Exhibit 10.2

 

 

 

CREDIT AND SECURITY AGREEMENT

DATED AS OF DECEMBER 19, 2012

AMONG

MOHAWK FACTORING, LLC,

AS BORROWER,

MOHAWK SERVICING, LLC,

AS SERVICER,

THE LENDERS FROM TIME TO TIME PARTY HERETO,

THE LIQUIDITY BANKS FROM TIME TO TIME PARTY HERETO,

THE CO-AGENTS FROM TIME TO TIME PARTY HERETO,

AND

SUNTRUST BANK, AS ADMINISTRATIVE AGENT

 

 

 

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TABLE OF CONTENTS

 

SECTION  

HEADING

     PAGE    ARTICLE I THE ADVANCES      2   

Section 1.1.

  Credit Facility      2   

Section 1.2.

 

Advances

     3   

Section 1.3.

 

Reduction

     3   

Section 1.4.

 

Deemed Collections; Borrowing Limit

     4   

Section 1.5.

 

Payment Requirements

     5   

Section 1.6.

 

Ratable Loans; Funding Mechanics; Liquidity Funding

     5   

Section 1.7.

 

Increase in Aggregate Commitment

     6   

Section 1.8.

 

Defaulting Lenders

     7    ARTICLE II PAYMENTS AND COLLECTIONS      9   

Section 2.1.

 

Payments

     9   

Section 2.2.

 

Collections Prior to Amortization; Demand for Payment of Certain Demand Advances

     9   

Section 2.3.

 

Demand for Payment of Demand Advances on Amortization Date; Collections
Following Amortization

     10   

Section 2.4.

 

Payment Rescission

     11    ARTICLE III COMMERCIAL PAPER FUNDING      11   

Section 3.1.

 

CP Costs

     11   

Section 3.2.

 

Calculation of CP Costs

     12   

Section 3.3.

 

CP Costs Payments

     12   

Section 3.4.

 

CP Costs Following Amortization Event

     12    ARTICLE IV NON-CONDUIT LENDER AND LIQUIDITY FUNDING      12   

Section 4.1.

 

Non-Conduit Lender Funding and Liquidity Funding

     12   

Section 4.2.

 

Interest Payments

     12   

Section 4.3.

 

Suspension of the LIBO Rate

     12   

Section 4.4.

 

Interest Following Amortization Event

     13    ARTICLE V REPRESENTATIONS AND WARRANTIES      13   

Section 5.1.

 

Representations and Warranties of the Loan Parties

     13   

Section 5.2.

 

Liquidity Bank Representations and Warranties

     19    ARTICLE VI CONDITIONS OF ADVANCES      19   

Section 6.1.

 

Conditions Precedent to Initial Advance

     19   

Section 6.2.

 

Conditions Precedent to All Advances

     20   

 

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ARTICLE VII COVENANTS      20   

Section 7.1.

 

Affirmative Covenants of the Loan Parties

     20   

Section 7.2.

 

Negative Covenants of the Loan Parties

     29    ARTICLE VIII ADMINISTRATION AND COLLECTION      31   

Section 8.1.

 

Designation of Servicer

     31   

Section 8.2.

 

Certain Duties of Servicer

     32   

Section 8.3.

 

Collection Notices

     33   

Section 8.4.

 

Responsibilities of Borrower

     33   

Section 8.5.

 

Monthly Reports

     33   

Section 8.6.

 

Servicing Fee

     33    ARTICLE IX AMORTIZATION EVENTS AND REMEDIES      34   

Section 9.1.

 

Amortization Events

     34   

Section 9.2.

 

Remedies

     37    ARTICLE X INDEMNIFICATION      38   

Section 10.1.

 

Indemnities by the Loan Parties

     38   

Section 10.2.

 

Increased Cost and Reduced Return

     40   

Section 10.3.

 

Taxes

     40   

Section 10.4.

 

Other Costs and Expenses

     43    ARTICLE XI THE AGENTS      44   

Section 11.1.

 

Authorization and Action

     44   

Section 11.2.

 

Delegation of Duties

     45   

Section 11.3.

 

Exculpatory Provisions

     46   

Section 11.4.

 

Reliance by the Agents

     46   

Section 11.5.

 

Non-Reliance on Other Agents and Other Lenders

     47   

Section 11.6.

 

Reimbursement and Indemnification

     47   

Section 11.7.

 

Agents in Their Individual Capacities

     47   

Section 11.8.

 

Conflict Waivers

     47   

Section 11.9.

 

UCC Filings

     48   

Section 11.10.

 

Successor Administrative Agent

     48    ARTICLE XII ASSIGNMENTS; PARTICIPATIONS      48   

Section 12.1.

 

Assignments

     48   

Section 12.2.

 

Participations

     49   

Section 12.3.

 

Federal Reserve

     50   

Section 12.4.

 

Substituion of Lenders

     51    ARTICLE XIII SECURITY INTEREST      51   

Section 13.1.

 

Grant of Security Interest

     51   

Section 13.2.

 

Termination after Final Payout Date

     51   

 

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Section 13.3.  

Excluded Receivables

     52    ARTICLE XIV MISCELLANEOUS      52   

Section 14.1.

 

Waivers and Amendments

     52   

Section 14.2.

 

Notices

     53   

Section 14.3.

 

Ratable Payments

     53   

Section 14.4.

 

Protection of Administrative Agent’s Security Interest

     54   

Section 14.5.

 

Confidentiality

     54   

Section 14.6.

 

Bankruptcy Petition; Excess Funds

     56   

Section 14.7.

 

CHOICE OF LAW

     56   

Section 14.8.

 

CONSENT TO JURISDICTION

     56   

Section 14.9.

 

WAIVER OF JURY TRIAL

     56   

Section 14.10.

 

Integration; Binding Effect; Survival of Terms

     57   

Section 14.11.

 

No Recourse Against the Lender

     57   

Section 14.13.

 

Counterparts; Severability; Section References

     57   

Section 14.14.

 

Termination

     58   

EXHIBITS AND SCHEDULES

 

Exhibit I

   —    Definitions

EXHIBIT II

   —    Form of Borrowing Notice

EXHIBIT III

   —    Places of Business of the Loan Parties; Locations of Records; Federal
Employer Identification Number(s)

EXHIBIT IV

   —    Names of Collection Banks; Collection Accounts

EXHIBIT V

   —    Form of Compliance Certificate

EXHIBIT VI

   —    Form of Lender Tax Certificates

EXHIBIT VII

   —    Credit and Collection Policy

EXHIBIT VIII

   —    Form of Monthly Report

EXHIBIT IX

   —    Form of Performance Undertaking

EXHIBIT X

   —    Form of Reduction Notice

EXHIBIT XI

   —    Form of Aggregate Commitment Increase Request

EXHIBIT XII

   —    Form of Weekly Report

SCHEDULE A

   —    Commitments

SCHEDULE B

   —    Closing Documents

 

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CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT, dated as of December 19, 2012 is entered
into by and among:

(a) Mohawk Factoring, LLC, a Delaware limited liability company (“Borrower”),

(b) Mohawk Servicing, LLC, a Delaware limited liability company (“Mohawk
Servicing”), as initial Servicer (the “Servicer”, and together with the
Borrower, the “Loan Parties” and each, a “Loan Party”),

(c) SunTrust Bank, as a non-conduit lender (together with its successors,
“SunTrust” or a “Non-Conduit Lender”),

(d) 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” or “Victory’s Liquidity Bank” and together with
Victory, the “BTMU Group”),

(e) Working Capital Management Co., LP, a Delaware limited partnership (together
with its successors, “WCM” or a “Conduit”), and Mizuho Corporate Bank, Ltd., in
its capacity as a Liquidity Bank to WCM (together with its successors, “Mizuho”
or “WCM’s Liquidity Bank” and together with WCM, the “Mizuho Group”),

(f) The issuers of Commercial Paper from time to time party hereto (together
with their respective successors, individually, a “Conduit” and collectively
with Victory and WCM 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 BTMU Group and the Mizuho Group, the “Groups”),

(g) SunTrust Bank, in its capacity as agent for SunTrust, as a Non-Conduit
Lender (together with its successors and assigns in such capacity, the “SunTrust
Agent” or a “Co-Agent”), The Bank of Tokyo-Mitsubishi UFG, Ltd., New York
Branch, in its capacity as agent for the BTMU Group (together with its
successors and assigns in such capacity, the “BTMU Agent” or a “Co-Agent”),
Mizuho Corporate Bank, Ltd., in its capacity as agent for the Mizuho Group
(together with its successors and assigns in such capacity, the “Mizuho Agent”
or a “Co-Agent”) and any other agent for a Group or a Non-Conduit Lender from
time to time party hereto (together with their respective successors,
individually a “Co-Agent” and collectively with the SunTrust Agent, the BTMU
Agent and the Mizuho Agent the “Co-Agents”), and

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(h) SunTrust Bank, as agent for the Co-Agents and the Lenders (together with its
successors and assigns hereunder, the “Administrative Agent” and together with
the Co-Agents, the “Agents”).

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

PRELIMINARY STATEMENTS

The Borrower has requested that the Lenders provide to it a trade receivables
securitization facility, and the Lenders are willing to do so on the terms and
conditions set forth herein.

In consideration of the premises and the mutual agreements herein contained, the
parties hereto agree 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 the Administrative Agent pursuant to
Section 1.2, each of the Co-Agents for a Group which includes a Conduit 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 (or its Co-Agent) elects not to make any such Loan to
Borrower, the applicable Co-Agent shall promptly notify the Borrower and the
Administrative Agent and, unless the Borrower cancels such 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”).

(b) 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 Non-Conduit Lender agrees to make its Percentage of the
requested Advance to Borrower, on the terms and subject to the conditions
hereof, provided that at no time may the aggregate principal amount of such
Non-Conduit Lender’s Loans outstanding exceed the lesser of (i) the aggregate
amount of such Non-Conduit Lender’s Commitment, and (ii) such Non-Conduit
Lender’s Percentage of the Borrowing Base (such lesser amount, the “Non-Conduit
Lender Allocation Limit”).

 

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

(d) Borrower may, upon at least 10 Business Days’ notice to the Administrative
Agent, terminate in whole or reduce in part, ratably in accordance with each
Non-Conduit Lender’s Percentage and each Group’s Percentage, the unused portion
of the Aggregate Commitment; provided that each partial reduction of the
Aggregate Commitment shall be in an amount equal to $5,000,000 per Non-Conduit
Lender and Group (or a larger integral multiple of $1,000,000 per Non-Conduit
Lender and Group if in excess thereof).

Section 1.2. Advances. Borrower shall provide the Administrative Agent 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 the Administrative
Agent no later than 12:00 noon (New York City time) on such Business Day (each,
a “Borrowing Notice”). Any Borrowing Notice received by the Administrative Agent
after 12:00 noon (New York City time) on any Business Day shall be deemed to be
received by the Administrative Agent on the next succeeding Business Day. Upon
receipt, the Administrative Agent shall promptly provide each such Borrowing
Notice to the other Co-Agents hereunder. 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 Non-Conduit Lender or Group or a larger integral
multiple of $100,000 per Non-Conduit Lender or Group) and the Borrowing Date
(which, in the case of any Advance after the initial Advance hereunder, shall
only be on a Settlement Date). If a Conduit declines to make its Group’s
Percentage of a proposed Advance, the Borrower may cancel the applicable
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) and each Non-Conduit Lender, as
applicable, shall make the proceeds of its Loan comprising such Non-Conduit
Lender’s Percentage or Group’s Percentage of such requested Advance available to
the Administrative Agent Account in immediately available funds on the proposed
Borrowing Date. In accordance with Section 1.6(b), the Administrative Agent
shall deposit to the Facility Account, in immediately available funds, on such
Borrowing Date, 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 if such
Conduit declines to make its Group’s Percentage of the requested Advance, for
each Liquidity Bank in such Group, each Liquidity Bank’s Pro Rata Share of such
Group’s Percentage of the principal amount of the requested Advance) or (ii) in
the case of a Non-Conduit Lender, such Non-Conduit Lender’s Percentage of the
principal amount of the requested Advance.

Section 1.3. Reduction. Except as provided in Section 1.4, Borrower shall
provide the Administrative Agent with prior written notice in conformity with
the Required Notice Period in the form attached hereto as Exhibit X hereto (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 in an amount that is at least $1,000,000
and in increments of $100,000 thereafter and which shall

 

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be applied ratably in accordance with each Non-Conduit Lender’s Percentage or
each Group’s Percentage of such reduction (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 by
any Originator or any Affiliate thereof, or as a result of any tariff or other
governmental or regulatory charge, or

(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(h), (i), (o), (p) and (q) 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, (i) a Borrowing Base Deficit shall
exist, (ii) the Aggregate Principal shall exceed the Aggregate Commitment,
(iii) the aggregate outstanding principal amount of the Loans from any Group
exceeds such Group’s Conduit Allocation Limit, or (iv) the aggregate outstanding
principal amount of the Loans from any Non-Conduit Lender exceeds such
Non-Conduit Lender’s Non-Conduit Lender Allocation Limit, Borrower shall prepay
such Loans by wire transfer to the Administrative Agent received not later than
12:00 noon (New York City time) on the next succeeding Business Day after the
earlier of the date on which (i) notice has been given to the Borrower by the
Administrative Agent of such occurrence or (ii) a Responsible Officer of the
Borrower shall have knowledge thereof, in an amount sufficient to eliminate such
excess, together with accrued and unpaid interest on the

 

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amount prepaid (as allocated by the Administrative Agent), such that after
giving effect to such payment (i) the Aggregate Principal does not exceed the
Borrowing Limit, (ii) no Borrowing Base Deficit shall exist, (iii) the Aggregate
Principal does not exceed the Aggregate Commitment, and (iv) the applicable
Non-Conduit Lender’s Percentage or Group’s Percentage of the Aggregate Principal
is less than or equal to the applicable Non-Conduit Lender Allocation Limit or
Group’s Conduit Allocation Limit. The Administrative Agent shall forward all
such amounts received from the Borrower to the accounts of the applicable
Co-Agents.

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, and if 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 Administrative Agent Account and the Administrative Agent shall
forward such payment to the applicable Co-Agent Account, for the account of such
Lender, until otherwise notified by the Administrative 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 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 Funding. (a) Each
Advance hereunder shall consist of one or more Loans made by a Non-Conduit
Lender, the Conduits and/or the applicable Liquidity Banks.

(b) Each Lender funding any Loan shall wire transfer the principal amount of its
Loan to the Administrative Agent Account in immediately available funds not
later than 12:00 noon (New York City time) on the applicable Borrowing Date and,
subject to the Administrative Agent’s receipt of such Loan proceeds, the
Administrative Agent shall wire transfer any such funds received from a Lender
to the Facility Account 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 assign or
put all or any portion of its Loans to its Liquidity Banks at any time to
finance or refinance the necessary portion of its Loans. Each Liquidity Funding
shall accrue Interest at the Alternative Rate. 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.

 

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

Section 1.7. Increase in Aggregate Commitment.

(a) Increases. The Borrower may, on any Business Day prior to the Facility
Termination Date, increase the Aggregate Commitment by delivering a request
substantially in the form attached as Exhibit XI hereto (each, an “Aggregate
Commitment Increase Request”) or in such other form as may be acceptable to the
Administrative Agent at least ten (10) Business Days prior to the desired
effective date of such increase (the “Aggregate Commitment Increase”)
identifying an additional Lender (or additional Commitments for existing
Lender(s)), which additional Lender(s) shall be reasonably acceptable to the
Administrative Agent, and the amount of its Commitment (or additional amount of
the existing Lender Commitment(s)); provided, however, that (i) any increase of
the Aggregate Commitment to an amount in excess of $700,000,000 will require the
approval of all Lenders, (ii) any incremental increase of the Aggregate
Commitment shall be in an amount not less than $25,000,000, (iii) no Unmatured
Amortization Event or Amortization Event shall have occurred and be continuing
at the time of the request or the effective date of the Aggregate Commitment
Increase, (iv) such Aggregate Commitment Increase shall not be prohibited by the
terms of the Parent Credit Agreement, and (v) all conditions precedent to the
making of any Loan contained in Section 6.2 hereof shall be satisfied
immediately after giving effect to such Aggregate Commitment Increase. The
effective date of an Aggregate Commitment Increase shall be agreed upon by the
Borrower and the Administrative Agent. Upon the effectiveness thereof, each
Person becoming a Lender, and any Lender increasing its Commitment, in
connection with an Aggregate Commitment Increase, shall on the date it becomes a
Lender hereunder (or in the case of an existing Lender, increases its
Commitment) purchase from the other Lenders its Percentage (determined with
respect to the Lenders’ respective Commitments and after giving effect to such
Aggregate Commitment Increase) of any outstanding Loans, by making available to
the Administrative Agent for the account of such other Lenders, in same day
funds, an amount equal to (A) the portion of the outstanding principal amount of
Loans to be purchased by such Lender, plus (B) interest accrued and unpaid to
and as of such date on such portion of the outstanding principal amount of such
Loans. Such purchases shall be deemed to have been effected by way of, and
subject to the terms and conditions of, Assignment Agreements and, except as
otherwise provided in the immediately following subsection (b), no documents or
instruments shall be, or shall be required to be, executed in connection with
such assignments (all of which are hereby waived). The Lenders shall make such
cash settlements among themselves, through the Administrative Agent, as the
Administrative Agent may direct (after giving effect to any netting effected by
the Administrative Agent) with respect to such reallocations and assignments.
The Borrower agrees to pay any reasonable expenses of the Administrative Agent
and the Lenders relating to any Aggregate Commitment Increase. Notwithstanding
anything herein to the contrary, no Lender shall have any obligation to increase
its Commitment and no Lender’s Commitment shall be increased without its consent
thereto, and each Lender may at its option, unconditionally and without cause,
decline to increase its Commitment.

 

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(b) Incremental Amendments. Commitments in respect of Aggregate Commitment
Increases shall become Commitments under this Agreement pursuant to an amendment
(an “Incremental Amendment”) to this Agreement and, as appropriate, the other
Transaction Documents, executed by the Borrower, each Lender agreeing to provide
such Commitment, if any, each additional Lender, if any, and the Administrative
Agent. The Incremental Amendment may, without the consent of any other Lenders,
effect such amendments to this Agreement and the other Transaction Documents as
may be necessary or appropriate, in the reasonable opinion of the Administrative
Agent and the Borrower, to effect the provisions of this Section 1.7.

Section 1.8. Defaulting Lenders. (a) Notwithstanding anything to the contrary
contained in this Agreement, if any Lender becomes a Defaulting Lender, then,
until such time as that Lender is no longer a Defaulting Lender, to the extent
permitted by applicable law:

(i) That Defaulting Lender’s right to approve or disapprove any amendment,
waiver or consent with respect to this Agreement shall be restricted as set
forth in Section 14.1.

(ii) Any payment of principal, interest, fees or other amounts received by the
Administrative Agent or the applicable Co-Agent for the account of that
Defaulting Lender (whether voluntary or mandatory, at maturity, or otherwise),
shall be applied at such time or times as may be determined by the
Administrative Agent as follows:

first, to the payment of any amounts owing by that Defaulting Lender to the
Administrative Agent hereunder;

second, as the Borrower may request (so long as no Amortization Event exists),
to the funding of any Loan in respect of which that Defaulting Lender has failed
to fund its portion thereof as required by this Agreement, as determined by the
Administrative Agent;

third, if so determined by the Administrative Agent and the Borrower, to be held
in a non-interest bearing deposit account and released in order to satisfy
obligations of that Defaulting Lender to fund Loans under this Agreement;

fourth, to the payment of any amounts owing to the Lenders as a result of any
judgment of a court of competent jurisdiction obtained by any Agent or Lender
against that Defaulting Lender as a result of that Defaulting Lender’s breach of
its obligations under this Agreement;

fifth, so long as no Amortization Event exists, to the payment of any amounts
owing to the Borrower as a result of any judgment of a court of competent
jurisdiction obtained by such Borrower against that Defaulting Lender as a
result of that Defaulting Lender’s breach of its obligations under this
Agreement; and

sixth, to that Defaulting Lender or as otherwise directed by a court of
competent jurisdiction; provided that if such payment is a payment of the
principal amount of any Loans in respect of which that Defaulting Lender has not
fully funded its appropriate share, such payment shall be applied solely to pay
the

 

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Loans of all non-Defaulting Lenders on a pro rata basis prior to being applied
to the payment of any Loans of that Defaulting Lender. Any payments, prepayments
or other amounts paid or payable to a Defaulting Lender that are applied (or
held) to pay amounts owed by a Defaulting Lender shall be deemed paid to and
redirected by that Defaulting Lender, and each Lender irrevocably consents
hereto.

(iii) For any period during which a Lender is a Defaulting Lender, that
Defaulting Lender shall not be entitled to receive any Unused Fee (as such term
is defined in the Fee Letter).

(b) If the Borrower and the Administrative Agent agree in writing in their sole
discretion that a Defaulting Lender is no longer a Defaulting Lender, the
Administrative Agent will so notify the parties hereto, whereupon as of the
effective date specified in such notice and subject to any conditions set forth
therein, that Lender will, to the extent applicable, purchase that portion of
outstanding Loans of the other Lenders or take such other actions as the
Administrative Agent may determine to be necessary to cause the Loans to be held
on a pro rata basis by the Lenders in accordance with their Percentage share (in
the case of a Non-Conduit Lender) or their Pro Rata Share of their Group’s
Percentage (in the case of a Liquidity Bank), whereupon that Lender will cease
to be a Defaulting Lender; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of
the Borrowers while that Lender was a Defaulting Lender; and provided, further,
that except to the extent otherwise expressly agreed by the affected parties, no
change hereunder from Defaulting Lender to Lender will constitute a waiver or
release of any claim of any party hereunder arising from that Lender’s having
been a Defaulting Lender.

(c) If any Lender is a Defaulting Lender hereunder, then the Borrower may, at
its sole expense and effort, upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in, and consents
required by, Section 12.1), all of its interests, rights and obligations under
this Agreement and the Transaction Documents to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that:

(i) such Lender shall have received payment of an amount equal to its
outstanding Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts); and

(ii) such assignment does not conflict with applicable Law.

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.

 

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(d) With the written approval of the Administrative Agent, the Borrower may
terminate (on a non-ratable basis) the unused amount of the Commitment of a
Defaulting Lender, and in such event the provisions of this Section 1.8 will
apply to all amounts thereafter paid by the Borrower for the account of any such
Defaulting Lender under this Agreement (whether on account of principal,
interest, fees, indemnity or other amounts); provided that such termination will
not be deemed to be a waiver or release of any claim that the Borrower, any
Agent or any other Lender may have against such Defaulting Lender.

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 and the Administrative Agent Fee Letter
on the dates specified therein;

(c) all accrued and unpaid Servicing Fees on each Settlement Date;

(d) all accrued and unpaid Interest and CP Costs on each Settlement Date;

(e) 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 Administrative Agent Account, for distribution to
the applicable Lenders (or their respective Co-Agent), 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 each Group or Non-Conduit Lender in accordance with their
respective Percentages, as applicable, 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 Non-Conduit Lender, Conduit and/or Liquidity
Bank,

second, ratably to each Group or Non-Conduit Lender in accordance with their
respective Percentages, as applicable, to the payment of all accrued and unpaid
fees under the Fee Letter (if any) that are then due and owing to the applicable
Non-Conduit Lender, Group or their respective Co-Agent,

third, to the payment of all accrued and unpaid fees under the Administrative
Agent Fee Letter (if any) that are then due and owing to the Administrative
Agent,

 

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fourth, if required under Section 1.3 or 1.4, to the ratable reduction of the
applicable Non-Conduit Lender’s or Group’s Percentage of the Aggregate
Principal, and

fifth, for the ratable payment of all other unpaid Obligations, if any, that are
then due and owing to such Non-Conduit Lender, Group, 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
its related Non-Conduit Lender or, if applicable, among the applicable Co-Agent
and the Lenders in its Group, in each case, in accordance with the amount of
such Obligations owing to each of them in respect of each such priority.

(b) If the Collections are insufficient to pay the Obligations specified above
on any required date of payment, the 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 Amortization Date;
Collections Following Amortization. (a) On the Amortization Date, the 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
Non-Conduit Lender’s Percentage or 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 Non-Conduit Lender’s or 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, to the payment of all accrued and unpaid fees under the Administrative
Agent Fee Letter (if any) that are then due and owing to the Administrative
Agent,

 

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third, ratably to each Group or Non-Conduit Lender in accordance with their
respective Percentages, as applicable, 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 Non-Conduit Lender, Group or their respective Co-Agent,

fourth, ratably to each Group or Non-Conduit Lender in accordance with their
respective Percentages, as applicable, to the payment of all accrued and unpaid
fees under the Fee Letter (if any) that are then due and owing to the applicable
Non-Conduit Lender, Group or their respective Co-Agent,

fifth, to the ratable reduction of such Non-Conduit Lender’s or Group’s
Percentage of the Aggregate Principal,

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

seventh, 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 Agents and the Lenders in accordance with the
amount of such Obligations owing to each of them in respect of each such
priority.

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 Conduit that
is funded substantially with 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 Conduit and funded
substantially with related Commercial Paper on such day.

 

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Section 3.2. Calculation of CP Costs. As soon as practicable, and not later than
the 3rd Business Day immediately preceding each Monthly Reporting Date, each
Conduit (or its Co-Agent) 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 Administrative Agent of such aggregate amount, which
notice shall include a reasonably detailed description of such calculations.
Upon receipt of such information, the Administrative Agent shall promptly (an in
no event, later than the 2nd Business Day immediately preceding each Monthly
Reporting Date) notify the Borrower of the CP Costs applicable to all CP Rate
Loans for the Calculation Period most recently ended.

Section 3.3. CP Costs Payments. On each Settlement Date, Borrower shall pay to
the Administrative Agent Account (for the benefit of each Conduit (or their
respective Co-Agent)) 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.
Promptly upon receipt, the Administrative Agent shall forward to each Co-Agent
Account, such Co-Agent’s respective share of the CP Costs so received.

Section 3.4. CP Costs Following Amortization Event. From and after the
occurrence of an Amortization Event under Section 9.1(a) or (g), or in the case
of any other Amortization Event, at the written direction of the Administrative
Agent or the Required Lenders, any Conduit Funding shall accrue Interest at the
Default Rate and shall cease to be CP Loans.

ARTICLE IV

NON-CONDUIT LENDER AND LIQUIDITY FUNDING

Section 4.1. Non-Conduit Lender Funding and Liquidity Funding. Prior to the
occurrence of an Amortization Event, the outstanding principal balance of each
Non-Conduit Lender Funding and each Liquidity Funding shall accrue interest for
each day during its Interest Period at the Alternative Rate in accordance with
the terms and conditions hereof. 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 Non-Conduit
Lender Funding and each Liquidity Funding, Borrower shall pay to the
Administrative Agent Account (for the benefit of the Non-Conduit Lenders and the
Liquidity Banks (or their respective Co-Agent)) an aggregate amount equal to the
accrued and unpaid Interest for the entire Interest Period of each such
Non-Conduit Lender Funding and Liquidity Funding in accordance with Article II.
Promptly upon receipt, the Administrative Agent shall forward to each Co-Agent
Account, such Co-Agent’s respective share of the Interest so received.

Section 4.3. Suspension of the LIBO Rate. (a) If any Non-Conduit Lender or
Liquidity Bank (or its respective Co-Agent) notifies the Administrative Agent
and the Borrower that it has reasonably determined that (i) funding its
Non-Conduit Lender Funding or its Pro Rata Share of its Group’s Percentage of a
Liquidity Funding, as applicable, at the LIBO Rate would violate any

 

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applicable law, rule, regulation, or directive of any governmental or regulatory
authority, (ii) deposits of a type and maturity appropriate to match fund its
Non-Conduit Lender Funding or Liquidity Funding, as applicable at the LIBO Rate
are not available or (iii) the LIBO Rate does not accurately reflect the cost of
acquiring or maintaining a Non-Conduit Lender Funding or a Liquidity Funding, as
applicable, then the Administrative Agent shall promptly notify the Borrower
thereof and Loans from such Non-Conduit Lender or Liquidity Bank shall no longer
bear interest based on the LIBO Rate but instead shall accrue interest at the
Base Rate plus the Applicable Margin until such Non-Conduit Lender or such
Liquidity Bank notifies the Administrative Agent and the Borrower that the
circumstances giving rise to such determination no longer exist (which such
Lender agrees to do promptly upon the occurrence thereof).

(b) If a Non-Conduit Lender or if less than all of the Liquidity Banks of any
applicable Group (or their Co-Agent) gives notice to the Administrative Agent
pursuant to Section 4.3(a), such Non-Conduit Lender or each Liquidity Bank which
gave such a notice shall be obliged, at the request of Borrower, the applicable
Conduit in the case of a Liquidity Bank or the Administrative Agent, to assign
all of its rights and obligations hereunder to (i) another Liquidity Bank in its
Group in the case of a Liquidity Bank or (ii) another funding entity nominated
by Borrower, the applicable Conduit or the Administrative Agent (which in the
case of a funding entity nominated by a Conduit or the Administrative Agent,
shall be reasonably acceptable to the Borrower) that is an Eligible Assignee
willing to participate in this Agreement through the Facility Termination Date
in the place of such notifying Non-Conduit Lender or Liquidity Bank; provided
that (i) the notifying Non-Conduit Lender or 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 4.4. Interest Following Amortization Event. From and after the
occurrence of an Amortization Event under Section 9.1(a) or (g), or in the case
of any other Amortization Event, at the written direction of the Administrative
Agent or the Required Lenders, any Liquidity Funding, Conduit Funding or
Non-Conduit Lender Funding 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 (a) is duly organized or formed,
validly existing and, as applicable, in good standing or the equivalent thereof
(to the extent applicable) under the Laws of the jurisdiction of its
incorporation, organization or formation, (b) has all requisite power and
authority and all requisite governmental licenses, authorizations, consents and
approvals to (i) own or lease its assets and carry on its business and
(ii) execute, deliver and perform its obligations under the Transaction

 

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Documents to which it is a party, and (c) is duly qualified and is licensed and,
as applicable, in good standing or the equivalent thereof (to the extent
applicable) under the Laws of each jurisdiction where its ownership, lease or
operation of properties or the conduct of its business requires such
qualification or license; except in each case referred to in clause (b)(i) or
(c), to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect.

(b) Authorization, No Contravention. The execution, delivery and performance by
such Loan Party of each Transaction Document to which such Person is party, have
been duly authorized by all necessary corporate or other organizational action,
and do not and will not (a) contravene the terms of any of such Person’s
organization documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Adverse Claim under (i) any material
provision of any security issued by such Person or of any agreement, instrument
or other written undertaking to which such Person is a party or by which it or
any of its property is bound (except as created hereunder) or (ii) any order,
injunction, writ or decree of any Governmental Authority or any arbitral award
to which such Person or its property is subject; or (c) violate any Law.

(c) Governmental Authorization; Other Consent. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by such Loan Party of
this Agreement or any other Transaction Document to which it is a party (other
than such notices or filings required hereunder or thereunder).

(d) Binding Effect. This Agreement has been, and each other Transaction
Document, when delivered hereunder, will have been, duly executed and delivered
by such Loan Party that is party thereto. This Agreement constitutes, and each
other Transaction Document when so delivered will constitute, a legal, valid and
binding obligation of such Loan Party that is a party thereto, enforceable
against such Loan Party that is party thereto in accordance with its terms;
provided that the enforceability hereof and thereof is subject in each case to
general principles of equity and to bankruptcy, insolvency and similar Laws
affecting the enforcement of creditors’ rights generally.

(e) Accuracy of Information; No Material Adverse Effect. No report, financial
statement, certificate or other written information furnished by or on behalf of
such Loan Party or any of its Affiliates to the Agents or the Lenders in
connection with the transactions contemplated hereby and the negotiation of this
Agreement or delivered hereunder or under any other Transaction Document (other
than information of a general economic or general industry nature), as and when
furnished and taken as a whole with all such reports, financial statements,
certificates and other information previously furnished, contained any material
misstatement of fact or omitted to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projections, such Loan
Party makes only those representations set forth in the last sentence of this
Section. Since September 30, 2012, there has been no event or circumstance
(including, without

 

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limitation, any casualty event), either individually or in the aggregate, that
has had or could reasonably be expected to have a Material Adverse Effect. Any
projections delivered by such Loan Party or any of its Affiliates to the Agents
or the Lenders to the have been prepared in light of the past operations of the
businesses of such Loan Party or Affiliate, as applicable and are based upon
estimates and assumptions stated therein, all of which such Loan Party or
Affiliate, as applicable has determined to be reasonable in light of then
current conditions and current facts and reflect the good faith and reasonable
estimates of such Loan Party or Affiliate, as applicable of the future financial
performance of such Loan Party or Affiliate, as applicable of the other
information projected therein for the periods set forth therein (it being
understood that actual results may differ from those set forth in such
projections).

(f) Litigation. There are no actions, suits, proceedings, claims or disputes
pending or, to the knowledge of such Loan Party overtly threatened in writing,
at law, in equity, in arbitration or before any Governmental Authority, by or
against such Loan Party or against any of its properties or revenues that
(a) purport to affect or pertain to this Agreement or any other Transaction
Document, or any of the transactions contemplated hereby, or (b) could
reasonably be expected to have a Material Adverse Effect.

(g) No Amortization Event. No Amortization Event has occurred and is continuing
or would result from the consummation of the transactions contemplated by this
Agreement or any other Transaction Document.

(h) 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.

(i) 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 Transaction 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.

(j) Collections. The conditions and requirements set forth in Section 7.1(l)
have at all times since the 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
hereto. Borrower has not granted any Person, other than the Administrative Agent
as contemplated by and subject to this Agreement,

 

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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.

(k) Margin Regulations; Use of Proceeds; Investment Company Act. Such Loan Party
is not engaged or will not engage, principally or as one of its important
activities, in the business of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System), or extending credit for the purpose of purchasing or carrying margin
stock. No proceeds of any Advance hereunder will be used for a purpose that
violates, or would be inconsistent with Section 7.2(e) of this Agreement from
time to time. Such Loan Party is not an “investment company” within the meaning
of the Investment Company Act of 1940, as amended, or any successor statute.

(l) Compliance with Law. Such Loan Party is in compliance with the requirements
of all Laws and all orders, writs, injunctions and decrees applicable to it or
to its properties, except in such instances in which (a) such requirement of Law
or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply
therewith, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. 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.

(m) Names. Places of Business and Locations of Collection Records. From the date
of its formation through 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. 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 hereto
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 hereto.

(n) 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.

 

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(o) 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.

(p) Enforceability of Receivables. Each Receivable represents a legal, valid and
binding obligation of the related Obligor to pay the Outstanding Balance thereof
and any accrued interest and other Finance Charges 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).

(q) 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.

(r) Borrowing Limit. Immediately after giving effect to each Advance and each
settlement on any Settlement Date hereunder, no Borrowing Base Deficit exists,
each Group’s Percentage of the Aggregate Principal is less than or equal to such
Group’s Conduit Allocation Limit and each Non-Conduit Lender’s Percentage of the
Aggregate Principal is less than or equal to such Non-Conduit Lender’s
Non-Conduit Lender Allocation Limit, as applicable.

(s) 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.

(t) Solvency. Such Loan Party and its Subsidiaries (taken as a whole) are
Solvent.

(u) Taxes. There is no proposed tax assessment against such Loan Party that
could reasonably be expected to have a Material Adverse Effect.

(v) OFAC. Neither such Loan Party nor (to the knowledge of such Loan Party) any
Affiliate of such Loan Party: (a) is a Sanctioned Person, (b) has any of its
assets in Sanctioned Entities, or (c) derives any of its operating income from
investments in, or transactions with Sanctioned Persons or Sanctioned Entities,
in each case, that would constitute a violation of applicable Laws. The proceeds
of any Advance will not be used and have not been used to fund any operations
in, finance any investments or activities in, or make any payments to, a
Sanctioned Person or a Sanctioned Entity, in each case, that would constitute a
violation of applicable Laws.

 

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(w) ERISA. (i) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Tax Code and other Federal or state Laws.
Each Pension Plan that is intended to be a qualified plan under Section 401(a)
of the Tax Code has either (i) received a favorable determination letter from
the Internal Revenue Service to the effect that the form of such Plan is
qualified under Section 401(a) of the Tax Code or an application for such a
letter is currently being processed by the Internal Revenue Service or (ii) is
maintained under a prototype or volume submitter plan and may rely upon a
favorable opinion or advisory letter issued by the Internal Revenue Service with
respect to such prototype or volume submitter plan. To the knowledge of the Loan
Parties, nothing has occurred that could reasonably be expected to prevent or
cause the loss of such tax-qualified status.

(ii) Except as has not resulted or could not reasonably be expected to result in
a Material Adverse Effect (i) there are no pending or, to the knowledge of the
Loan Parties or any ERISA Affiliate, threatened claims, actions or lawsuits, or
action by any Governmental Authority, with respect to any Plan or Pension Plan;
(ii) no Loan Party nor any ERISA Affiliate has engaged in a non-exempt
“prohibited transaction”, (as defined in Section 406 of ERISA and Section 4975
of the Code), in connection with any Plan or Pension Plan, that could reasonably
subject any Loan Party to a tax on prohibited transactions imposed by
Section 502(i) of ERISA or Section 4975 of the Code; and (iii) there has been no
violation of the fiduciary responsibility rules with respect to any Plan or
Pension Plan.

(iii) Except as would not reasonably be expected to have a Material Adverse
Effect: (i) No ERISA Event has occurred, and no Loan Party nor any ERISA
Affiliate is aware of any fact, event or circumstance that could reasonably be
expected to constitute or result in an ERISA Event with respect to any Pension
Plan or Multiemployer Plan; (ii) the Loan Parties and each ERISA Affiliate have
met all applicable requirements under the Pension Funding Rules in respect of
each Pension Plan, and no waiver of the minimum funding standards under the
Pension Funding Rules has been applied for or obtained; (iii) as of the most
recent valuation date for any Pension Plan, the funding target attainment
percentage (as defined in Section 430(d)(2) of the Code) is 60% or higher and
neither Loan Party nor any ERISA Affiliate knows of any facts or circumstances
that could reasonably be expected to cause the funding target attainment
percentage for any such plan to drop below 60% as of the next valuation date;
(iv) neither Loan Party nor any ERISA Affiliate has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which are delinquent; and (v) neither Loan Party nor any ERISA
Affiliate has engaged in a transaction that could reasonably be expected to
become subject to Section 4069 or Section 4212(c) of ERISA.

(iv) Neither Loan Party nor any ERISA Affiliate maintains or contributes to, or
has any unsatisfied obligation to contribute to, or liability under, any active
or terminated Pension Plan on the date hereof.

 

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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, and (b) the Administrative
Agent shall have received, for the benefit of itself and the Lenders, all fees
and expenses required to be paid on such date pursuant to the terms of this
Agreement and the Fee Letter.

 

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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
Administrative Agent 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 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), (e), (f), (l), (u) and (w), 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. Such Loan Party 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. As soon as available, but in any event within 90 days
after the end of each fiscal year of the Performance Guarantor (or, if earlier,
10 Business Days after the date required to be filed with the SEC), (A) a
consolidated balance sheet of the Performance Guarantor and its Subsidiaries as
at the end of such fiscal year, and the related consolidated statements of
income or operations and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, prepared in
accordance with GAAP, such consolidated statements to be audited and accompanied
by a

 

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report and opinion of an independent certified public accountant of nationally
recognized standing, which report and opinion shall be prepared in accordance
with generally accepted auditing standards or the standards of the Public
Company Accounting Oversight Board (or any entity succeeding to its principal
functions), as applicable, and shall not be subject to any “going concern” or
like qualification or exception or any qualification or exception as to the
scope of such audit and accompanied by a report containing management’s
discussion and analysis of such financial statements for the fiscal year then
ended; and (B) analogous unaudited balance sheets and statements of earnings for
Borrower, certified by one of its Responsible Officers.

(ii) Quarterly Reporting. As soon as available, but in any event within 45 days
after the end of each of the first three (3) fiscal quarters of each fiscal year
of the Performance Guarantor (commencing with the fiscal quarter ending
March 30, 2013) (or, if earlier, 10 Business Days after the date required to be
filed with the SEC), (A) a consolidated balance sheet of the Performance
Guarantor and its Subsidiaries as at the end of such fiscal quarter, the related
consolidated statements of income or operations for such fiscal quarter and for
the portion of the Performance Guarantor’s fiscal year then ended, and the
related consolidated statements of cash flows for the portion of the Performance
Guarantor’s fiscal year then ended, in each case setting forth in comparative
form, as applicable, the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal year,
such consolidated statements to be certified by the chief executive officer,
chief financial officer, treasurer or controller of the Performance Guarantor as
fairly presenting in all material respects the financial condition, results of
operations and cash flows of the Performance Guarantor and its Subsidiaries in
accordance with GAAP, subject only to normal year-end audit adjustments and the
absence of footnotes; and (B) analogous unaudited balance sheets and statements
of earnings for Borrower, certified by one of its Responsible Officers.

(iii) Compliance Certificate. Together with the financial statements required
hereunder, a compliance certificate in substantially the form of Exhibit V
hereto signed by one of Borrower’s Responsible 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 after the same are available,
copies of each annual report, proxy or financial statement or other material
report or communication sent to the stockholders of the Performance Guarantor
generally, and copies of all annual, regular, periodic and special reports and
material registration statements which the Performance Guarantor may file or be
required to file with the SEC under Section 13 or 15(d) of the Securities
Exchange Act of 1934, and not otherwise required to be delivered to the
Administrative Agent pursuant to this Agreement.

 

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(v) 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.

Documents required to be delivered pursuant to Section 7.1(a) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date (i) on which the Performance Guarantor posts such documents, or
provides a link thereto on the Performance Guarantor’s website currently found
at http://www.mohawkind.com; or (ii) on which such documents are posted on the
Performance Guarantor’s behalf on an Internet or intranet website, if any, to
which each Lender and the Administrative Agent have access (whether a
commercial, third-party website or whether sponsored by the Administrative
Agent); provided that: (x) the Loan Parties shall deliver paper copies of such
documents to the Administrative Agent or any Lender that reasonably requests the
delivery of such paper copies until a written request to cease delivering paper
copies is given by the Administrative Agent or such Lender and (y) the Loan
Parties shall notify the Administrative Agent of the posting of any such
documents and provide to the Administrative Agent by electronic mail electronic
versions (i.e., soft copies) of such documents. Notwithstanding anything
contained herein, in every instance the Performance Guarantor shall be required
to provide paper copies of the compliance certificates required by
Section 7.1(a)(iii) to the Administrative Agent. Except for such compliance
certificates, the Administrative Agent shall have no obligation to request the
delivery of or to maintain paper copies of the documents referred to above, and
in any event shall have no responsibility to monitor compliance by the Loan
Parties with any such request by a Lender for delivery, and each Lender shall be
solely responsible for requesting delivery to it or maintaining its copies of
such documents.

(b) Notices. Such Loan Party will notify the Administrative Agent in writing of
any of the following within one (1) business day of a Responsible Officer of it
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 Officer of such Loan Party.

(ii) Material Adverse Effect. The occurrence of any matter that has resulted or
could reasonably be expected to result in a Material Adverse Effect.

(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 collectability
of the Receivables generally or materially decrease the credit quality of newly
created Receivables generally.

 

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(iv) 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.

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

(vi) 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.

(vii) 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 or any instruction by the
Performance Guarantor to Moody’s or S&P not to provide a rating for any
Indebtedness of Performance Guarantor.

(viii) Appointment and Removal of Independent Manager. The appointment of a new
manager of the Borrower as the “Independent Manager” for purposes of this
Agreement, such notice to be issued not less than ten (10) days prior to the
effective date of such appointment and to certify that the designated Person
satisfies the criteria set forth in the definition herein of “Independent
Manager.” The Borrower shall not appoint any Person as the Independent Manager
without first confirming such proposed new Independent Manager is acceptable to
the Administrative Agent as evidenced in a writing executed by the
Administrative Agent, which consent shall not be unreasonably withheld or
delayed.

(c) Payment of Taxes and Claims. Such Loan Party will pay and discharge as the
same shall become due and payable, (a) all federal and other tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets, unless (i) the same are being contested in good faith by appropriate
proceedings diligently conducted and adequate reserves in accordance with GAAP
are being maintained by such Loan Party or (ii) the failure to so pay or
discharge the same could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, or (b) all lawful claims which, if
unpaid, could reasonably be expected, either individually or in the aggregate,
to have a Material Adverse Effect.

(d) Preservation of Corporate Existence. Such Loan Party will (i) reserve, renew
and maintain in full force and effect its legal existence and in good standing
or the equivalent thereof (to the extent applicable) under the Laws of the
jurisdiction of its organization and (ii) take all reasonable action to maintain
all rights, privileges, permits, licenses and franchises necessary or desirable
in the normal conduct of its business, except to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect.

 

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(e) Compliance with Laws. Such Loan Party will comply with the requirements of
all Laws and all orders, writs, injunctions and decrees applicable to it or to
its business or property, except in such instances in which (a) such requirement
of Law or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted; or (b) the failure to comply
therewith could not reasonably be expected to have a Material Adverse Effect.

(f) Keeping and Marking of Records and Books.

(i) Servicer. 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 Administrative Agent notice of any material change in the
administrative and operating procedures referred to in the previous sentence.

(ii) Borrower. 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 Administrative Agent,
describing the Administrative Agent’s security interest in the Collateral and
(B) upon the request of the Administrative Agent following the occurrence of an
Amortization Event, mark each Contract with a legend or code describing the
Administrative Agent’s security interest relating to the Receivables.

(g) Inspection Rights. 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) 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, the Servicer or
any Originator 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, the Loan Parties shall only
be responsible for the fees and associated out-of-pocket costs and expenses of
one (1) Review in any one period of 12 consecutive months (such fees not to
exceed $30,000 per Originator (the “Review Fee Cap”) per Review plus
out-of-pocket costs and expenses, it being understood that the Review Fee Cap
shall not be applicable if the Loan Parties do not reasonably cooperate with the
Administrative Agent (or its agents or representatives) as set forth in this
Section 7.1(g) or are otherwise not reasonably prepared for any such Review). So
long as no Amortization Event has occurred and is

 

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continuing, the Administrative Agent shall provide to the Loan Parties a written
estimate of the fees, out-of-pocket 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. Following the occurrence of an
Amortization Event, the Agents and the Lenders may perform a Review as
frequently as the Agents or the Lenders deem necessary and the Loan Parties
shall solely be responsible for the fees, out-of-pocket costs and expenses of
all such Reviews.

(h) 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.

(i) 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 the Administrative Agent 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.

(j) 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 the Administrative Agent 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 the Administrative Agent may
reasonably request, all to the extent such ownership can be perfected by filing
UCC financing statements.

(k) Lenders’ Reliance; Separate Identity. 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, so long as this Agreement is in effect, the Borrower shall:

 

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(i) conduct its affairs in strict compliance with Section 3.3 of its Limited
Liability Company Agreement as in effect on the date hereof and as thereafter
amended with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld or delayed),

(ii) 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,

(iii) hold itself out to the public and conduct its own business in its own name
and require that all full-time employees of the Borrower, if any, identify
themselves as such and not as employees of the Originators or the Performance
Guarantor (including, without limitation, by means of providing appropriate
employees with business or identification cards identifying such employees as
the Borrower’s employees);

(iv) compensate all employees, consultants and agents directly, from the
Borrower’s own funds, for services provided to the Borrower by such employees,
consultants and agents and, to the extent any employee, consultant or agent of
the Borrower is also an employee, consultant or agent of the Originators or any
Affiliate thereof, allocate the compensation of such employee, consultant or
agent between the Borrower and the Originators or such Affiliate, as applicable,
on a basis that reflects the services rendered to the Borrower and the
Originators or such Affiliate, as applicable;

(v) maintain separate stationery, invoices, checks and other business forms in
its own name;

(vi) conduct all transactions with the Originators and the Servicer (including,
without limitation, any delegation of its obligations hereunder to the Servicer)
strictly on an arm’s-length basis, allocate fairly and reasonably all overhead
expenses (including, without limitation, telephone and other utility charges)
for items shared between the Borrower and the Originators or the Servicer on the
basis of actual use to the extent practicable and, to the extent such allocation
is not practicable, on a basis reasonably related to actual use;

(vii) at all times provide that its business and affairs be managed by its
managers and have at least one member that is an Independent Manager;

(viii) observe all organizational formalities as a distinct entity, and ensure
that all entity actions relating to (A) the selection, maintenance or
replacement of the Independent Manager, (B) the dissolution or liquidation of
the Borrower or (C) the initiation of, participation in, acquiescence in or
consent to any bankruptcy, insolvency, reorganization or similar proceeding
involving the Borrower, are duly authorized by unanimous vote of its managers
(including the Independent Manager);

 

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(ix) maintain the Borrower’s books and records separate and distinct from those
of the Originators and any Affiliate thereof and otherwise in such a manner so
that the assets of the Borrower are readily identifiable as its own assets
rather than assets of the Originators or any Affiliate thereof;

(x) prepare its financial statements separately from those of the Originators
and insure that any consolidated financial statements of the Originators or any
Affiliate thereof that include the Borrower have notes clearly stating that the
Borrower is a separate legal entity and that its assets will be available only
to satisfy the claims of the creditors of the Borrower;

(xi) except as herein specifically otherwise provided, maintain the funds and
other assets of the Borrower separate from, and not commingled with, those of
the Originators or any Affiliate thereof and only maintain bank accounts or
other depository accounts to which the Borrower alone is the account party, into
which the Borrower alone makes deposits and from which the Borrower alone (or
the Administrative Agent hereunder) has the power to make withdrawals;

(xii) pay all of the Borrower’s operating expenses from the Borrower’s own
assets (except for certain payments by the Originators or other Persons pursuant
to allocation arrangements that comply with the requirements of this
Section 7.1(k)) and pay its own liabilities out of its own funds;

(xiii) operate its business and activities such that: it does not engage in any
business or activity of any kind, or enter into any transaction or indenture,
mortgage, instrument, agreement, contract, lease or other undertaking, other
than the transactions contemplated and authorized by this Agreement and the
Receivables Sale Agreement; and does not create, incur, guarantee, assume or
suffer to exist any indebtedness or other liabilities, whether direct or
contingent, other than (A) as a result of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (B) the incurrence of obligations under this Agreement and
the other Transaction Documents to which it is a party, (C) the incurrence of
obligations, as expressly contemplated in the Receivables Sale Agreement, to
make payment to the Originators thereunder for the purchase of Receivables from
the Originators under the Receivables Sale Agreement, and (D) the incurrence of
operating expenses in the ordinary course of business of the type otherwise
contemplated by this Agreement;

(xiv) maintain its organizational documents in conformity with this Agreement,
such that it does not amend, restate, supplement or otherwise modify its
Certificate of Formation in any respect that would impair its ability to comply
with the terms or provisions of any of the Transaction Documents, including,
without limitation, this Section 7.1(k);

 

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(xv) maintain the effectiveness of, and continue to perform under the
Receivables Sale Agreement, such that it does not amend, restate, supplement,
cancel, terminate or otherwise modify the Receivables Sale Agreement, or give
any consent, waiver, directive or approval thereunder or waive any default,
action, omission or breach under the Receivables Sale Agreement or otherwise
grant any indulgence thereunder, without (in each case) the prior written
consent of the Administrative Agent;

(xvi) maintain its entity separateness such that it does not merge or
consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions, and except as
otherwise contemplated herein) all or substantially all of its assets (whether
now owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any Person, nor at any time create, have, acquire, maintain or hold
any interest in any Subsidiary;

(xvii) operate its business and activities such that it (A) does not hold itself
out as having agreed to guarantee or be obligated for the debts of either
Originator or any Affiliate thereof, (B) does not hold out its credit as being
available to satisfy the obligations of either Originator or any Affiliate
thereof and (C) has not pledged assets for the benefit of either Originator or
any Affiliate thereof; and

(xviii) take such other actions as are necessary on its part to ensure that the
facts and assumptions set forth in the opinion issued by Alston & Bird LLP as
counsel for the Borrower, in connection with the closing or initial Loan under
this Agreement and relating to substantive consolidation issues, and in the
certificates accompanying such opinion, remain true and correct in all material
respects at all times; and

(xix) maintain its organizational documents in conformity with this Agreement,
such that its organizational documents, at all times that this Agreement is in
effect, provides for not less than ten (10) days’ prior written notice to the
Administrative Agent of the replacement or appointment of any manager that is to
serve as an Independent Manager for purposes of this Agreement and the condition
precedent to giving effect to such replacement or appointment that the Borrower
certify that the designated Person satisfied the criteria set forth in the
definition herein of Independent Manager and the Administrative Agent’s written
acknowledgement that in its reasonable judgment the designated Person satisfies
the criteria set forth in the definition herein of Independent Manager.

(l) Collections. Each Loan Party 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, that
with respect to any Collection Account marked with an asterisk on Exhibit IV
hereto, the Loan Parties shall have 120 days after the Closing Date (or such
longer period as all of the Lenders may agree to in their sole discretion) to
cause a Collection Account Agreement in favor of the Administrative Agent to be
executed with respect to such Collection Accounts or to cause all Collections
previously flowing to any such Collection Account to be sent to a Collection
Account that is subject to a Collection Account Agreement, provided,

 

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further, that the failure to satisfy the foregoing proviso shall not cause an
Amortization Event hereunder but shall clause any Receivable that pays into any
such Collection Account marked with an asterisk on Exhibit IV hereto to fail to
constitute an Eligible Receivable hereunder pursuant to clause (xxii) of such
definition. 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), such Loan Party will promptly provide the Administrative Agent with
copies of an updated Exhibit IV to this Agreement (and upon such delivery such
Exhibit shall be deemed to be amended accordingly notwithstanding anything in
Section 14.1 hereof 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) 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.

(m) 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.
Such Loan Party 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 Administrative Agent at
least thirty (30) days’ prior written notice thereof (or such shorter period as
may be acceptable to the Administrative Agent) 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(a), 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 (other than a direction to remit
payment to another Lock-Box or Collection Account already subject to a
Collection Account Agreement),

 

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unless the Administrative Agent shall have received, at least ten (10) days (or
such shorter period as may be acceptable to the Administrative Agent) 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 make payments to another existing
Collection Account that complies with this clause (ii).

(c) Modifications to Contracts and Credit and Collection Policy. Such Loan Party
will not, and will not authorize any Originator to, make any change to the
Credit and Collection Policy that is reasonably likely to materially adversely
affect the collectability 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) paying its ordinary and
necessary operating expenses when and as due, (iii) making Restricted Junior
Payments to the extent permitted under this Agreement and (iv) making loans to
Mohawk Resources at any time so long as no Amortization Event or Unmatured
Amortization Event exists and is continuing.

(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.

 

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(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.

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 (or such shorter period as may
be acceptable to the Administrative Agent) prior written notice to the
Administrative Agent, designate any other direct or indirect Subsidiary of the
Performance Guarantor as a successor Servicer. The Co-Agents may at any time
following the occurrence of an Amortization Event (other than an Amortization
Event described in paragraphs (f), (g) or (j)(ii) solely to the extent relating
to a Material Subsidiary that is not a Loan Party) designate as Servicer any
Person to succeed Mohawk Servicing or any successor Servicer. 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 Lenders, 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.

 

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Section 8.2. Certain Duties of Servicer. (a) From and after the date the
Administrative Agent delivers to any Collection Bank a Collection Notice
pursuant to Section 8.3, the Administrative Agent may request that the Servicer,
and the Servicer thereupon promptly shall instruct all Obligors with respect to
the 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.

(b) 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 the Administrative Agent, segregate, in a manner acceptable
to the Administrative Agent, 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.

(c) 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.

(d) 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.

(e) 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
Administrative 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.

 

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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
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 Administrative Agent may reasonably
request, a listing by Obligor of all Receivables together with an aging of such
Receivables; provided, however, upon a downgrade of the rating of the
Performance Guarantor below “BB” by S&P or “Ba2” by Moody’s, the Administrative
Agent or the Required Lenders may request that the Servicer prepare and forward
a weekly report on the third Business Day of each calendar week in the form
attached hereto as Exhibit XII. Upon request of the Administrative Agent, the
Servicer will provide the Administrative Agent with copies of all reports
received by the Servicer from each Originator promptly upon receipt of the same.

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.

 

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ARTICLE IX

AMORTIZATION EVENTS AND REMEDIES

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

(a) (i) the Borrower shall fail to make any payment of principal when due, or
(ii) the Performance Guarantor or any Loan Party shall fail to make any other
payment or deposit required to be made by it under this Agreement or any other
Transaction Document when due and, for any such payment or deposit which is not
in respect of principal, such failure continues for five (5) consecutive
Business Days.

(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) (i) 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)(vii)) within three (3) Business Days after the same
is due, or (ii) any Originator shall fail to perform or observe any covenant
contained in Section 4.1(b) of the Receivables Sale Agreement within three
(3) Business Days after the same is due.

(d) Performance Guarantor or any Loan Party 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 the earlier of (i) the date a Responsible Officer of the Performance
Guarantor or of such Loan Party first obtains actual knowledge of such failure
or non-performance and (ii) receipt by the Borrower of notice of non-performance
from the Administrative Agent.

(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) (i) The Performance Guarantor or any of its Restricted Subsidiaries (other
than the Borrower) fails to (A) make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) in respect of
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Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness
under Swap Contracts) having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $50,000,000,
or (B) observe or perform any other agreement or condition relating to such
Indebtedness or Guarantee referred to in the immediately preceding clause (A) or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event occurs, the effect of which default or other event
is to cause, or to permit the holder or holders of such Indebtedness or the
beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to be demanded or to become due
or to be repurchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity, or such Guarantee to
become payable or cash collateral in respect thereof to be demanded; or

(ii) There occurs under any Swap Contract an Early Termination Date (as defined
in such Swap Contract) resulting from (A) any event of default under such Swap
Contract as to which the Performance Guaranty or any Restricted Subsidiary is
the Defaulting Party (as defined in such Swap Contract) or (B) any Termination
Event (as so defined) under such Swap Contract as to which the Performance
Guaranty or any Restricted Subsidiary is an Affected Party (as so defined) and,
in either event, the Swap Termination Value owed by the Company or such
Restricted Subsidiary as a result thereof is greater than $50,000,000.

(g) Any of the Performance Guarantor, any Loan Party or any Restricted
Subsidiary that is a Material Subsidiary institutes or consents to the
institution of any proceeding under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
examiner, rehabilitator or similar officer for it or for all or any material
part of its property; or (ii) any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed without the
application or consent of such Person and the appointment continues undischarged
or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law
relating to any such Person or to all or any material part of its property is
instituted without the consent of such Person and continues undismissed or
unstayed for 60 calendar days, or an order for relief is entered in any such
proceeding;

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

(i) the three-month rolling average Delinquency Ratio shall exceed 3.0%,

(ii) the three-month rolling average Default Ratio shall exceed 2.75%,

 

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(iii) the three-month rolling average Non-Contractual Dilution Ratio shall
exceed 6.5%, or

(iv) the three-month rolling average Days Sales Outstanding shall exceed 55;

(i) A Change of Control shall occur.

(j) There is entered against a Loan Party, the Performance Guarantor or a
Restricted Subsidiary that is a Material Subsidiary (i) one or more final
judgments or orders for the payment of money in an aggregate amount (as to all
such judgments or orders) exceeding the $50,000,000 (to the extent not covered
by independent, third-party insurance as to which the applicable insurer has not
disputed, denied or failed to acknowledge coverage), or (ii) any one or more
nonmonetary final judgments that have, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and, in either case,
(A) enforcement proceedings are commenced by any creditor upon such judgment or
order, or (B) there is a period of 30 consecutive days during which a stay of
enforcement of such judgment, by reason of a pending appeal or otherwise, is not
in effect.

(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) Any Transaction Document 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 any Loan Party or any Originator
(in each case, with respect to such Transaction Document to which it is a 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) Either (i) the Aggregate Principal exceeds the Aggregate Commitment or
(ii) a Borrowing Base Deficit exists, and such condition remains unremedied for
one (1) Business Day after the earlier of the date on which (i) notice has been
given to the Borrower by the Administrative Agent of such occurrence or (ii) a
Responsible Officer of the Borrower shall have knowledge thereof.

 

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(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) Any breach shall occur of any financial covenant set forth in Section 7.12
of the Parent Credit Agreement as in effect on the date hereof (as amended by
any amendment or waiver to the Parent Credit Agreement executed by Lenders that
at the time of such amendment or waiver were party to the Parent Credit
Agreement and that at such time constituted the Required Lenders, in which case
the Parent Credit Agreement shall be deemed to have been amended or waived for
purposes of this Amortization Event by such amendment or waiver).

(p) A material adverse change occurs with regard to the Servicer’s operations or
policies, which would make it unlikely, adversely effect, or prevent Servicer
from performing its obligations under the Transaction Documents to which it is a
party.

Section 9.2. Remedies. Upon the occurrence and during the continuation of an
Amortization Event, the Administrative Agent may, or upon the direction of the
Required Lenders (or their respective Co-Agents) shall, take any of the
following actions: (i) declare the Amortization Date to have occurred, whereupon
the Aggregate Commitment shall immediately 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, provided,
however that upon the occurrence of an Amortization Event described in
Section 9.2(g) with respect to any Loan Party or the Performance Guarantor, 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
and the Aggregate Commitment shall terminate, (ii) deliver the Collection
Notices to the Collection Banks, (iii) notify Obligors of the Administrative
Agent’s security interest in the Receivables and other Collateral, (iv) direct
that a Conduit Funding, Liquidity Funding or Non-Conduit Lender Funding accrue
Interest at the Default Rate in accordance with Sections 3.4 and 4.4, as
applicable, and (v) exercise all rights and remedies of a secured party upon
default under the UCC and other applicable laws. Additionally, upon the
occurrence and during the continuation of an Amortization Event (other than an
Amortization Event described in paragraphs (f), (g) or (j)(ii) solely to the
extent relating to a Material Subsidiary that is not a Loan Party), the
Administrative Agent may, or upon the direction of the Required Lenders (or
their respective Co-Agents) shall, replace the Person acting as Servicer.

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.

 

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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 Non-Conduit Lender, 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
Indemnified Party for Indemnified Amounts awarded against and actually paid or
actually incurred by any of them arising out of the Servicer’s activities as
Servicer hereunder and under the Servicing Agreement excluding, however, in all
of the foregoing instances under the preceding clauses (A) and (B):

(i) Indemnified Amounts to the extent a final judgment of a court of competent
jurisdiction holds that such Indemnified Amounts resulted from gross negligence
or willful misconduct on the part of any Indemnified Party;

(ii) Indemnified Amounts to the extent the same includes losses in respect of
Receivables that are uncollectible on account of any Event of Bankruptcy or lack
of creditworthiness of the related Obligor; or

(iii) Indemnified Amounts to the extent the same arise out of or result from
claims of one or more Indemnified Parties against another Indemnified Party,

provided, however, that nothing contained in this sentence shall limit the
liability of any Loan Party or limit the recourse of the Indemnified Parties to
Borrower or Servicer for amounts otherwise specifically provided to be paid by
either such Loan Party under the terms of this Agreement. Without limiting the
generality of the foregoing indemnification, Borrower shall indemnify the
Indemnified Parties for Indemnified Amounts (including, without limitation,
losses in respect of uncollectible receivables, regardless of whether
reimbursement therefor would constitute recourse to Borrower or the Servicer)
relating to or resulting from:

(i) any representation or warranty made by any Loan Party or any Originator (or
any of their respective officers on behalf of any such Person) under or in
connection with any Transaction Document to which they are parties, or any other
written information or report delivered by any such Person pursuant hereto or
thereto, which shall have been false or incorrect when made or deemed made;

 

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(ii) the failure by any Loan Party or any Originator to comply with any
applicable law, rule or regulation with respect to any Receivable or Contract
related thereto, or the nonconformity of any Receivable or Contract included
therein with any such applicable law, rule or regulation or any failure of any
Originator to keep or perform any of its obligations, express or implied, with
respect to any Contract;

(iii) any failure of any Loan Party or any Originator to perform its duties,
covenants or other obligations in accordance with the provisions of this
Agreement, the Receivables Sale Agreement or the Servicing Agreement;

(iv) any products liability, personal injury or damage suit, or other similar
claim arising out of or in connection with merchandise, insurance or services
that are the subject of any Contract or any Receivable;

(v) any dispute, claim, offset or defense (other than discharge in bankruptcy of
the Obligor) of the Obligor to the payment of any Receivable (including, without
limitation, a defense based on such Receivable or the related Contract not being
a legal, valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale of the
merchandise or service related to such Receivable or the furnishing or failure
to furnish such merchandise or services;

(vi) any Collections received, directly or indirectly by an Originator (or its
agent) which are not promptly remitted to Borrower;

(vii) any investigation, litigation or proceeding related to or arising from
this Agreement, the Receivables Sales Agreement or the Servicing Agreement, the
transactions contemplated hereby, the use of the proceeds of any Advance, the
Collateral or any other investigation, litigation or proceeding relating to
Borrower, the Servicer or any Originator in which any Indemnified Party becomes
involved as a result of any of the transactions contemplated hereby;

(viii) any inability to litigate any claim against any Obligor in respect of any
Receivable as a result of such Obligor being immune from civil and commercial
law and suit on the grounds of sovereignty or otherwise from any legal action,
suit or proceeding;

(ix) any failure of Borrower to acquire and maintain ownership of any of the
Collateral from the applicable Originator, free and clear of any Adverse Claim
(other than as created hereunder);

(x) any failure to vest and maintain vested in the Administrative Agent for the
benefit of the Secured Parties a valid first priority perfected security
interests in the Collateral, free and clear of any Adverse Claim (except as
created by the Transaction Documents);

(xi) the failure to have filed or to have maintained effective financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable domestic or foreign laws with
respect to any Collateral, and the proceeds thereof, whether at the time of any
Advance or at any subsequent time;

 

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(xii) the failure of any Receivable included in the calculation of the Net Pool
Balance as an Eligible Receivable to be an Eligible Receivable at the time so
included.

Section 10.2. Increased Cost and Reduced Return. If any Affected Entity shall be
charged any fee, expense or increased cost on account of a Regulatory Change:
(i) that subjects any Affected Entity to any Tax, duty or other charge or
withholding on or with respect to any Funding Agreement or an Affected Entity’s
obligations under a Funding Agreement, or on or with respect to the Receivables,
or changes the basis of taxation of payments to any Affected Entity of any
amounts payable under any Funding Agreement (except for (a) changes in the rate
of Tax on the overall revenues or net income of an Affected Entity and
(b) Excluded Taxes) or (ii) that imposes, modifies or deems applicable any
reserve, assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of an Affected Entity, or
credit extended by an Affected Entity pursuant to a Funding Agreement or
(iii) that imposes any other condition the result of which is to increase the
cost to an Affected Entity of performing its obligations under a Funding
Agreement, or to reduce the rate of return on an Affected Entity’s capital as a
consequence of its obligations under a Funding Agreement, or to reduce the
amount of any sum received or receivable by an Affected Entity under a Funding
Agreement or to require any payment calculated by reference to the amount of
interests or loans held or interest received by it, then, upon demand by the
applicable Co-Agent, Borrower shall pay to such Co-Agent, for the benefit of the
relevant Affected Entity, such amounts charged to such Affected Entity or such
amounts to otherwise compensate such Affected Entity for such increased cost or
such reduction. Each Affected Entity will promptly notify the applicable
Co-Agent, and such Co-Agent will promptly thereafter notify Borrower, of any
event of which it has knowledge, occurring after the date such Affected Entity
first became entitled to the benefits of this Section, which will entitle such
Affected Entity to compensation pursuant to this Section and will, if possible,
designate a different lending office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Affected Entity, be otherwise materially disadvantageous to such Affected
Entity. A certificate of any Affected Entity claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder and showing in reasonable detail the calculation thereof shall be
conclusive in the absence of manifest error. In determining such amount, such
Affected Entity may use any reasonable averaging and attribution methods
previously disclosed in writing to Borrower.

Section 10.3. Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of Borrower hereunder or under any other Transaction Document shall
be made free and clear of and without reduction or withholding for any
Indemnified Taxes or Other Taxes; provided that if Borrower shall be required by
applicable law to deduct any Indemnified Taxes (including any Other Taxes) from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) any Agent or Lender, as the case may
be, receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions and
(iii) Borrower shall timely pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

 

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(b) Payment of Other Taxes by Borrower. Without limiting the provisions of
paragraph (a) above, Borrower shall timely pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

(c) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority,
Borrower shall deliver to the Administrative Agent the original or a certified
copy of a receipt issued by such Governmental Authority evidencing such payment,
a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.

(d) Status of Lenders. Any Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments hereunder or under any
other Transaction Document shall deliver to Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by Borrower or the Administrative Agent, such properly
completed and executed documentation reasonably requested by the Borrower or the
Administrative Agent or prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate of withholding. In
addition, any Lender, if requested by Borrower or the Administrative Agent,
shall deliver such other documentation prescribed by applicable law or
reasonably requested by Borrower or the Administrative Agent as will enable
Borrower or the Administrative Agent to determine whether or not such Lender is
subject to backup withholding or information reporting requirements. Without
limiting the generality of the foregoing, any Lender shall deliver to Borrower
and the Administrative Agent (in such number of copies as shall be requested by
the recipient) on or prior to the date on which such Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the request of
Borrower or the Administrative Agent), but in each case only to the extent such
Lender is legally entitled to do so, whichever of the following is applicable:

(i) in the case of a Foreign Lender claiming eligibility for benefits of an
income tax treaty to which the United States is a party, duly completed copies
of Internal Revenue Service Form W-8BEN (or successor form),

(ii) duly completed copies of Internal Revenue Service Form W-8ECI (or successor
form),

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Tax Code, (x) a certificate
substantially in the form of Exhibit VI-A to the effect that such Foreign Lender
is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Tax Code,
(B) a “10 percent shareholder” of Borrower within the meaning of section
881(c)(3)(B) of the Tax Code, or (C) a “controlled foreign corporation”
described in section 881(c)(3)(C) of the Tax Code and (y) duly completed copies
of Internal Revenue Service Form W-8BEN (or successor form), or

 

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(iv) to the extent a Foreign Lender is not the beneficial owner, executed
originals of Internal Revenue Service Form W-8IMY, accompanied by Internal
Revenue Service Form W-8ECI, Internal Revenue Service Form W-8BEN, a certificate
substantially in the form of Exhibit VI-B or Exhibit VI-C, Internal Revenue
Service Form W-9, and/or other certification documents from each beneficial
owner, as applicable; provided that if the Foreign Lender is a partnership and
one or more direct or indirect partners of such Foreign Lender are claiming the
portfolio interest exemption, such Foreign Lender may provide a certificate
substantially in the form of Exhibit VI-D on behalf of each such direct and
indirect partner;

(v) in the case of a Lender that is a U.S. Person, executed originals of IRS
Form W-9, or

(vi) any other form prescribed by applicable law as a basis for claiming
exemption from or a reduction in United States Federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
applicable law to permit Borrower to determine the withholding or deduction
required to be made.

Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrower and the Administrative
Agent in writing of its legal inability to do so.

(e) Treatment of Certain Refunds. If any Agent or Lender determines, in its
reasonable discretion, that it has received a refund or a foreign tax credit of
any Taxes or Other Taxes as to which it has been indemnified by Borrower or with
respect to which Borrower has paid additional amounts pursuant to this Section,
it shall pay to Borrower an amount equal to such refund or credit (but only to
the extent of indemnity payments made, or additional amounts paid, by Borrower
under this Section with respect to the Taxes or Other Taxes giving rise to such
refund or credit), net of all out-of-pocket expenses (including Taxes) of such
Agent or Lender, as the case may be, and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such refund
or credit). Borrower, upon the request of such Agent or Lender shall repay to
such Agent or Lender the amount paid over pursuant to this paragraph (e) (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such Agent or Lender’s required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this paragraph, in no event will any Agent or Lender be required to pay any
amount to the Borrower pursuant to this paragraph the payment of which would
place such Agent or Lender in a less favorable net aftertax position than such
Agent or Lender would have been in if the Tax or Other Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax or Other Tax had never been paid. This paragraph shall not
be construed to require any Agent or Lender to make available its tax returns
(or any other information relating to its taxes which it deems confidential) to
Borrower or any other Person.

 

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(e) Indemnification by the Borrower. The Borrower shall indemnify each Lender,
within 10 days after demand therefor, for the full amount of any Indemnified
Taxes (including Indemnified Taxes imposed or asserted on or attributable to
amounts payable under this Section) payable or paid by such Lender or required
to be withheld or deducted from a payment to such Lender and any reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender (with a copy to the
Administrative Agent), or by the Administrative Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.

(f) Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent, within 10 days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that the
Borrower has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Borrower to do so),
(ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 12.2 relating to the maintenance of a Participant Register
and (iii) any Excluded Taxes attributable to such Lender, in each case, that are
payable or paid by the Administrative Agent in connection with any Transaction
Document, and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to any Lender by the Administrative Agent shall be
conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing
to such Lender under any Transaction Document or otherwise payable by the
Administrative Agent to the Lender from any other source against any amount due
to the Administrative Agent under this paragraph (f).

(h) Survival. Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
Section shall survive the payment in full of the obligations of Borrower
hereunder and the termination of the Aggregate Commitment.

(i) FATCA. If a payment made to any Lender would be subject to United States
federal withholding tax imposed by FATCA if such Lender were to fail to comply
with the applicable reporting requirements of FATCA (including those contained
in Section 1471(b) or 1472(b) of the Tax Code, as applicable), such Lender shall
deliver to the Borrower and Administrative Agent, at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Administrative Agent, such documentation prescribed by applicable law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Tax Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower or the Administrative
Agent to comply with their obligations under FATCA, to determine that such
Lender has complied with such Lender’s obligations under FATCA or to determine
the amount to deduct and withhold from such payment. Solely for purposes of this
Section 10.3(i), “FATCA” shall include any amendments made to FATCA after the
date of this Agreement.

Section 10.4. Other Costs and Expenses. Subject to the last sentence of this
Section, Borrower shall pay to the Agents and the Conduits on demand all
reasonable costs and documented out-of-pocket expenses actually incurred in
connection with the preparation, execution, and delivery of this Agreement, the
transactions contemplated hereby and the other

 

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documents to be delivered hereunder, including without limitation, the cost of
each Review (subject to the limitations set forth in Section 7.1(d)). Subject to
the last sentence of this Section, Borrower shall pay to the Agents on demand
any and all reasonable costs and documented out-of-pocket expenses of the Agents
and the Lenders, including reasonable counsel fees and expenses actually
incurred in connection with the enforcement of this Agreement and the other
documents delivered hereunder and in connection with any restructuring or
workout of this Agreement or such documents, or the administration of this
Agreement following an Amortization Event. Notwithstanding anything to the
contrary in this Agreement, in the case of payment or reimbursement of fees and
expenses of counsel of the Agents, the Conduits and the other Lenders and of
auditors for the Agents, the Conduits and the other Lenders, the Borrower’s
obligations shall be limited to (i) the reasonable fees and documented
out-of-pocket expenses of one counsel for the Administrative Agent, the Conduits
and the other Lenders (all taken as one group) and, if necessary, one firm of
local counsel in each appropriate jurisdiction (which may include a single
special counsel acting in multiple jurisdictions) for the Administrative Agent,
the Conduits and the other Lenders (all taken as one group), and, in the case of
actual or reasonably perceived conflicts of interest, where one or more of the
Administrative Agent, the Conduits and the other Lenders affected by such
conflict informs the Borrower of such conflict and thereafter retains its own
counsel, of another firm of counsel for such affected Person and (ii) the
reasonable fees and documented out-of-pocket expenses of one auditing firm for
the Administrative Agent, the Conduits and the other Lenders (all taken as one
group).

ARTICLE XI

THE AGENTS

Section 11.1. Authorization and Action. (a) Each member of the BTMU Group hereby
irrevocably designates and appoints The Bank of Tokyo-Mitsubishi UFJ, Ltd.,
New York Branch as BTMU Agent hereunder and under the other Transaction
Documents to which the BTMU Agent is a party and authorizes the BTMU Agent to
take such action on its behalf under the provisions of the Transaction Documents
and to exercise such powers and perform such duties as are expressly delegated
to the BTMU Agent by the terms of the Transaction Documents, together with such
other powers as are reasonably incidental thereto. Each member of the Mizuho
Group hereby irrevocably designates and appoints Mizuho Corporate Bank, Ltd. as
Mizuho Agent hereunder and under the other Transaction Documents to which the
Mizuho Agent is a party and authorizes the Mizuho Agent to take such action on
its behalf under the provisions of the Transaction Documents and to exercise
such powers and perform such duties as are expressly delegated to the Mizuho
Agent by the terms of the Transaction Documents, together with such other powers
as are reasonably incidental thereto. SunTrust Bank, as Non-Conduit Lender
hereby irrevocably designates and appoints SunTrust Bank as SunTrust Agent
hereunder and under the other Transaction Documents to which the SunTrust Agent
is a party, and authorizes the SunTrust Agent to take such action on its behalf
under the provisions of the Transaction Documents and to exercise such powers
and perform such duties as are expressly delegated to the SunTrust Agent by the
terms of the Transaction Documents, together with such other powers as are
reasonably incidental thereto. Each Non-Conduit Lender or member of any other
Group that becomes a party to this Agreement after the date hereof shall
designate and appoint an agent and authorize such agent to take such action on
its behalf under the provision of the Transaction

 

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Documents, and to exercise such powers and perform such duties as are expressly
delegated to such agent by the terms of the Transaction Documents, together with
such other powers as are reasonably incidental thereto. Each of the Lenders and
the Co-Agents hereby irrevocably designates and appoints SunTrust Bank as
Administrative Agent hereunder and under the Transaction Documents to which the
Administrative Agent is a party, and each Lender and Co-Agent that becomes a
party to this Agreement hereafter ratifies such designation and appointment and
authorizes the Administrative Agent to take such action on its behalf under the
provisions of the Transaction Documents and to exercise such powers and perform
such duties as are expressly delegated to the Administrative Agent by the terms
of the Transaction Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, none of the Agents shall have any duties or responsibilities,
except those expressly set forth in the Transaction Documents to which it is a
party, or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities on the part of
such Agent shall be read into any Transaction Document or otherwise exist
against such Agent.

(b) The provisions of this Article XI are solely for the benefit of the Agents
and the Lenders, and none of the Loan Parties shall have any rights as a
third-party beneficiary or otherwise under any of the provisions of this
Article XI, except (i) as provided in Section 11.10 and (ii) that this
Article XI shall not affect any obligations which any of the Agents or Lenders
may have to any of the Loan Parties under the other provisions of this
Agreement.

(c) In performing its functions and duties hereunder, (i) the BTMU Agent shall
act solely as the agent of the members of the BTMU Group and does not assume nor
shall be deemed to have assumed any obligation or relationship of trust or
agency with or for any of the Loan Parties or any of their respective successors
and assigns, (ii) the Mizuho Agent shall act solely as the agent of the members
of the Mizuho Group and does not assume nor shall be deemed to have assumed any
obligation or relationship of trust or agency with or for any of the Loan
Parties or any of their respective successors and assign, (iii) the SunTrust
Agent shall act solely as the agent of SunTrust, as Non-Conduit Lender and does
not assume nor shall be deemed to have assumed any obligation or relationship of
trust or agency with or for any of the Loan Parties or any of their respective
successors and assigns, (iv) the agent for any Non-Conduit Lender or the member
of any Group that becomes a party hereto after the date hereof shall act solely
as the agent of such Non-Conduit Lender or the members of such Group and does
not assume nor shall be deemed to have assumed any obligation or relationship of
trust or agency with or for any of the Loan Parties or their respective
successors or assigns, and (v) the Administrative Agent shall act solely as the
agent of the Secured Parties and does not assume nor shall be deemed to have
assumed any obligation or relationship of trust or agency with or for any of the
Loan Parties or any of their respective successors and assigns.

Section 11.2. Delegation of Duties. Each of the Agents may execute any of its
duties under this Agreement and each other Transaction Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. None of the Agents shall be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.

 

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Section 11.3. Exculpatory Provisions. (a) None of the Agents nor any of its
directors, officers, agents or employees shall be (i) liable for any action
lawfully taken or omitted to be taken by it or them under or in connection with
this Agreement or any other Transaction Document (except for its, their or such
Person’s own gross negligence or willful misconduct), or (ii) responsible in any
manner to any of the Lenders or other Agents for any recitals, statements,
representations or warranties made by any Loan Party contained in this
Agreement, any other Transaction Document or any certificate, report, statement
or other document referred to or provided for in, or received under or in
connection with, this Agreement, or any other Transaction Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, or any other Transaction Document or any other document
furnished in connection herewith or therewith, or for any failure of any Loan
Party to perform its obligations hereunder or thereunder, or for the
satisfaction of any condition specified in Article VI, or for the perfection,
priority, condition, value or sufficiency of any collateral pledged in
connection herewith. None of the Agents shall be under any obligation to any
other Agent or any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements or covenants contained in, or conditions
of, this Agreement or any other Transaction Document, or to inspect the
properties, books or records of the Loan Parties. None of the Agents shall be
deemed to have knowledge of any Amortization Event or Unmatured Amortization
Event unless such Agent has received notice from Borrower, another Agent or a
Lender. Except as expressly set forth in the Transaction Documents, none of the
Agents shall have any duty to disclose, and shall not be liable for the failure
to disclose, any information relating to the Borrower or any of its Affiliates
that is communicated to or obtained by such Agent or any of its Affiliates in
any capacity.

(b) The Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except those discretionary rights
and powers expressly contemplated by the Transaction Documents that the
Administrative Agent is required to exercise in writing by the Required Lenders
(or such other number or percentage of the Lenders as shall be necessary under
the circumstances as provided in Section 14.1).

Section 11.4. Reliance by the Agents. (a) Each of the Agents shall in all cases
be entitled to rely, and shall be fully protected in relying, upon any document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to
Borrower), independent accountants and other experts selected by such Agent.
Each of the Agents shall in all cases be fully justified in failing or refusing
to take any action under this Agreement or any other Transaction Document unless
it shall first receive such advice or concurrence of the Lenders or Liquidity
Banks in its Group (or its related Non-Conduit Lender, as applicable) as it
deems appropriate and it shall first be indemnified to its satisfaction by the
Liquidity Banks in its Group (or its related Non-Conduit Lender, as applicable)
against any and all liability, cost and expense which may be incurred by it by
reason of taking or continuing to take any such action.

(b) Any action taken by any of the Agents in accordance with Section 11.4(a)
shall be binding upon all of the Agents and the Lenders.

 

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Section 11.5. Non-Reliance on Other Agents and Other Lenders. Each Lender
expressly acknowledges that none of the Agents, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by any Agent hereafter
taken, including, without limitation, any review of the affairs of any Loan
Party, shall be deemed to constitute any representation or warranty by such
Agent. Each Lender represents and warrants to each Agent that it has and will,
independently and without reliance upon any Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
appraisal of an investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of Borrower and
made its own decision to enter into this Agreement, the other Transaction
Documents and all other documents related hereto or thereto.

Section 11.6. Reimbursement and Indemnification. Each Non-Conduit Lender and
each Liquidity Bank agrees to reimburse and indemnify (a) its applicable
Co-Agent, (b) the Administrative Agent and its officers, directors, employees,
representatives and agents ratably according to their Percentage of the
Obligations or their Pro Rata Share of their Group’s Percentage of the
Obligations, as applicable, to the extent not paid or reimbursed by the Loan
Parties (i) for any amounts for which such Agent, acting in its capacity as
Agent, is entitled to reimbursement by the Loan Parties hereunder and (ii) for
any other expenses incurred by such Agent, in its capacity as Agent and acting
on behalf of the Lenders, in connection with the administration and enforcement
of this Agreement and the other Transaction Documents.

Section 11.7. Agents in Their Individual Capacities. Each of the Agents and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with Borrower or any Affiliate of Borrower as though such Agent
were not an Agent hereunder. With respect to the making of Loans pursuant to
this Agreement, each of the Agents shall have the same rights and powers under
this Agreement in its individual capacity as any Lender and may exercise the
same as though it were not an Agent, and the terms “Liquidity Bank,” “Lender,”
“Liquidity Banks” and “Lenders” shall include each of the Agents in its
individual capacity.

Section 11.8. Conflict Waivers. Each Co-Agent acts, or may in the future act:
(i) as administrative agent for such Co-Agent’s Conduit or Non-Conduit Lender,
(ii) as issuing and paying agent for such Conduit’s Commercial Paper, (iii) to
provide credit or liquidity enhancement for the timely payment for such
Conduit’s Commercial Paper and (iv) to provide other services from time to time
for such Conduit or Non-Conduit Lender (collectively, the “Co-Agent Roles”).
Without limiting the generality of Sections 11.1 and 11.8, each of the other
Agents and the Lenders hereby acknowledges and consents to any and all Co-Agent
Roles and agrees that in connection with any Co-Agent Role, a Co-Agent may take,
or refrain from taking, any action which it, in its discretion, deems
appropriate, including, without limitation, in its role as administrative agent
for its Conduit, the giving of notice to the Liquidity Banks in its Group of a
mandatory purchase pursuant to the Liquidity Agreement for such Group, and
hereby acknowledges that neither the applicable Co-Agent nor any of its
Affiliates has any fiduciary duties hereunder to any Lender (other than its
Conduit) arising out of any Co-Agent Roles.

 

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Section 11.9. UCC Filings. Each of the Secured Parties hereby expressly
recognizes and agrees that the Administrative Agent may be listed as the
assignee or secured party of record on the various UCC filings required to be
made under the Transaction Documents in order to perfect their respective
interests in the Collateral, that such listing shall be for administrative
convenience only in creating a record or nominee holder to take certain actions
hereunder on behalf of the Secured Parties and that such listing will not affect
in any way the status of the Secured Parties as the true parties in interest
with respect to the Collateral. In addition, such listing shall impose no duties
on the Administrative Agent other than those expressly and specifically
undertaken in accordance with this Article XI.

Section 11.10. Successor Administrative Agent. The Administrative Agent, upon
five (5) days’ notice to the Loan Parties, the other Agents and the Lenders, may
voluntarily resign and may be removed at any time, with or without cause, by the
Required Lenders; provided, however, that SunTrust shall not voluntarily resign
as the Administrative Agent so long as the Commitment of SunTrust, as
Non-Conduit Lender remains in effect or SunTrust has any outstanding Loans. If
the Administrative Agent (other than SunTrust) shall voluntarily resign or be
removed as Administrative Agent under this Agreement, then the Required Lenders
(other than SunTrust) during such five-day period shall appoint, with the
consent of Borrower from among the remaining Liquidity Banks, a successor
Administrative Agent, whereupon such successor Administrative Agent shall
succeed to the rights, powers and duties of the Administrative Agent and the
term “Administrative Agent” shall mean such successor agent, effective upon its
appointment, and the former Administrative Agent’s rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement. Upon resignation or replacement of any Administrative Agent in
accordance with this Section 11.10, the retiring Administrative Agent shall
execute such UCC-3 or other UCC assignments and amendments, and assignments and
amendments of the Transaction Documents, as may be necessary to give effect to
its replacement by a successor Administrative Agent. After any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, the
provisions of this Article XI and Article X shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement.

ARTICLE XII

ASSIGNMENTS; PARTICIPATIONS

Section 12.1. Assignments. (a) Each of the Agents, the Loan Parties and the
Liquidity Banks hereby agrees and consents to the complete or partial assignment
by each Conduit of all or any portion of its rights under, interest in, title to
and obligations under this Agreement to (i) the Liquidity Banks in its Group and
(ii) any other Conduit administered by the Co-Agent with respect to the assignor
Conduit.

(b) Any Liquidity Bank may at any time and from time to time assign to one or
more Eligible Assignees (each, a “Purchasing Liquidity Bank”) all or any part of
its rights and obligations under this Agreement pursuant to an assignment
agreement (an “Assignment Agreement”) executed by such Purchasing Liquidity Bank
and such selling Liquidity Bank and in a form reasonably acceptable to the
applicable Conduit and the Loan Parties; provided, however, that any assignment
of a Liquidity Bank’s rights and obligations hereunder shall

 

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include a pro rata assignment of its rights and obligations under the applicable
Liquidity Agreement. The consent of the applicable Conduit shall be required
prior to the effectiveness of any such assignment by a Liquidity Bank in such
Conduit’s Group. Each assignee of a Liquidity Bank must (i) be an Eligible
Assignee and (ii) agree to deliver to the applicable Co-Agent, promptly
following any request therefor by the applicable Co-Agent or the applicable
Conduit, an enforceability opinion with respect to such Liquidity Bank’s
obligations under the Transaction Documents to which such Liquidity Bank would
be a party in form and substance satisfactory to such Co-Agent and such Conduit.
Upon delivery of an executed Assignment Agreement to the applicable Co-Agent,
such selling Liquidity Bank shall be released from its obligations hereunder and
under applicable Liquidity Agreement to the extent of such assignment.
Thereafter the Purchasing Liquidity Bank shall for all purposes be a Liquidity
Bank party to this Agreement and the applicable Liquidity Agreement and shall
have all the rights and obligations of a Liquidity Bank hereunder and thereunder
to the same extent as if it were an original party hereto and thereto and no
further consent or action by Borrower, the Lenders or the Agents shall be
required. The applicable Agent shall give Borrower prior notice of the name of
any assignee of a Liquidity Bank in such Co-Agent’s Group and the name(s) of the
selling Liquidity Bank(s) and the amounts assigned by each selling Liquidity
Bank.

(c) Not in limitation of the Borrower’s rights under Section 12.4, each of the
Liquidity Banks agrees that in the event that it shall suffer a Downgrading
Event, the applicable Co-Agent shall promptly notify Borrower and such
Downgraded Liquidity Bank shall be obliged, at the request of the applicable
Conduit, the applicable Co-Agent or Borrower, to (i) collateralize its
Commitment and its Liquidity Commitment in a manner acceptable to the applicable
Co-Agent, or (ii) use commercially reasonable efforts to assign all of its
rights and obligations hereunder and under the applicable Liquidity Agreement to
an Eligible Replacement Lender nominated by the applicable Co-Agent or a Loan
Party and acceptable to the applicable Conduit and willing to participate in
this Agreement and such Liquidity Agreement through the Facility Termination
Date in the place of such Downgraded Liquidity Bank; provided that the
Downgraded Liquidity Bank receives payment in full, pursuant to an Assignment
Agreement, of an amount equal to such Liquidity Bank’s Pro Rata Share of such
Liquidity Bank’s Group’s Percentage of the Obligations owing to the Liquidity
Banks of such Group.

(d) No Loan Party may assign any of its rights or obligations under this
Agreement without the prior written consent of each of the Agents and each of
the Lenders.

Section 12.2. Participations. Any Non-Conduit Lender or Liquidity Bank may, in
the ordinary course of its business at any time sell to one or more Persons
(each, a “Participant”) participating interests in its Percentage (or, with
respect to a Liquidity Bank, its Pro Rata Share of its Group’s Percentage) of
the Aggregate Commitment, its Loans, its Liquidity Commitment or any other
interest of such Non-Conduit Lender or Liquidity Bank hereunder or under the
applicable Liquidity Agreement. Notwithstanding any such sale by a Non-Conduit
Lender or Liquidity Bank of a participating interest to a Participant, such
Non-Conduit Lender’s or Liquidity Bank’s rights and obligations under this
Agreement and such Liquidity Agreement shall remain unchanged, such Non-Conduit
Lender or Liquidity Bank shall remain solely responsible for the performance of
its obligations hereunder and under such Liquidity Agreement, and the Loan
Parties, the Conduits and the Agents shall continue to deal solely and

 

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directly with such Non-Conduit Lender or Liquidity Bank in connection with such
Non-Conduit Lender’s or Liquidity Bank’s rights and obligations under this
Agreement and the applicable Liquidity Agreement. Each Non-Conduit Lender or
Liquidity Bank agrees that any agreement between such Non-Conduit Lender or
Liquidity Bank and any such Participant in respect of such participating
interest shall not restrict such Non-Conduit Lender’s or Liquidity Bank’s right
to agree to any amendment, supplement, waiver or modification to this Agreement,
except for any amendment, supplement, waiver or modification described in
Section 14.1(b)(i). The Borrower agrees that each Participant shall be entitled
to the benefits of Sections 10.2 and 10.3 (subject to the requirements and
limitations therein, including the requirements under Section 10.3(d) (it being
understood that the documentation required under Section 10.3(d) shall be
delivered to the participating Non-Conduit Lender or Liquidity Bank)) to the
same extent as if it were a Lender and had acquired its interest by assignment
pursuant to Section 12.1; provided that such Participant (A) agrees to be
subject to the provisions of Sections 12.4 as if it were an assignee under
Section 12.1; and (B) shall not be entitled to receive any greater payment under
Sections 10.2 or 10.3, with respect to any participation, than its participating
Non-Conduit Lender or Liquidity Bank, as the case may be, would have been
entitled to receive, except to the extent such entitlement to receive a greater
payment results from a Regulatory Change that occurs after the Participant
acquired the applicable participation. Each Non-Conduit Lender or Liquidity Bank
that sells a participation agrees, at the Borrower’s request and expense, to use
reasonable efforts to cooperate with the Borrower to effectuate the provisions
of Section 12.4 with respect to any Participant. To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 14.12 as
though it were a Lender. Each Non-Conduit Lender or Liquidity Bank that sells a
participation shall, acting solely for this purpose as an agent of the Borrower,
maintain a register on which it enters the name and address of each Participant
and the principal amounts (and stated interest) of each Participant’s interest
in the Loans or other obligations under the Transaction Documents (the
“Participant Register”); provided that no Non-Conduit Lender or Liquidity Bank
shall have any obligation to disclose all or any port ion of the Participant
Register (including the identity of any Participant or any information relating
to a Participant's interest in any commitments, loans, letters of credit or its
other obligations under any Transaction Document) to any Person except to the
extent that such disclosure is necessary to establish that such commitment,
loan, letter of credit or other obligation is in registered form under
Section 5f.103-1(c) of the United States Treasury Regulations. The entries in
the Participant Register shall be conclusive absent manifest error, and such
Non-Conduit Lender or Liquidity Bank shall treat each Person whose name is
recorded in the Participant Register as the owner of such participation for all
purposes of this Agreement notwithstanding any notice to the contrary. For the
avoidance of doubt, the Administrative Agent (in its capacity as Administrative
Agent) shall have no responsibility for maintaining a Participant Register.

Section 12.3. Federal Reserve. Notwithstanding any other provision of this
Agreement to the contrary, any Non-Conduit Lender or any Liquidity Bank may at
any time pledge or grant a security interest in all or any portion of its rights
(including, without limitation, any Loan and any rights to payment of principal
or interest thereon) under this Agreement to secure obligations of such
Non-Conduit Lender or Liquidity Bank to a Federal Reserve Bank, without notice
to or consent of Borrower, Servicer or any Agent; provided that no such pledge
or grant of a security interest shall release a Non-Conduit Lender or Liquidity
Bank from any of its obligations hereunder, or substitute any such pledgee or
grantee for such Non-Conduit Lender or Liquidity Bank as a party hereto.

 

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Section 12.4. Substitution of Lenders. In the event (a) any Lender is then a
Defaulting Lender, (b) a Lender or Agent hereunder is also a lender under the
Parent Credit Agreement and such Lender or Agent fails to consent to an
amendment or waiver requested under the Parent Credit Agreement at a time when
the Required Lenders have approved such amendment or waiver, (c) any Lender
requests compensation under Section 10.2, (d) the Borrower is required to pay
amount under Section 10.3 to a Lender, (e) any Conduit is then a Downgraded
Conduit, (f) any Liquidity Bank that is entitled to receive the Applicable
Margin set forth in clause (ii) of the definition of “Applicable Margin” (the
“CP Disruption Margin”) during the occurrence of a CP Market Disruption Event
does not waive such CP Disruption Margin and elect to receive the Applicable
Margin set forth in clause (i) of the definition of “Applicable Margin”, or
(g) a Lender that is a Non-Conduit Lender or a Liquidity Bank provides a notice
to the Administrative Agent under Section 4.3 (any such Lender referred to in
any of clauses (a) through (g) above being hereinafter, together with its
related Agent and its related Conduit in its Group (if any) referred to as an
“Affected Lender Group”), the Borrower may, in addition to any other rights the
Borrower may have hereunder or under applicable law, require, at its expense,
any such Affected Lender Group to assign, at par, without recourse, all of its
interest, rights, and obligations hereunder (including all of its Commitments
and the Loans and other amounts at any time owing to the members of such
Affected Lender Group hereunder and the other Transaction Documents) to an
Eligible Replacement Lender specified by the Borrower, provided that (i) such
assignment shall not conflict with or violate any law, rule or regulation or
order of any court or other Governmental Authority, (ii) the Borrower shall have
paid to the members of such Affected Lender Group all monies (together with any
Broken Funding Costs computed as if the Loans owing to it were prepaid rather
than assigned) other than such principal owing to it hereunder, and (iii) the
assignment is entered into in accordance with, and subject to the consents
required by, Section 12.1 hereof (provided any assignment fees and reimbursable
expenses due thereunder shall be paid by the Borrower).

ARTICLE XIII

SECURITY INTEREST

Section 13.1. Grant of Security Interest. To secure the due and punctual payment
of the Obligations, whether now or hereafter existing, due or to become due,
direct or indirect, or absolute or contingent, including, without limitation,
all Indemnified Amounts, in each case pro rata according to the respective
amounts thereof, Borrower hereby grants to the Administrative Agent, for the
benefit of the Secured Parties, a security interest in, all of Borrower’s right,
title and interest, whether now owned and existing or hereafter arising in and
to all of the Receivables, the Related Security and all proceeds of the
foregoing (collectively, the “Collateral”).

Section 13.2. Termination after Final Payout Date. Each of the Secured Parties
hereby authorizes the Administrative Agent or any other Agent, if applicable,
and the Administrative Agent or such other Agent, if applicable, hereby agrees,
promptly upon the Final Payout Date to

 

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execute and deliver to Borrower a termination of and release of the security
interests created under this Agreement and any Collection Account Agreement,
together with such UCC termination statements or other documents as may be
necessary as reasonably determined by Borrower to terminate, on behalf of
itself, the other Agents and the Lenders, the security interest in and Adverse
Claim upon the Collateral held by the Administrative Agent, or other Agent, if
applicable, for the benefit of the Secured Parties, all at Borrower’s expense.
Upon the Final Payout Date, all right, title and interest of the Administrative
Agent, the other Agents and the Lenders in and to the Collateral shall
terminate. The Secured Parties agree that Borrower shall be authorized to file
any UCC financing statements and amendment statements to evidence such
termination.

Section 13.3. Excluded Receivables. Each of the Secured Parties hereby
authorizes the Administrative Agent or any other Agent, if applicable, and the
Administrative Agent or such other Agent, if applicable, hereby agrees, promptly
upon written request from Borrower to execute and deliver to Borrower such UCC
termination statements or other documents as may be necessary as reasonably
determined by Borrower to terminate, on behalf of itself, the other Agents and
the Lenders, the security interest in and Adverse Claim upon any Excluded
Receivable (as defined in the Receivables Sale Agreement) held by the
Administrative Agent, or other Agent, if applicable, for the benefit of the
Secured Parties, all at Borrower’s expense.

ARTICLE XIV

MISCELLANEOUS

Section 14.1. Waivers and Amendments. (a) No failure or delay on the part of any
Agent or any Lender in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other further exercise
thereof or the exercise of any other power, right or remedy. The rights and
remedies herein provided shall be cumulative and nonexclusive of any rights or
remedies provided by law. Any waiver of this Agreement shall be effective only
in the specific instance and for the specific purpose for which given.

(b) No provision of this Agreement may be amended, supplemented, modified or
waived except in writing in accordance with the provisions of this
Section 14.1(b). The Conduits, Borrower and the Administrative Agent, with the
consent of the Required Lenders, may enter into written modifications or waivers
of any provisions of this Agreement, provided, however, that no such
modification or waiver shall:

(i) without the consent of each affected Lender, (A) extend the Facility
Termination Date or the date of any payment or deposit of Collections by
Borrower or the Servicer, (B) reduce the rate or extend the time of payment of
Interest or any CP Costs (or any component of Interest or CP Costs), (C) reduce
any fee payable to any Agent for the benefit of the Lenders, (D) except pursuant
to Article XII hereof, change the amount of the principal of any Lender, any
Liquidity Bank’s Pro Rata Share or any Liquidity Bank’s Liquidity Commitment,
(E) amend, modify or waive any provision of the definition of Required Lenders
or this Section 14.1(b), (F) consent to or permit the

 

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assignment or transfer by Borrower of any of its rights and obligations under
this Agreement, (G) change the definition of “Eligible Receivable,” “Loss
Reserve,” “Dilution Reserve,” “Interest Reserve,” “Servicing Reserve” or
“Required Reserve” or (H) amend or modify any defined term (or any defined term
used directly or indirectly in such defined term) used in clauses (A) through
(G) above in a manner that would circumvent the intention of the restrictions
set forth in such clauses, or

(ii) without the written consent of any affected Agent, amend, modify or waive
any provision of this Agreement if the effect thereof is to affect the rights or
duties of such Agent.

Notwithstanding the foregoing, (i) without the consent of the Liquidity Banks,
but with the consent of Borrower, the applicable Co-Agent may direct the
Administrative Agent to amend this Agreement solely to add additional Persons as
Liquidity Banks hereunder and (ii) the Agents, the Required Lenders and the
Conduits may enter into amendments to modify any of the terms or provisions of
Article XI, Article XII or any other provision of this Agreement without the
consent of Borrower, provided that such amendment has no negative impact upon
Borrower. Any modification or waiver made in accordance with this Section 14.1
shall apply to each of the Lenders equally and shall be binding upon Borrower,
the Lenders and the Agents.

(c) Defaulting Lenders. Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or consent hereunder except that the Commitment of such Defaulting Lender
may not be increased or extended without the consent of such Defaulting Lender.

Section 14.2. Notices. Except as provided in this Section 14.2, all
communications and notices provided for hereunder shall be in writing (including
bank wire, facsimile transmission, electronic mail or similar writing) and shall
be given to the other parties hereto at their respective addresses, facsimile
numbers or e-mail address set forth on the signature pages hereof or at such
other address, facsimile numbers or e-mail address as such Person may hereafter
specify for the purpose of notice to each of the other parties hereto. Each such
notice or other communication shall be effective (i) if given by facsimile or
e-mail, upon the receipt thereof, or (ii) if given by mail, three (3) Business
Days after the time such communication is deposited in the mail with first class
postage prepaid.

Section 14.3. Ratable Payments. If (a) any Lender, whether by setoff or
otherwise, has payment made to such Lender in respect to any portion of the
Obligations owing to such Lender (other than payments received pursuant to
Section 10.2, 10.3 or 10.4) in a greater proportion than that received by any
other Lender in such Lender’s Group entitled to receive a ratable share of such
Obligations, such Lender agrees, promptly upon demand, to purchase for cash
without recourse or warranty a portion of such Obligations held by the other
Lenders in such Lender’s Group so that after such Purchase each Lender in such
Group will hold its Pro Rata Share of such Obligations or (b) any Non-Conduit
Lender or Group, whether by set off or otherwise, has payment made to such
Non-Conduit

 

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Lender or Group (other than payments received pursuant to Section 10.2, 10.3 or
10.4) in a greater proportion than that received by any other Non-Conduit Lender
or Group entitled to receive a ratable share of such Obligations, such
Non-Conduit Lender or the Lenders in such Group agree, promptly upon demand, to
purchase for cash without recourse or warranty a portion of such Obligations
held by the other Non-Conduit Lenders or Groups so that after such purchase each
Non-Conduit Lender and each Lender in such Group, taken together, will hold its
Percentage of such Obligations; provided that in the case of the preceding
clauses (a) and (b), if all or any portion of such excess amount is thereafter
recovered from such Lender or Group, as applicable, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.

Section 14.4. Protection of Administrative Agent’s Security Interest. (a) Each
of Borrower and Servicer agree that from time to time, at the Borrower’s
expense, it will promptly execute and deliver all instruments and documents, and
take all actions, that may be necessary, or that any of the Agents may
reasonably request, to perfect, protect or more fully evidence the
Administrative Agent’s security interest in the Collateral, or to enable the
Agents or the Lenders to exercise and enforce their rights and remedies
hereunder. At any time after the occurrence of an Amortization Event, the
Administrative Agent may, or the Administrative Agent may direct Borrower or the
Servicer to, notify the Obligors of Receivables, at Borrower’s expense, of the
ownership or security interests of the Lenders under this Agreement and may also
direct that payments of all amounts due or that become due under any or all
Receivables be made directly to the Administrative Agent or its designee.

(b) If any Loan Party or the Performance Guarantor fails to perform any of its
obligations hereunder or under the Performance Undertaking, any Agent or any
Lender may (but shall not be required to) perform, or cause performance of, such
obligations, and such Agent’s or such Lender’s reasonable costs and expenses
incurred in connection therewith shall be payable by Borrower as provided in
Section 10.4. Borrower irrevocably authorizes the Administrative Agent at any
time and from time to time in the sole discretion of the Administrative Agent,
and appoints the Administrative Agent as its attorney-in-fact, to act on behalf
of Borrower (i) to execute on behalf of Borrower as debtor and to file financing
statements necessary or desirable in the Administrative Agent’s sole discretion
to perfect and to maintain the perfection and priority of the interest of the
Lenders in the Receivables and (ii) to file a carbon, photographic or other
reproduction of this Agreement or any financing statement with respect to the
Receivables as a financing statement in such offices as the Administrative Agent
in its sole discretion deems necessary or desirable to perfect and to maintain
the perfection and priority of the Administrative Agent’s security interest in
the Collateral, for the benefit of the Secured Parties. This appointment is
coupled with an interest and is irrevocable.

Section 14.5. Confidentiality. (a) Each of the Loan Parties shall maintain and
shall cause each of its employees and officers to maintain the confidentiality
of the Fee Letter and the electronic models and files (including electronic
files containing model accounting entries for securitization transactions)
provided by the Agents or the Conduits in connection with this Agreement,
provided, however, such information may be disclosed to third parties to the
extent such disclosure is (i) required to comply with any applicable law
(including federal and state securities laws) or order of any judicial or
administrative proceeding, or (ii) required in response to any summons or
subpoena or in connection with any litigation, provided, further, that such Loan
Party informs such person that such information is sensitive, proprietary and
confidential. Notwithstanding the foregoing, the Loan Parties shall have no
obligation of confidentiality in respect of any information which may be
generally available to the public or becomes available to the public through no
fault of such Loan Party or its Affiliates.

 

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(b) Each of the Lenders and each of the Agents shall maintain and shall cause
each of its officers, directors, employees, investors, potential investors,
credit enhancers, outside accountants, attorneys and other advisors to maintain
the confidentiality of any nonpublic information with respect to the
Originators, the Performance Guarantor, the Conduits and the Loan Parties,
except that any of the foregoing may disclose such information (i) to any party
to this Agreement, (ii) to any provider of a surety, guaranty or credit or
liquidity enhancement to any Conduit, (iii) to the outside accountants,
attorneys and other advisors of any Person described in clause (i) or
(ii) above, (iv) to any prospective or actual assignee or participant of any of
the Agents or any Lender, (v) to any rating agency, (vi) to any Commercial Paper
dealer, (vii) to any other entity organized for the purpose of purchasing, or
making loans secured by, financial assets for which SunTrust, BTMU, Mizuho or
one of their respective affiliates acts as the administrative agent and to any
officers, directors, employees, outside accountants and attorneys of each of the
foregoing, provided that each Person described in the foregoing clause (ii),
(iii), (iv), (v), (vi) or (vii) is informed of the confidential nature of such
information and, in the case of a Person described in clause (ii) or (iv),
agrees in writing to maintain the confidentiality of such information in
accordance with this Section 14.5(b); and (viii) as required pursuant to any
law, rule, regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings (whether or not having the
force or effect of law). Notwithstanding the foregoing, (x) each Conduit and its
officers, directors, employees, investors, potential investors, credit
enhancers, outside accountants, attorneys and other advisors shall be permitted
to disclose Receivables performance information and details concerning the
structure of the facility contemplated hereby in summary form and in a manner
not identifying the Originators, Borrower, the Servicer, the Performance
Guarantor, or the Obligors to prospective investors in Commercial Paper issued
by such Conduit, and (y) the Conduits, the Agents and the Lenders shall have no
obligation of confidentiality in respect of any information which may be
generally available to the public or becomes available to the public through no
fault of theirs or their respective Affiliates.

(c) Notwithstanding anything to the contrary contained herein or in any other
Transaction Document, each of the parties hereto acknowledges and agrees that
any Agent or any Conduit, may post to a secured password-protected internet
website maintained by such Person in connection with Rule 17g-5 (as defined
below) such information as any rating agency may request in connection with the
confirming or monitoring its rating of such Conduit’s Commercial Paper or that
such Agent or such Conduit may otherwise determine is necessary or appropriate
to post to such website in furtherance of the requirements of Rule 17g-5.
“Rule 17g-5” shall mean Rule 17g-5 under the Securities Exchange Act of 1934 as
such may be amended from time to time, and subject to such clarification and
interpretation as has been provided by the Securities and Exchange Commission in
the adopting release (Amendments to Rules for Nationally Recognized Statistical
Rating Organizations, Exchange Act Release No. 34-61050, 74 Fed. Reg. 63,832,
63,865 (Dec. 4, 2009)) and subject to such clarification and interpretation as
may be provided by the Securities and Exchange Commission or its staff from time
to time.

 

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Section 14.6. Bankruptcy Petition; Excess Funds. (a) Borrower, the Servicer,
each Agent, each Non-Conduit Lender and each Liquidity Bank hereby covenants and
agrees that, prior to the date that is one year and one day after the payment in
full of all outstanding senior indebtedness of any Conduit, it will not
institute against, or join any other Person in instituting against, such Conduit
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States.

(b) Notwithstanding anything to the contrary contained herein, the obligations
of each Conduit under this Agreement shall be solely the corporate or limited
liability company obligations of such Conduit and, in the case of obligations of
any Conduit other than its Commercial Paper, shall be payable at such time as
funds are actually received by, or are available to, such Conduit in excess of
funds necessary to pay in full all outstanding Commercial Paper Notes and, to
the extent funds are not available to pay such obligations, the claims relating
thereto shall not constitute a claim (as defined in Section 101 of Title 11,
United States Code (Bankruptcy)) against such Conduit but shall continue to
accrue. Each party hereto agrees that the payment of any claim (as defined in
Section 101 of Title 11, United States Code (Bankruptcy)) of any such party
shall be subordinated to the payment in full of all Commercial Paper Notes of
the applicable Conduit Lender. The provisions of this Section 14.6 will survive
termination of this Agreement.

Section 14.7. CHOICE OF LAW. THIS AGREEMENT AND EACH OF THE OTHER TRANSACTION
DOCUMENTS SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK (EXCEPT IN THE CASE OF THE OTHER TRANSACTION
DOCUMENTS, TO THE EXTENT OTHERWISE EXPRESSLY STATED THEREIN) WITHOUT REGARD TO
ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF
THE LAWS OF ANY OTHER JURISDICTION AND EXCEPT TO THE EXTENT THAT THE PERFECTION
OF THE OWNERSHIP INTEREST OF BORROWER OR THE SECURITY INTEREST OF THE
ADMINISTRATIVE AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, IN ANY OF THE
COLLATERAL IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK.

Section 14.8. CONSENT TO JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS FOR
THE SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO
THIS AGREEMENT, AND EACH SUCH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF ANY
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF
ANY OTHER JURISDICTION.

Section 14.9. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY LOAN
PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR
THEREUNDER.

 

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Section 14.10. Integration; Binding Effect; Survival of Terms. (a) This
Agreement and each other Transaction Document contain the final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.

(b) This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns (including any
receiver or trustee in bankruptcy appointed for any of the parties or their
respective successors and assigns). This Agreement shall create and constitute
the continuing obligations of the parties hereto in accordance with its terms
and shall remain in full force and effect until terminated in accordance with
its terms; provided, however, that the rights and remedies with respect to
(i) any breach of any representation and warranty made by any Loan Party
pursuant to Article V, (ii) the indemnification and payment provisions of
Article X, and Sections 14.5 and 14.6 shall be continuing and shall survive any
termination of this Agreement.

Section 14.11. No Recourse Against the Lender. The obligations of each Lender
under this Agreement are solely the obligations of such Lender. No recourse
shall be had for any obligation, covenant or agreement (including, without
limitation, the payment of any amount owing in respect to this Agreement or the
payment of any fee hereunder or for any other obligation or claim) arising out
of or based upon this Agreement or any other agreement, instrument or
Transaction Document entered into pursuant hereto or in connection herewith
against any member, employee, officer, director, manager, agent or organizer of
any Lender, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise.

Section 14.12 Right of Setoff. During the continuance of an Amortization Event,
each Lender is hereby authorized (in addition to any other rights it may have)
to setoff, appropriate and apply (without presentment, demand, protest or other
notice which are hereby expressly waived) any deposits and any other
indebtedness held or owing by such Lender (including by any branches or agencies
of such Lender) to, or for the account of, the Borrower against amounts owing by
the Borrower hereunder (even if contingent or unmatured).

Section 14.13. Counterparts; Severability; Section References. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Unless otherwise expressly indicated, all references herein
to “Article,” “Section,” “Schedule” or “Exhibit” shall mean articles and
sections of, and schedules and exhibits to, this Agreement.

 

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Section 14.14. Termination. This Agreement shall terminate following the Final
Payout Date; provided, however, that the rights and remedies of the Agents, each
Indemnified Party and each Lender will survive such termination as and to the
extent provided in Section 14.10(b).

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the Loan Parties hereto have caused this Credit and Security
Agreement to be executed and delivered by their duly authorized officers as of
the date hereof in Wilmington, Delaware, and each of the other parties hereto
has caused this Agreement to be executed and delivered by their duly authorized
officers or attorneys-in-fact as of the date hereof.

 

MOHAWK FACTORING, LLC, AS BORROWER By:   /s/ John J. Koach Name:   John J. Koach
Title:   Secretary and Assistant Treasurer   Address:  

Mohawk Factoring, LLC

300 Delaware Avenue, Suite 1273-D

Wilmington, Delaware, 19801

Attn: John J. Koach, Secretary and

Assistant Treasurer

Phone: (302) 576-2843

Fax: (302) 658-4269

    With a copy to:    

Attn: James T. Lucke, General Counsel

Phone: (706) 624-2660

Fax: (706) 624-2483

 

MOHAWK SERVICING, LLC, AS SERVICER. By:   /s/ Shailesh Bettadapur Name:  
Shailesh Bettadapur Title:   Vice President and Treasurer   Address:  

Mohawk Servicing, LLC

160 South Industrial Boulevard

Calhoun, Georgia 30301

Attn: James T. Lucke, General Counsel

Phone: (706) 624-2660

Fax: (706) 624-2483

 

- Signature Page to Credit and Security Agreement -

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VICTORY RECEIVABLES CORPORATION By:   /s/ David V. DeAngelis Name:   David V.
DeAngelis Title:   Vice President   Address:   Victory Receivables Corporation  

c/o Global Securitization Services LLC

114 West 47th Street

Suite 2310

New York, NY 10036

Attn: Frank Bilotta

Phone: (212) 295-2745

Fax: (212) 302-8767

  With a copy to:   The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch  

Securitization Group

1251 Avenue of the Americas, 12th Floor

New York, New York 10020

Attn: Aditya Reddy

Phone: (212) 782-6957

Fax: (212) 782-6448

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH, as Co-Agent By:   /s/
Devang Sodha Name:   Devang Sodha Title:   Director   Address:   The Bank of
Tokyo-Mitsubishi UFJ, Ltd., New York Branch  

Investment Banking Division for the Americas

1251 Avenue of the Americas, 12th Floor

New York, New York 10020

Attention: Richard "Greg" Hurst

Telephone: (212) 782-6963

Fax: (212) 782-6448

 

- Signature Page to Credit and Security Agreement -

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WORKING CAPITAL MANAGEMENT CO., L.P., AS CONDUIT By:   /s/ Shinichi Nochilde
Name:   Shinichi Nochilde Title:   Attorney-In-Fact   Address:   c/o Mizuho
Corporate Bank, Ltd.  

1251 Avenue of the Americas

32nd Floor

New York, New York 10020

Attention: AFPD / Securitization

Telephone: (212) 282-4998

Fax: (212) 282-4105

 

MIZUHO CORPORATE BANK, LTD., as WCM Liquidity
    Bank and as Co-Agent By:   /s/ David E. Lim Name:   David E. Lim Title:  
Authorized Signatory   Address:  

Mizuho Corporate Bank, Ltd.

1251 Avenue of the Americas

32nd Floor

New York, New York 10020

Attention: AFPD / Securitization

Telephone: (212) 282-4998

Fax: (212) 282-4105

 

- Signature Page to Credit and Security Agreement -

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SUNTRUST BANK, AS A NON-CONDUIT LENDER By:   /s/ Michael Peden Name:   Michael
Peden Title:   Vice President   Address:  

SunTrust Bank

3333 Peachtree Road NE

10th Floor East

Atlanta, Georgia 30326

Attention: Kyle Shenton

Facsimile: (404) 926-5100

Telephone: (404) 926-5490

E-mail: kyle.shenton@suntrust.com

 

SUNTRUST BANK, as Co-Agent and Administrative
    Agent By:   /s/ Michael Peden Name:   Michael Peden Title:   Vice President
  Address:  

SunTrust Bank

3333 Peachtree Road NE

10th Floor East

Atlanta, Georgia 30326

Attention: Kyle Shenton

Facsimile: (404) 926-5100

Telephone: (404) 926-5490

E-mail: kyle.shenton@suntrust.com

 

- Signature Page to Credit and Security Agreement -

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THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
    NEW YORK BRANCH, as Victory Liquidity Bank By:   /s/ R. Mumick Name:   R.
Mumick Title:   Director   Address:  

The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch

Investment Banking Division for the Americas

1251 Avenue of the Americas, 12th Floor

New York, New York 10020

Attention: Richard "Greg" Hurst

Telephone: (212) 782-6963

Fax: (212) 782-6448

 

- Signature Page to Credit and Security Agreement -

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EXHIBIT I

DEFINITIONS

As used in this Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

“Adjusted Dilution Ratio” means, at any time, the rolling average of the
Non-Contractual Dilution Ratio for the twelve (12) Calculation Periods then most
recently ended.

“Administrative Agent” has the meaning set forth in the preamble to this
Agreement.

“Administrative Agent Account” means the account set up to make and receive
payments from and to the Borrower, which, shall initially be the SunTrust
Agent’s Account.

“Administrative Agent Fee Letter” means that certain letter agreement dated as
of December 19, 2012 between the Borrower and the Administrative Agent.

“Advance” means a borrowing hereunder consisting of the aggregate amount of the
several Loans made on the same Borrowing Date.

“Adverse Claim” means a lien, security interest, charge or encumbrance, or other
right or claim in, of or on any Person’s assets or properties in favor of any
other Person.

“Affected Entity” means (i) any Funding Source, (ii) any agent, administrator or
manager of a Conduit, or (iii) any bank holding company in respect of any of the
foregoing.

“Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified.

“Agents” has the meaning set forth in the preamble to this Agreement.

“Aggregate Commitment” means, on any date of determination, the aggregate amount
of the Commitments to make Loans hereunder. As of the date hereof, the Aggregate
Commitment is $300,000,000.

“Aggregate Principal” means, on any date of determination, the aggregate
outstanding principal amount of all Advances outstanding on such date.

“Aggregate Reduction” has the meaning specified in Section 1.3.

“Agreement” means this Credit and Security Agreement.

 

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“Alternative Rate” means for any day, the rate per annum equal to the sum of
(i) the LIBO Rate for an Interest Period of one month, or, if the LIBO Rate is
unavailable as provided in Section 4.3, the Base Rate, and (ii) the Applicable
Margin.

“Alternative Rate Loan” means, for each Loan of a Non-Conduit Lender or a
Liquidity Bank, a Loan which bears interest at the Alternative Rate.

“Amortization Date” means the earliest to occur of (i) the day on which any of
the conditions precedent set forth in Section 6.2 are not satisfied, (ii) the
Business Day immediately prior to the occurrence of an Amortization Event
described in Section 9.1(g) with respect to any Loan Party, any Originator or
the Performance Guarantor, (iii) the Business Day specified in a written notice
from the Administrative Agent, at the direction of any Co-Agent, following the
occurrence of any other Amortization Event, and (iv) the date which is ten (10)
Business Days after the Administrative Agent’s receipt of written notice from
Borrower that it wishes to terminate the facility evidenced by this Agreement.

“Amortization Event” has the meaning specified in Article IX.

“Applicable Margin” shall mean either (i) 0.75% per annum, or (ii) with respect
to any Liquidity Funding made by any Liquidity Bank solely during the occurrence
of a CP Market Disruption Event, a per annum rate equal to the “Applicable Rate”
for “Eurocurrency Rate Loans” as such terms are defined in the Parent Credit
Agreement in effect at such time.

“Assignment Agreement” has the meaning set forth in Section 12.1(b).

“Attributable Indebtedness” means, on any date, (a) in respect of any capital
lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of
the remaining lease payments under the relevant lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a capital lease.

“Base Rate” means for any day, the rate per annum equal to the highest as of
such day of (a) the Prime Rate, (b) the Federal Funds Rate plus one-half of one
percent (0.50%), and (c) the LIBO Rate for an Interest Period of one month plus
1.00%. For purposes of determining the Base Rate for any day, changes in the
Prime Rate or the Federal Funds Rate shall be effective on the date of each such
change.

“Base Rate Loan” means, for each Loan of a Non-Conduit Lender or a Liquidity
Bank, a Loan which bears interest at the Base Rate.

“Borrower” has the meaning set forth in the preamble to this Agreement.

“Borrowing Base” means, on any date of determination, the Net Pool Balance as of
the last day of the period covered by the most recent Monthly Report, minus the
Required Reserve as of the last day of the period covered by the most recent
Monthly Report, and minus Deemed Collections that have occurred since the most
recent Cut-Off Date to the extent that such Deemed Collections exceed the
Dilution Reserve.

 

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“Borrowing Base Deficit” means, on any date of determination, the Aggregate
Principal exceeds the Borrowing Base.

“Borrowing Date” means a Business Day on which an Advance is made hereunder.

“Borrowing Limit” means an amount equal to the sum of the Conduit Allocation
Limits and the Non-Conduit Lender Allocation Limits.

“Borrowing Notice” has the meaning set forth in Section 1.2.

“Broken Funding Costs” means (a) for a CP Rate Loan which has its principal
reduced without compliance by Borrower with the notice requirements hereunder,
(b) for a CP Rate Loan that a Conduit intends to fund and where such Conduit has
issued (or has committed to issue) Commercial Paper in order to fund such CP
Rate Loan following receipt of a Borrowing Notice but prior to receiving notice
that the Borrower intends to cancel such Borrowing Notice in accordance
Section 1.2 (such CP Rate Loan, a “Non-Funded Loan”), (c) for a CP Rate Loan or
Alternative Rate Loan which does not become subject to its Percentage of an
Aggregate Reduction following the delivery of any Reduction Notice, (d) for a CP
Rate Loan which is assigned under the applicable Liquidity Agreement, or (e) for
an Alternative Rate Loan which is terminated or reduced prior to the last day of
its Interest Period: an amount equal to the excess, if any, of (i) the CP Costs
or Interest (as applicable) that would have accrued during the remainder of the
Interest Periods or the tranche periods for Commercial Paper determined by the
applicable Co-Agent to relate to such Loan or Non-Funded Loan (as applicable)
subsequent to the date of such reduction, withdrawal, assignment or termination
(or in respect of clause (c) above, the date such Aggregate Reduction was
designated to occur pursuant to the Reduction Notice) of the principal of such
Loan or Non-Funded Loan if such reduction, withdrawal, assignment or termination
had not occurred or such Reduction Notice had not been delivered, over (ii) the
sum of (x) to the extent all or a portion of such principal is allocated to
another Loan, the amount of CP Costs or Interest actually accrued during the
remainder of such period on such principal for the new Loan, and (y) to the
extent such principal is not allocated to another Loan, the income, if any,
actually received during the remainder of such period by the holder of such Loan
or Non-Funded Loan from investing the portion of such principal not so
allocated. In the event that the amount referred to in clause (ii) exceeds the
amount referred to in clause (i), the relevant Lender or Lenders agree to pay to
Borrower the amount of such excess. All Broken Funding Costs shall be due and
payable hereunder upon demand.

“BTMU” has the meaning set forth in the preamble to this Agreement.

“BTMU Agent” has the meaning set forth in the preamble to this Agreement.

“BTMU Agent’s Account” means Account Number xxxxxxxxxx in the name of Victory
Receivables Corporation at The Bank of Tokyo-Mitsubishi UFJ, Ltd, ABA
No. xxxxxxxxxx.

 

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“BTMU Group” has the meaning set forth in the preamble to this Agreement.

“Business Day” means any day on which banks are not authorized or required to
close in New York, New York or Atlanta, Georgia, and The Depository Trust
Company of New York is open for business, and, if the applicable Business Day
relates to any computation or payment to be made with respect to the LIBO Rate,
any day on which dealings in dollar deposits are carried on in the London
interbank offering market.

“Calculation Period” means a calendar month or portion thereof which elapses
during the term of this Agreement prior to the Final Payout Date. The first
Calculation Period shall commence on the date of the initial Advance hereunder.
For purposes of the use of this term in other definitions in Exhibit I to this
Agreement, Calculation Periods occurring prior to the date of the initial
Advance shall mean a fiscal month of Borrower.

“Canadian Currency Reserve” means, on any date of determination, an amount equal
to 10% (or such other percentage as reasonably determined with the consent of
all of the Lenders based on the results set forth in the most recent Review) of
the spot market Dollar-equivalent of all Eligible Receivables that are Canadian
Receivables that are denominated in Canadian Dollars and that are otherwise
included in the Net Pool Balance.

“Canadian Receivable” means a Receivable owing from an Obligor which, if a
natural person, is a resident of Canada, or, if a corporation or other business
organization, is organized under the laws of Canada or one of its political
subdivisions.

“Canadian Receivable Concentration Limit” means 4% of the Eligible Receivables
Balance.

“Canadian Receivables Concentration Balance” means (i) the Eligible Receivables
Balance of all Eligible Receivables that are Canadian Receivables minus (ii) the
amount of the Canadian Currency Reserve.

“Canadian Receivables Concentration Excess” means the aggregate amount by which
the Canadian Receivables Concentration Balance exceeds the Canadian Receivables
Concentration Limit.

“Cash Discount” means any reduction in a Receivable due to any cash discount
taken by an Obligor.

“Change of Control” means an event or series of events by which: (a) any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, but excluding any employee benefit plan of such
person or its subsidiaries, and any person or entity acting in its capacity as
trustee, agent or other fiduciary or administrator of any such plan) other than
the Permitted Holders becomes the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934, except that a person or
group shall be deemed to have “beneficial ownership” of all securities that such
person or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time

 

I-4

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(such right, an “option right”)), directly or indirectly, of 30% or more of the
Equity Interests of the Performance Guarantor entitled to vote for members of
the board of directors or equivalent governing body of the Performance Guarantor
on a fully-diluted basis (and taking into account all such securities that such
person or group has the right to acquire pursuant to any option right);
(b) during any period of 12 consecutive months, a majority of the members of the
board of directors or other equivalent governing body of the Performance
Guarantor cease to be composed of individuals (x) (i) who were members of that
board or equivalent governing body on the first day of such period, (ii) whose
election or nomination to that board or equivalent governing body was approved
by individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and
(ii) above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors) or (y) who were appointed by the Permitted
Holders; or (c) except as otherwise permitted pursuant to the terms of this
Agreement, the failure of the Performance Guarantor to, directly or indirectly,
own and control 100% of the Equity Interests of any of the Loan Parties.

“Co-Agent” has the meaning set forth in the preamble to this Agreement.

“Co-Agent Account” means the account set up to receive payments for the
applicable Group including without limitation, the SunTrust Agent’s Account, the
BTMU Agent’s Account and the Mizuho Agent’s Account.

“Collateral” has the meaning set forth in Section 13.1.

“Collection Account” means each concentration account, depositary account,
lock-box account or similar account in which any Collections are collected or
deposited, in each case, in the Borrower’s name and subject to a Collection
Account Agreement.

“Collection Account Agreement” means an agreement in form reasonably acceptable
to the Administrative Agent, Borrower and the applicable Collection Bank giving
the Administrative Agent (for the benefit of the Secured Parties) control (as
defined in the UCC) over a Collection Account.

“Collection Bank” means, at any time, any of the banks holding one or more
Collection Accounts.

“Collection Notice” means a notice, in substantially the form attached to or
specified in a Collection Agreement, from the Administrative Agent to a
Collection Bank.

 

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“Collection Records” means, with respect to any Receivable, all Invoices and all
other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to amounts paid on or owing
in respect of such Receivable.

“Collections” means, with respect to any Receivable, all cash collections and
other cash proceeds in respect of such Receivable, including, without
limitation, all Finance Charges or other related amounts accruing in respect
thereof and all cash proceeds of Related Security with respect to such
Receivable.

“Commercial Paper” means short-term promissory notes of any Conduit issued by
such Conduit to fund its Loans.

“Commitment” means, (a) for each Liquidity Bank, the commitment of such
Liquidity Bank to make its Pro Rata Share of its Group’s Percentage of Loans to
Borrower hereunder in the event the applicable Conduit elects not to fund any
Advance and (b) for each Non-Conduit Lender, the commitment of such Non-Conduit
Lender to make its Percentage of Loans to Borrower hereunder, in either case, in
an aggregate principal amount at any one time outstanding not to exceed the
amount set forth opposite such Liquidity Bank’s or Non-Conduit Lender’s name on
Schedule A to this Agreement.

“Conduit” has the meaning set forth in the preamble to this Agreement.

“Conduit Allocation Limit” has the meaning set forth in Section 1.1(a).

“Conduit Funding” means any Loan made by a Conduit pursuant to Section 1.1(a).

“Contract” means, with respect to any Receivable, any and all instruments and
agreements, purchase orders, invoices, writings, or other communications
pursuant to which such Receivable arises but excluding any Invoice.

“Contractual Dilution Reserve” means at any time, 10% (or such other percentage
as reasonably determined with the consent of all of the Lenders based on the
results set forth in the most recent Review) of the Outstanding Balance of
Receivables originated by Mohawk Distribution that are outstanding as of the
last day of the period covered by the most recent Collection Period.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

“CP Costs” means the sum of (i) discount or interest accrued on Commercial Paper
of each Conduit on each day, plus (ii) any and all accrued commissions in
respect of placement agents and dealers, and issuing and paying agent fees
incurred, in respect of such Commercial Paper for such day, plus (iii) other
costs associated with funding small or odd-lot amounts with

 

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respect to all receivable purchase facilities which are funded by Commercial
Paper for such day, plus (iv) the Applicable Margin minus (iv) any accrual of
income net of expenses received on such day from investment of collections
received under all receivable purchase or financing facilities funded
substantially with Commercial Paper, minus (v) any payment received on such day
net of expenses in respect of Broken Funding Costs (or similar costs) related to
the prepayment of any investment of such Conduit, as applicable, pursuant to the
terms of any receivable purchase or financing facilities funded substantially
with Commercial Paper of such Conduit. In addition to the foregoing costs, if
Borrower shall request any Advance during any period of time determined by the
applicable Co-Agent in its sole discretion to result in incrementally higher CP
Costs applicable to a Conduit’s Percentage of such Advance, the principal
associated with any such Advance shall, during such period, be deemed to be
funded by such Conduit in a special pool (which may include capital associated
with other receivable purchase or financing facilities) for purposes of
determining such additional CP Costs applicable only to such special pool and
charged each day during such period against such principal.

“CP Market Disruption Event” means the inability of any Conduit to raise
(whether as a result of a prohibition or any other event or circumstance
whatsoever) funds through the issuance of Commercial Paper in the United States
commercial paper market, including by virtue of any disruption in the commercial
paper market.

“CP Rate Loan” means, for each Loan of a Conduit prior to the time, if
applicable, when it is refinanced with a Liquidity Funding pursuant to a
Liquidity Agreement.

“Credit and Collection Policy” means Borrower’s credit and collection policies
and practices relating to Contracts and Receivables existing on and as
administered historically prior to the date hereof and summarized in Exhibit VII
hereto, as modified from time to time in accordance with this Agreement.

“Cut-Off Date” means the last day of a Calculation Period.

“Days Sales Outstanding” means, as of any day, an amount equal to the product of
(x) 91, multiplied by (y) the amount obtained by dividing (i) the aggregate
outstanding balance of Receivables as of the most recent Cut-Off Date, by
(ii) the aggregate amount of Receivables created during the three (3)
Calculation Periods including and immediately preceding such Cut-Off Date.

“Debtor Relief Laws” means the Federal Bankruptcy Code, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

“Deemed Collections” means Collections deemed received by Borrower under
Section 1.4(a).

 

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“Default Horizon Ratio” means, as of any Cut-Off Date, the ratio (expressed as a
decimal) computed by dividing (a) the sum of (i) the product of the aggregate
sales generated by the Originators during the Calculation Period that is 4
Calculation Periods prior to the Calculation Period ending on such Cut-Off Date,
multiplied by the Weighted Average Credit Percentage, plus (ii) the aggregate
sales generated by the Originators during the 4 most recent Calculation Periods
ending on or prior to such Cut-Off Date, by (b) the Net Pool Balance as of such
Cut-off Date.

“Default Rate” means for any day, a rate per annum equal to the Base Rate plus
two and three-quarters percent (2.75%). For purposes of determining the Base
Rate for any day, changes in the Base Rate shall be effective on the date of
each such change.

“Default Ratio” means, as of any Cut-Off Date, the ratio (expressed as a
percentage) computed by dividing (x) the total amount of Receivables which
became Defaulted Receivables during the Calculation Period that includes such
Cut-Off Date, by (y) the aggregate dollar amount of Receivables generated by the
Originators during the Calculation Period occurring four months prior to the
Calculation Period ending on such Cut-Off Date.

“Defaulted Receivable” means a Receivable: (i) as to which the Obligor thereof
has suffered an Event of Bankruptcy; (ii) which, consistent with the Credit and
Collection Policy, would be written off Borrower’s books as uncollectible; or
(iii) as to which any payment, or part thereof, remains unpaid for 61 days or
more from the original due date for such payment.

“Defaulting Lender” Any Non-Conduit Lender or Liquidity Bank:

(i) that has failed to fund any portion of the Loans required to be funded by it
hereunder within one (1) Business Day of the date required to be funded by it
hereunder unless such Non-Conduit Lender or Liquidity Bank has notified the
Administrative Agent and the Borrower in writing that such failure is the result
of such Non-Conduit Lender’s or Liquidity Bank’s good faith determination that
one or more conditions precedent to funding has not been satisfied (which
conditions precedent, together with any applicable Amortization Event or
Unmatured Amortization Event, will be specifically identified in such writing),

(ii) that has otherwise failed to pay over to the Administrative Agent or any
other Lender any other amount required to be paid by it hereunder within three
(3) Business Days of the date when due,

(iii) that has notified the Borrower, the Administrative Agent or any other
Co-Agent in writing that it does not intend to comply with any of its funding
obligations under this Agreement or has made a public statement to the effect
that it does not intend to comply or has failed to comply with its funding
obligations under this Agreement or generally under other agreements in which it
commits or is obligated to extend credit,

 

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(iv) that has failed, within three (3) Business Days after written request by
the Administrative Agent or the Borrower, to confirm in a manner satisfactory to
the Administrative Agent and the Borrower that it will comply with its funding
obligations hereunder (provided that such Lender shall cease to be a Defaulting
Lender pursuant to this clause (iv) upon receipt of such written confirmation by
the Administrative Agent and the Borrower), or

(v) with respect to which a Lender Insolvency Event has occurred and is
continuing.

“Delinquency Ratio” means, at any time, a percentage equal to (i) the aggregate
Outstanding Balance of all Receivables that were Delinquent Receivables at such
time divided by (ii) the aggregate Outstanding Balance of all Receivables at
such time.

“Delinquent Receivable” means a Receivable (other than a Defaulted Receivable)
as to which any payment, or part thereof, remains unpaid for 31 - 60 days from
the original due date for such payment or which is delinquent under the Credit
and Collection Policy.

“Demand Advance” means an advance of Collections made by the Borrower to Mohawk
Resources on any day prior to the Facility Termination Date on which no
Amortization Event or Unmatured Amortization Event exists and is continuing,
which advance (a) is payable upon demand, (b) bears interest at a market rate
determined from time to time by the Borrower and Mohawk Resources, and (c) is
not subordinated to any other Indebtedness or obligation of Mohawk Resources.

“Demand Note” means the Note dated as of December 19, 2012 issued by Mohawk
Resources in favor of the Borrower, evidencing Mohawk Resources’ obligation to
repay any Demand Advance.

“Dilution” means the amount of any reduction or cancellation of the Outstanding
Balance of a Receivable as described in Section 1.4(a).

“Dilution Horizon Ratio” means, as of any Cut-Off Date, the ratio computed by
dividing (a) the aggregate amount of Receivables generated by the Originators
for the previous 2 Calculation Period(s) (or such other number of Calculation
Periods (or portions thereof) as reasonably determined with the consent of all
of the Lenders based on the results set forth in the most recent Review) by
(b) an amount equal to the Net Pool Balance as of such Cut-Off Date.

“Dilution Reserve” means, on any date of determination, the product (expressed
as a percentage) of

(i) the sum of (a) the product of (x) the Stress Factor times (y) the Adjusted
Dilution Ratio and (b) the Dilution Volatility Component, and

(ii) the Dilution Horizon Ratio.

 

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“Dilution Volatility Component” means, on any date of determination, the product
(expressed as a percentage) of (i) the difference between (a) the highest
two-month rolling average Non-Contractual Dilution Ratio over the past twelve
(12) Calculation Periods and (b) the Adjusted Dilution Ratio, and (ii) a
fraction, the numerator of which is equal to the highest two-month rolling
average Non-Contractual Dilution Ratio over the past twelve (12) Calculation
Periods and the denominator of which is equal to Adjusted Dilution Ratio.

“Disqualified Equity Interest” means any Equity Interest that, by its terms (or
by the terms of any security or other Equity Interests in to which it is
convertible or for which it is exchangeable), or upon the happening of any event
or condition (a) matures or is mandatorily redeemable (other than solely for
Equity Interests not constituting Disqualified Equity Interests), pursuant to
sinking fund obligations or otherwise except as a result of a change of control
or asset sale so long as any rights of the holders thereof upon the occurrence
of a change of control or asset sale event shall be subject to the prior
repayment in full of the Loans and all other Obligations that are accrued and
payable and the termination of the Commitments, (b) is redeemable at the option
of the holder thereof (other than solely for Equity Interests not constituting
Disqualified Equity Interests) in whole or in part, (c) provides for the
scheduled payments of dividends in cash or (d) is or becomes convertible into or
exchangeable for Indebtedness or any other Equity Interests that would
constitute Disqualified Equity Interests, in each case, prior to the date that
is ninety-one (91) days after the date referred to in clause (i) of the
definition of the term “Facility Termination Date”; provided that if such Equity
Interests are issued pursuant to a plan for the benefit of employees of the
Performance Guarantor or any of its Subsidiaries or by any such plan to such
employees, such Equity Interests shall not constitute Disqualified Equity
Interests solely because they may be required to be repurchased by the
Performance Guarantor or any of its Subsidiaries in order to satisfy the
applicable statutory or regulatory obligations.

“Downgraded Conduit” means a Conduit that does not have a rating of its
Commercial Paper short-term securities equal to or higher than such rating at
the time such Conduit became a party to this Agreement and in any event equal to
or higher than (i) A-2 by S&P and (ii) P-2 by Moody’s.

“Downgraded Liquidity Bank” means a Liquidity Bank which has been the subject of
a Downgrading Event.

“Downgrading Event” with respect to a Liquidity Bank means the lowering of the
rating with regard to the short-term securities of such Liquidity Bank to below
such rating at the time such Liquidity Bank became a party to this Agreement and
in any event to below (i) A-2 by S&P, or (ii) P-2 by Moody’s.

“Eligible Assignee” means (A) a commercial bank having a combined capital and
surplus of at least $250,000,000 with a rating of its (or its parent holding
company’s) short-term securities at least equal to the short-term rating
assigned to the related Non-Conduit Lender or Liquidity Bank at the time such
Non-Conduit Lender or Liquidity Bank became a party to this or (B) such other
financial institution as may be reasonably acceptable to the Borrower.

 

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“Eligible Replacement Lender” means (A) a commercial bank having a combined
capital and surplus of at least $250,000,000 with a rating of its (or its parent
holding company’s) short-term securities at least equal to the short-term rating
assigned to the related Affected Lender Group or Downgraded Liquidity Bank at
the time such Affected Lender Group or Downgraded Liquidity Bank became a party
to this Agreement or (B) a Conduit whose Commercial Paper is rated at least
equal to the short-term rating assigned to the related Affected Lender Group or
Downgraded Liquidity Bank at the time such Affected Lender Group or Downgraded
Liquidity Bank became a party to this Agreement.

“Eligible Receivable” means, at any time, a Receivable:

(i) the Obligor of which is not an Affiliate of any of the Loan Parties, any
Originator or the Performance Guarantor,

(ii) which is not a Defaulted Receivable,

(iii) which is not owing from an Obligor as to which more than 50% of the
Outstanding Balance of all such Obligor’s Receivables remains unpaid for 31 or
more days past the original billing date,

(iv) which (A) by its terms is due and payable in full within 120 days of the
original billing date therefor, and (B) has not had its payment terms extended
more than once, and if such extension had not been made, such Receivable would
not otherwise have become a Defaulted Receivable,

(v) which is an “account,” a “payment intangible,” a “general intangible” or
“chattel paper” within the meaning of Article 9 of the UCC of all applicable
jurisdictions, and is not evidenced by an “instrument” within the meaning of
Article 9 of the UCC,

(vi) which is denominated and payable only in United States Dollars or Canadian
Dollars in the United States or Canada,

(vii) which is in full force and effect and constitutes the legal, valid and
binding obligation of the related Obligor enforceable against such Obligor in
accordance with its terms,

(viii) which does not contain a confidentiality provision that purports to
restrict the ability of Borrower (or, at any time this Agreement remains in
effect and after an Amortization Event which is continuing, the Administrative
Agent as Borrower’s assignee) to exercise its rights under this Agreement,
including, without limitation, its right to review the Contract or Invoice
applicable thereto,

(ix) which represents an obligation to pay a specified sum of money, contingent
only upon (A) the sale of goods or the provision of services by the applicable
Originator (which sale has been consummated or services have been performed),
and (B) satisfaction by such Originator of any applicable warranty claims which
have not yet been made or asserted,

 

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(x) which does not contravene any law, rule or regulation applicable thereto
(including, without limitation, any law, rule and regulation relating to truth
in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy),

(xi) which satisfies all applicable requirements of the applicable Credit and
Collection Policy,

(xii) which was generated in the ordinary course of the applicable Originator’s
business,

(xiii) which arises solely from the sale (and not the lease) of goods or the
provision of services to the related Obligor by the applicable Originator or a
predecessor to such Originator, and not by any other Person (in whole or in
part),

(xiv) which is not the subject of, to the Originator’s knowledge, any asserted
dispute, counterclaim, right of rescission, setoff, counterclaim or any other
defense (including defenses arising out of violations of usury laws) of the
applicable Obligor against the applicable Originator or any other Adverse Claim,
and the Obligor thereon holds no rights as against such Originator to cause such
Originator to repurchase the goods or merchandise the sale of which shall have
given rise to such Receivable (except with respect to sale discounts effected
pursuant to the Contract, or defective goods returned in accordance with the
terms of the Contract) and which requires that all or part of such receivable be
charged off in accordance with the Credit and Collection Policy; provided,
however, that if such dispute, offset, counterclaim or defense affects only a
portion of the Outstanding Balance of such Receivable, then such Receivable may
be deemed an Eligible Receivable to the extent of the portion of such
Outstanding Balance which is not so affected,

(xv) as to which the applicable Originator has satisfied and fully performed all
obligations on its part with respect to such Receivable required to be fulfilled
by it, and no further action is required to be performed by any Person with
respect thereto other than payment thereon by the applicable Obligor (excluding
any warranty obligation for which no claim exists or is known to exist), and,
for the avoidance of any doubt, as to which the applicable goods have been
delivered and are not in transit to the applicable Obligor,

(xvi) as to which each of the representations and warranties contained in
Sections 5.1(h), (i), (o), (p) and (q) is true and correct,

(xvii) all right, title and interest to and in which has been validly
transferred by the applicable Originator directly to Borrower under and in
accordance with the Receivables Sale Agreement, and Borrower has good and
marketable title thereto free and clear of any Adverse Claim (including, without
limitation, any PBGC or tax lien but excluding any Adverse Claim created under
this Agreement),

 

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(xviii) as to which each of the Borrower’s ownership interest and the
Administrative Agent’s (for the benefit of the Secured Parties) first priority
security interest in such Receivable have been perfected under the applicable
UCC and other applicable laws,

(xix) the Obligor of which is not the Obligor on any Receivables which have been
sold or pledged to any Person other than the Borrower,

(xx) the assignment of which by the Originator to the Borrower (and pledge of
which by the Borrower to Administrative Agent) does not violate any applicable
contractual agreement not otherwise rendered ineffective by any applicable Law,

(xxi) as to which the Servicer is in possession of the related Contract file or,
in the case of electronic purchases, the applicable computer data files,

(xxii) as to which all payments by the applicable Obligor are made to a Lock-Box
that clears to a Collection Account which is subject to a Collection Account
Agreement, provided, however, that with respect to any Receivable that pays into
any Collection Account marked with an asterisk on Exhibit IV hereto, such
Receivable shall not be subject to the requirements of this clause (xxii) until
the expiration of the period by which Collection Account Agreements are to be
executed with respect to such Collection Accounts as provided in Section 7.1(l)
hereof so long as any such Collection Account that is marked with an asterisk on
Exhibit IV hereto clears or is swept on a daily basis to a Collection Account
that is subject to a Collection Account Agreement,

(xxiii) which does not arise from the sale of goods on consignment,

(xxiv) which does not arise from direct sales to consumers, and

(xxv) that is not owed by an Obligor which is required to pay cash in advance of
shipment of goods or with respect to which credit card payment terms are
established, in each case due to such Obligor’s inadequate credit.

“Eligible Receivables Balance” means the total Outstanding Balance of Eligible
Receivables.

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with the Performance Guarantor within the meaning of
Section 414(b) or (c) of the Tax Code (and Sections 414(m) and (o) of the Tax
Code for purposes of provisions relating to Section 412 of the Tax Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan;
(b) the withdrawal of the Performance Guarantor or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which such
entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or
a cessation of operations that is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the
Performance Guarantor or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization, insolvency or has
been terminated; (d) the filing of a notice of intent to terminate or the
treatment of a Pension Plan amendment as a termination under Section 4041 or
4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a
Pension Plan; (f) any event or condition which constitutes grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; (g) the determination that
any Pension Plan or Multiemployer Plan is considered an at-risk plan or a plan
in endangered or critical status within the meaning of Sections 430, 431 and 432
of the Tax Code or Sections 303, 304 and 305 of ERISA; or (h) the imposition of
any liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Performance Guarantor or any
ERISA Affiliate.

“Event of Bankruptcy” shall be deemed to have occurred with respect to a Person
if either:

(i) a case or other proceeding shall be commenced, without the application or
consent of such Person, in any court, seeking the liquidation, reorganization,
debt arrangement, dissolution, winding up, or composition or readjustment of
debts of such Person, the appointment of a trustee, receiver, custodian,
liquidator, assignee, sequestrator or the like for such Person or all or
substantially all of its assets, or any similar action with respect to such
Person under any law relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60 consecutive
days; or an order for relief in respect of such Person shall be entered in an
involuntary case under any Debtor Relief Law; or

(ii) such Person shall commence a voluntary case or other proceeding under any
applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution
or other similar law now or hereafter in effect, or shall consent to the
appointment of or taking possession by a receiver, liquidator, assignee, trustee
(other than a trustee under a deed of trust, indenture or similar instrument),
custodian, sequestrator (or other similar official) for, such Person or for any
substantial part of its property, or shall make any general assignment for the
benefit of creditors, or shall be adjudicated insolvent, or admit in writing its
inability to pay its debts generally as they become due, or, if a corporation or
similar entity, its board of directors shall vote to implement any of the
foregoing.

 

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“Excluded Taxes” means, with respect to any Agent, any Lender or any other
recipient of any payment to be made by or on account of any obligation of
Borrower hereunder, any of the following Taxes imposed on or with respect to a
recipient or required to be withheld or deducted from a payment to a recipient,
(a) Taxes imposed on or measured by net income (however denominated), franchise
Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such
recipient being organized under the laws of, or having its principal office or,
in the case of any Lender, its applicable lending office located in, the
jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal
withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in an Advance or Commitment
pursuant to a law in effect on the date on which (i) such Lender acquires such
interest in the Advance or Commitment (other than pursuant to an assignment
request by the Borrower under Section 12.4) or (ii) such Lender changes its
lending office, except in each case to the extent that, pursuant to
Section 10.3, amounts with respect to such Taxes were payable either to such
Lender's assignor immediately before such Lender became a party hereto or to
such Lender immediately before it changed its lending office, (c) Taxes
attributable to such recipient’s failure to comply with Section 10.3(d) and
(d) any U.S. federal withholding Taxes imposed under FATCA.

“Extended Payment Terms Excess” means the aggregate amount by which the Eligible
Receivables Balance of all Eligible Receivables that are due and payable within
91-120 days of the original billing date thereof exceeds the Extended Payment
Terms Limit.

“Extended Payment Terms Limit” means 2.5% of the Eligible Receivables Balance.

“Facility Account” means:

U.S. Bank

Account name: ITC South & East Depository Account Number: xxxxxxxxxx

ABA: xxxxxxxxxx

FFC to: Mohawk Factoring, LLC xxxxxxxxxx

“Facility Termination Date” means the earlier of (i) December 19, 2015 (or such
later date as the parties hereto may agree to from time to time) and (ii) the
Amortization Date.

“FATCA” means Sections 1471 through 1474 of the Tax Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with) and any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Tax Code.

“Federal Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as amended and any successor statute thereto.

 

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“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if
necessary, to the next higher 1/100th of 1%) equal to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be the average rate charged to the
applicable Lender’s Reference Bank on such day on such transactions as
determined by such Reference Bank.

“Fee Letter” means that certain letter agreement dated as of December 19, 2012
among Borrower, the Performance Guarantor, the Lenders and the Agents.

“Final Payout Date” means the date on which all Obligations (other than
contingent indemnification obligations as to which no claim has been asserted)
have been paid in full and the Aggregate Commitment has been terminated.

“Finance Charges” means, with respect to a Contract, any finance, interest, late
payment charges or similar charges owing by an Obligor pursuant to such
Contract.

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which Borrower is resident for tax purposes. For
purposes of this definition, the United States, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Receivable” means a Receivable, (i) the Obligor of which, if a natural
person, is a resident of an OECD country other than the United States and
Canada, or, if a corporation or other business organization, is organized under
the laws of an OECD country other than the United States and Canada, and
(ii) that is payable in U.S. Dollars.

“Foreign Receivable Concentration Excess” means the aggregate amount by which
the Eligible Receivables Balance of all Eligible Receivables that are Foreign
Receivables exceeds the Foreign Receivable Concentration Limit.

“Foreign Receivable Concentration Limit” means 3.0% of the Eligible Receivables
Balance.

“Funding Agreement” means, with respect to any Non-Conduit Lender, this
Agreement, and with respect to any Conduit: (i) this Agreement, (ii) its
Liquidity Agreement and (iii) any other agreement or instrument executed by any
Funding Source that provides credit enhancement or liquidity support for the
benefit of such Conduit other than any such agreement or instrument that is not
related in any way to such Conduit’s funding obligations hereunder.

“Funding Source” means, any Non-Conduit Lender and, with respect to any Conduit:
(i) any of its Liquidity Banks or (ii) any insurance company, bank or other
funding entity providing liquidity, credit enhancement or back-up purchase
support or facilities to such Conduit.

 

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“GAAP” means United States generally accepted accounting principles as in effect
from time to time.

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).

“Governmental Obligor” means an Obligor that is a government or a governmental
subdivision or agency.

“Governmental Obligor Concentration Excess” means the aggregate amount by which
the Eligible Receivables Balance of all Eligible Receivables that are owing by
an Obligor that is a Governmental Obligor exceeds the Governmental Obligor
Concentration Limit.

“Governmental Obligor Concentration Limit” means 1.0% of the Eligible
Receivables Balance.

“Group” has the meaning set forth in the preamble to this Agreement.

“Guarantee” means, as to any Person, (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Adverse Claim on any assets of such Person securing any Indebtedness or
other obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent or otherwise, of
any holder of such Indebtedness to obtain any such Adverse Claim). The amount of
any Guarantee shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof, in
respect of which such Guarantee is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith.

 

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“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP: (a) all obligations of such Person for
borrowed money and all obligations of such Person evidenced by bonds,
debentures, notes, loan agreements or other similar instruments; (b) all direct
or contingent obligations of such Person arising under letters of credit
(including standby, but excluding commercial), bankers’ acceptances (including
any bankers’ acceptances arising from the drawing of commercial letters of
credit), bank guaranties, surety bonds and similar instruments; (c) net
obligations of such Person under any Swap Contract; (d) all obligations of such
Person to pay the deferred purchase price of property or services (other than
trade accounts payable in the ordinary course of business and payable in
accordance with customary trade practices); (e) indebtedness (excluding prepaid
interest thereon) secured by an Adverse Claim on property owned or being
purchased by such Person (including indebtedness arising under conditional sales
or other title retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse; provided that in the
case of Indebtedness which has not been assumed by such Person, the amount of
the Indebtedness of such Person under this clause (e) shall be deemed to be the
lesser of (i) the fair market value of the property subject to such Adverse
Claim and (ii) the aggregate principal amount of the Indebtedness of such other
Person secured thereby; (f) capital leases and Synthetic Lease Obligations;
(g) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Disqualified Equity Interest in
such Person, valued, in the case of a redeemable preferred interest, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends; and (h) all Guarantees of such Person in respect of any of the
foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date. The amount of any capital lease or Synthetic Lease
Obligation as of any date shall be deemed to be the amount of Attributable
Indebtedness in respect thereof as of such date.

“Indemnified Taxes” means Taxes and Other Taxes other than Excluded Taxes.

“Independent Manager” shall mean a manager of the Borrower who (i) shall not
have been at the time of such Person’s appointment or at any time during the
preceding five years, and shall not be as long as such Person is a manager of
the Borrower, (A) a director, officer, employee, partner, shareholder, member,
manager, trustee or Affiliate of any of the following Persons (collectively, the
“Independent Parties”): Performance Guarantor, Servicer, any Originator, or any
of their respective Subsidiaries or Affiliates (other than Borrower or any other
Subsidiary of Performance Guarantor during any period such Subsidiary was or is
intended to be a special purpose, “bankruptcy remote” entity), (B) a supplier,
significant advisor or consultant to any of the Independent Parties, (C) a
Person controlling or under common control with any partner, shareholder,
member, manager, trustee, Affiliate, supplier, significant advisor or consultant
of any of the Independent Parties, or (D) a spouse, parent, sibling or child of
any director, officer, employee, partner, shareholder, member, manager, trustee,
Affiliate, supplier,

 

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significant advisor or consultant of any of the Independent Parties; (ii) has
prior experience as an independent director for a corporation or limited
liability company whose charter documents required the unanimous consent of all
independent directors or managers thereof before such corporation or limited
liability company could consent to the institution of bankruptcy or insolvency
proceedings against it or could file a petition seeking relief under any
applicable federal or state law relating to bankruptcy, (iii) has at least three
years of employment experience with one or more entities that provide, in the
ordinary course of their respective businesses, advisory, management or
placement services to issuers of securitization or structured finance
instruments, agreements or securities, and (iv) is reasonably acceptable to the
Administrative Agent as evidenced in a writing executed by the Administrative
Agent.

“Interest” means for each respective Interest Period relating to Loans of a
Non-Conduit Lender or the Liquidity Banks, an amount equal to the product of the
applicable Interest Rate for each Loan multiplied by the principal of such Loan
for each day elapsed during such Interest Period, annualized on (a) in the case
of an Interest Period for the LIBO Rate, a 360 day basis, and (b) in the case of
an Interest Period for the Base Rate, a 365 (or, when appropriate, 366) day
basis.

“Interest Period” means, with respect to any Loan held by a Liquidity Bank or a
Non-Conduit Lender, (i) the period commencing on the date of the related
Borrowing Date of such Loan and ending on, but excluding, the next following
Settlement Date; and thereafter, (ii) each period commencing on, and including,
a Settlement Date and ending on, but excluding, the next following Settlement
Date. If any CP Rate Loan initially funded by a Conduit with Commercial Paper is
put to a Liquidity Bank, such Loan shall be deemed to have an Interest Period
commencing on the date of such sale and ending on, but excluding, the next
following Settlement Date. In the case of any Interest Period for any Loan which
commences before the Amortization Date and would otherwise end on a date
occurring after the Amortization Date, such Interest Period shall end on the
Amortization Date. The duration of each Interest Period which commences after
the Amortization Date shall be of such duration as selected by the applicable
Co-Agent.

“Interest Rate” means, with respect to each Loan of a Non-Conduit Lender or the
Liquidity Banks, the LIBO Rate, the Alternative Rate or the Default Rate, as
applicable.

“Interest Reserve” means, as of any Cut-Off Date, the product (expressed as a
percentage) of (i) the highest Days Sales Outstanding during the most recent
twelve (12) month period, (ii) the Stress Factor, (ii) the Prime Rate in effect
as of such Cut-Off Date, and (iv)1/360.

“Invoice” means any paper or electronic invoice evidencing any Receivable.

“Laws” means, collectively, all international, foreign, federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

 

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“Lender” means each Conduit, each Liquidity Bank and each Non-Conduit Lender.

“Lender Insolvency Event” shall mean that (i) a Lender or its Parent Company is
insolvent, or is generally unable to pay its debts as they become due, or admits
in writing its inability to pay its debts as they become due, or makes a general
assignment for the benefit of its creditors, (ii) a Lender or its Parent Company
is the subject of a bankruptcy, insolvency, reorganization, liquidation or
similar proceeding, or a receiver, trustee, conservator, custodian or similar
Person charged with reorganization or liquidation of its business or assets,
including the Federal Deposit Insurance Corporation or any other state or
federal regulatory authority acting in such capacity, has been appointed for
such Lender or its Parent Company, or such Lender or its Parent Company has
taken any action in furtherance of or indicating its consent to or acquiescence
in any such proceeding or appointment, or (iii) a Lender or its Parent Company
has been adjudicated as, or determined by any Governmental Authority having
regulatory authority over such Person or its assets to be, insolvent; provided
that, for the avoidance of doubt, a Lender Insolvency Event shall not be deemed
to have occurred solely by virtue of the ownership or acquisition of any equity
interest in or control of a Lender or a Parent Company thereof by a Governmental
Authority or an instrumentality thereof so long as such ownership or acquisition
does not result in or provide such Lender with immunity from the jurisdiction of
courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Lender (or such Governmental Authority)
to reject, repudiate, disavow or disaffirm any contracts or agreements made with
such Lender.

“LIBO Rate” means, for any Interest Period, the quotient of (a) a rate per annum
determined on the basis of the offered rate for deposits in U.S. dollars of
amounts equal or comparable to the principal amount of the related Loan offered
for a term comparable to such Interest Period, which rates appear on page BBAM
on the Bloomberg Terminal (successor to Telerate page 3750) (“Page BBAM”) (or
any other page that may replace such page from time to time for the purpose of
displaying offered rates of leading banks for London interbank deposits for such
Interest Period in United States dollars) at approximately 11:00 a.m. (London
time), two Business Days prior to the first day of such Interest Period,
provided that if no such offered rates appear on such page, the LIBO Rate for
such Interest Period will be the arithmetic average (rounded upwards, if
necessary, to the next higher 1/100th of 1%) of rates quoted by not less than
three (3) major banks in New York, New York, selected by the applicable
Co-Agent, at approximately 10:00 a.m. (New York City time), two Business Days
prior to the first day of such Interest Period, for deposits in U.S. dollars
offered by leading European banks for a period comparable to such Interest
Period in an amount comparable to the principal amount of such Loan, and (b) one
minus the maximum aggregate reserve requirement, if any (including all basic,
supplemental, marginal or other reserves) which is imposed against the
applicable Co-Agent in respect of Eurocurrency liabilities, as defined in
Regulation D of the Board of Governors of the Federal Reserve System as in
effect from time to time (expressed as a decimal), applicable to such Interest
Period. The LIBO Rate shall be rounded, if necessary, to the next higher 1/16 of
1%.

 

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“Limited Liability Company Agreement” means, the Limited Liability Company
Agreement of the Borrower dated as of November 27, 2012.

“Liquidity Agreement” means, collectively, as to each Conduit and its Group, any
liquidity agreement pursuant to which any of its Liquidity Banks provides
liquidity to such Conduit and any related asset purchase agreement, as each may
be amended, restated, supplemented, replaced or otherwise modified from time to
time.

“Liquidity Banks” means, with respect to each Group, the banks or other
financial institutions and their respective successors and permitted assigns
under each Group’s Liquidity Agreement.

“Liquidity Commitment” means, as to each Liquidity Bank in any Group, its
commitment to such Group’s Conduit under the Liquidity Agreements (which shall
equal either 100% or 102% of such Group’s Percentage of the Aggregate Commitment
hereunder).

“Liquidity Funding” means (a) a purchase made by any Liquidity Bank pursuant to
its Liquidity Commitment of all or any portion of, or any undivided interest in,
an applicable Conduit’s Loans, or (b) any Loan made by a Liquidity Bank in lieu
of such Conduit pursuant to Section 1.1(a), any Loan assigned or put to a
Liquidity Bank by a Conduit pursuant to Section 1.6(c) or Section 12.1, or any
Loan otherwise assigned or participated by a Conduit to a Liquidity Bank.

“Loan” means any loan made by a Lender to Borrower pursuant to this Agreement
(including, without limitation, any Liquidity Funding). Each Loan shall either
be a CP Rate Loan, an Alternative Rate Loan or a Base Rate Loan, selected in
accordance with the terms of this Agreement.

“Loan Parties” has the meaning set forth in the preamble to this Agreement.

“Lock-Box” means each locked postal box with respect to which a bank has been
granted exclusive access for the purpose of retrieving and processing payments
made on the Receivables.

“Loss Reserve” means, as of any Cut-Off Date, the product (expressed as a
percentage) of (i) the Stress Factor, (ii) the highest three-month rolling
average Default Ratio during the 12 Calculation Periods ending on such Cut-Off
Date, times (c) the Default Horizon Ratio as of such Cut-Off Date.

“Material Adverse Effect” means a material adverse effect on (i) the financial
condition of any Loan Party and its Subsidiaries, taken as a whole, (ii) the
ability of any Loan Party to perform its material obligations under this
Agreement or the Performance Guarantor to perform its material obligations under
the Performance Undertaking, (iii) the legality, validity or enforceability of
this Agreement, the Performance Undertaking, the Receivables Sale Agreement, the
Servicing Agreement or any Collection Account Agreement, (iv) the Administrative
Agent’s security interest, for the benefit of the Secured Parties, in the
Receivables generally or in any significant portion of the Receivables, the
Related Security or the Collections with respect thereto, or (v) the
collectability of the Receivables generally or of any significant portion of the
Receivables.

 

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“Material Subsidiary” means, any Subsidiary of the Performance Guarantor
identified as such pursuant to the terms of the Parent Credit Agreement.

“Mizuho” has the meaning set forth in the preamble to this Agreement.

“Mizuho Agent” has the meaning set forth in the preamble to this Agreement.

“Mizuho Agent’s Account” means account number xxxxxxxxxx in the name of Working
Capital Management Co., L.P., at Mizuho Corporate Bank Ltd., New York Branch,
ABA No. xxxxxxxxxx, Reference: Mohawk, Attention: David Krafchik.

“Mizuho Group” has the meaning set forth in the preamble to this Agreement.

“Mohawk Resources” means Mohawk Resources, Inc., a Delaware corporation.

“Mohawk Servicing” has the meaning specified in the preamble to this Agreement.

“Monthly Report” means a report, in substantially the form of Exhibit VIII
hereto (appropriately completed), furnished by the Servicer to the
Administrative Agent pursuant to Section 8.5.

“Monthly Reporting Date” means the 2nd Business Day prior to each Settlement
Date.

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which the Performance Guarantor or any ERISA
Affiliate makes or is obligated to make contributions, or during the preceding
five plan years, has made or been obligated to make contributions on behalf of
participants who are or were formerly employed by any of them.

“Net Pool Balance” means, at any time, (i) the aggregate Eligible Receivables
Balance at such time minus (ii) the aggregate Obligor Concentration Excess minus
(iii) the aggregate Governmental Obligor Concentration Excess minus (iv) the
aggregate Canadian Receivables Concentration Excess minus (v) the aggregate
Foreign Receivable Concentration Excess minus (vi) the aggregate Extended
Payment Terms Excess minus (vii) the aggregate Contractual Dilution Reserve,
minus (viii) the Canadian Currency Reserve.

“Net Worth” means, as of the last Business Day of each Calculation Period
preceding any date of determination, net worth determined in accordance with
GAAP.

“Non-Conduit Lender Allocation Limit” has the meaning set forth in
Section 1.1(b).

 

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“Non-Conduit Lender Funding” means any Loan made by a Non-Conduit Lender
pursuant to Section 1.1(b).

“Non-Contractual Dilution” means the amount of any reduction or cancellation of
the Outstanding Balance of a Receivable as described in Section 1.4(a),
excluding Section 1.4(a)(iii).

“Non-Contractual Dilution Ratio” means, as of any Cut-Off Date, an amount
(expressed as a percentage) equal to a fraction, the numerator of which is the
total amount of Non-Contractual Dilution during the previous Calculation Period,
and the denominator of which is the aggregate amount of Receivables generated by
the Originators during the second preceding Calculation Period.

“Obligations” means, at any time, any and all obligations of either of the Loan
Parties or the Performance Guarantor to any of the Secured Parties arising under
or in connection with the Transaction Documents, whether now existing or
hereafter arising, due or accrued, absolute or contingent, including, without
limitation, obligations in respect of Aggregate Principal, CP Costs, Interest,
fees under the Fee Letter, Broken Funding Costs and Indemnified Amounts.

“Obligor” means a Person obligated to make payments on a Receivable.

“Obligor Concentration Excess” means the aggregate amount by which the Eligible
Receivables Balance of all Eligible Receivables of each Obligor and its
Affiliates exceeds the Obligor Concentration Limit applicable to such Obligor.

“Obligor Concentration Limit” means, at any time, in relation to the aggregate
Outstanding Balance of Receivables owed by any single Obligor and its Affiliates
(if any), the applicable concentration limit shall be determined as follows for
Obligors who have short term unsecured debt ratings currently assigned to them
by S&P and Moody’s (or in the absence thereof, the equivalent long term
unsecured senior debt rating noted in the table below), the applicable
concentration limit shall be determined according to the following table:

 

S&P SHORT-TERM

RATING

  

S&P EQUIVALENT

LONG-TERM

RATING

  

MOODY’S

SHORT-TERM

RATING

  

MOODY’S

EQUIVALENT

LONG-TERM

RATING

  

ALLOWABLE %

OF ELIGIBLE

RECEIVABLES

NET BALANCE

A-1 or higher

   A+ or higher    P-1 or higher    A2 or higher    14%

A-2

   A-, BBB+    P-2    A3, Baa1    10%

A-3 or lower

   BBB or lower    P-3 or lower    Baa2 or lower    3%

provided, however, that (a) if any Obligor has a split rating, the applicable
rating will be the lower of the two, (b) if any Obligor is not rated by both S&P
and Moody’s, the applicable Obligor Concentration Limit shall be the one set
forth in the last line of the table above, and (c) subject to satisfaction of
each Lender and/or an increase in the percentage set forth in clause (a)(i) of
the definition of “Required Reserve,” upon Borrower’s request from time to time,

 

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the Administrative Agent may agree to a higher percentage of the Eligible
Receivables Balance for a particular Obligor and its Affiliates (each such
higher percentage, a “Special Concentration Limit”), it being understood that
any Special Concentration Limit may be cancelled by any Lender upon not less
than ten (10) Business Days’ prior written notice to the Loan Parties.

“OECD” means the Organization for Economic Co-operation and Development.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets
Control.

“Originator” means each of Mohawk Carpet Distribution, Inc., a Delaware
corporation, and Dal-Tile Distribution, Inc., a Delaware corporation, and each
other Originator that becomes a party to the Receivables Sale Agreement pursuant
to the terms thereof, in each case, in its capacity as a seller under the
Receivables Sale Agreement.

“Other Connection Taxes” means, with respect to any recipient, Taxes imposed as
a result of a present or former connection between such recipient and the
jurisdiction imposing such Tax (other than connections arising from such
recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Transaction Document, or sold or assigned an interest in any Advance or
Transaction Document).

“Other Records” means, with respect to any Receivable: (a) all Contracts and
(b) all other documents, books, records and other information (including,
without limitation, computer programs, tapes, disks, punch cards, data
processing software and related property and rights) relating to the
creditworthiness of any Obligor in respect thereof.

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
hereunder or under any other Transaction Document or from the execution,
delivery, performance, enforcement or registration of, from the receipt or
perfection of a security interest under, or otherwise with respect to, this
Agreement or any other Transaction Document, except any such Taxes that are
Other Connection Taxes imposed with respect to an assignment (other than an
assignment made pursuant to Section 12.4).

“Outstanding Balance” of any Receivable at any time means the then outstanding
principal balance thereof, provided, however, that the Outstanding Balance of
any Receivable that is a Canadian Receivable that is denominated in Canadian
Dollars at any time shall be equal to the spot market Dollar-equivalent the
outstanding principal balance in Canadian Dollars of such Canadian Receivable.

“Parent Company” with respect to a Lender, means the “bank holding company” as
defined in Regulation Y, if any, of such Lender, and/or any Person owning,
beneficially or of record, directly or indirectly, a majority of the shares of
such Lender.

 

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“Parent Credit Agreement” means that certain Credit Agreement dated as of
July 8, 2011 by and among the Performance Guarantor, Mohawk Unilin International
B.V., Mohawk Foreign Holdings, S.à r.L., Mohawk International Holdings, S.à
r.L., Unilin B.V.B.A., the Guarantors identified on the signature pages thereto,
the financial institutions from time to time party thereto as “Lenders”, and
Bank of America, N.A., as Administrative Agent thereunder.

“Participant” has the meaning set forth in Section 12.2.

“Participant Register” has the meaning set forth in Section 12.2.

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

“Pension Act” means the Pension Protection Act of 2006.

“Pension Funding Rules” means the rules of the Tax Code and ERISA regarding
minimum required contributions (including any installment payment thereof) to
Pension Plans or Multiemployer Plans, as applicable, and set forth in, with
respect to plan years ending prior to the effective date of the Pension Act,
Section 412 of the Tax Code and Section 302 of ERISA, each as in effect prior to
the Pension Act and, thereafter, Section 412, 430, 431, 432 and 436 of the Tax
Code and Sections 302, 303, 304 and 305 of ERISA.

“Pension Plan” means any employee pension benefit plan (other than a
Multiemployer Plan) that is maintained or is contributed to by the Performance
Guarantor and any ERISA Affiliate and is either covered by Title IV of ERISA or
is subject to the minimum funding standards under Section 412 of the Tax Code.

“Percentage” means, on any date of determination, the ratio by which, for each
Non-Conduit Lender, its Commitment, and for each Group, the sum of the
Commitments for all Liquidity Banks in that Group, bears to the Aggregate
Commitment.

“Performance Guarantor” means Mohawk Industries, Inc., a Delaware corporation.

“Performance Undertaking” means that certain Performance Undertaking, dated as
of the date hereof, by Performance Guarantor in favor of Borrower, substantially
in the form of Exhibit IX hereto.

“Permitted Holders” means (a) any of (or any combination of) Jeffrey S.
Lorberbaum and his siblings (whether natural or adopted); (b) any of the
immediate family members of any individual referred to in clause (a) consisting
of such individual’s spouse and lineal descendants (whether natural or adopted);
(c) any trusts established for the sole benefit of any of the foregoing
individuals; and (d) any corporation, partnership, limited liability company or
other legal entity of which all of the outstanding Equity Interests are owned
directly or indirectly, by any of the Persons (or any combination of the
Persons) referred to in clauses (a) through (c) above.

“Person” means an individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.

 

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“Plan” means any employee benefit plan within the meaning of Section 3(3) of
ERISA (including a Pension Plan), maintained for participants who are current or
former employees of the Performance Guarantor or any such Plan to which the
Performance Guarantor is required to contribute on behalf of such participants.

“Prime Rate” means a rate per annum equal to the prime rate of interest
announced from time to time by SunTrust (which is not necessarily the lowest
rate charged to any customer), changing when and as said prime rate changes.

“Pro Rata Share” means, with respect to each Group on any date of determination,
the ratio which the Commitment of a Liquidity Bank in such Group bears to the
sum of the Commitments of all Liquidity Banks in such Group.

“Proposed Reduction Date” has the meaning set forth in Section 1.3.

“Purchasing Liquidity Bank” has the meaning set forth in Section 12.1(b).

“Receivable” means an account receivable (including all rights to payment
created by or arising from the sale of goods, lease of goods or the rendition of
services, no matter how evidenced (including in the form of a chattel paper or
an instrument)) owed to any Originator at the time it arises and before giving
effect to any transfer or conveyance under the Receivables Sale Agreement;
provided, however, in no event shall the term “Receivable” include any Factored
Receivable (as defined in the Receivables Sale Agreement), any Excluded
Receivable (as defined in the Receivables Sale Agreement). For the purposes of
this Agreement, an account receivable arising from any one transaction,
including, without limitation, an account receivable represented by an
individual invoice, shall constitute a Receivable separate from a Receivable
consisting of an account receivable arising from any other transaction; provided
further, that any account receivable referred to in the immediately preceding
sentence shall be a Receivable regardless of whether the account debtor or
Borrower treats such account receivable as a separate payment obligation.

“Receivables Sale Agreement” means that certain Receivables Purchase and Sale
Agreement, dated as of the date hereof, among the Originators and Borrower.

“Records” means, with respect to any Receivable, all Contracts and other
documents, books, records and other information (including, without limitation,
computer programs, tapes, disks, punch cards, data processing software and
related property and rights) relating to such Receivable, any Related Security
therefor and the related Obligor.

“Reduction Notice” has the meaning set forth in Section 1.3.

“Reference Bank” means, as to each Non-Conduit Lender or Group, the commercial
bank that is its Co-Agent (or, if any such Co-Agent is not a commercial bank,
such Co-Agent’s largest commercial bank Affiliate).

 

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“Regulatory Change” means, with respect to an Affected Entity, any of the
following occurring after the date hereof and about which such Affected Entity
learns after the date such Affected Entity is first entitled to the benefits of
Section 10.2 or 10.3 hereof: (a) the adoption or taking effect of any law, rule,
regulation or treaty, (b) any change in any law, rule, regulation or treaty or
in the administration, interpretation, implementation or application thereof by
any Governmental Authority or (c) the making or issuance of any request,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided, however, that notwithstanding anything herein
to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection
Act and all requests, rules, guidelines or directives thereunder or issued in
connection therewith and (y) all requests, rules, guidelines or directives
promulgated by the Bank for International Settlements, the Basel Committee on
Banking Supervision (or any successor or similar authority) or the United States
or foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “Regulatory Change” regardless of the date enacted,
adopted or issued and such event shall constitute a circumstance on which such
Affected Entity may base a claim for reimbursement under Section 10.2.

“Related Security” means, with respect to any Receivable:

(i) all of the applicable Originator’s interest, if any, in the goods (including
returned or repossessed goods), the sale of which by such Originator gave rise
to such Receivable,

(ii) all collateral securing such Receivable, all contracts and contract rights,
purchase orders, security interests, financing statements or other documentation
in respect of such Receivable, any guarantees, indemnities, warranties or other
obligations in respect of such Receivable,

(ii) all Collections and Collection Accounts related to such Receivable,

(iv) all of Borrower’s right, title and interest in, to and under the
Receivables Sale Agreement in respect of such Receivable,

(v) all of Borrower’s right, title and interest in, to and under the Performance
Undertaking,

(vi) all of Borrower’s right, title and interest in, to and under the Servicing
Agreement, and

(vii) all proceeds of any of the foregoing or of any Receivable.

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

“Required Capital Amount” means, as of any date of determination, an amount
equal to the greater of (a) 3% of the Aggregate Commitment, and (b) the product
of (i) 1.5 times the product of the Default Ratio times the Default Horizon
Ratio, each as determined from the most recent Monthly Report received from the
Servicer, and (ii) the Outstanding Balance of all Receivables as of such date,
as determined from the most recent Monthly Report received from the Servicer.

 

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“Required Lenders” means, at any time, Non-Conduit Lenders and Liquidity Banks
with Commitments in excess of 66-2/3% of the Aggregate Commitment; provided that
the Commitment of, and the portion of any Loan, as applicable, held or deemed
held by, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.

“Required Notice Period” means two (2) Business Days.

“Required Reserve” means, on any day during a Calculation Period, the product of
(a) the greater of (i) the Required Reserve Factor Floor and (ii) the sum of
(w) the Loss Reserve, (x) the Interest Reserve, (y) the Dilution Reserve and
(z) the Servicing Reserve, and (b) the Net Pool Balance as of the most recent
Cut-Off Date.

“Required Reserve Factor Floor” means the sum (expressed as a percentage) of
(a) 18% and (b) the product of (i) the Adjusted Dilution Ratio and (ii) the
Dilution Horizon Ratio.

“Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer or controller of a Loan Party or the Performance
Guarantor, as applicable, and, solely for purposes of notices given pursuant to
Section 1.2 or 1.3, any other officer of the Borrower so designated by any of
the foregoing officers of the Borrower in a notice to the Administrative Agent.

“Restricted Junior Payment” means (i) any dividend or other distribution, direct
or indirect, on account of any shares of any class of capital stock of Borrower
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock or in any junior class of stock of Borrower, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of capital stock of
Borrower now or hereafter outstanding, (iii) any payment or prepayment of
principal of, premium, if any, or interest, fees or other charges on or with
respect to, and any redemption, purchase, retirement, defeasance, sinking fund
or similar payment and any claim for rescission with respect to any Indebtedness
of Borrower (other than the Obligations), (iv) any payment made to redeem,
purchase, repurchase or retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of capital
stock of Borrower now or hereafter outstanding, and (v) any payment of
management fees by Borrower (except for the Servicing Fee and reasonable
management fees to the Performance Guarantor or any of its Affiliates in payment
of actual management services performed).

“Restricted Subsidiary” means any Subsidiary of the Performance Guarantor that
is a “Restricted Subsidiary” under the Parent Credit Agreement; provided that
any Originator shall be deemed to be at all times a Restricted Subsidiary.

 

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“S&P” means Standard and Poor’s Ratings Services, a Standard & Poor’s Financial
Services LLC business.

“Sanctioned Entity” means (a) an agency of the government of, (b) an
organization directly or indirectly controlled by, or (c) a person resident in,
a country that is subject to a sanctions program identified on the list
maintained and published by OFAC and available at
http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise
published from time to time as such program may be applicable to such agency,
organization or person.

“Sanctioned Person” means a person named on the list of Specially Designated
Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise
published from time to time.

“SEC” means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.

“Secured Parties” means the Agents and the Lenders.

“Servicer” means at any time the Person (which may be the Administrative Agent)
then authorized pursuant to Article VIII to service, administer and collect
Receivables.

“Servicing Agreement” means that certain Servicing Agreement dated as of the
date hereof, by and between Borrower and Mohawk Servicing, as Servicer,
providing for the collection and servicing of all Receivables held by Borrower.

“Servicing Fee” means, for each Settlement Date, the product of (i) the
Servicing Fee Rate, (ii) the aggregate Outstanding Balance of all Receivables at
the close of business on the Cut-Off Date immediately preceding such Settlement
Date, and (iii) the actual number of days in the related Calculation Period, and
(iv) 1/360. Any Servicing Fee computed hereunder shall be in lieu of and not in
addition to any Servicing Fee payable under the Servicing Agreement.

“Servicing Fee Rate” means a rate of 1.0% per annum (or, at any time while
Mohawk Servicing or one of its Affiliates is the Servicer, such lesser
percentage as may be agreed between Borrower and the Servicer on an arms’ length
basis based on then prevailing market terms for similar services).

“Servicing Reserve” means, for any Calculation Period, the product (expressed as
a percentage) of (i) the highest Days Sales Outstanding during the most recent
twelve (12) month period, (ii) the Stress Factor, (iii) the Servicing Fee Rate
and (iv) 1/360.

“Settlement Date” means the 20th day of each month commencing on January 20,
2013 (or if any such day is not a Business Day, the next succeeding Business Day
thereafter).

 

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“Settlement Period” means (A) in respect of each Loan of a Conduit, the
immediately preceding Calculation Period, and (B) in respect of each Loan of a
Non-Conduit Lender or a Liquidity Bank, the entire Interest Period of such Loan.

“Solvent” means, with respect to any Person on any date of determination, that
on such date (a) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person’s ability to pay such debts and liabilities as they mature,
(d) such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person’s property would
constitute an unreasonably small capital, and (e) such Person is able to pay its
debts and liabilities, contingent obligations and other commitments as they
mature in the ordinary course of business. The amount of contingent liabilities
at any time shall be computed as the amount that, in the light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

“Stress Factor” means two (2.0).

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
Equity Interests having ordinary voting power for the election of directors or
other governing body (other than Equity Interests having such power only by
reason of the happening of a contingency) are at the time beneficially owned, or
the management of which is otherwise controlled, directly, or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise specified,
all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of the Performance Guarantor.

“SunTrust” has the meaning set forth in the preamble to this Agreement.

“SunTrust Agent” has the meaning set forth in the preamble to this Agreement.

“SunTrust Agent’s Account” means account number xxxxxxxxxx in the name of STB
Agency Services Operating Account at SunTrust Bank, ABA No. xxxxxxxxxx,
Reference Mohawk, Attention: Doug Welz.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and

 

I-30

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(b) any and all transactions of any kind, and the related confirmations, which
are subject to the terms and conditions of, or governed by, any form of master
agreement published by the International Swaps and Derivatives Association,
Inc., any International Foreign Exchange Master Agreement, or any other master
agreement (any such master agreement, together with any related schedules, a
“Master Agreement”), including any such obligations or liabilities under any
Master Agreement.

“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

“Synthetic Lease Obligation” means the monetary obligation of a Person under
(a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations that do not
appear on the balance sheet of such Person but which, upon the insolvency or
bankruptcy of such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

“Tax Code” means the Internal Revenue Code of 1986, as amended from time to
time, or any successor Federal tax code.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

“Transaction Documents” means, collectively, this Agreement, each Borrowing
Notice, the Receivables Sale Agreement, the Demand Note, the Servicing
Agreement, each Collection Account Agreement, the Performance Undertaking, the
Fee Letter and each Monthly Report.

“UCC” means the Uniform Commercial Code as from time to time in effect in the
specified jurisdiction.

“Unmatured Amortization Event” means an event which, with the passage of time or
the giving of notice, or both, would constitute an Amortization Event.

“Victory” has the meaning set forth in the preamble to this Agreement.

“Victory’s Liquidity Banks” has the meaning set forth in the preamble to this
Agreement.

“WCM” has the meaning set forth in the preamble to this Agreement.

 

I-31

--------------------------------------------------------------------------------

“WCM’s Liquidity Banks” means has the meaning set forth in the preamble to this
Agreement.

“Weighted Average Credit Percentage” means, on any date of determination, the
percentage determined pursuant to the following formula:

 

LOGO [g458171g37y71.jpg]

where:

WACT = the Weighted Average Credit Terms for the most recent Calculation Period.

“Weighted Average Credit Terms” means, for any Calculation Period, the weighted
average of payment terms granted in invoices for Receivables generated during
such Calculation Period.

The definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.” The word “will” shall be construed to have the same
meaning and effect as the word “shall.” Unless the context requires otherwise,
(i) any definition of or reference to any agreement, instrument or other
document (including any organization document) shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or in any other
Transaction Document), (ii) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (iii) the words
“hereto,” “herein,” “hereof” and “hereunder,” and words of similar import when
used in any Transaction Document, shall be construed to refer to such
Transaction Document in its entirety and not to any particular provision
thereof, (iv) all references in a Transaction Document to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, the Transaction Document in which such references
appear, (v) any reference to any law shall include all statutory and regulatory
provisions consolidating, amending, replacing or interpreting such law and any
reference to any law or regulation shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time,
and (vi) the words “asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights. In the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including;” the words “to” and “until” each mean
“to but excluding;” and the word “through” means “to and including.” Section and
Article headings herein and in the other Transaction Documents are included for
convenience of reference only and shall not affect the interpretation of this
Agreement or any other Transaction Document. All accounting terms not
specifically or completely defined herein shall be construed

 

I-32

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in conformity with, and all financial data (including financial ratios and other
financial calculations) required to be submitted pursuant to this Agreement or
any other Transaction Document shall be prepared in conformity with, GAAP
applied on a consistent basis, as in effect from time to time, applied in a
manner consistent with that used in preparing the audited financial statements
of the Performance Guarantor for its fiscal year ended December 31, 2012, except
as otherwise specifically prescribed herein.

 

I-33

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EXHIBIT II

FORM OF BORROWING NOTICE

MOHAWK FACTORING, LLC

BORROWING NOTICE

dated             , 201    

for Borrowing on                 , 201    

SunTrust Bank, as Administrative Agent

3333 Peachtree Road NE

10th Floor East

Atlanta, Georgia 30326

Attention: Asset Securitization Funding Desk

Ladies and Gentlemen:

Reference is made to the Credit and Security Agreement dated as of December 19,
2012 (as amended, supplemented or otherwise modified from time to time, the
“Credit Agreement”) among Mohawk Factoring, LLC (the “Borrower”), Mohawk
Servicing, LLC, as initial Servicer, the Lenders thereunder, the Co-Agents
thereunder and SunTrust Bank, as Administrative Agent. Capitalized terms defined
in the Credit Agreement are used herein with the same meanings.

1. Borrower hereby certifies, represents and warrants to the Agents and the
Lenders that on and as of the Borrowing Date (as hereinafter defined):

(a) all applicable conditions precedent set forth in Article VI of the Credit
Agreement have been satisfied;

(b) each of its representations and warranties contained in Section 5.1 of the
Credit Agreement are true and correct on and as of the date of such Borrowing
Date as though made on and as of such date; provided, that with respect to those
contained in Sections 5.1(a), (e), (f), (u) and (w) of the Credit Agreement, 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;

(c) no event will have occurred and is continuing, or would result from the
requested Advance, that constitutes an Amortization Event or Unmatured
Amortization Event;

(d) the Facility Termination Date has not occurred; and

--------------------------------------------------------------------------------

(e) after giving effect to the Loans comprising the Advance requested below, the
Aggregate Principal will not exceed the Borrowing Limit.

2. Borrower hereby requests that the Non-Conduit Lender and the Conduits (or
their respective Liquidity Banks) make an Advance on             , 201     (the
“Borrowing Date”) in an aggregate amount of $            .

[SIGNATURE PAGE TO FOLLOW]

 

-2-

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IN WITNESS WHEREOF, Borrower has caused this Borrowing Request to be executed
and delivered as of this             day of             , 201    .

 

MOHAWK FACTORING, LLC, as Borrower By       Name:       Title:    

 

-3-

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EXHIBIT III

PLACES OF BUSINESS OF THE LOAN PARTIES; LOCATIONS OF

RECORDS; FEDERAL EMPLOYER IDENTIFICATION NUMBER(S)

ORGANIZATIONAL IDENTIFICATION NUMBER

PLACES OF BUSINESS AND LOCATION OF COLLECTION RECORDS:

 

Mohawk Factoring, LLC

300 Delaware Avenue

Suite 1273-D

Wilmington, DE 19801

Mohawk Servicing, LLC

160 S. Industrial Boulevard

Calhoun, GA 30701

FEDERAL EMPLOYER IDENTIFICATION NUMBER:

 

Mohawk Factoring, LLC:

FEI # xxxxxxxxxx

ORGANIZATIONAL IDENTIFICATION NUMBERS:

 

Mohawk Factoring, LLC: 5247625

LEGAL, TRADE AND ASSUMED NAMES:

 

Mohawk Servicing, LLC:

none

  

Mohawk Factoring, LLC:

none

--------------------------------------------------------------------------------

EXHIBIT IV

NAMES OF COLLECTION BANKS; COLLECTION ACCOUNTS

 

BORROWER’S LOCKBOX OR
ACCOUNT

  

ACCOUNT NAME
BORROWER

   RELATED COLLECTION ACCOUNT
OF BORROWER

P O Box 406289

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx

Atlanta, GA 30384-6289

   (Mohawk )    Bank of America

P O Box 91157

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx

Chicago, IL 60693-1157

   (Mohawk )    Bank of America

P O Box 847640

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx

Dallas, TX 75284-7640

   (Mohawk )    Bank of America

P O Box 56502

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx

Los Angeles, CA 90074-6502

   (Mohawk )    Bank of America

Collection Account

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx

( ACH )

   (Mohawk )    Bank of America

Collection Account

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx    (Mohawk )    Bank of
America

Collection Account

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx    (Mohawk )    Bank of
America

Collection Account

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx    (DalTile store deposits)
   Bank of America

P O Box 730578

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

Dallas, TX 75373-0578

   (DalTile)    JP Morgan Chase Bank

P O Box 13038

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

Newark, NJ 07188-0038

   (DalTile)    JP Morgan Chase Bank

P O Box 905444

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

Charlotte, NC 28290-5444

   (DalTile)    JP Morgan Chase Bank

--------------------------------------------------------------------------------

P O Box 70671

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

Chicago, IL 60673-0671

   (DalTile)    JP Morgan Chase Bank

P O Box 100396

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

Pasadena, CA 91189-0396

   (DalTile)    JP Morgan Chase Bank

P O Box 57407

   Mohawk Factoring, Inc.    Account no. USD xxxxxxxxxx *

Station A

   (Mohawk )    Account no. CAD xxxxxxxxxx *

Toronto, Ontario M5W 5M5

      Bank of Montreal       Swift xxxxxxxxxx

Collection Account

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx    (DalTile store deposits)
   Bank of America

P O Box 935550

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx

Atlanta, GA 31193-5550

   (Mohawk )    Wells Fargo

P O Box 935553

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx

Atlanta, GA 31193-5553

   (Mohawk )    Wells Fargo

Lockbox 9957

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx

P O Box 8500

   (Mohawk )    Wells Fargo

Philadelphia, PA 19178-9957

     

P O Box 845059

   Mohawk Factoring, Inc.    Account no. xxxxxxxxxx

Los Angeles, CA 90084-5059

   (Mohawk )    Wells Fargo

Collection Account

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

( ACH )

   (Mohawk )    Wells Fargo

P O Box 209058

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

Dallas, TX 75320-9058

   (DalTile)    Wells Fargo

P O Box 209068

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

Dallas, TX 75320-9068

   (DalTile)    Wells Fargo

Lockbox 9237

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

P O Box 8500

   (DalTile)    Wells Fargo

Philadelphia, PA 19178-9237

     

P O Box 845051

   Mohawk Factoring, Inc    Account no. xxxxxxxxxx

Los Angeles, CA 90084-5051

   (DalTile)    Wells Fargo

 

-2-

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EXHIBIT V

FORM OF COMPLIANCE CERTIFICATE

To: SunTrust Bank, as Administrative Agent

This Compliance Certificate is furnished pursuant to that certain Credit and
Security Agreement dated as of December 19, 2012 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”) among Mohawk
Factoring, LLC (the “Borrower”), Mohawk Servicing, LLC, as initial Servicer, the
Lenders thereunder, the Co-Agents thereunder and SunTrust Bank, as
Administrative Agent. Capitalized terms defined in the Credit Agreement are used
herein with the same meanings.

THE UNDERSIGNED HEREBY CERTIFIES (IN MY CAPACITY AS AN OFFICER OF THE BORROWER
AND NOT IN MY INDIVIDUAL CAPACITY) THAT:

1. I am the duly elected                     and, accordingly, a Responsible
Officer, of Borrower.

2. I have reviewed the terms of the Agreement and I have made, or have caused to
be made under my supervision, a detailed review of the transactions and
conditions of Borrower and its Subsidiaries during the accounting period covered
by the attached financial statements.

3. The examinations described in paragraph 2 did not disclose, and I have no
knowledge of, the existence of any condition or event which constitutes an
Amortization Event or Unmatured Amortization Event, as each such term is defined
under the Agreement, during or at the end of the accounting period covered by
the attached financial statements or as of the date of this Certificate[, except
as set forth in paragraph 4 below].

4. Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which Borrower has taken, is taking, or proposes to take
with respect to each such condition or event:                     ]

--------------------------------------------------------------------------------

The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered as of             , 201    .

 

Mohawk Factoring, LLC By       Name:       Title:    

 

-2-

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EXHIBIT VI-A

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit and Security Agreement dated as of
December 19, 2012 among Mohawk Factor, LLC, as the borrower, Mohawk Servicing,
LLC, a Delaware limited liability company, as the initial Servicer, the Lenders
thereunder, the Co-Agents thereunder and SunTrust Bank, as administrative agent
for the Co-Agents and the Lenders (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”).

Pursuant to the provisions of Section 10.3 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan in respect of which it is providing this certificate, (ii) it is not
a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a
ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign
corporation related to the Borrower as described in Section 881(c)(3)(C) of the
Code.

The undersigned has furnished the Administrative Agent and the Borrower with a
certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this
certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and
the Administrative Agent, and (2) the undersigned shall have at all times
furnished the Borrower and the Administrative Agent with a properly completed
and currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[Name of Lender] By:       Name:     Title:   Date:      

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EXHIBIT VI-B

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit and Security Agreement dated as of
December 19, 2012 among Mohawk Factor, LLC, as the borrower, Mohawk Servicing,
LLC, a Delaware limited liability company, as the initial Servicer, the Lenders
thereunder, the Co-Agents thereunder and SunTrust Bank, as administrative agent
for the Co-Agents and the Lenders (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”).

Pursuant to the provisions of Section 10.3 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign
corporation related to the Borrower as described in Section 881(c)(3)(C) of the
Code.

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing, and
(2) the undersigned shall have at all times furnished such Lender with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[Name of Participant] By:       Name:     Title:   Date:      

 

-2-

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EXHIBIT VI-C

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit and Security Agreement dated as of
December 19, 2012 among Mohawk Factor, LLC, as the borrower, Mohawk Servicing,
LLC, a Delaware limited liability company, as the initial Servicer, the Lenders
thereunder, the Co-Agents thereunder and SunTrust Bank, as administrative agent
for the Co-Agents and the Lenders (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”).

Pursuant to the provisions of Section 10.3 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a ten percent shareholder of the
Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of
its direct or indirect partners/members is a controlled foreign corporation
related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an Internal Revenue Service
Form W-8BEN or (ii) an Internal Revenue Service Form W-8IMY accompanied by an
Internal Revenue Service Form W-8BEN from each of such partner’s/member’s
beneficial owners that is claiming the portfolio interest exemption. By
executing this certificate, the undersigned agrees that (1) if the information
provided on this certificate changes, the undersigned shall promptly so inform
such Lender and (2) the undersigned shall have at all times furnished such
Lender with a properly completed and currently effective certificate in either
the calendar year in which each payment is to be made to the undersigned, or in
either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[Name of Participant] By:       Name:     Title:   Date:      

 

-3-

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EXHIBIT VI-D

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit and Security Agreement dated as of
December 19, 2012 among Mohawk Factor, LLC, as the borrower, Mohawk Servicing,
LLC, a Delaware limited liability company, as the initial Servicer, the Lenders
thereunder, the Co-Agents thereunder and SunTrust Bank, as administrative agent
for the Co-Agents and the Lenders (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”).

Pursuant to the provisions of Section 10.3 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s)
in respect of which it is providing this certificate, (ii) its direct or
indirect partners/members are the sole beneficial owners of such Loan(s),
(iii) with respect to the extension of credit pursuant to this Credit Agreement
or any other Transaction Document, neither the undersigned nor any of its direct
or indirect partners/members is a bank extending credit pursuant to a loan
agreement entered into in the ordinary course of its trade or business within
the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or
indirect partners/members is a ten percent shareholder of the Borrower within
the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to the
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with
Internal Revenue Service Form W-8IMY accompanied by one of the following forms
from each of its partners/members that is claiming the portfolio interest
exemption: (i) an Internal Revenue Service Form W-8BEN or (ii) an Internal
Revenue Service Form W-8IMY accompanied by an Internal Revenue Service Form
W-8BEN from each of such partner’s/member’s beneficial owners that is claiming
the portfolio interest exemption. By executing this certificate, the undersigned
agrees that (1) if the information provided on this certificate changes, the
undersigned shall promptly so inform the Borrower and the Administrative Agent,
and (2) the undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

-4-

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[Name of Lender] By:       Name:     Title:   Date:      

 

-5-

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EXHIBIT VII

CREDIT AND COLLECTION POLICY

 

6

--------------------------------------------------------------------------------

1. PURPOSE

 

  To provide guidance on the accounting for accounts receivable and related
reserve accounts.

2. POLICY

 

  Accounts Receivable

 

  2.1 All business units must maintain an adequate and up to date accounts
receivable subsidiary ledger.

 

  2.2 The accounts receivable subsidiary ledger must be reconciled to the
general ledger balances at least monthly. This reconciliation is to be
documented and the documentation maintained as a part of the accounting records.

Credit and Collections

 

  2.3 The Company will extend trade credit to established customers in the
normal course of business.

 

  2.4 Credit department representatives from the business units will meet at a
minimum annually to discuss common customers.

 

  2.5 Extension of credit must be approved at the appropriate management level
and supported by appropriate documentation consistent with the amount of credit
extended.

  2.6 Collection of past due accounts receivable is to be performed in a timely
and professional manner with third party involvement being employed when
necessary.

 

  2.7 Each Division should have formal written procedures for its Credit
department. The procedures should incorporate the appropriate segregation of
duties.

Reserve Accounts

 

  2.8 Reserves should be based on historical patterns, aging of collections and
specific identification as defined by divisional policy.

3. RESPONSIBILITY

 

  3.1 The Corporate Controller is responsible for issuing the general guidelines
and the maintenance of this policy.

 

7

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  3.2 Divisional CFOs are responsible for review and oversight of accounts
receivable and related valuation reserves.

 

  3.3 Changes in existing methodology must be communicated to Corporate
Accounting prior to implementation.

 

  3.4 The Head of the Credit Department for each business unit is responsible
for establishing and monitoring customer trade credit and for collecting
accounts receivable.

4. SARBANES-OXLEY REFERENCE

 

       Customer Accounts and Credit & Collections

5. EXHIBITS

 

       None

6. AUTHORITATIVE LITERATURE

 

       None

 

8

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LOGO [g458171g67j29.jpg]   LOGO [g458171g77y54.jpg]      LOGO
[g458171g54q28.jpg]         Period-end: December 31, 2011

Prepared by:

Tony Patti

 

        Company:

        Mohawk Industries

  

  

   Process:

Credit and Collections

Revised by:

 

Tony Patti

 

        Revised Date:

 

        June 17, 2011

  

  

   Sub-Process:

 

PROCESS ANALYSIS OVERVIEW Description    The Financial Services Department
provides credit and collection services for the Mohawk Segment of the business.
This includes the establishment and maintenance of credit lines as well as the
collection of past due accounts receivable. In the event of a serious credit
problem the department personnel determine when outside intervention is
necessary and ultimately when the balance is deemed to be uncollectible and
should be written off the books. It is the responsibility of the V.P. Credit to
ensure that the Mohawk Segment has adequate reserves in place for credit losses.
Location(s) and

Division

  

Mohawk Flooring’s credit and collection personnel are located in Calhoun and
Chatsworth.

Mohawk Flooring and Mohawk Home customers credit functions and collection
activities are handled through the Mohawk Flooring credit group.

    Financial Statement    

Category and/or
accounts

   The general ledger account number for recording bad debt expense is: Mohawk –
027169. Operating Software

and or Applications

used in Process

  

Infinium software is used to maintain customer balances and generate statements.

CAMS (Chadwick & Associates Management Systems) system is used by order entry
and interfaces to Infinium.

Operates on the AS400; RPG program language; CAMS and Infinium module

Hardware
Configuration    Process Owner
Responsibilities:    As the Process Owner you are responsible to update this
document as your process changes due to new laws, system or server upgrades,
reorganization, etc. before your SOX semi-annual or annual certification. Once
you have completed, please submit to SOX Compliance.

 

9

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Contact Name, Title

   IV. Phone
Number    Location    Ton Tony Patti, VP of Credit, and Process Owner   
706-624-2109    Calhoun, GA    Tony_Paty@mohawkind.com Bill Queener, IT CAMS
support    X-  24805    Dalton, GA    Bill_Quenner@mohawkind.com Joe Martin, AR
Infinium support    X-  24831    Dalton, GA    Joe-Martin@mohawind.com

OVERVIEW

The Financial Services Department provides credit and collection services for
the Mohawk Segment of the business. This includes the establishment and
maintenance of credit lines as well as the collection of past due accounts
receivable. In the event of a serious credit problem the department personnel
determine when outside intervention is necessary and ultimately when the balance
is deemed to be uncollectible and should be written off the books. It is the
responsibility of the V.P. Credit to ensure that the Mohawk Segment has adequate
reserves in place for credit losses.

IV.

 

I. Forward Customer Request

To ensure customer requests are forwarded to the appropriate parties:

 

  •  

Programming in CAMS causes orders that fail a credit check to drop into a queue
for evaluation by a credit group. Credit analysts check the queue throughout the
day and work on orders as they appear. This helps ensure that customer’s
requests for goods are not unnecessarily delayed due to credit limits or past
dues.

 

  •  

Analysts determine why an order has failed and then work to remedy the situation
so the order can be released. There are usually one of three reasons for credit
failure on an order: 1) limit exceeded – customer file is reviewed to see if the
limit can be raised and if necessary, ask for more information from the customer
so the limit can be increased; 2) past dues related issues – the customer is
contacted to get a commitment for payment on account; 3) claims issue – customer
has a claim not yet addressed. The analyst will advise the claims department.

 

  •  

Approved orders are released by the credit analyst for unapproved orders, the
credit department advises the customer.

 

  •  

Orders that are not released after 10 business days from the stock assigned date
are generally cancelled. Customer service is responsible for cancelling orders
that exceed that parameter.

 

II. Approve Customer

To approve customers consistent with management guidelines:

 

  •  

Department policy provides limits of credit that can be established by Financial
Services personnel.

 

10

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  •  

The following table lists the employee’s level of authority along with the
maximum credit limit they are allowed. These maximum credit thresholds apply for
each employee level when establishing new customers or increasing credit limits
for old customers.

Level of Authority

   Credit Limit  

Credit Analyst I

   $ 35,000   

Credit Analyst II/Credit Specialist

   $ 75,000   

Credit Managers I

   $ 200,000   

Credit Managers II

   $ 250,000   

Sr.Mgr/Mgr of Financial Services

   $ 350,000   

V.P. Credit

   $ 1 million   

CFO or VP of Finance of Flooring

   $ 3 million   

Corporate C.F.O.

   >$ 3 million   

 

  •  

The Managers of Financial Service and the V.P. of Credit do not have a ‘system
limitation’. This is necessary to allow orders to flow without concern for who
is available to approve an order. However, the department’s policy guidelines,
as stated above, are manually controlled through the completion of a
‘synopsis’(see CC-1.0) that must have the appropriate signatures supporting the
credit exposure. For customers who have accounts across multiple business units,
the amounts are aggregated on the synopsis form. The form has been adapted to
include signatures of the appropriate individuals from each of the business
units that carry a balance for this type customer.

 

  •  

Key users at main warehouses also have the ability to release orders with no
system limitation. This is required to handle order changes that occur in the
evening or when a customer is trying to pick up an order and there are no credit
representatives available to approve the order in the system. A daily report
(QSYSOPR) is emailed to the Managers of Financial Services showing orders that
were approved by non-credit users. The daily report is forwarded to the
appropriate regional manager for review to ensure the release was justified and
that no abuses occur. The regional credit manager provides a written statement
approving the decision by a non-credit user to release orders over $20,000
(CC-2.0-S). The Managers of Financial Services save this for future reference,
if needed.

 

  •  

The system security includes credit limit authority and dollar thresholds by
employee position. Once an analyst reaches their authority limit, the order’s
status is manually coded 99 (requires further approval) and a manager is

 

11

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notified that an order is in queue requiring their approval. While the system
does not automatically forward an order for futher approval, the order cannot
ship until the proper approval level has approved the order for release. This
action repeats itself as necessary until an adequate authority level is reached.
Departmental policies specify file documentation requirements to support various
levels of credit exposure. Group managers conduct periodic random reviews of
accounts with balances over $75k and under $200K to ensure compliance. A
synopsis must be completed for any account that has an unsecured month-end
balance of $200k for two successive months or more and should be submitted for
approval. A synopsis is prepared by the Credit department and approved by either
the V.P of Credit or Manager of Financial Services for account balances over
$200k for accounts controlled by credit managers I and $250k for accounts
managed by credit managers II (CC-1.0).

 

III. Establish Terms/ Approve Credit

 

  •  

To ensure terms and conditions offered are consistent with management
guidelines:

 

  •  

Security tables prevent analysts from exceeding their authority to establish or
increase credit lines (See table in Section II). This control speaks to
establishing new credit guides or increasing existing credit guides whether or
not an order is present.

 

  •  

Only the VP of Credit and the Managers of Financial Services have the system
authority to change the credit limit authority values for employees authorized
to approve credit. General access tested with General IS DS05-Security controls.

 

  •  

Terms for all new accounts are either set as collect-on-delivery (COD),
cash-before-delivery (CBD) or open account depending on the results of the
initial credit investigation.

 

  •  

Customer master standard open account terms for the Residential Business unit
are 9Y; 5/20, 3/30, Net 40, for discounted products and 23; Net 30, for net
products. The Commercial Group’s discounted terms are 3/30 Net 45 and Net 30 for
non-discounted products. Mohawk Home’s terms are generally Net 60. Sales have
the ability to offer non-standard terms to a customer at their discretion, not
to exceed 120 days. Each Company and Division has different policies governing
who can grant non-standard terms and to what extent. These terms policies are
managed at the VP level. The A/R aging controls are set by the Standard Aging
Policy Tables in the Infinium System. The AR system (AR Infinium) automatically
ages receivables. Invoices are properly aged based on invoice date and terms.
(CC-3.0).

 

  •  

At the time of order entry, the system will use the terms contained in the
customer master for the specific product type being ordered unless an exception
is given by sales.

 

12

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  •  

The RVP’s or their designated personnel can approve standard and nonstandard
terms of up to 120 days. Beyond that, the V.P. of Credit or V.P. of Sales must
approve all other term changes. Terms can be changed at the order level by
customer service agents but this is not considered a significant risk. A field
has been added to the customer master terms file to indicate whether the term is
valid for customer service and/or for credit. If a customer service agent
attempts to enter an invalid terms for a particular order, the system will
display a pop-up window asking them to confirm that they entered the correct
terms code. If they continue to process the order, the customer master terms
file system will look to see if the terms code entered is valid for credit. If
not, the order will fail the credit algorithm. The Director of Customer Service
or his designee maintains the customer service flag. The V.P. of Credit or one
of the Managers of Financial Services maintains the credit flags. These flags
exist in the CAMS system.

 

  •  

The customer master contains several fields that can be used to control sales to
non-credit worthy accounts.

Allow Sales – This flag can be set to “N”, which prevents an order for the
customer from being entered into CAMS, by either Credit or Customer Service at
the request of Sales.

Approved Status – The value in this field can be set to “2”. This tells the CAMS
system to automatically fail every order entered for this customer and submit
the order for a manual decision.

 

  •  

Virtually all customers have only one account. For the exceptions that are
provided a second number, a system comment is added cross-referencing the two
accounts.

 

IV. Forward Approval to Deliver Goods or Services

To ensure all approved customer requests are acted on in a timely manner:

 

  •  

To ensure all approved customer requests are acted on in a timely manner, CAMS
automatically forwards any failed orders due to credit to a work queue for
review by the credit group.

 

  •  

Credit analysts review each order and determine a course of action in line with
policy and their approval levels, i.e. request additional documentation from the
customer (bank reference, etc.)

 

  •  

These orders are automatically released to CAMS for order fulfillment once
approved by an authorized user.

 

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V. Deliver Goods or Services

To ensure approved requests, and only approved requests, are satisfied:

 

  •  

The CAMS system will automatically route to the appropriate credit group any
orders from customers that exceed their credit limit by more than 25%. This
ensures only appropriate requests are addressed.

 

  •  

New customers are required to complete a credit application before the credit
group will establish credit limits (See chart of employee positions & authority
limits in Section II). The completed credit application is returned to the
Customer Service Department or the New Accounts Department who determines if the
customer already exists within the system. If not, a customer master is
established and the CAMS system assigns a customer number to the account.

 

  •  

The application is forwarded to the appropriate credit analyst or manager who
will be responsible for managing the account. The analyst / manager review the
application in conjunction with financial information provided and available
credit information from third party resources including trade, credit bureau and
banks. The extent of the investigation is based upon the amount of credit
requested. Once the investigation is complete, a credit guide is assigned.

 

  •  

The credit application along with any financial information, etc. accompanying
it are sent to the imaging department to be archived. Trade information for the
account is saved within the RAM software. Subsequent credit information received
for file updates is generally saved as a PDF file in RAM although it may be also
saved to On-demand, as well.

 

  •  

The credit group has the authority to release the orders for customers for
shipment or production if the release does not cause the customer’s credit to
exceed the analyst’s authority limit or cause the customer’s limit to be
exceeded by more than 50%.

 

  •  

There are policy guidelines for the credit department that assist analysts in
decisions to increase credit such as: 1) for limits less than $75k, Mohawk
account aging, past experience, recent credit history, and trade information
(i.e., D&B) are reviewed; 2) for more than $75k, trade information and credit
rating data are reviewed, and financial and bank information is requested. (See
Table in Section II for authority and credit thresholds to increase credit)

 

14

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  •  

Managers of Financial Services perform an audit of at least two accounts over
$75K and less than $200k at least once a year for each manager to verify their
compliance with department policy.

 

VI. Accounts Receivable Write-offs – Bad Debt and Discretionary

 

  •  

The V.P. of Credit or Managers of Financial Services perform a quarterly review
of files that are placed for collection to determine which files should be
written-off as bad debts per departmental policy (See CC-5.0).

 

  •  

Accounts that are past due with no payment activity and have been turned over to
collection agencies, as well as accounts that are in bankruptcy, accounts in
litigation and accounts with long-term payouts are identified as uncollectible
and eligible for write-off.

 

  •  

The V.P of Credit and Managers of Financial Services notate and sign on the
Legal Aged Trial Balance which accounts to write-off (w/o). The report is
submitted to the Manager of Customer Accounts for write-off. The customer
accounts agent designated to perform the write-off initials the report upon
completion and returns it to the V.P. of Credit for his records. The VP of
Credit or Managers of Financial Services approve which accounts are candidates
for write-off (CC-5.0).

 

  •  

The V.P of Credit prepares a summary report of the accounts written off and
presents it to the V.P. Flooring and Corporate Controller as part of the
quarterly package for their signatures (CC-6.0-S).

 

  •  

Credit personnel, from time to time, submit amounts for discretionary write-off
subject to table below.

 

Authority Limits For Approving Discretionary Write-offs

Non Managers

   $50.00

Credit Manager I

   $250.00

Credit Manager II

   $500.00

Senior Manager

   $1000.00

Vice-President of Credit

   $25,000.00

Corp. Controller/CFO Flooring

   Over $25K

 

  •  

The new Workflow system allows discretionary write-off authorization
electronically. The system automatically sends requested write-offs initiated in
Credit to follow an approval routing dictated by approval levels in the system.
Once required approvals are obtained, the system sends the document to a work
queue accessed by Customer Accounts where the adjustment is made to the
customer’s records. The system maintains the authorization history for the
write-off. Customer Accounts/AR personnel’s system security includes authority
to write off item balances and limits. To help ensure improper write offs are
not executed, system access is

 

15

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controlled and reviewed by the department manager and there are system dollar
limits by user. AR personnel’s system security includes authority to write-off
accounts and the department manager controls dollar limits. Customer Accounts
manually checks for the proper authority approval signatures on each
discretionary write-off that is submitted for write-off entry (CC-4.0).

 

  •  

The V.P. Credit reviews a monthly report (Mill Allowance Report) from Customer
Accounts Department that summarizes by business unit the total discretionary
dollars written off during the month (CC-7.0-S).

 

  •  

The V.P. of Credit generates a monthly report of accounts with credit items that
are over 1 year old that is divided into two groups. The first group represents
customers in states that have B2B exemptions and the second group for customers
that are in non-B2B states. The reports are sent to the Customer Accounts
department. For obligations on customers in states with B2B exemptions, a
determination is made as to whether the account has had activity within the last
12 months. If so, the item is removed from trade receivables and transferred to
the appropriate general ledger allowance account. If the account has not had
activity in the last 12 months or if the customer is located in Texas, Tennessee
or Arizona the obligation is transferred into “BB” company for further research
to determine if the obligation qualifies for escheatment. For obligations on
customers in states that do not have a B2B exemption, the obligations are moved
to “Z” company for further research to determine if the obligations are
escheatable. In either case, any item less than $25.00 is removed from the
customer’s ledger and transferred to the appropriate general ledger allowance
account. Neither “BB”” nor “Z” company are part of “trade receivables.

 

VII. Reserves for Returns & Allowances, Claims and Accounts In Legal Status

 

  •  

Reserves are developed quarterly by the V.P. of Credit and the Director of After
Sales Service who jointly prepare a summary of the calculated credit and claim
reserve need and it is submitted to the Director of Flooring Accounting, CFO and
the Division Controller of Flooring (See CC-8.0). The quarterly results are
recorded on shared excel file that only the Director of External Reporting,
Assistant Controller, Director of After Sales Service and the V.P. of Credit
have access to.

 

  •  

The V.P. of Credit records on the spreadsheet the gross dollars that were
written off the accounts receivable for customers that were in legal status and
deemed to be uncollectible. A running three (3) year quarterly average of bad
debt as a percent of net sales is calculated by the V.P. of Credit to confirm
accuracy of the calculation. Additionally, the V.P. of Credit provides a special
reserve for Note accounts based on the quarter ending

 

16

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‘A/R Notes Outstanding’ report, a reserve for material pending preference claims
and a reserve for any customers that have a balance in excess of $1 million
dollars that he has determined to be very high risk. The sum of these four
components comprises the ‘Credit’ portion of the reserve calculation.

 

  •  

Quarterly there is a review of the calculation and comparison of the GL to the
reserve requirement by the Divisional Controller-Flooring and the CFO- Flooring.
The Director of Accounting-Flooring, the VP of Credit, the Director of After
Sales Service and the Corporate Controller also review. Executive Management
reviews reserves monthly or quarterly to ensure reserves are adequate. Their
review includes the following: a) specific on reserve review, b) general reserve
factor review, c) review of overall accuracy and reasonableness of reserve
required balance, d) and comparison of required reserve balance to the GL.
During their review they compare the calculated reserve need to the actual
reserve in the general ledger to determine if the reserve is adequate or needs
adjustment. Adjustments to the reserve are made as deemed necessary. The
Flooring Controller and Director of External Reporting submit any needed
adjustments to the Corporate Accounting Manager to make the journal entry
adjusting the reserve.

Other reserves and assumptions

The Company also includes the following in its reserve calculation:

Write offs under $75. This category represents customers short paying invoices
under $25 and typically relate to freight and pricing claims. Customer Accounts
can also write-off up to $75 as a goodwill customer allowance when manually
applying a check. The annual expense for these invoice deductions is
approximately $2 million. The Company applies a range of 3-6 months (90-180
days) to this category.

Unreported claims greater than one year. The Company uses a range of
$4-8 million for the category. The claims in this category relate principally to
warranty type claims that extend greater than the twelve-month analysis.
(Warranty Claims Process)

 

17

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LOGO [g458171g84o00.jpg]

 

18

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LOGO [g458171g37h09.jpg]

 

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LOGO [g458171g90o90.jpg]

Key Controls Matrix

 

•                   V. ASSERTIONS    VI. COSO

Risk Description

   CP #   

• Control Description

  

Control
Frequency

   • TBT    C    • E    P    V    • R    • CA    CE    IC    M    RA Bad Debt
allowance is miscalculated, written off without proper authorization, is
recorded incorrectly or not recorded.    CC-1.0    A synopsis is prepared by the
Credit department and approved by either the V.P of Credit or Manager of
Financial Services for account balances over $200k for accounts controlled by
Credit Managers I and $250k for accounts managed by Credit Managers II.   
Monthly    ü    ü    ü       ü       ü       ü    ü    Aging of receivables is
not calculated correctly, which will distort reserve figures for returns &
allowances, claims, and accounts in legal status, which can impact income
calculations.    CC-3.0    The A/R system (AR infinium) automatically ages the
receivables. Invoices are properly aged based on invoice date and terms.
-Automated Control-   

Multiple

Times a Day

   ü          ü    ü          ü          ü Bad Debt allowance is miscalculated,
written off without proper authorization, is recorded incorrectly or not
recorded.    CC-4.0    Customer Accounts manually checks for the proper
authority approval signatures on each discretionary write-off that is submitted
for write-off entry.    Daily    ü             ü       ü       ü    ü    ü

 

I-128

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LOGO [g458171g90o90.jpg]

 

Bad Debt allowance is miscalculated, written off without proper authorization,
is recorded incorrectly or not recorded.    CC-5.0   

VP of Credit or Managers of Financial Services approve

which accounts are candidates

for write-off.

   Quarterly    ü    ü          ü                ü    ü

V.     ASSERTIONS

  

I.      COSO

E—Existence or Occurrence – Assets, Liabilities and ownership interests exist at
a Specific date and recorded transactions represent events that actually
occurred during a certain period.    Control Activities: Refers to policies and
procedures to ensure that management objectives are achieved and that risk
mitigation strategies are carried out. C—Completeness – All transactions and
other events and circumstances that occurred during a specific period and should
have been recognized in that period have in fact been recorded.    Control
Environment: Establishes the foundation for an internal control system by
providing discipline and structure to the organization R—Rights and Obligations
– Assets are the rights and Liabilities are the obligations of the entity at a
given date.    Information and Communication: Supports all other control
components by communicating controls responsibilities to employees and providing
information in a form and time frame that allows people to carry out their
duties. V—Valuation or Allocation – Assets, Liabilities, Revenue and Expense
components are recorded at appropriate amounts in conformity with relevant and
appropriate accounting principles. Transactions are mathematically correct and
appropriately summarized and recorded in the entity’s books and records.   
Monitoring: Covers the oversight of internal controls by management or other
parties outside the process, or the application of independent methodologies -
such as customized procedures or standard checklists by employees within a
process.

P—Presentation and Disclosure – Items in the statements are properly described,
sorted, and classified.

TBT – Control to be tested

   Risk Assessment: Involves the identification and analysis by management or
relevant risks to achieving predetermined objectives. Forming a basis for
determining how those risks should be managed.

 

-2-

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LOGO [g458171g67j29.jpg]    LOGO [g458171g77y54.jpg]      LOGO
[g458171g64n63.jpg]         Period-end:
December 31, 2012

Prepared by:

Marcello Distefano

  

Company:

Dal-Tile

  

  

   Process:

Credit & Collection

Revised by:

 

Marcello Distefano

   Revised Date: Q3 2012       Sub-Process:

PROCESS ANALYSIS OVERVIEW Description   

American Software International software is used for customer master, invoices,
recording payments, aging, GetPaid collection system, etc.

COPS, Custom Order Processing System, is used for entering orders.

Location(s) and

Division

   Dal-Tile credit and collection personnel are located in Dallas, TX with one
credit manager in each of eight business regions.

Financial Statement

Category and/or

accounts

   The general ledger account numbers for Dal-Tile are: Bad debt provision – 62,
Reserves for Other Receivables – 024XXX, Allowance for Cash Discounts – 026XXX,
Allowance for Bad Debt – 027XXX, Claims Reserve- 028XXX

Operating Software

and or Applications

used in Process

  

Hardware

Configuration

   Spreadsheets Used (include filename and path)   

Primary users and

functions and #’s)

   Dal_Tile domestic and Canadian customers credit functions and collection
activities are handled through the Dal_Tile group.

Annual revenue

billed

  

Dollar amount of revenue billed through the system in 2005: $1,681,411,186 $

 

U.S. & Canada operations

Volume of Invoices   

# of invoices billed in 2005: 4,066,842

U.S. & Canada operations

# of accounts   

# of accounts billed in 2005: 83,596

U.S. & Canada operations

Process Owner Responsibilities:    As a Process Owner you are responsible to
update this document as your process changes due to new laws, system or server
upgrades, reorganization, etc. Before your SOX quarterly or annual
certification. Once you have completed, please submit to Compliance. They will
attach in Oracle GRCM.

 

3

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Contact Name, Title

   Phone Number    Location    E-mail Address Barry Hickman, Dal-Tile Director
of Credit    214-309-4117       Barry.hickman@daltile.com David Rivera, Manager
of Application Development    214-309-4257       David.rivera@daltile.com
Marcello Distefano, Manager, A/R Reporting and Planning    214-309-4077      
Marcello.distefano@daltile.com

INPUTS, ACTIVITIES, OUTPUTS (includes key performance indicators)

Systems Forword: ASI, COPS and Get Paid systems are used by the Credit &
Collection group. COPS is the order entry system and interfaces sales to ASI.
The credit algorithm resides in ASI. Summary a/r information from ASI is
interfaced nightly to COPS. ASI is the accounts receivable system. It contains
the details of open obligations on each customer and cash is applied in ASI. It
is the source of the aging of a/r. Customer collection activity is based on the
customer aging in ASI.

The following activities are documented in this CPD and have associated process
flow diagrams

 

III. Forward Customer Request

To ensure customer requests are forwarded to the appropriate parties:

 

  •  

System control is a $1,000 limit for SSC’s to release customer orders. Beyond
that, the SSC must contact credit for instructions.

 

  •  

Orders are entered then subject to a credit algorithm (Credit Limits, Past Due
Status, Hard Hold, etc.) If order meets the credit parameters, it is considered
approved and will process in the system. For unapproved orders, the order taker
advises the customer.

 

4

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IV. Approve Customer

To approve customers consistent with management guidelines:

 

  •  

System control is a $1,000 limit for SSC’s to release customer orders.
Programming in COPS allows orders that fail due to credit limits or past due
status to be released at the SSC level up to $1,000 per order.

 

  •  

Monthly report of all orders released at the SSC with a manual override goes to
credit managers.

 

  •  

Order approval from the three different Dal-Tile business units all function
differently. The units are: Sales Service Centers (SSC); Home Center Stores
(HCS); and American Olean (AO).

 

  •  

For the SSC business unit, the vast majority of orders are processed at the
store with the customer standing at the counter. If the order fails the
algorithm for release and the order is for over $1,000, then credit must provide
the authority then the order is not processed with credit terms .

 

  •  

For SSC orders that are direct ships out of RDC's or Plants that fail the
release process the SSC is notified by the customer service area. The SSC
manager then contacts credit, who will decide to release or not to release based
upon the state of the account, and payment history. There is not a time
component for automatic cancels.

 

  •  

For HCS, all orders are automatically approved. This business is mostly composed
of Home Depot and Lowe’s.

 

  •  

For AO which are direct shipments from our RDC's and Plants, orders not approved
are updated live to an "Orders on Credit Hold and Release Action" screen within
COPS. The RCA's working in the AO business unit review this screen generally on
the hour. Orders not approved and not released stay in this que until the order
is cancelled or released. There is not a time component for automatic cancels.

 

  •  

Credit managers may release any order value they deem appropriate, although they
use joint check, project accounts, securitization agreements, and perfection of
property rights for the vast majority of large jobs and orders. Credit managers
are not restricted by the system. Their bad debt performance is measured and
available for review by GM’s, VP’s and other executives.

 

5

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V. Establish Terms/ Approve Credit

To ensure terms and conditions offered are consistent with management
guidelines:

 

  •  

All requests for new customer terms or terms changes are sent to the customer
master group. Terms other than the standard net 30 are approved in writing
(e-mail) by credit managers / regional general managers.

 

  •  

System security allows only the customer master group to change terms.

 

  •  

System security allows only the credit group or security administration access
to maintain credit limits.

 

IV. Forward Approval to Deliver Goods or Services

To ensure all approved customer requests are acted on in a timely manner:

 

  •  

Credit limits and/or terms changes requested from the SSC’s are followed up by
SSC personnel.

 

  •  

Most credit decisions for the SSC’s are completed while the customer is at the
store or on the phone. There are no logs or system follow ups in cases they
cannot immediately resolved.

 

V. Deliver Goods or Services

To ensure approved requests, and only approved requests, are satisfied:

 

  •  

The credit group sets up credit limits (CC-12-DT-S, Rights and Obligations,
Manual, Authorization). They require a credit application or credit information
for all new open account customers. Additional information may be requested
depending on the limit requested or the results of a general credit review.

 

  •  

The credit department mails either a credit approval or credit denial letter to
each customer with an e-mail notification to the SSC manager or advises the SSC
manager of the need for more information or follow-up.

 

  •  

HCS accounts credit issues, which are Home Depot and Lowe’s, are reviewed and
approved at the senior management level.

 

6

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  •  

AO accounts, which are regional distributors and Standard terms for these are 2%
20 Net 30 unless negotiated by senior management.

 

VI. Calculate Bad Debt Expense and Write-offs

 

  •  

Information on accounts is pulled from the A/R system, Get Paid, and other
casual sources such as attorney communication of bankruptcy. The system ages
receivables. (CC-4-DT-A, Valuation, I.T., System Configuration)

 

  •  

Credit managers control which accounts are candidates for write-off. This
process is limited to credit department personnel only. They or the regional
credit analyst initiate the paperwork to identify the account and explain the
reasons for write-off. (CC-7-DT-Q, Existence, Manual, Management Review)

 

  •  

The Get Paid module automatically generates a past due letter (or e-mail or fax)
10 days after an invoice becomes past due. The program continues to promp action
every 10 days until it is paid.

 

  •  

SSC personnel have view access to customer account balances and past dues. They
also receive weekly an aging for each customer assigned to their store by which
they can contact the customer.

 

  •  

Access for the transaction code for “Bad Debt” is controlled by the Director of
Credit and currently only the Director, Department Financial Controller, and
Accounts Receivable Supervisor and whoever else authorized by Director of Credit
can process a write-off. The sales organization does not have access to this
transaction code.

 

  •  

Finance Controller reviews the reserve monthly. (FRC-2.0 -A/R Reserve Review,
Valuation, Monitoring) Refer to CPD Financial Reporting Close- Dal Tile

 

7

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CONTROLS

The following control categories should be considered when identifying controls
throughout the process narrative. Controls throughout the narrative should be
highlighted by placing the appropriate initial of control category next to the
description and numbered for identification purposes.

 

Authorization (A)    Management review (M) Configuration/Account mapping
controls (C)    Reconciliation (R) Exception/Edit report (E)    Segregation of
duties (SD) Interface/Conversion controls (I)    System access (SA) Key
performance indicator (KPI)   

Authorization includes:

 

  •  

Approval of transactions executed in accordance with management’s general or
specific policies and procedures

 

  •  

Access to assets and records in accordance with management’s general or specific
policies and procedures.

System configuration and account mapping includes “switches” that can be set by
turning them on or off to secure data against inappropriate processing, based on
the organization’s business rules. If the switch is turned on, the checking can
be customized for the particular organization to be very robust or very
permissive. The more specific definition of each is as follows:

 

  •  

Configurable controls—specific “switches” that can be set by turning them on or
off to secure data against inappropriate processing.

 

  •  

Account mapping—specific “switches” that can be set related to how a transaction
is posted to the general ledger and then to the financial statements.

System configuration and account mapping includes standard (comes with the
application or system) and customized (developed or changed by the client)
controls that have been designed based on appropriate business criteria, to
secure data against inappropriate processing (by enforcing validity,
completeness, accuracy) and help ensure data integrity. All configurable
controls/account mapping should be documented and tested properly before
implementation and be subject to appropriate change control procedures (which
include authorization, segregation of duties and testing). In addition, the
system access, authorization and segregation of duties controls (see the
separate control categories) must be appropriately designed and implemented to
support the controls provided by configuration and account mapping.

Typical examples of configurable controls are: Posting Limits, Release
Strategies, Tolerance Limits, Validations and Edit checks, Screen Layout (some
fields and values are required, others are suppressed, some are pre-populated
with default values, and some are “display only” values), Authorization Groups
(as noted above), Transaction Variants (a way to modify a standard transaction
such as Post GL entry, so it does something different, User Parameter ID’s
(which populate a user’s field automatically), and Security Settings (which need
to be aligned with the configuration) and Configuration options (ability to
“lock” the system).

 

8

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For purposes of the audit, when carrying out test of design and test of
operating effectiveness on a configurable control, the specific configurable
control(s) or account mapping(s) that manage a specific risk should be
identified and the focus of test work (versus performing test work on the all of
the configurable controls within a system).

Configurable controls and account mapping are usually set up and performed en
masse when a new system is implemented, such as an ERP system (SAP, PeopleSoft,
Oracle Applications), a reporting package such as Hyperion, or during a “data
warehouse” implementation. Account mapping, re-mapping, or updates to
configurable controls may also be performed any time a client has undergone a
corporate reorganization.

If IRM was involved in performing post-implementation test work on the system
that encompassed the specific control for which we are concerned, then annual
test work on the initial set-up and design is not necessary. Annual test work
should focus on the change control and maintenance aspect of a specific control
to the extent that the control is chosen for test work.

Some risks or concerns to address when testing a configurable control or account
mapping are as follows:

 

  •  

Account mapping may be changeable in a “live” production environment by users.
Mis-mapped accounts may not appear on the financial statements, or they may
appear in an inappropriate manner such as in a suspense account or in an
“opposite” category such as revenue to liability. Configurable controls can be
circumvented by an end user if the control is not appropriately set up to meet
the organisation's need and user access appropriate. For example, using the
warning message “can continue” may not be as appropriate to meet the
organisation’s needs as “cannot continue—transaction is “held/blocked.”

 

  •  

Configurable controls can override security control features. For example, not
assigning “authorisation groups” to certain accounts, tables or programs can
result in ineffective security. On the other hand, a configurable control can be
set up but may not be effective unless the system access supports the control as
configured (for example: a user with superuser access can just change the
configured control setting).

 

9

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Exception Edit Report

Controls that fall into the exception/edit report category relate to when a
report is generated by an entity to monitor something and followed-up on through
to resolution. In most instances, the reports are focused on exceptions/edits as
defined below, however in some instances it may just be a report. For example,
if an aging report is generated by the system and followed up, the content does
not necessarily represent edits or exceptions, but the control would fall into
this category for TOD and TOE considerations.

 

  •  

Exception—a violation of a set standard (e.g. customer sales exceed credit
limit; 3 way match does not reconcile)

 

  •  

Edit—a change to a master file (e.g. addition of a new employee; changes in wage
rates)

Data interfaces—Data interfaces transfer specifically defined portions of
information (data) between two computer systems, using either manual or
automated means or a hybrid of both, and should ensure accuracy, completeness
and integrity of the data being transferred. The job of a data interface is to
transfer the data securely, once and only once, completely, accurately, with
integrity, and to highlight any exceptions. Interfaces can be two-way (back and
forth between two systems) or one-way (from one system to another), and can link
new systems to old/Legacy systems or old/Legacy systems to new systems. If the
interfaced data originates in an old/Legacy system, it is important to consider
the extent of testing to be done on data quality/integrity controls from the
“old” system since Garbage In = Garbage Out.

Data conversion—Data conversion is the process of migrating data from a Legacy
system (which may have old, duplicate, inaccurate, incomplete data, which reside
in several places within the system) to a new system. To perform this process,
the data needs to be cleansed, reviewed and synchronized prior to conversion (a
critical step), then mapped (which may include parsing or other manipulation),
reformatted, translated, consolidated and loaded into the new system (which may
include a time lag or delay during which new data is created). Once the data has
been converted and loaded into the new system, it must be maintained to ensure
its completeness, existence, accuracy and integrity.

Interfaces require a detailed understanding of the technical and business issues
related to the interfaces. For example, business issues include: the business
need for the interface, when is the system able to perform the interface, how
often is the interface run, how much data or how many transactions are
processed, impact of interface procedures on normal business operations, and
synchronization of legacy and new systems. Technical issues include: method used
to interface (import/export features of the old and/or new package, custom
programs that were developed, intermediate system/utility (holding place),
manual entry of the interfaced data), technical approach (batch, real time,
parallel) and content of what exactly is interfaced (master file updates,
detail/summary transactions, balances).

 

10

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Interface/conversion data itself must be prepared properly and appropriately. In
addition, the interface/conversion must be properly and appropriately: designed
(i.e., data mapping techniques detailing how data from one system is to be
reflected in the other), tested, performed (manual or automated), owned,
maintained, re-sent if needed, auditable (audit trail) and traceable
(distinguishable from normal transactions). Any changes are authorised, tested
and documented. The attributes of interfaces/conversion include: data integrity
(data is not changed or manipulated) and security (no one can access it).
Interfaces/conversion include controls in these areas: data management
(date/time stamps, file names), processing (no missing, duplicate or redundant
data and to ensure completeness and accuracy), validation/reconciliation
(on-line edits, batch totals), as well as over the detection and correction of
exceptions and errors.

Key performance indicators (“KPIs”) are the financial and non-financial
quantitative measurements that are:

 

  •  

collected by the entity, either continuously or periodically; and

 

  •  

used by management to evaluate the extent of progress toward meeting the
entity's defined objectives.

We select only those KPIs that are both relevant to the financial statement
assertions we are auditing and possess the following qualities:

 

  •  

they are strong and valid;

 

  •  

they are expected to produce reliable results; and

 

  •  

they are at an appropriate level of precision to detect significant misstatement
(as defined by the auditor).

Management review is the activity of a person different than the preparer
analyzing and performing oversight of activities performed. In many instances,
it will be a manager reviewing the work of a subordinate. However, it is not
limited to this. It may include co-workers reviewing each other’s work. Examples
including internal audit activities, etc.

A reconciliation is a control designed to check whether two items/computer
systems, etc. are consistent.

The separation of duties and responsibilities of authorizing transactions,
recording transactions and maintaining custody to prevent individuals from being
in a position to both perpetrate and conceal an error or irregularity.

System Access

The ability that individual users or groups of users have within a computer
information system processing environment, as determined and defined by access
rights configured in the system. The access rights in the system agree to the
access in practice.

 

11

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Key Controls Matrix

 

                    ASSERTIONS    COSO

Risk Description

  

CP #

  

Control Description

   Test
Frequency    TBT    C    E    P    V    R    CA    CE    IC    M    RA Credit
Limits are not authorized.   

CC-12-

DT-S

CP-11

   Credit Group sets up credit limits.    Semi-
Annual    ü             ü                ü    Receivables are not aged
accurately.   

CC-4-

DT-A

CP-14

   The ASI system ages receivables.    Annual    ü             ü             ü
      Write-off without proper approval.   

CC-7-

DT-Q

CP-15

   Credit managers or regional credit analysis identify write-off accounts and
explain the reasons for write-off.    Semi-
Annual    ü       ü                      ü   

 

ASSERTIONS

  

COSO

E—Existence or Occurrence – Assets, Liabilities and ownership interests exist at
a Specific date and recorded transactions represent events that actually
occurred during a certain period.    Control Activities: Refers to policies and
procedures to ensure that management objectives are achieved and that risk
mitigation strategies are carried out. C—Completeness – All transactions and
other events and circumstances that occurred during a specific period and should
have been recognized in that period have in fact been recorded.    Control
Environment: Establishes the foundation for an internal control system by
providing discipline and structure to the organization R—Rights and Obligations
– Assets are the rights and Liabilities are the obligations of the entity at a
given date.    Information and Communication: Supports all other control
components by communicating controls responsibilities to employees and providing
information in a form and time frame that allows people to carry out their
duties.

--------------------------------------------------------------------------------

V—Valuation or Allocation – Assets, Liabilities, Revenue and Expense components
are recorded at appropriate amounts in conformity with relevant and appropriate
accounting principles. Transactions are mathematically correct and appropriately
summarized and recorded in the entity’s books and records.    Monitoring: Covers
the oversight of internal controls by management or other parties outside the
process, or the application of independent methodologies - such as customized
procedures or standard checklists by employees within a process. P—Presentation
and Disclosure – Items in the statements are properly described, sorted, and
classified.    Risk Assessment: Involves the identification and analysis by
management or relevant risks to achieving predetermined objectives. Forming a
basis for determining how those risks should be managed. TBT – Control To Be
Tested   

 

2

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EXHIBIT VIII

FORM OF MONTHLY REPORT

 

                    MONTHLY REPORT      

 

Borrower:   

Mohawk

Factoring, LLC

           

Administrative

Agent:

   SunTrust Bank Servicer:   

Mohawk

Servicing, LLC

              

 

Pursuant to Section 8.5 of the Credit and Security Agreement, dated as of
December 19, 2012, as amended from time to time, among: Mohawk Factoring, LLC,
Mohawk Servicing LLC, and SunTrust Bank, the Servicer is required to prepare
certain information each Calculation Period regarding the Receivables. The
undersigned, a duly authorized representative of the Servicer, does hereby
certify that the information provided is true and as of the date hereof, to the
best knowledge of the undersigned, the Servicer has performed in all material
respects all of its obligations under the Credit and Security Agreement.

 

ACCOUNTS RECEIVABLE ACTIVITY      (in $)       RESERVE CALCULATION      

Beginning Outstanding Balance of all Receivables:

             Default Ratio        

+   Net Credit Sales:

             LTM Max. 3-Mo. Avg. Default Ratio        

-   Collections:

             Loss Horizon Ratio        

-   Total Dilution:

            

Loss Reserve

       

-   Discounts

                    

-   Write-offs:

             Dilution Ratio        

+   Recoveries

             LTM Avg. Dilution Ratio        

+   Manual Adjustments:

             LTM Max. 2-Mo Avg. Dilution Ratio        

Ending Outstanding Balance of all Receivables:

             Dilution Horizon Ratio                   

Dilution Reserve

        ACCOUNTS RECEIVABLE AGING                        Total    Days Sales
Outstanding Ratio          

(in $)

   (% of Total)        LTM Max Days Sales Outstanding Ratio        

Current

               Prime Rate        

1-30 days past billing

               Servicing Rate        

31-60 days past billing

              

Interest Reserve

       

61-90 days past billing

              

Servicing Reserve

       

91-120 days past billing

               Dynamic Calculation        

120+ days past billing

               Required Reserve Factor Floor        

61-90 credit balances

              

Required Reserve %

       

91-120 credit balances

               Required Reserve (RR)        

120+ credit balances

                      

 

--------------------------------------------------------------------------------

Total                 

LOAN
INFORMATION

                  Diff:    -         Aggregate Loan Amount (ALA) as of:         
 

NET POOL BALANCE

      (in $)      Facility Limit:           

Outstanding Receivables Balance

             Borrowing Base:           

-  A/R 61+ DPD

             Addtl Amt Avail. / (Required Paydown) as of:           

-  Affiliate / Intercompany

             Borrowing Base in Compliance as of:           

-  Cross Age

                     

-  Bill & Hold

             Borrowings after           

-  Consignment

             Paydowns after           

-  Direct to Consumers

             Paydown Date (if applicable)           

-  Total Legal and Bankrupt < 60DPD

             ALA following Borrowing / Paydown as of: Reporting Date           

-  Notes Receivable

             Addtl Amt Avail. / (Required Paydown) as of: Reporting Date      
    

-  Terms Greater Than 121 Days

             Borrowing Base in Compliance as of: Reporting Date           

-  Foreign (Not denominated in USD or CAD

                     

-  COD

                Allocations    %    Loans

-  Finance charges

                      -   

-  Outstanding Warranty Claim Accrual (Balance Sheet)

                      -   

-  Contra Relationships

                          -   

-  Customer Deductions < 60DPD

                Total       -   

-  Extended, Modified or Restructured

                     

-  FOB Destination Adjustment / Invoice Before Shipped Reserve

                                      

AMORTIZATION
EVENTS

        Actual    In
Compliance       Eligible Receivables             

NPB - (ALA + RR) <

                  

-  Contractual Dilution Reserve

            

3M Avg. Default Rate >

                  

-  Canadian Reserve Amount

            

3M Avg. Delinquency Rate >

                  

-  Excess Obligor Concentrations

            

3M Avg. Dilution Rate >

                  

-  Excess Canadian Receivables

            

3M Avg. DSO >

              

-  Excess Foreign Receivables

                       

-  Excess Payment Terms

             REPORTING TRIGGER       Moody’s    S&P      

-  Excess Gov’t Receivables

             Mohawk Corporate Ratings                   

Net Pool Balance (NPB)

             Weekly: Below Ba2 or BB (M/S&P)?             

 

2

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EXCESS CONCENTRATIONS

 

Top Obligors

  

Rating

   Rating    %    Dollar    Balance    Concentration               Total Excess
Concentrations      —     

 

Company    Name: Title: Date:

 

3

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EXHIBIT IX

FORM OF PERFORMANCE UNDERTAKING

THIS PERFORMANCE UNDERTAKING (this “Undertaking”), dated as of December 19,
2012, is executed by Mohawk Industries, Inc., a Delaware corporation (the
“Performance Guarantor”) in favor of Mohawk Factoring, LLC, a Delaware limited
liability company (together with its successors and assigns, “Recipient”).

R E C I T A L S:

1. Mohawk Carpet Distribution, Inc., a Delaware corporation and Dal-Tile
Distribution, Inc., a Delaware corporation (collectively, together with any
other “Originator” under the Sale Agreement referred to below, as the
“Originators”), and Recipient have entered into a Receivables Purchase and Sale
Agreement, dated as of the date hereof (as amended, restated or otherwise
modified from time to time, the “Sale Agreement”), pursuant to which
Originators, subject to the terms and conditions contained therein, are selling
and/or contributing their respective right, title and interest in their accounts
receivable to Recipient.

2. Recipient, as Borrower, Mohawk Servicing, LLC, a Georgia limited liability
company (“Mohawk Servicing”), as Servicer, SunTrust Bank, as Non-Conduit Lender,
Victory Receivables Corporation (“Victory”), as a Conduit, and Working Capital
Management Co., LP (“WCM”), the other Conduits, Lenders and Liquidity Banks from
time to time party thereto, SunTrust Bank, as agent for itself as a Non-Conduit
Lender and as administrative agent for the Lenders (together with its successors
and assigns, the “Administrative Agent”), The Bank of Tokyo-Mitsubishi UFJ,
Ltd., New York Branch, a Japanese banking corporation acting through its New
York branch (“BTMUNY”), as Agent (the “Victory Agent”) for Victory and its
liquidity banks, and Mizuho Corporate Bank, Ltd., as Agent (the “WCM Agent”) for
WCM and its liquidity banks (the Victory Agent and the WCM Agent collectively
referred to herein as the “Co-Agents”, and the Co-Agents together with the
Administrative Agent collectively referred to herein as the “Agents”), have
entered into a Credit and Security Agreement, dated as of the date hereof (as
amended, restated or otherwise modified from time to time, the “Credit and
Security Agreement”), pursuant to which the Lenders, subject to the terms and
conditions contained therein, may make loans to Recipient.

3. Recipient has requested that Mohawk Servicing act as servicer for the
accounts receivable described above.

4. Performance Guarantor owns, directly or indirectly, one hundred percent
(100%) of the capital stock of each of the Originators, Mohawk Servicing, Mohawk
Resources and Recipient, and each of the Originators, and accordingly,
Performance Guarantor, is expected to receive substantial direct and indirect
benefits from their sale or contribution of receivables to Recipient pursuant to
the Sale Agreement (which benefits are hereby acknowledged), the loans made to
Recipient pursuant to the Credit and Security Agreement and the Demand Advances
made to Mohawk Resources by the Recipient (which benefits are hereby
acknowledged).

--------------------------------------------------------------------------------

5. As an inducement for Agents and the Lenders to make loans to Recipient
pursuant to the Credit and Security Agreement and for Agents and Lenders to
appoint Mohawk Servicing as Servicer pursuant to the Credit and Security
Agreement, Performance Guarantor has agreed to guaranty (a) the due and punctual
performance by the Originators under the Sale Agreement, (b) the due and
punctual performance by Mohawk Servicing of its servicing duties under the
Credit and Security Agreement and (c) the due and punctual payment of any Demand
Advance by Mohawk Resources and any other obligations of Mohawk Resources under
the Demand Note.

6. Performance Guarantor wishes to guaranty the due and punctual performance of
the above-described obligations, as provided herein.

AGREEMENT

NOW, THEREFORE, Performance Guarantor hereby agrees as follows:

SECTION 1. DEFINITIONS.

Capitalized terms used herein and not defined herein shall the respective
meanings assigned thereto in the Credit and Security Agreement. In addition:

“Agreements” means the Sale Agreement and the Credit and Security Agreement.

“Guaranteed Obligations” means, collectively, (a) the Originator Guaranteed
Obligations, (b) the Resources Guaranteed Obligations and (c) the Servicer
Guaranteed Obligations.

“Originator Guaranteed Obligations” means, collectively, all covenants,
agreements terms, conditions and indemnities to be performed and observed by the
Originators solely in their capacity as “Originators” under the Sale Agreement,
including, without limitation, in each of the foregoing cases, the due and
punctual payment of all sums which are or may become due and owing by any such
Originator in its capacity as a seller under the Sale Agreement, whether for
fees, expenses (including actual and reasonable counsel fees), indemnified
amounts or otherwise, whether upon any termination or for any other reason.

“Resources Guaranteed Obligations” means, collectively, all obligations of
Mohawk Resources under the Demand Note including, without limitation, the due
and punctual payment of all sums which are or may become due and owing by Mohawk
Resources under a Demand Advance, whether for interest, principal, fees,
expenses, indemnified amounts or otherwise, whether upon any termination or for
any other reason.

“Servicer Guaranteed Obligations” means, collectively, all obligations of Mohawk
Servicing as Servicer under the Credit and Security Agreement and the Servicing
Agreement including, without limitation, in each of the foregoing cases, the due
and punctual payment of all sums which are or may become due and owing by Mohawk
Servicing, whether upon any termination or for any other reason including,
without limitation, those which arise pursuant to Sections 8.2, 8.3, 8.5 or
14.4(a) of the Credit and Security Agreement as a result of its termination as
Servicer.

 

-2-

--------------------------------------------------------------------------------

SECTION 2. GUARANTY OF PERFORMANCE OF GUARANTEED OBLIGATIONS.

Performance Guarantor hereby guarantees to Recipient, the full and punctual
payment and performance of the Guaranteed Obligations until such time as the
Performance Guarantor’s obligations are terminated in accordance with Section 8
hereof. This Undertaking is an absolute, unconditional and continuing guaranty
of the full and punctual performance of all Guaranteed Obligations and is in no
way conditioned upon any requirement that Recipient first attempt to collect any
amounts owing by Mohawk Servicing, any Originator or Mohawk Resources to
Recipient, the Agents or the Lenders from any other Person or resort to any
collateral security, any balance of any deposit account or credit on the books
of Recipient, the Agents or any Lender in favor of Mohawk Servicing, any
Originator, Mohawk Resources or any other Person or other means of obtaining
payment. Should Mohawk Servicing, any Originator or Mohawk Resources default in
the performance of any of its respective Guaranteed Obligations, Recipient (or
its assigns) may cause the immediate performance by Performance Guarantor of the
applicable Guaranteed Obligations and cause any payment Guaranteed Obligation to
become forthwith due and payable to Recipient, without demand or notice of any
nature (other than as expressly provided herein or in any other Transaction
Document), all of which are hereby expressly waived by Performance Guarantor.
Notwithstanding the foregoing, this Undertaking is not a guarantee of the
collection of any of the Receivables and Performance Guarantor shall not be
responsible for any Guaranteed Obligations to the extent the failure results
from Receivables being uncollectible on account of an Event of Bankruptcy with
respect to, or lack of creditworthiness of, the related Obligor; provided that
nothing herein shall relieve any of the Originators, Mohawk Servicing or Mohawk
Resources from performing in full its Guaranteed Obligations under the
Agreements or the Performance Guarantor of its undertaking hereunder with
respect to the full performance of such duties.

SECTION 3. PERFORMANCE GUARANTOR’S FURTHER AGREEMENTS TO PAY.

Performance Guarantor further agrees, as the principal obligor and not as a
guarantor only, to pay to Recipient (and its assigns), forthwith upon demand in
funds immediately available to Recipient, all reasonable costs and expenses
(including court costs and reasonable legal expenses) actually incurred or
expended by Recipient in connection with the Guaranteed Obligations, this
Undertaking and the enforcement thereof, together with interest on amounts
recoverable under this Undertaking from the time when such amounts become due
until payment, at a rate of interest (computed for the actual number of days
elapsed based on a 360 day year) equal to the Prime Rate plus 2% per annum, such
rate of interest changing when and as the Prime Rate changes.

 

-3-

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SECTION 4. WAIVERS BY PERFORMANCE GUARANTOR.

Performance Guarantor waives notice of acceptance of this Undertaking, notice of
any action taken or omitted by Recipient (or its assigns) in reliance on this
Undertaking, and any requirement that Recipient (or its assigns) be diligent or
prompt in making demands under this Undertaking, giving notice of any
Termination Event, Amortization Event, other default or omission by Mohawk
Servicing, any Originator or Mohawk Resources or asserting any other rights of
Recipient under this Undertaking. Performance Guarantor warrants that it has
adequate means to obtain from Mohawk Servicing, each Originator and Mohawk
Resources, on a continuing basis, information concerning the financial condition
of Mohawk Servicing, each Originator and Mohawk Resources, and that it is not
relying on Recipient to provide such information, now or in the future.
Performance Guarantor also irrevocably waives all defenses (i) that at any time
may be available in respect of the Guaranteed Obligations by virtue of any
statute of limitations, valuation, stay, moratorium law or other similar law now
or hereafter in effect or (ii) that arise under the law of suretyship, including
impairment of collateral. Recipient (and its assigns) shall be at liberty,
without giving notice to or obtaining the assent of Performance Guarantor and
without relieving Performance Guarantor of any liability under this Undertaking,
to deal with Mohawk Servicing, each Originator, Mohawk Resources and with each
other party who now is or becomes liable in any manner for any of the Guaranteed
Obligations, in such manner as Recipient in its sole discretion deems fit, and
to this end, Performance Guarantor agrees that the validity and enforceability
of this Undertaking, including without limitation, the provisions of Section 7
hereof, shall not be impaired or affected by any of the following: (a) any
extension, modification or renewal of, or indulgence with respect to, or
substitutions for, the Guaranteed Obligations or any part thereof or any
agreement relating thereto at any time; (b) any failure or omission to enforce
any right, power or remedy with respect to the Guaranteed Obligations or any
part thereof or any agreement relating thereto, or any collateral securing the
Guaranteed Obligations or any part thereof; (c) any waiver of any right, power
or remedy or of any Termination Event, Amortization Event, or default with
respect to the Guaranteed Obligations or any part thereof or any agreement
relating thereto; (d) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration, of any other
obligation of any person or entity with respect to the Guaranteed Obligations or
any part thereof, other than release of the Performance Guarantor; (e) the
enforceability or validity of the Guaranteed Obligations or any part thereof or
the genuineness, enforceability or validity of any agreement relating thereto or
with respect to the Guaranteed Obligations or any part thereof; (f) the
existence of any claim, setoff or other rights which Performance Guarantor may
have at any time against Mohawk Servicing, any Originator or Mohawk Resources in
connection herewith or any unrelated transaction; (g) any assignment or transfer
of the Guaranteed Obligations or any part thereof; or (h) any failure on the
part of Mohawk Servicing, any Originator or Mohawk Resources to perform or
comply with any term of the Guaranteed Obligations whether or not Performance
Guarantor shall have had notice or knowledge of any act or omission referred to
in the foregoing clauses (a) through (h) of this Section 4.

SECTION 5. UNENFORCEABILITY OF GUARANTEED OBLIGATIONS.

This Undertaking shall be binding on Performance Guarantor notwithstanding
(a) any change of ownership of, or an Event of Bankruptcy with respect to, or
any other change in the legal status of Mohawk Servicing, any Originator or
Mohawk Resources; (b) the change in or the imposition of any law, decree,
regulation or other governmental act which does or might impair, delay or in any
way affect the validity, enforceability or the payment when due of the

 

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Guaranteed Obligations; (c) the failure of Mohawk Servicing, any Originator,
Mohawk Resources or Performance Guarantor to maintain in full force, validity or
effect or to obtain or renew when required all governmental and other approvals,
licenses or consents required in connection with the Guaranteed Obligations or
this Undertaking, or to take any other action required in connection with the
performance of all obligations pursuant to the Guaranteed Obligations or this
Undertaking; or (d) if any of the moneys included in the Guaranteed Obligations
have become irrecoverable from Mohawk Servicing, any Originator or Mohawk
Resources for any other reason other than final payment in full of the payment
Guaranteed Obligations in accordance with their terms. This Undertaking shall be
in addition to any other guaranty or other security for the Guaranteed
Obligations, and it shall not be rendered unenforceable by the invalidity of any
such other guaranty or security. In the event that acceleration of the time for
payment of any of the Guaranteed Obligations is stayed upon an Event of
Bankruptcy of Mohawk Servicing, any Originator or Mohawk Resources or for any
other reason with respect to Mohawk Servicing, any Originator or Mohawk
Resources, all such amounts then due and owing with respect to the Guaranteed
Obligations under the terms of the Agreements, or any other agreement
evidencing, securing or otherwise executed in connection with the Guaranteed
Obligations, shall be immediately due and payable by Performance Guarantor.

SECTION 6. REPRESENTATIONS AND WARRANTIES.

Performance Guarantor hereby represents and warrants to Recipient that:

(a) Existence and Standing. Performance Guarantor (a) is duly organized, validly
existing and, as applicable, in good standing or the equivalent thereof (to the
extent applicable) under the Laws of the jurisdiction of its incorporation,
(b) has all requisite power and authority and all requisite governmental
licenses, authorizations, consents and approvals to (i) own or lease its assets
and carry on its business and (ii) execute, deliver and perform its obligations
under this Undertaking, and (c) is duly qualified and is licensed and, as
applicable, in good standing or the equivalent thereof (to the extent
applicable) under the Laws of each jurisdiction where its ownership, lease or
operation of properties or the conduct of its business requires such
qualification or license; except in each case referred to in clause (b)(i) or
(c), to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect.

(b) Authorization, Execution and Delivery; Binding Effect. The execution,
delivery and performance by Performance Guarantor of this Undertaking, have been
duly authorized by all necessary corporate action, and do not and will not
(a) contravene the terms of any of Performance Guarantor’s organization
documents; (b) conflict with or result in any breach or contravention of, or the
creation of any Adverse Claim under (i) any material provision of any security
issued by Performance Guarantor or of any agreement, instrument or other written
undertaking to which Performance Guarantor is a party or by which it or any of
its property is bound or (ii) any order, injunction, writ or decree of any
Governmental Authority or any arbitral award to which Performance Guarantor or
its property is subject; or (c) violate any Law. This Undertaking has been duly
executed and delivered by Performance Guarantor. This Undertaking constitutes
the

 

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legal, valid and binding obligation of Performance Guarantor enforceable against
Performance Guarantor in accordance with its terms; provided that the
enforceability hereof is subject in each case to general principles of equity
and to bankruptcy, insolvency and similar Laws affecting the enforcement of
creditors' rights generally.

(c) Financial Statements. The audited consolidated financial statements of
Performance Guarantor and its consolidated Subsidiaries dated as of December 31,
2010 and December 31, 2011 heretofore delivered to Recipient (i) were prepared
in accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein; and (ii) fairly present in
all material respects the financial condition of the Performance Guarantor and
its consolidated Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein. Since December 31, 2011, there has been no event or circumstance
(including, without limitation, any casualty event), either individually or in
the aggregate, that has had or could reasonably be expected to have a Material
Adverse Effect.

SECTION 7. SUBROGATION; SUBORDINATION.

Notwithstanding anything to the contrary contained herein, until the Guaranteed
Obligations are paid in full Performance Guarantor: (a) will not enforce or
otherwise exercise (i) any right of subrogation (whether contractual, under §509
of the Bankruptcy Code, at law or in equity or otherwise) to any of the rights
or claims of Recipient, any Agent, or any Lender against Mohawk Servicing, any
Originator or Mohawk Resources and (ii) any contractual, statutory or legal or
equitable rights of contribution, reimbursement, indemnification and similar
rights and “claims” (as that term is defined in the Bankruptcy Code) which the
Performance Guarantor might now have or hereafter acquire against any of the
Originators, Mohawk Servicing or Mohawk Resources that arise from the existence
or performance of the Performance Guarantor’s obligations hereunder, and
(b) will not claim any setoff, recoupment or counterclaim against Mohawk
Servicing, any Originator or Mohawk Resources in respect of any liability of
Performance Guarantor to Mohawk Servicing, any Originator or Mohawk Resources.
The payment of any amounts due with respect to any indebtedness of Mohawk
Servicing, any Originator or Mohawk Resources now or hereafter owed to
Performance Guarantor is hereby subordinated to the prior payment in full of all
of the Guaranteed Obligations. Performance Guarantor agrees that, after the
occurrence of any default in the payment or performance of any of the Guaranteed
Obligations, Performance Guarantor will not demand, sue for or otherwise attempt
to collect any such indebtedness of Mohawk Servicing, any Originator or Mohawk
Resources to Performance Guarantor until all of the Guaranteed Obligations shall
have been paid and performed in full. If, notwithstanding the foregoing
sentence, Performance Guarantor shall collect, enforce or receive any amounts in
respect of such indebtedness while any Obligations are still unperformed or
outstanding, such amounts shall be collected, enforced and received by
Performance Guarantor as trustee for Recipient (and its assigns) and be paid
over to Recipient (or its assigns) on account of the Guaranteed Obligations
without affecting in any manner the liability of Performance Guarantor under the
other provisions of this Undertaking. The provisions of this Section 7 shall be
supplemental to and not in derogation of any rights and remedies of Recipient
under any separate subordination agreement which Recipient may at any time and
from time to time enter into with Performance Guarantor.

 

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SECTION 8. TERMINATION OF PERFORMANCE UNDERTAKING.

Subject to Section 9, Performance Guarantor’s obligations hereunder with respect
to the Servicer Guaranteed Obligations shall continue in full force and effect
until the earlier of (i) the date on which the Servicing Agreement is terminated
in accordance with its terms, (ii) the date on which Mohawk Servicing is no
longer the Servicer under the Servicing Agreement and the Credit and Security
Agreement, except as to the Servicing Guaranteed Obligations incurred prior to
such time which remain unsatisfied and (iii) the date on which all Servicer
Guaranteed Obligations have been satisfied in full; provided, however, in any
case, the Performance Guarantor’s obligations hereunder with respect to any
Servicer Guaranteed Obligations incurred prior to any such date or which
expressly survive the termination of the Servicing Agreement or the Credit and
Security Agreement shall remain in full force and effect thereafter. Subject to
Section 9, Performance Guarantor’s obligations hereunder with respect to the
Originator Guaranteed Obligations shall continue in full force and effect until
all Originator Guaranteed Obligations have been satisfied in full, provided,
however, that the Performance Guarantor’s obligations hereunder with respect to
any Originator Guaranteed Obligations which expressly survive the termination of
the Sale Agreement shall remain in full force and effect thereafter. Subject to
Section 9, Performance Guarantor’s obligations hereunder with respect to the
Resources Guaranteed Obligations shall continue in full force and effect until
all Resources Guaranteed Obligations have been satisfied in full, provided,
however, that the Performance Guarantor’s obligations hereunder with respect to
any Resources Guaranteed Obligations which expressly survive the termination of
the Credit and Security Agreement or the Demand Note shall remain in full force
and effect thereafter. No invalidity, irregularity or unenforceability by reason
of any Debtor Relief Law, or any Law of any Governmental Authority purporting to
reduce, amend or otherwise affect the Guaranteed Obligations shall impair,
affect, be a defense to or claim against the obligations of Performance
Guarantor under this Undertaking.

SECTION 9. EFFECT OF BANKRUPTCY.

Subject to Sections 2 and 8 hereof, this Performance Undertaking shall survive
an Event of Bankruptcy of Mohawk Servicing, any Originator or Mohawk Resources
and the commencement of any case or proceeding by or against Mohawk Servicing,
any Originator or Mohawk Resources under any Debtor Relief Law. No automatic
stay under any Debtor Relief Law with respect to Mohawk Servicing, any
Originator or Mohawk Resources is subject shall postpone the obligations of
Performance Guarantor under this Undertaking.

This Undertaking shall continue to be effective or be reinstated, as the case
may be, if at any time payment, in whole or in part, of any of the Guaranteed
Obligations is rescinded or must otherwise be restored or returned by Recipient
(or its assigns) upon an Event of Bankruptcy of Mohawk Servicing, any
Originator, Mohawk Resources or the Performance Guarantor, or as a result of the
appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to Mohawk Servicing, any Originator, Mohawk Resources or the
Performance Guarantor or any substantial part of any such Person’s respective
property, all as though such payment had not been made, notwithstanding any
termination of this Undertaking, the Credit and Security Agreement, the
Servicing Agreement the Sale Agreement, the Demand Note or any other documents
relating thereto.

 

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SECTION 10. TAXES.

All payments to be made by Performance Guarantor hereunder shall be made free
and clear of any deduction or withholding. If Performance Guarantor is required
by law to make any deduction or withholding on account of tax or otherwise from
any such payment, the sum due from it in respect of such payment shall be
increased to the extent necessary to ensure that, after the making of such
deduction or withholding, Recipient receive a net sum equal to the sum which
they would have received had no deduction or withholding been made.

SECTION 11. FURTHER ASSURANCES.

Performance Guarantor agrees that it will from time to time, at the request of
Recipient (or its assigns), provide information relating to the business and
affairs of Performance Guarantor as Recipient (or its assigns) may reasonably
request.

SECTION 12. SUCCESSORS AND ASSIGNS; PLEDGE TO ADMINISTRATIVE AGENT.

This Undertaking shall be binding upon Performance Guarantor, its successors and
permitted assigns, and shall inure to the benefit of and be enforceable by
Recipient and its successors and permitted assigns (including, for the avoidance
of any doubt, the Administrative Agent). Neither party may assign or transfer
any of its rights or obligations hereunder without the prior written consent of
each of Recipient and each Agent; provided, however, that Performance Guarantor
hereby acknowledges and consents to Recipient’s grant of a security interest in
this Undertaking to Administrative Agent for the benefit of the Secured Parties
as part of the Collateral for the Secured Obligations to Secured Parties under
the Credit and Security Agreement, and that the Administrative Agent, its
successors and permitted assigns, is vested with all rights granted to the
Recipient herein. The Performance Guarantor hereby agrees that from the date
hereof until the later to occur of payment and performance in full of the
Guaranteed Obligations to the Secured Parties and the Final Payout Date, the
Administrative Agent shall have the non-exclusive right to enforce this
Undertaking against the Performance Guarantor in the Recipient’s name, place and
stead.

SECTION 13. AMENDMENTS AND WAIVERS.

No amendment or waiver of any provision of this Undertaking nor consent to any
departure by Performance Guarantor therefrom shall be effective unless the same
shall be in writing and signed by Recipient, the Agents and Performance
Guarantor. No failure on the part of Recipient to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.

 

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SECTION 14. NOTICES.

All notices and other communications provided for hereunder shall be made in
writing and shall be addressed as follows: if to Performance Guarantor, at the
address set forth beneath its signature hereto, and if to Recipient, at the
addresses set forth beneath its signature hereto, or at such other addresses as
each of Performance Guarantor or any Recipient may designate in writing to the
other. Any notice by any party to the other must include a copy to the
Administrative Agent at the address specified in the Credit and Security
Agreement. Each such notice or other communication shall be effective (1) if
given by facsimile or electronic mail, upon the receipt thereof, (2) if given by
mail, three (3) Business Days after the time such communication is deposited in
the mail with first class postage prepaid or (4) if given by any other means,
when received at the address specified in this Section 14.

SECTION 15. GOVERNING LAW.

This undertaking shall, in accordance with Section 5-1401 of the General
Obligations Law of the State of New York, be governed by, and construed in
accordance with, the laws of the State of New York without regard to any
conflict of laws principles thereof that would call for the application of the
laws of any other jurisdiction.

SECTION 16. CONSENT TO JURISDICTION.

Each of performance guarantor and recipient hereby irrevocably submits to the
non-exclusive jurisdiction of any United States Federal courts for the Southern
District of New York in any action or proceeding arising out of or relating to
this undertaking, the agreements or any other document executed in connection
therewith or delivered thereunder and each of the performance guarantor and
recipient hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in any such court and irrevocably waives
any objection it may now or hereafter have as to the venue of any such suit,
action or proceeding brought in such a court or that such court is an
inconvenient forum.

SECTION 17. WAIVER OF JURY TRAIL.

EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY LOAN PARTY PURSUANT TO THIS
AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

SECTION 18. BANKRUPTCY PETITION.

Performance Guarantor hereby covenants and agrees that, prior to the date that
is one year and one day after the payment in full of all outstanding senior
Indebtedness of Recipient, it will not institute against, or join any other
Person in instituting against, Recipient any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.

 

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SECTION 19. MISCELLANEOUS.

This Undertaking constitutes the entire agreement of Performance Guarantor with
respect to the matters set forth herein. The rights and remedies herein provided
are cumulative and not exclusive of any remedies provided by law or any other
agreement, and this Undertaking shall be in addition to any other guaranty of or
collateral security for any of the Guaranteed Obligations. The provisions of
this Undertaking are severable, and in any action or proceeding involving any
state corporate law, or any Debtor Relief Law, if the obligations of Performance
Guarantor hereunder would otherwise be held or determined to be avoidable,
invalid or unenforceable on account of the amount of Performance Guarantor’s
liability under this Undertaking, then, notwithstanding any other provision of
this Undertaking to the contrary, the amount of such liability shall, without
any further action by Performance Guarantor or Recipient, be automatically
limited and reduced to the highest amount that is valid and enforceable as
determined in such action or proceeding. Any provisions of this Undertaking
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Unless otherwise
specified, references herein to “Section” shall mean a reference to sections of
this Undertaking.

[SIGNATURE PAGE TO FOLLOW]

 

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IN WITNESS WHEREOF, Performance Guarantor has caused this Undertaking to be
executed and delivered as of the date first above written.

 

MOHAWK INDUSTRIES, INC. By       Name:                            
                                                          
Title:                                                                      
                 Address for Notices:

Mohawk Industries, Inc.

160 South Industrial Boulevard

Calhoun, Georgia 30301

Attn: James T. Lucke, General Counsel

Phone: (706) 624-2660

Fax: (706) 624-2483

 

Acknowledged and Agreed: MOHAWK FACTORING, LLC By      
Name:                                                                      
           Title:                            
                                                     

Address for Notices:

Mohawk Factoring, LLC

300 Delaware Avenue, Suite 1273-D

Wilmington, Delaware, 19801

Attn: John J. Koach, Secretary and Assistant Treasurer

Phone: (302) 576-2843

Fax: (302) 658-4269

With a copy to:

Attn: James T. Lucke, General Counsel

Phone: (706) 624-2660

Fax: (706) 624-2483

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EXHIBIT X

FORM OF REDUCTION NOTICE

dated                      , 201  

SunTrust Bank

3333 Peachtree Road NE - 10th Floor East

Atlanta, Georgia 30326

Attention: Asset Securitization Funding Desk

Ladies and Gentlemen:

Reference is made to the Credit and Security Agreement dated as of December 19,
2012 (as amended, supplemented or otherwise modified from time to time, the
“Credit Agreement”) among Mohawk Factoring, LLC (the “Borrower”), Mohawk
Servicing, LLC, as initial Servicer, the Lenders thereunder, the Co-Agents
thereunder and SunTrust Bank, as Administrative Agent. Capitalized terms defined
in the Credit Agreement are used herein with the same meanings.

Pursuant to Section 1.3, Borrower is hereby delivering this Reduction Notice.
The Proposed Reduction Date is                      , 201   1 and (ii) the
Aggregate Reduction is $            .2

IN WITNESS WHEREOF, Borrower has caused this Borrowing Request to be executed
and delivered as of this             day of                      , 201  .

 

MOHAWK FACTORING, LLC, as Borrower By       Name:                            
                                                          
Title:                                                                      
                

 

1 

Notice of Reduction is to be delivered 2 Business Days prior to Proposed
Reduction Date

2 

Reduction Amount to be at least $1,000,000 and in increments of $100,000
thereafter

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EXHIBIT XI

FORM OF AGGREGATE COMMITMENT INCREASE REQUEST

                     , 201  

 

To: SUNTRUST BANK, as Administrative Agent for the Lenders and Co-Agents party
to the Credit and Security Agreement dated as of December 19, 2012 (as extended,
renewed, amended or restated from time to time, the “Credit Agreement”), among
Mohawk Factoring, LLC (the “Borrower”), Mohawk Servicing, LLC, as initial
Servicer, the Lenders thereunder, the Co-Agents thereunder and SunTrust Bank, as
Administrative Agent. Capitalized terms defined in the Credit Agreement are used
herein with the same meanings.

Ladies and Gentlemen:

The undersigned, Mohawk Factoring, LLC (the “Borrower”) hereby refers to the
Credit Agreement and requests that the Administrative Agent consent to an
increase in the Aggregate Commitment (the “Aggregate Commitment Increase”), in
accordance with Section 1.7 of the Credit Agreement, to be effected by [an
increase in the Commitment of [name of existing Non-Conduit Lender/Liquidity
Bank] [the addition of [name of new Non-Conduit Lender/Group and Co-Agent] (the
“New Lender”) as a Lender/Group/Co-Agent under the terms of the Credit
Agreement].

After giving effect to such Aggregate Commitment Increase, the Commitment of the
[Non-Conduit Lender/Group] [New Lender] shall be $            .

[Include paragraphs 1-4 for a New Lender]

 

1.         The New Lender hereby confirms that it has received a copy of the
Transaction Documents and the exhibits related thereto, together with copies of
the documents which were required to be delivered under the Credit Agreement as
a condition to the making of the Advances and other extensions of credit
thereunder. The New Lender acknowledges and agrees that it has made and will
continue to make, independently and without reliance upon the Administrative
Agent, any other Co-Agent or any other Lender and based on such documents and
information as it has deemed appropriate, its own credit analysis and decisions
relating to the Credit Agreement. The New Lender further acknowledges and agrees
that none of the Administrative Agent, any other Co-Agent or any other Lender
has made any representations or warranties about the credit worthiness of the
Borrower or any other party to the Credit Agreement or any other Transaction
Document or with respect to the legality, validity, sufficiency or
enforceability of the Credit Agreement or any other Transaction Document or the
value of any security therefor.

 

2.         Except as otherwise provided in the Credit Agreement, effective as of
the date of acceptance hereof by the Administrative Agent, the New Lender
(i) shall be deemed automatically to have become a party to the Credit Agreement
and have all the rights and obligations of a “Lender” under the Credit Agreement
as if it were an original signatory thereto and (ii) agrees to be bound by the
terms and conditions set forth in the Credit Agreement as if it were an original
signatory thereto.

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3.         The New Lender shall deliver to the Administrative Agent such
information and shall complete such forms as are reasonably requested of the New
Lender by the Administrative Agent.

 

4.         [The New Lender has delivered, if appropriate, to the Borrower and
the Administrative Agent (or is delivering to the Borrower and the
Administrative Agent concurrently herewith) the tax forms referred to in
Section 10.3(d) of the Credit Agreement.]?

THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.

The Aggregate Commitment Increase shall be effective when the executed consent
of the Administrative Agent is received or otherwise in accordance with
Section 1.7 of the Loan Agreement, but not in any case prior to             ,
201    . It shall be a condition to the effectiveness of the Aggregate
Commitment Increase that all expenses referred to in Section 1.7 of the Credit
Agreement shall have been paid.

The Borrower hereby certifies that no Unmatured Amortization Event or
Amortization Event has occurred and is continuing and that the Aggregate
Commitment Increase is permitted pursuant to the terms of the Parent Credit
Agreement.

Please indicate the Administrative Agent’s consent to such Aggregate Commitment
Increase by signing the enclosed copy of this letter in the space provided
below.

[SIGNATURE PAGE FOLLOWS]

 

* Insert bracketed paragraph if New Lender is organized under the law of a
jurisdiction other than the United States of America or a state thereof.

 

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Very truly yours,

 

MOHAWK FACTORING, LLC By       Name:                            
                                                          
Title:                                                                      
                

 

[NEW OR EXISTING LENDER INCREASING COMMITMENTS] By      
Name                                                                      
                  Title                            
                                                            

 

The undersigned hereby consents on

this             day of                      , 201  

to the above-requested Aggregate

Commitment Increase.

SUNTRUST BANK, as Administrative Agent By       Name                            
                                                      
Title                                                                      
            

 

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EXHIBIT XII

FORM OF WEEKLY REPORT

 

                    WEEKLY REPORT      

 

   Borrower:   

Mohawk

Factoring,

LLC

      Administrative Agent:   

SunTrust

Bank

Sevicer:   

Mohawk

Servicing,

LLC

        

Pursuant to Section 8.5 of the Credit and Security Agreement, dated as of
December 19, 2012, as amended from time to time, among: Mohawk Factoring, LLC,
Mohawk Servicing LLC, and SunTrust Bank, the Servicer is required to prepare
certain information each Calculation Period regarding the Receivables. The
undersigned, a duly authorized representative of the Servicer, does hereby
certify that the information provided is true and as of the date hereof, to the
best knowledge of the undersigned, the Servicer has performed in all material
respects all of its obligations under the Credit and Security Agreement.

 

 

ACCOUNTS RECEIVABLE

AGING

               RESERVE CALCULATION          Total               Dynamic
Calculation (prior month end)         (in $)   

(% of

Total)

         Required Reserve Factor Floor (prior month end)     

Current

                   Reserve Percentage        

1-30 days past billing

                   Required Reserve (RR)        

31-60 days past

billing

                          

61-90 days past

billing

                          

91-120 days past

billing

                   NET POOL BALANCE       (in $)

 

120+ days past billing

                   Outstanding Receivables Balance        

61-90 credit balances

                   -   A/R 61+ DPD        

91-120 credit balances

                   -  

Other Ineligible Receivables (% of

prior month end)

    

120+ credit balances

                   Eligible Receivables        

Total

                   -   Contractual Dilution Reserve                     -  
Canadian Reserve Amount (% of prior month end)                     -   Excess
Obligor Concentrations (% of prior month end)                -   Excess Canadian
Receivables (% of prior month end)                -   Excess Foreign Receivables
(% of prior month end)                -   Excess Payment Terms (% of prior month
end)                     -   Excess Gov't Receivables (% of prior month end)   
                 Net Pool Balance (NPB)                        LOAN INFORMATION
      (in $)                Aggregate Loan Amount (ALA) as of:                 
   Facility Limit:                        Borrowing Base:                    

Addtl Amt Avail. / (Required Paydown) as of:

                 Borrowing Base in Compliance as of:     

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               Borrowings after       -             Paydowns after       -      
      Paydown Date (if applicable)       -             ALA following Borrowing /
Paydown as of: Weekly Reporting Date       -             Addtl Amt Avail. /
(Required Paydown) as of: Weekly Reporting Date       -             Borrowing
Base in Compliance as of: Weekly Reporting Date                               
                 Allocations    %    Loans                                      
        -                        -                            -            
Total       - Company                                                 Name:   
                    Title:                        Date:                       

 

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Schedule A

Commitments

SunTrust Bank: $110,000,000

The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch: $100,000,000

Mizuho Corporate Bank, Ltd.: $90,000,000

 

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