and remedies of a secured party upon default under the UCC and other applicable laws, and (iv) notify Obligors of the Administrative Agent’s security interest in the Receivables and other Collateral. The aforementioned rights and remedies shall be without limitation, and shall be in addition to all other rights and remedies of the Agents and the Lenders otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative.

ARTICLE X.

INDEMNIFICATION

Section 10.1 Indemnities by the Loan Parties . Without limiting any other rights that any Agent or any Lender may have hereunder or under applicable law, (A) Borrower hereby agrees to indemnify (and pay upon demand to) each Agent, each Conduit, each of the Liquidity Banks and each of their respective officers, directors, agents and employees of the foregoing (each, an “Indemnified Party” ) from and against any and all damages, losses, claims, Indemnified Taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys’ fees and disbursements actually incurred (all of the foregoing being collectively referred to as “Indemnified Amounts” ) awarded against and actually paid or actually incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by a Lender of an interest in the Receivables, and (B) the Servicer hereby agrees to indemnify (and pay upon demand to) each Indem