Exhibit 10.1

EXECUTION COPY

RECEIVABLES SALE AND SERVICING AGREEMENT

Dated as of September 26, 2007

by and among

EACH OF THE ENTITIES PARTY HERETO FROM TIME TO TIME

AS ORIGINATORS,

REXNORD FUNDING LLC,

as Buyer,

and

REXNORD INDUSTRIES, LLC,

as Servicer

 

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TABLE OF CONTENTS

 

          Page ARTICLE I DEFINITIONS AND INTERPRETATION    1

Section 1.01.

   Definitions    1

Section 1.02.

   Rules of Construction    1 ARTICLE II TRANSFERS OF RECEIVABLES    2

Section 2.01.

   Agreement to Transfer    2

Section 2.02.

   Grant of Security Interest    4

Section 2.03.

   Originators Remain Liable    4

Section 2.04.

   Sale Price Credits    5 ARTICLE III CONDITIONS PRECEDENT    5

Section 3.01.

   Conditions Precedent to Initial Transfer    5

Section 3.02.

   Conditions Precedent to all Transfers    5 ARTICLE IV REPRESENTATIONS,
WARRANTIES AND COVENANTS    6

Section 4.01.

   Representations and Warranties    6

Section 4.02.

   Affirmative Covenants of the Originators    13

Section 4.03.

   Negative Covenants of the Originators    20

Section 4.04.

   Breach of Representations, Warranties or Covenants    22 ARTICLE V
INDEMNIFICATION    23

Section 5.01.

   Indemnification    23

Section 5.02.

   Indemnities by the Servicer    25 ARTICLE VI MISCELLANEOUS    26

Section 6.01.

   Notices    26

Section 6.02.

   No Waiver; Remedies    27

Section 6.03.

   Successors and Assigns    27

Section 6.04.

   Termination; Survival of Obligations    28

Section 6.05.

   Complete Agreement; Modification of Agreement    28

Section 6.06.

   Amendments and Waivers    28

Section 6.07.

   Governing Law; Consent to Jurisdiction; Waiver of Jury Trial    29

Section 6.08.

   Counterparts    30

Section 6.09.

   Severability    30

Section 6.10.

   Section Titles    30

Section 6.11.

   No Setoff    30

Section 6.12.

   Confidentiality    30

Section 6.13.

   Further Assurances    32

 

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Section 6.14.

   Fees and Expenses    32

Section 6.15.

   Nonrecourse Obligations    32

ARTICLE VII SERVICER PROVISIONS

   33

Section 7.01.

   Appointment of the Servicer    33

Section 7.02.

   Duties and Responsibilities of the Servicer    33

Section 7.03.

   Collections on Receivables    34

Section 7.04.

   Covenants of the Servicer    35

Section 7.05.

   Reporting Requirements of the Servicer    39

ARTICLE VIII EVENTS OF SERVICER TERMINATION

   39

Section 8.01.

   Events of Servicer Termination    39

ARTICLE IX SUCCESSOR SERVICER PROVISIONS

   41

Section 9.01.

   Servicer Not to Resign    41

Section 9.02.

   Appointment of the Successor Servicer    41

Section 9.03.

   Duties of the Servicer    41

Section 9.04.

   Effect of Termination or Resignation    43

Section 9.05.

   Power of Attorney    43

Section 9.06.

   No Proceedings    43

 

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

RECITALS

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

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

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

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

AGREEMENT

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

ARTICLE I

DEFINITIONS AND INTERPRETATION

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

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

 

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ARTICLE II

TRANSFERS OF RECEIVABLES

Section 2.01. Agreement to Transfer.

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

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

 

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

ARTICLE III

CONDITIONS PRECEDENT

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

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

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

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

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

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

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

 

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

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

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

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND COVENANTS

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

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

 

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

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

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

 

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

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

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

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

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

 

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

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

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

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

(m) ERISA.

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

 

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

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

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

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

 

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

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

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

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

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

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

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

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

 

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

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

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

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

(z) Supplementary Representations.

(i) Receivables; Collection-Accounts.

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

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

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

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

 

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(iv) Priority.

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

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

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

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

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

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

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

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

 

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

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

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

 

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

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

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

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

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

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

 

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

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

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

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

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

 

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

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

(i) Separate Identity.

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

(ii) The financial statements of the Parent and its consolidated Subsidiaries
shall disclose the effects of each Originator’s transactions in accordance with
GAAP and, in addition, disclose that (A) Buyer’s sole business consists of the
purchase of the Receivables from the Originators and the subsequent financing of
such Receivables pursuant to the Funding Agreement, (B) Buyer is a separate
legal entity with its own separate creditors who will be entitled, upon its
liquidation, to be satisfied out of Buyer’s assets prior to any value in Buyer
becoming available to Buyer’s equity holders and (C) the assets of Buyer are not
available to pay creditors of any Originator or any other Affiliate of such
Originator.

(iii) The resolutions, agreements and other instruments underlying the
transactions described in this Agreement shall be continuously maintained by
each Originator as official records.

(iv) Each Originator shall, and shall cause each other member of the Parent
Group to, maintain an arm’s-length relationship with Buyer and shall not hold
itself out as being liable for the Debts of Buyer.

(v) Each Originator shall, and shall cause each other member of the Parent Group
to, keep its assets and its liabilities wholly separate from those of Buyer.

(vi) Each Originator shall, and shall cause each other member of the Parent
Group to, conduct its business solely in its own name or the name of the Member
or Parent through its duly Authorized Officers or agents and in a manner
designed not to mislead third parties as to the separate identity of Buyer.

(vii) No Originator shall (and each Originator shall cause each other member of
the Parent Group not to) mislead third parties by conducting or appearing to
conduct business on behalf of Buyer or expressly or impliedly representing or
suggesting that such Originator or any other member of the Parent Group is
liable or responsible for the Debts of Buyer or that the assets of such
Originator or any other member of the Parent Group are available to pay the
creditors of Buyer.

 

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(viii) The operating expenses and liabilities of Buyer shall be paid from
Buyer’s own funds and not from any funds of any Originator or other member of
the Parent Group.

(ix) Each Originator shall, and shall cause each other member of the Parent
Group to, at all times have stationery and other business forms and a mailing
address and telephone number separate from those of Buyer.

(x) Each Originator shall, and shall cause each other member of the Parent Group
to, at all times limit its transactions with Buyer only to those expressly
permitted hereunder or under any other Related Document.

(xi) Each Originator shall, and shall cause each other member of the Parent
Group to, comply with (and cause to be true and correct) each of the facts and
assumptions contained in the opinions of Quarles & Brady LLP delivered pursuant
to the Schedule of Documents.

(j) ERISA and Environmental Notices. Each Originator shall give Buyer prompt
written notice of (i) any event that could reasonably be expected to result in
the imposition of a material Lien under Section 412 of the IRC or Section 302 or
4068 of ERISA, (ii) any event that could reasonably be expected to result in the
incurrence by any Originator of any material liabilities under Title IV of ERISA
(other than premium payments arising in the ordinary course of business), and
(iii) any overt written claims against the Parent, any Originator or any other
material domestic Subsidiary of the Parent based on environmental laws which,
individually or in the aggregate, could reasonably be expected to exceed
$10,000,000.

(k) Payment, Performance and Discharge of Obligations.

(i) Subject to Section 4.02(k)(ii), each Originator shall (and shall cause the
Servicer, the Parent and each of their material domestic subsidiaries to) pay,
perform and discharge or cause to be paid, performed and discharged all of its
material obligations and liabilities, including all material Charges upon its
income and properties and all lawful claims for labor, materials, supplies and
services, promptly when due, in each case where the failure to do so would
reasonably be expected to have a Material Adverse Effect.

(ii) Each Originator and the Servicer, the Parent and each of their material
domestic subsidiaries may in good faith contest, by appropriate proceedings, the
validity or amount of any Charges or claims described in Section 4.02(k)(i);
provided, that (A) adequate reserves with respect to such contest are maintained
on the books of such Originator or such other Person, as applicable, in
accordance with GAAP, (B) such contest is maintained and prosecuted continuously
and with diligence, (C) none of the Receivables may become subject to forfeiture
or loss as a result of such contest, (D) no Lien may be imposed on any of the
Receivables to secure payment of such Charges or claims other than inchoate tax
liens and (E) Buyer has advised such Originator in writing that Buyer reasonably
believes that nonpayment or nondischarge thereof could not reasonably be
expected to have or result in a Material Adverse Effect.

 

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(l) Deposit of Collections. Each Originator shall (and shall cause each of its
Affiliates to) (i) instruct all Obligors to remit all payments with respect to
any Receivables directly into a Collection Account, and (ii) deposit or cause to
be deposited promptly into a Collection Account, and in any event no later than
the first Business Day after receipt thereof, all Collections it may receive in
respect of Transferred Receivables (and until so deposited, all such Collections
shall be held in trust for the benefit of Buyer and its assigns (including the
Administrative Agent and the Lenders)). No Originator shall make or permit to be
made deposits into a Lockbox or a Collection Account other than in accordance
with this Agreement and the other Related Documents. Without limiting the
generality of the foregoing, each Originator shall ensure that no Collections or
other proceeds with respect to a Receivable reconveyed to it pursuant to
Section 4.04 hereof are paid or deposited into any Lockbox or Collection
Account.

(m) Accounting Changes. If any Accounting Changes occur and such changes result
in a change in the standards or terms used herein, then the parties hereto agree
to enter into good faith negotiations in order to amend such provisions so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating the financial condition of such Persons and their
Subsidiaries shall be the same after such Accounting Changes as if such
Accounting Changes had not been made. If the parties hereto agree upon the
required amendments to this Agreement, then after appropriate amendments have
been executed and the underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained herein shall, only to the extent of
such Accounting Change, refer to GAAP consistently applied after giving effect
to the implementation of such Accounting Change. If such parties cannot agree
upon the required amendments within 30 days following the date of implementation
of any Accounting Change, then all financial statements delivered and all
standards and terms used herein shall be prepared, delivered and used without
regard to the underlying Accounting Change.

(n) Originators to Maintain Perfection and Priority. In order to evidence the
interests of the Buyer under this Agreement, each Originator shall, from time to
time take such action, or execute and deliver such instruments (other than
filing financing statements) as may be necessary or advisable (including, such
actions as are reasonably requested by the Buyer) to maintain and perfect, as a
first-priority interest, the Buyer’s ownership and security interest in the
Receivables and all other assets sold to the Buyer pursuant hereto. Each
Originator shall, from time to time and within the time limits established by
law, prepare and present to the Buyer for the Buyer’s authorization and approval
all financing statements, amendments, continuations or initial financing
statements in lieu of a continuation statement in the, or other filings
necessary to continue, maintain and perfect the Buyer’s ownership and security
interest in the Receivables and all other assets sold to the Buyer pursuant
hereto as a first-priority interest. The Buyer’s approval of such filings shall
authorize the Originators to file such financing statements under the UCC
without the signature of the Buyer where allowed by applicable law.
Notwithstanding anything else in the Related Documents to the contrary, neither
the Servicer nor any Originator shall have any authority to file a termination,
partial termination, release, partial release or any amendment that deletes the
name of a debtor or excludes collateral of any such financing statements,
without the prior written consent of the Buyer. Originator agrees to maintain
perfection and priority of the security interest in accordance with Section 6.13
hereof.

 

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Section 4.03. Negative Covenants of the Originators. Each Originator covenants
and agrees that, without the prior written consent of Buyer, from and after the
Closing Date and until the Termination Date:

(a) Sale of Receivables and Related Assets. No Originator shall sell, transfer,
convey, assign (by operation of law or otherwise) or otherwise dispose of, or
assign any right to receive income in respect of, any of its Receivables or
Contracts therefor, or any of its rights with respect to any Lockbox or
Collection Account, except for the sales, transfers, conveyances, assignments or
dispositions expressly contemplated hereunder.

(b) Liens. No Originator shall create, incur, assume or permit to exist any
Adverse Claim on or with respect to its Receivables (whether now owned or
hereafter acquired) except for Permitted Encumbrances that do not attach to
Transferred Receivables. No Originator nor the Parent, Servicer or any material
domestic subsidiary of any of the foregoing shall create, incur, assume or
permit to exist any Lien upon any of its property or receivables whether now
owned or hereafter acquired, except for (i) Liens permitted pursuant to the
Credit Agreement as in effect from time to time or any credit agreement
effecting a refinancing of the Debt incurred pursuant to the Credit Agreement
and (ii) Liens created pursuant to the Credit Agreement as in effect from time
to time or any credit facility effecting a refinancing of the Debt incurred
pursuant to the Credit Agreement; provided that any such credit facility
expressly excludes all Transferred Receivables from any such Lien and the terms
and conditions of any such credit facility are not otherwise inconsistent with
the terms and conditions of this Agreement or any other Related Document (but in
any event which terms and conditions are consistent with the provisions of the
Credit Agreement relating to the transactions contemplated by this Agreement and
the other Related Documents).

(c) Modifications of Receivables or Contracts. No Originator shall extend,
amend, forgive, discharge, compromise, cancel or otherwise modify the terms of
any Transferred Receivable, or amend, modify or waive any term or condition of
any Contract therefor.

(d) Sale Characterization. No Originator shall (and each Originator shall cause
each other member of the Parent Group not to) make statements or disclosures or
prepare any financial statements for any purpose, including for federal income
tax, reporting or accounting purposes, that shall account for the transactions
contemplated by this Agreement in any manner other than with respect to the Sale
of each Sold Receivable originated or acquired by it, as a true sale or absolute
assignment of its full right, title and ownership interest in such Transferred
Receivable to Buyer.

(e) Capital Structure and Business. No Originator shall (and each Originator
shall cause each other member of the Parent Group not to) make any changes in
any of its business objectives, purposes, operations or its capital structure
that could reasonably be expected to have or result in a Material Adverse
Effect. No Originator shall change the type of entity it is, its jurisdiction of
organization or formation or its organizational identification number, if any,
issued by its state of organization or formation, except upon 30 days’ prior
written notice to Buyer and with respect to which jurisdiction all action
requested by Buyer pursuant to Section 6.13 shall have been taken with respect
to the Transferred Receivables.

 

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(f) Actions Affecting Rights. No Originator shall (i) take any action, or fail
to take any action, if such action or failure to take action may interfere with
the enforcement of any rights hereunder or under the other Related Documents,
including rights with respect to the Transferred Receivables; or (ii) fail to
pay any Charge, fee or other obligation of such Originator with respect to the
Transferred Receivables, or fail to defend any action, if such failure to pay or
defend may adversely affect the priority or enforceability of the perfected
title of Buyer to and the sole record and beneficial ownership interest of Buyer
in the Transferred Receivables or, prior to their Transfer hereunder, such
Originator’s right, title or interest therein.

(g) ERISA. No Originator shall, or shall cause or permit any ERISA Affiliate to,
cause or permit to occur an event that could reasonably be expected to result in
the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event which would reasonably be
expected to have a Material Adverse Effect.

(h) Change to Credit and Collection Policies. No Originator shall fail to comply
in any material respect with, and no change, amendment, modification or waiver
shall be made to, the Credit and Collection Policies without the prior written
consent of Buyer.

(i) Adverse Tax Consequences. No Originator shall take or permit to be taken any
action (other than with respect to actions taken or to be taken solely by a
Governmental Authority), or fail or neglect to perform, keep or observe any of
its obligations hereunder or under the other Related Documents, that would have
the effect directly or indirectly of subjecting any payment to Buyer, or to any
assignee who is a resident of the United States of America, to withholding
taxation.

(j) No Proceedings. From and after the Effective Date and until the date one
year plus one day following the Termination Date, no Originator shall, directly
or indirectly, institute or cause to be instituted against Buyer any proceeding
of the type referred to in Sections 8.01(d) and 8.01(e) of the Funding
Agreement.

(k) Mergers, Acquisitions, Sales, etc. No Originator shall (i) be a party to any
merger or consolidation, except a merger or consolidation where an Originator is
the surviving entity or (ii) directly or indirectly sell, transfer, assign,
convey or lease whether in one or a series of transactions, all or substantially
all of its assets other than pursuant hereto. In connection with any merger or
consolidation of an Originator that is permitted pursuant to this
Section 4.03(k), each Originator will (i) provide written notice thereof to the
Buyer, and (ii) take all such actions and deliver, or cause to be delivered,
such opinion letters of counsel, certificates and other agreements that the
Buyer deems reasonably necessary or desirable under the UCC to maintain the
perfection and priority of the Buyer’s ownership interest in the Receivables.

(l) Commingling. No Originator shall (and each Originator shall cause each other
member of the Parent Group not to) deposit or permit the deposit of any funds
that do not constitute Collections of Transferred Receivables into any Lockbox
or Collection Account, provided that after the Commitment Termination Date, so
long as any Transferred Receivables of an Obligor remain unpaid, no Originator
shall instruct such Obligor to remit Collections of any Receivables to any
Person or account other than to a Lockbox or Collection Account. If any funds
not constituting collections of Transferred Receivables are nonetheless
deposited into a Lockbox or Collection Account and such Originator so notifies
Buyer, Buyer shall notify the Administrative Agent to promptly remit any such
amounts to the applicable Originator.

 

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(m) Purchases of Receivables. No Originator shall, directly or indirectly,
purchase any accounts receivable from any Person without the express written
consent of the Buyer.

Section 4.04. Breach of Representations, Warranties or Covenants. Upon discovery
by any Originator or Buyer of any breach of representation, warranty or covenant
described in Section 4.01(g), 4.01(l), 4.01(v), 4.01(w), 4.01(z), 4.02(l),
4.03(a), 4.03(b), 4.03(c), 4.03(d), 4.03(l), and 4.03(m) with respect to any
Transferred Receivable, the party discovering the same shall give prompt written
notice thereof to the other parties hereto. The Originator that breached such
representation, warranty or covenant shall, if requested by notice from Buyer,
on the first Business Day following receipt of such notice, either
(a) repurchase the affected Transferred Receivable from Buyer for cash remitted
to the applicable Collection Account, or (b) transfer ownership of a new
Eligible Receivable or new Eligible Receivables to Buyer on such Business Day,
in each case, in an amount (the “Rejected Amount”) equal to the Billed Amount of
such Transferred Receivable minus the sum of (i) Collections received in respect
thereof plus (ii) the amount of any Dilution Factors taken into account in the
calculation of the Original Sale Price thereof. Each Originator shall ensure
that no Collections or other proceeds with respect to a Transferred Receivable
so reconveyed to it are paid or deposited into any Collection Account.

 

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ARTICLE V

INDEMNIFICATION

Section 5.01. Indemnification. Without limiting any other rights that Buyer or
any of its Stockholders, any of its assignees including the Lenders and the
Administrative Agent, or any of their respective officers, directors, employees,
attorneys, agents or representatives and transferees, successors and assigns
(each, a “Buyer Indemnified Person”) may have hereunder or under applicable law,
each Originator hereby agrees to indemnify and hold harmless each Buyer
Indemnified Person from and against any and all Indemnified Amounts that may be
claimed or asserted against or incurred by any such Buyer Indemnified Person in
connection with or arising out of the transactions contemplated under this
Agreement or under any other Related Document, any actions or failures to act in
connection therewith, including any and all reasonable legal costs and expenses
arising out of or incurred in connection with disputes between or among any
parties to any of the Related Documents, or in respect of any Transferred
Receivable or any Contract therefor or the use by such Originator of the Sale
Price therefor; provided, that no Originator shall be liable for any
indemnification to a Buyer Indemnified Person to the extent that any such
Indemnified Amounts (a) result from such Buyer Indemnified Person’s gross
negligence or willful misconduct, as finally determined by a court of competent
jurisdiction, or (b) constitute recourse for uncollectible or uncollected
Transferred Receivables due to the failure (without cause or justification) or
inability on the part of the related Obligor to perform its obligations
thereunder or the occurrence of any event of bankruptcy with respect to such
Obligor. Subject to clauses (a) and (b) of the proviso in the immediately
preceding sentence, but otherwise without limiting the generality of the
foregoing, each Originator shall pay on demand to each Buyer Indemnified Person
any and all Indemnified Amounts relating to or resulting from:

(i) reliance on any representation or warranty made or deemed made by such
Originator (or any of its officers) under or in connection with this Agreement
or any other Related Document (without regard to any qualifications concerning
the occurrence or non-occurrence of a Material Adverse Effect or similar
concepts of materiality) or on any other information delivered by such
Originator pursuant hereto or thereto that shall have been incorrect when made
or deemed made or delivered;

(ii) the failure by such Originator to comply with any term, provision or
covenant contained in this Agreement, any other Related Document or any
agreement executed in connection herewith or therewith (without regard to any
qualifications concerning the occurrence or non-occurrence of a Material Adverse
Effect or similar concepts of materiality), any applicable law, rule or
regulation with respect to any Transferred Receivable or the Contract therefor,
or the nonconformity of any Transferred Receivable or the Contract therefor with
any such applicable law, rule or regulation;

(iii) the failure to vest and maintain vested in Buyer, or to Transfer to Buyer,
valid and properly perfected title to and sole record and beneficial ownership
of the Receivables that constitute Transferred Receivables, together with all
Collections in respect thereof, free and clear of any Adverse Claim;

(iv) any dispute, claim, offset or defense of any Obligor (other than its
discharge in bankruptcy) to the payment of any Receivable that is the subject of
a

 

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Transfer hereunder (including (x) a defense based on such Receivable or the
Contract therefor not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms (other than as a
result of a discharge in bankruptcy), or any other claim resulting from the sale
of the merchandise or services giving rise to such Receivable or the furnishing
or failure to furnish such merchandise or services or relating to collection
activities with respect to such Receivable (if such collection activities were
performed by any Originator or any Affiliate thereof acting as the Servicer or a
Sub-Servicer) and (y) resulting from or in connection with any Dilution
Factors);

(v) any products liability claim or other claim arising out of or in connection
with merchandise, insurance or services that is the subject of any Contract;

(vi) the commingling of Collections with respect to Transferred Receivables by
any Originator at any time with its other funds or the funds of any other
Person;

(vii) any failure by such Originator to cause the filing of, or any delay in
filing, financing statements or to cause the effectiveness of other similar
instruments or documents under the UCC of any applicable jurisdiction or any
other applicable laws with respect to any Receivable that is the subject of a
Transfer hereunder, any Collections in respect thereof, the Collection Accounts
or the Lockboxes, whether at the time of any such Transfer or at any subsequent
time, in each case, to the extent such filing or effectiveness is necessary to
maintain the perfection and priority of Buyer’s interest in such property;

(viii) any investigation, litigation or proceeding related to this Agreement or
any other Related Document or the ownership of Receivables or Collections with
respect thereto or any other investigation, litigation or proceeding relating to
the Buyer, the Servicer or any Originator in which any Indemnified Person
becomes involved as a result of any of the transactions contemplated hereby or
by any other Related Document;

(ix) any claim brought by any Person other than a Buyer Indemnified Person
arising from any activity by such Originator or any of its Affiliates in
servicing, administering or collecting any Transferred Receivables;

(x) any failure of (x) a Collection Account Bank to comply with the terms of the
applicable Collection Account Agreement, (y) the Concentration Account Bank to
comply with the terms of the Concentration Account Agreement, or (z) the
Borrower Account Bank to comply with the terms of the Borrower Account
Agreement;

(xi) any action or omission by such Originator which reduces or impairs the
rights of the Buyer or any of its assigns with respect to any Transferred
Receivable or the value of any such Receivable;

(xii) any attempt by any Person to void any Transfer or the Lien granted
hereunder under statutory provisions or common law or equitable action;

(xiii) any Termination Event described in Section 8.01(d) or (e); or

 

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(xiv) any withholding, deduction or Charge imposed upon any payments with
respect to any Transferred Receivable, any Borrower Assigned Agreement or any
other Borrower Collateral.

Section 5.02. Indemnities by the Servicer.

(a) Without limiting any other rights that a Buyer Indemnified Person may have
hereunder or under applicable law, the Servicer hereby agrees to indemnify and
hold harmless each Buyer Indemnified Person from and against any and all
Indemnified Amounts that may be claimed or asserted against or incurred by any
such Buyer Indemnified Person in connection with or arising out of the
collection activities of the Servicer hereunder or out of any breach by the
Servicer of its obligations hereunder or under any other Related Document;
provided, that the Servicer shall not be liable for any indemnification to a
Buyer Indemnified Person to the extent that any such Indemnified Amount
(x) results from such Buyer Indemnified Person’s gross negligence or willful
misconduct, in each case as finally determined by a court of competent
jurisdiction, or (y) constitutes recourse for uncollectible or uncollected
Transferred Receivables as a result of the insolvency, bankruptcy or the failure
(without cause or justification) or inability on the part of the related Obligor
to perform its obligations thereunder. Without limiting the generality of the
foregoing, the Servicer shall pay on demand to each Buyer Indemnified Person any
and all Indemnified Amounts relating to or resulting from:

(i) reliance on any representation or warranty made or deemed made by the
Servicer (or any of its officers) under or in connection with this Agreement or
any other Related Document (without regard to any qualifications concerning the
occurrence or non-occurrence of a Material Adverse Effect or similar concepts of
materiality) or on any other information delivered by the Servicer pursuant
hereto or thereto that shall have been incorrect when made or deemed made or
delivered;

(ii) the failure by the Servicer to comply with any term, provision or covenant
contained in this Agreement, any other Related Document or any agreement
executed in connection herewith or therewith (without regard to any
qualifications concerning the occurrence or non-occurrence of a Material Adverse
Effect or similar concepts of materiality), any applicable law, rule or
regulation with respect to any Transferred Receivable or the Contract therefor,
or the nonconformity of any Transferred Receivable or the Contract therefor with
any such applicable law, rule or regulation;

(iii) the imposition of any Adverse Claim with respect to any Transferred
Receivable or the Borrower Collateral as a result of any action taken by the
Servicer;

(iv) any Event of Servicer Termination described in Section 8.01(c) or (d);

(v) the commingling of Collections with respect to Transferred Receivables by
the Servicer at any time with its other funds or the funds of any other Person;

(vi) any investigation, litigation or proceeding relating to the Servicer in
which any Buyer Indemnified Person becomes involved as a result of any of the
transactions contemplated by the Related Documents;

 

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(vii) any action or omission by the Servicer which reduces or impairs the rights
of the Buyer, the Administrative Agent or any Secured Party with respect to any
Transferred Receivable or the value of any Transferred Receivable; or

(viii) any claim brought by any Person other than a Buyer Indemnified Person
arising from any activity by the Servicer or any of its Affiliates in servicing,
administering or collecting an Transferred Receivables.

(b) Any Indemnified Amounts subject to the indemnification provisions of this
Section 5.02 shall be paid by the Servicer to the Buyer Indemnified Person
entitled thereto within five Business Days following demand therefor.

ARTICLE VI

MISCELLANEOUS

Section 6.01. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by email of the signed notice in PDF form or facsimile
transmission (with such email or facsimile promptly confirmed by delivery of a
copy by personal delivery or United States Mail as otherwise provided in this
Section 6.01), (c) one Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number set forth below in this Section 6.01 or to
such other address (or facsimile number) as may be substituted by notice given
as herein provided:

Each Originator:

c/o Rexnord Industries Inc.

4701 West Greenfield Ave.

Milwaukee, Wisconsin 53214

Attention: Chief Financial Officer/Treasurer

Telephone: (414) 643-2344

Facsimile: (414) 643-4584

Buyer:

Rexnord Funding LLC

4701 West Greenfield Ave.

Milwaukee, Wisconsin 53214

Attention: Chief Financial Officer/Treasurer

Telephone: (414) 643-2344

Facsimile: (414) 643-4584

 

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Servicer:

c/o Rexnord Industries Inc.

4701 West Greenfield Ave.

Milwaukee, Wisconsin 53214

Attention: Chief Financial Officer/Treasurer

Telephone: (414) 643-2344

Facsimile: (414) 643-4584

Without limiting the generality of the foregoing, all notices to be provided to
the Buyer hereunder shall be delivered to both the Buyer and the Administrative
Agent under the Funding Agreement, and shall be effective only upon such
delivery to the Administrative Agent in accordance with the terms of the Funding
Agreement. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Buyer) designated in any written
communication provided hereunder to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication. Notwithstanding the foregoing, whenever it
is provided herein that a notice is to be given to any other party hereto by a
specific time, such notice shall only be effective if actually received by such
party prior to such time, and if such notice is received after such time or on a
day other than a Business Day, such notice shall only be effective on the
immediately succeeding Business Day.

Section 6.02. No Waiver; Remedies. Buyer’s failure, at any time or times, to
require strict performance by the Originators of any provision of this Agreement
or any Receivables Assignment shall not waive, affect or diminish any right of
Buyer thereafter to demand strict compliance and performance herewith or
therewith. Any suspension or waiver of any breach or default hereunder shall not
suspend, waive or affect any other breach or default whether the same is prior
or subsequent thereto and whether the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of any
Originator contained in this Agreement or any Receivables Assignment, and no
breach or default by any Originator hereunder or thereunder, shall be deemed to
have been suspended or waived by Buyer unless such waiver or suspension is by an
instrument in writing signed by an officer of or other duly authorized signatory
of Buyer and directed to such Originator specifying such suspension or waiver.
Buyer shall not waive any of the provisions set forth in Section 4.01(z) or
Section 4.02(n) if such waiver would adversely affect the Ratings. Buyer’s
rights and remedies under this Agreement shall be cumulative and nonexclusive of
any other rights and remedies that Buyer may have under any other agreement,
including the other Related Documents, by operation of law or otherwise.
Recourse to the Receivables shall not be required.

Section 6.03. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of each Originator, Servicer and Buyer and their
respective successors and permitted assigns, except as otherwise provided
herein. No Originator nor the Servicer may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder without
the prior express written consent of Buyer. Any such purported assignment,
transfer, hypothecation or other conveyance by any Originator without the prior
express written

 

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consent of Buyer, shall be void. Each Originator and the Servicer acknowledges
that Buyer may assign its rights granted hereunder, including the benefit of any
indemnities under Article V, and upon such assignment, such assignee shall have,
to the extent of such assignment, all rights of Buyer hereunder and, to the
extent permitted under the Funding Agreement, may in turn assign such rights.
Each Originator and the Servicer agrees that, upon any such assignment, such
assignee may enforce directly, without joinder of Buyer, the rights set forth in
this Agreement. All such assignees, including parties to the Funding Agreement
in the case of any assignment to such parties, shall be third party
beneficiaries of, and shall be entitled to enforce Buyer’s rights and remedies
under, this Agreement to the same extent as Buyer or any of its designated
representatives may do. The terms and provisions of this Agreement are for the
purpose of defining the relative rights and obligations of each Originator, the
Servicer and Buyer with respect to the transactions contemplated hereby and,
except for the Secured Parties and the Administrative Agent, no Person shall be
a third party beneficiary of any of the terms and provisions of this Agreement.

Section 6.04. Termination; Survival of Obligations.

(a) 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 the Termination Date.

(b) Except as otherwise expressly provided herein or in any other Related
Document, no termination or cancellation (regardless of cause or procedure) of
any commitment made by Buyer under this Agreement shall in any way affect or
impair the obligations, duties and liabilities of any Originator, the Servicer
or the rights of Buyer relating to any unpaid portion of any and all recourse
and indemnity obligations of such Originator or the Servicer to Buyer, including
those set forth in Sections 4.04, 5.01, 6.12, 6.14 and 6.15, due or not due,
liquidated, contingent or unliquidated or any transaction or event occurring
prior to such termination, or any transaction or event, the performance of which
is required after the Commitment Termination Date. Except as otherwise expressly
provided herein or in any other Related Document, all undertakings, agreements,
covenants, warranties and representations of or binding upon each Originator and
the Servicer, and all rights of Buyer hereunder, all as contained in the Related
Documents, shall not terminate or expire, but rather shall survive any such
termination or cancellation and shall continue in full force and effect until
the Termination Date; provided, that the rights and remedies pursuant to
Sections 4.04, the indemnification and payment provisions of Article V, and the
provisions of Sections 4.03(j), 6.03, 6.12 and 6.14 shall be continuing and
shall survive any termination of this Agreement.

Section 6.05. Complete Agreement; Modification of Agreement. This Agreement and
the other Related Documents constitute the complete agreement between the
parties with respect to the subject matter hereof and thereof, supersede all
prior agreements and understandings relating to the subject matter hereof and
thereof, and may not be modified, altered or amended except as set forth in
Section 6.06.

Section 6.06. Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Agreement, or any consent to any departure by
any Originator therefrom, shall in any event be effective unless the same shall
be in writing and signed by each

 

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of the parties hereto; provided, that, prior to the Termination Date, no
amendment, modification, termination or waiver of any provision of this
Agreement, or any consent to any departure by any Originator or the Servicer
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent. No consent or demand in any case shall,
in itself, entitle any party to any other consent or further notice or demand in
similar or other circumstances.

Section 6.07. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.

(a) THIS AGREEMENT AND EACH RELATED DOCUMENT (EXCEPT TO THE EXTENT THAT ANY
RELATED DOCUMENT EXPRESSLY PROVIDES TO THE CONTRARY) AND THE OBLIGATIONS ARISING
HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS
(INCLUDING 735 ILCS SECTION 105/5-1 ET. SEQ. BUT OTHERWISE WITHOUT REGARD TO
CONFLICT OF LAWS PROVISIONS), EXCEPT TO THE EXTENT THAT THE PERFECTION, EFFECT
OF PERFECTION OR PRIORITY OF THE INTERESTS OF THE BUYER IN THE RECEIVABLES OR
REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS
OF A JURISDICTION OTHER THAN THE STATE OF ILLINOIS, AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA.

(b) EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THEM PERTAINING TO THIS AGREEMENT
OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED
DOCUMENT; PROVIDED, THAT EACH PARTY HERETO ACKNOWLEDGES THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO,
ILLINOIS; PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE BUYER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO REALIZE ON THE RECEIVABLES OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OF THE ORIGINATORS ARISING HEREUNDER, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF BUYER. EACH PARTY HERETO SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION THAT SUCH PARTY MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER

 

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PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT
THE ADDRESS SET FORTH IN SECTION 6.01 HEREOF AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH PARTY’S ACTUAL RECEIPT THEREOF OR
THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID.
NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

(c) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS
ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON
AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 6.08. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.

Section 6.09. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement.

Section 6.10. Section Titles. The section titles and table of contents contained
in this Agreement are provided for ease of reference only and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreement between the parties hereto.

Section 6.11. No Setoff. Each Originator’s obligations under this Agreement
shall not be affected by any right of setoff, counterclaim, recoupment, defense
or other right such Originator might have against Buyer, all of which rights are
hereby expressly waived by such Originator.

Section 6.12. Confidentiality.

(a) Except to the extent otherwise required by applicable law, as required to be
filed publicly with the Securities and Exchange Commission, or unless each
Secured Party shall otherwise consent in writing, each Originator, the Servicer
and Buyer agree to maintain the confidentiality of this Agreement (and all
drafts hereof and documents ancillary hereto) in its

 

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communications with third parties (other than its directors, officers,
employees, accountants or counsel and any Secured Parties) Person and otherwise
not to disclose, deliver or otherwise make available to any third party (other
than its directors, officers, employees, accountants or counsel) the original or
any copy of all or any part of this Agreement (or any draft hereof and documents
ancillary hereto) except to a Secured Party.

(b) Each Originator and the Servicer agrees that it shall not (and shall not
permit any of its Subsidiaries to) issue any news release or make any public
announcement pertaining to the transactions contemplated by this Agreement and
the Related Documents without the prior written consent of Buyer (which consent
shall not be unreasonably withheld) unless such news release or public
announcement is required by law, in which case such Originator or the Servicer
shall consult with Buyer prior to the issuance of such news release or public
announcement. Any Originator or the Servicer may, however, disclose the general
terms of the transactions contemplated by this Agreement and the Related
Documents to trade creditors, suppliers and other similarly-situated Persons so
long as such disclosure is not in the form of a news release or public
announcement.

(c) Except to the extent otherwise required by applicable law, or in connection
with any judicial or administrative proceedings, as required to be filed
publicly with the Securities Exchange Commission, or unless the Originators and
the Servicer otherwise consent in writing, the Buyer agrees (i) to maintain the
confidentiality of (A) this Agreement (and all drafts hereof and documents
ancillary hereto) and (B) all other confidential proprietary information with
respect to the Originators, the Servicer and their respective Affiliates and
each of their respective businesses obtained by the Buyer in connection with the
structuring, negotiation and execution of the transactions contemplated herein
and in the other documents ancillary hereto, in each case, in its communications
with third parties other than any Originator or the Servicer, and (ii) not to
disclose, deliver, or otherwise make available to any third party (other than
its directors, officers, employees, accountants or counsel) the original or any
copy of all or any part of this Agreement (or any draft hereof and documents
ancillary hereto) except to any Originator. Notwithstanding the foregoing, Buyer
shall be permitted to disclose copies of this Agreement and the confidential
proprietary information described above to (1) each Secured Party and each
Secured Party’s and their respective Affiliates’ directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential and to not disclose or use such Information in
violation of Regulation FD (17 C.F.R. § 243.100-243.103)); (2) any regulatory
authority (it being understood that it will to the extent reasonably practicable
provide the Originators and/or the Servicer with an opportunity to request
confidential treatment from such regulatory authority), (3) to the extent
required by applicable laws or regulations or by any subpoena or similar legal
process, (4) to any other party to the Funding Agreement, (5) to the extent
required in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or any other Related Document or
the enforcement of rights hereunder or thereunder, (6) subject to an agreement
containing provisions substantially the same as those of this Section, to any
assignee or pledgee of (or participant in), or any prospective assignee or
pledgee of (or participant in), any of its rights or obligations under this
Agreement, (7) with the consent of the applicable Originator or Servicer or
(8) to the extent such Agreement or other information (i) becomes publicly
available other than as a result of a breach of this Section or (ii) becomes
available to the Buyer or Secured Party on a nonconfidential basis from a source
other than the Parent or any Subsidiary thereof.

 

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Section 6.13. Further Assurances.

(a) Each Originator shall, at its sole cost and expense, upon request of Buyer,
promptly and duly execute and deliver any and all further instruments and
documents and take such further actions that may be necessary or desirable or
that Buyer may request to carry out more effectively the provisions and purposes
of this Agreement or any other Related Document or to obtain the full benefits
of this Agreement and of the rights and powers herein granted, including
(i) using its best efforts to secure all consents and approvals necessary or
appropriate for the assignment to or for the benefit of Buyer of any Transferred
Receivable held by such Originator or in which such Originator has any rights
not heretofore assigned, and (ii) filing any financing or continuation
statements under the UCC with respect to the ownership interests or Liens
granted hereunder or under any other Related Document. Each Originator hereby
authorizes Buyer, to file any such financing or continuation statements without
the signature of such Originator to the extent permitted by applicable law. A
carbon, photographic or other reproduction of this Agreement or of any notice or
financing statement covering the Transferred Receivables or any part thereof
shall be sufficient as a notice or financing statement where permitted by law.
If any amount payable under or in connection with any of the Transferred
Receivables is or shall become evidenced by any instrument, such instrument,
other than checks and notes received in the ordinary course of business, shall
be duly endorsed in a manner satisfactory to Buyer immediately upon such
Originator’s receipt thereof and promptly delivered to Buyer.

(b) If any Originator fails to perform any agreement or obligation under this
Section 6.13, Buyer may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the reasonable expenses of
Buyer incurred in connection therewith shall be payable by such Originator upon
demand of Buyer.

Section 6.14. Fees and Expenses. In addition to its indemnification obligations
pursuant to Article V, each Originator agrees, jointly and severally, to pay on
demand all Rating Agency fees and all costs and expenses incurred by Buyer in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the other Related Documents, including the reasonable fees and
out-of-pocket expenses incurred by Buyer, (including any such amounts owed by
Buyer in connection with its financing of the Transfers hereunder), for counsel,
advisors, consultants and auditors retained in connection with the transactions
contemplated hereby and advice in connection therewith, and each Originator
agrees, jointly and severally, to pay all costs and expenses, if any (including
reasonable attorneys’ fees and expenses but excluding any costs of enforcement
or collection of the Transferred Receivables), in connection with the
enforcement of this Agreement and the other Related Documents.

Section 6.15. Nonrecourse Obligations. Notwithstanding any provision in any
other Section of this Agreement to the contrary, any obligation of Buyer to pay
any amounts payable to the Originators pursuant to this Agreement shall be
without recourse to the Buyer except to the extent that funds from Advances or
Collections are available to the Buyer pursuant to the terms of the Funding
Agreement for such payment (collectively, the “Buyer Available Amounts”), in

 

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the event that amounts payable to the Originators pursuant to this Agreement
exceed the Buyer Available Amounts, the excess of the amounts due hereunder (and
subject to this Section 6.15) over the Buyer Available Amounts paid shall not
constitute a “claim” under Section 101(5) of the Bankruptcy Code against Buyer
until such time as the Buyer has Buyer Available Amounts.

ARTICLE VII

SERVICER PROVISIONS

Section 7.01. Appointment of the Servicer. Buyer hereby appoints the Servicer as
its agent to service the Transferred Receivables and, in accordance with the
Related Documents, to enforce Buyer’s rights and interests in and under each
Transferred Receivable and Contract therefor and to serve in such capacity until
the termination of its responsibilities pursuant to Sections 8.01 or 9.01. In
connection therewith, the Servicer hereby accepts such appointment and agrees to
perform the duties and obligations set forth herein. The Servicer may,
(a) subcontract with Zurn Industries, LLC for the collection, servicing or
administration of the Transferred Receivables originated by Zurn Industries, LLC
and/or Zurn PEX, Inc. and (b) with the prior written consent of the Buyer,
subcontract with a Sub-Servicer for the collection, servicing or administration
of the Transferred Receivables; provided, that (i) the Servicer shall remain
liable for the performance of the duties and obligations of such Sub-Servicer
pursuant to the terms hereof, (ii) any Sub-Servicing Agreement that may be
entered into and any other transactions or services relating to the Transferred
Receivables involving a Sub-Servicer shall be deemed to be between the
Sub-Servicer and the Servicer alone, and Buyer shall not be deemed a party
thereto and shall have no obligations, duties or liabilities with respect to the
Sub-Servicer and (iii) each Sub-Servicing Agreement shall expressly provide that
it shall automatically terminate upon the termination of the Servicer’s
responsibilities hereunder in accordance with the terms hereof.

Section 7.02. Duties and Responsibilities of the Servicer.

(a) Subject to the provisions of this Agreement, the Servicer shall conduct the
servicing, administration and collection of the Transferred Receivables and
shall take, or cause to be taken, all actions that (i) may be necessary or
advisable to service, administer and collect each Transferred Receivable from
time to time, (ii) the Servicer would take if the Transferred Receivables were
owned by the Servicer, and (iii) are consistent with the Credit and Collection
Policies and industry practice for the servicing of accounts receivable similar
to such Transferred Receivables.

(b) In addition to the foregoing, in order to ensure that the Buyer has adequate
funding for the purchase of Receivables hereunder, the Servicer shall be
responsible for the following:

(i) preparation and delivery on behalf of Buyer all Borrowing Requests,
Repayment Notices, Borrowing Base Certificates, Monthly Reports, Weekly Reports
and Daily Reports required to be delivered under the Funding Agreement;

(ii) calculation and monitoring of the Borrowing Base and the components
thereof, and whether the Receivables included in the calculation of the Net
Receivables Balance are in fact Eligible Receivables; and

 

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(iii) establishment, maintenance and administration of the Collection Accounts,
the Concentration Account, and the Borrower Account in accordance with Article
VIII of the Funding Agreement.

Section 7.03. Collections on Receivables.

(a) In the event that the Servicer is unable to determine the specific
Transferred Receivables on which Collections have been received from the Obligor
thereunder, the parties agree that such Collections shall be deemed to have been
received on such Receivables in the order in which they were originated with
respect to such Obligor. In addition, if an Obligor is an obligor on Transferred
Receivables and any other Receivables or indebtedness owed to any Originator,
the Parent or any of their respective Affiliates then, unless otherwise required
by applicable law, Collections on such Transferred Receivables or other
Receivables or indebtedness shall be treated first, as a Collection of any
Transferred Receivables of such Obligor, in the order in which they were
originated, before being applied to any other Receivables or other indebtedness
of such Obligor. In the event that the Servicer is unable to determine the
specific Transferred Receivables on which discounts, offsets or other non-cash
reductions have been granted or made with respect to the Obligor thereunder, the
parties agree for purposes of this Agreement only that such reductions shall be
deemed to have been granted or made (i) prior to a Termination Event, on such
Receivables as determined by the Servicer, and (ii) from and after the
occurrence of a Termination Event, in the reverse order in which they were
originated with respect to such Obligor.

(b) If the Servicer determines that amounts unrelated to the Transferred
Receivables (the “Unrelated Amounts”) have been deposited in any Account, then
the Servicer shall provide written evidence thereof to the Buyer no later than
the first Business Day following the day on which the Servicer had actual
knowledge thereof, which evidence shall be provided in writing and shall be
otherwise satisfactory to Buyer.

(c) Authorization of the Servicer. Buyer hereby authorizes the Servicer to take
any and all reasonable steps in its name and on its behalf necessary or
desirable and not inconsistent with the rights of the Buyer hereunder, in the
determination of the Servicer, to (a) collect all amounts due under any
Transferred Receivable, including endorsing the applicable name on checks and
other instruments representing Collections on such Receivable, and executing and
delivering any and all instruments of satisfaction or cancellation or of partial
or full release or discharge and all other comparable instruments with respect
to any such Receivable and (b) after any Transferred Receivable becomes a
Delinquent Receivable or a Defaulted Receivable and to the extent permitted
under and in compliance with applicable law and regulations, commencing
proceedings with respect to the enforcement of payment of any such Receivable
and the Contract therefor and adjusting, settling or compromising any payments
due thereunder, in each case to the same extent as the applicable Originator
could have done if it had continued to own such Receivable. The Borrower shall
furnish the Servicer with any powers of attorney and other documents necessary
or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. Notwithstanding anything to the contrary
contained herein, the Buyer shall have the absolute and unlimited right to
direct the Servicer (at the Servicer’s expense) (i) to commence or settle any
legal action to enforce collection of any Transferred Receivable or (ii) to
foreclose upon, repossess or take any other action that the Buyer deems

 

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necessary or advisable with respect thereto. In no event shall the Servicer be
entitled to make Buyer or any Secured Party a party to any Litigation without,
as the case may be, Buyer or such Secured Party’s express prior written consent.

(d) Servicing Fees. As compensation for its servicing activities and as
reimbursement for its reasonable expenses in connection therewith, the Servicer
shall be entitled to receive the Servicing Fees monthly on each Settlement Date.
Such Servicing Fees shall be payable from available funds in accordance with
Section 2.07 and 2.08 of the Funding Agreement. The Servicer shall be required
to pay for all expenses incurred by it in connection with its activities
hereunder (including any payments to accountants, counsel or any other Person)
and shall not be entitled to any payment therefor other than the Servicing Fees.

Section 7.04. Covenants of the Servicer. The Servicer covenants and agrees that
from and after the Effective Date and until the Termination Date:

(a) Compliance with Agreements and Applicable Laws. The Servicer shall perform
each of its obligations under this Agreement and the other Related Documents.
The Servicer shall comply with all federal, state and local laws and regulations
applicable to it and the Transferred Receivables, including those relating to
truth in lending, retail installment sales, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices, privacy,
licensing, taxation, ERISA and labor matters and environmental laws and
environmental permits, except, in each case, where the failure to so comply
could not reasonably be expected to result in a Material Adverse Effect.

(b) Maintenance of Existence and Conduct of Business. The Servicer shall: (i) do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and its rights and franchises; (ii) continue to
conduct its business substantially as now conducted or as otherwise permitted
hereunder and in accordance with the terms of its certificate or articles of
incorporation and by-laws; and (iii) at all times maintain, preserve and protect
all of its assets and properties used or useful in the conduct of its business,
including all licenses, permits, charters and registrations, and keep the same
in good repair, working order and condition in all material respects (taking
into consideration ordinary wear and tear) and from time to time make, or cause
to be made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices, except to the extent that the
failure to comply with this clause (iii) could not reasonably be expected to
have a Material Adverse Effect.

(c) Deposit of Collections. The Servicer shall deposit or cause to be deposited
promptly into a Collection Account, and in any event no later than the first
Business Day after receipt thereof, all Collections it may receive with respect
to any Transferred Receivable.

(d) ERISA. The Servicer shall give the Administrative Agent prompt written
notice of any event that (i) could reasonably be expected to result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA, or (ii) could reasonably be expected to result in the incurrence by
Servicer of any liabilities under Title IV of ERISA (other than premium payments
arising in the ordinary course of business).

(e) Compliance with Credit and Collection Policies. The Servicer shall comply
with the Credit and Collection Policies with respect to each Transferred
Receivable and the Contract

 

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therefor. The Servicer shall not extend, amend, forgive, discharge, compromise,
waive, cancel or otherwise modify the terms of any Transferred Receivable or
amend, modify or waive any term or condition of any Contract related thereto,
except that the Servicer may (i) reduce the Outstanding Balance of a Receivable
as required to reflect any Dilution Factors and (ii) take such actions, to the
extent permitted by the Credit and Collection Policies, as the Servicer may deem
reasonably necessary or desirable in order to maximize Collections with respect
to any past-due Receivable (it being understood that, to the extent that any
such modification causes any Receivable to fail one or more of the criteria set
forth in the definition of “Eligible Receivable” in Annex X hereto, such
Receivable shall cease to be an Eligible Receivable for purposes of this
Agreement). The Servicer shall not without the prior written consent of the
Buyer amend, modify or waive any term or provision of the Credit and Collection
Policies.

(f) Ownership of Transferred Receivables; Servicing Records. The Servicer shall
(i) identify the Transferred Receivables clearly and unambiguously in its
Servicing Records to reflect that such Transferred Receivables are the property
of the Buyer and that a Lien on such Transferred Receivables has been granted to
the Administrative Agent for the benefit of the Lenders; (ii) maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing such Receivables in the
event of the destruction of any originals thereof) as are necessary or advisable
in accordance with industry practice (1) to reflect promptly (a) all payments
received and all credits and extensions granted with respect to such
Receivables, (b) the return, rejection, repossessions, or stoppage in transit of
any merchandise the sale of which has given rise to any such Receivable and
(c) any other reductions in the Outstanding Balance of the Receivables on
account of Dilution Factors; and (2) to determine no less frequently than the
date each Daily Report, Weekly Report or Monthly Report is due, whether each
Transferred Receivable then outstanding qualifies as an Eligible Receivable;
(iii) by no later than the Effective Date, mark conspicuously with a legend, in
form and substance satisfactory to the Buyer, its books and records (including
computer records) and credit files pertaining to the Borrower Collateral, and
its file cabinets or other storage facilities where it maintains information
pertaining thereto, to evidence the assignment of the Receivables under this
Agreement and the assignment and Liens granted pursuant to the Funding
Agreement. Upon the occurrence and during the continuance of a Termination
Event, the Servicer shall deliver and turn over such books and records to the
Buyer or its representatives at any time on demand. The Servicer shall permit
any representative of the Buyer to inspect such books and records and shall
provide photocopies thereof to Buyer as more specifically set forth in Section
7.04(i).

(g) Payment and Performance of Charges and other Obligations.

(i) Subject to Section 7.04(g)(ii), the Servicer shall pay, perform and
discharge or cause to be paid, performed and discharged promptly all charges and
claims payable by it, including (A) Charges imposed upon it, its income and
profits, or any of its property (real, personal or mixed) and all Charges with
respect to tax, social security and unemployment withholding with respect to its
employees, and (B) lawful claims for labor, materials, supplies and services or
otherwise before any amount thereof shall become past due.

 

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(ii) The Servicer may in good faith contest, by appropriate proceedings, the
validity or amount of any charges or claims described in Section 7.04(g)(i);
provided that (A) adequate reserves with respect to such contest are maintained
on the books of the Servicer, in accordance with GAAP, (B) such contest is
maintained and prosecuted continuously and with diligence, (C) none of the
Borrower Collateral becomes subject to forfeiture or loss as a result of such
contest, (D) no Lien shall be imposed to secure payment of such charges or
claims other than inchoate tax liens and (E) the Administrative Agent has not
advised the Servicer in writing that it reasonably believes that failure to pay
or to discharge such claims or charges could have or result in a Material
Adverse Effect.

(h) Access. The Servicer agrees to provide Buyer and the Buyer’s officers,
employees, directors, agents and representatives with all access that the
Originators have covenanted and agreed to provide to the Buyer in
Section 4.02(b).

(i) Communication with Accountants. If a Termination Event has occurred and is
continuing, the Servicer authorizes Buyer to discuss matters relating to the
Transferred Receivables or its performance under this Agreement or the other
Related Documents or its affairs, finances and accounts directly with its
independent certified public accountants (subject to reasonable requirements of
confidentiality, including requirements imposed by law or by contract).

(j) Collection of Transferred Receivables. In connection with the collection of
amounts due or to become due under the Transferred Receivables, the Borrower
Assigned Agreements and any other Borrower Collateral, the Servicer shall take
such action as it, and from and after the occurrence and during the continuance
of a Termination Event, the Buyer may deem necessary or desirable to enforce
collection of the Transferred Receivables, the Borrower Assigned Agreements and
the other Borrower Collateral; provided that applicable Originator may, rather
than commencing any such action or taking any other enforcement action, at its
option, elect to pay to the Buyer, for deposit into the Agent Account, an amount
equal to the Outstanding Balance of any such Transferred Receivable. If (i) an
Incipient Termination Event or a Termination Event shall have occurred and be
continuing or (ii) the Buyer in good faith believes that an Incipient
Termination Event or a Termination Event is imminent, then the Buyer may,
without prior notice to any Originator or the Servicer, (x) exercise its right
to take exclusive ownership and control of (1) the Collections and the
Collection Accounts in accordance with the terms of the applicable Collection
Account Agreements and (2) the Concentration Account and the Borrower Account
(in which case the Servicer shall be required to deposit any Collections it then
has in its possession or at any time thereafter receives, immediately in the
Agent Account) and (y) notify any Obligor under any Transferred Receivable or
obligors under the Borrower Assigned Agreements of the sale to Buyer of such
Transferred Receivables and of the pledge of such Transferred Receivables or
Borrower Assigned Agreements, as the case may be, to the Administrative Agent
and direct that payments of all amounts due or to become due to the Buyer
thereunder be made directly to the Buyer or any servicer, collection agent or
Lockbox or other account designated by the Buyer and the Buyer may enforce
collection of any such Transferred Receivable or the Borrower Assigned
Agreements and adjust, settle or compromise the amount or payment thereof. The
Buyer shall provide prompt notice to the Servicer of any such notification of
assignment, pledge or direction of payment to the Obligors under any Transferred
Receivables.

 

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(k) Performance of Borrower Assigned Agreements. The Servicer shall (i) perform
and observe all the terms and provisions of the Borrower Assigned Agreements to
be performed or observed by it, maintain the Borrower Assigned Agreements in
full force and effect, enforce the Borrower Assigned Agreements in accordance
with their terms and take all action as may from time to time be requested by
the Buyer in order to accomplish the foregoing, and (ii) upon the request of and
as directed by the Buyer, make such demands and requests to any other party to
the Borrower Assigned Agreements as are permitted to be made by the Servicer
thereunder.

(l) License for Use of Software and Other Intellectual Property. Unless
expressly prohibited by the licensor thereof or any provision of applicable law,
if any, the Servicer hereby grants to the Buyer (and to the Administrative Agent
on behalf of the Lenders as assignee of the Buyer) a limited license to use,
without charge, the Servicer’s computer programs, software, printouts and other
computer materials, technical knowledge or processes, data bases, materials,
trademarks, registered trademarks, trademark applications, service marks,
registered service marks, service mark applications, patents, patent
applications, trade names, rights of use of any name, labels, fictitious names,
inventions, designs, trade secrets, goodwill, registrations, copyrights,
copyright applications, permits, licenses, franchises, customer lists, credit
files, correspondence, and advertising materials or any property of a similar
nature, as it pertains to the Transferred Receivables and the other Borrower
Collateral, or any rights to any of the foregoing, only as reasonably required
in connection with the collection of the Transferred Receivables and the
advertising for sale, and selling any of the Borrower Collateral, or exercising
of any other remedies with respect thereto, and the Servicer agrees that its
rights under all licenses and franchise agreements shall inure to the Buyer (and
to the Administrative Agent on behalf of the Lenders as assignee of the Buyer)
for purposes of the limited license granted herein. Except upon the occurrence
and during the continuation of a Termination Event, the Buyer agrees not to use
(and shall cause the Administrative Agent to covenant not to use) any such
license without giving the Servicer prior written notice.

(m) Deposit of Collections. The Servicer shall (and shall cause each of its
Affiliates to) (i) instruct all Obligors to remit all payments with respect to
any Transferred Receivables directly into a Lockbox or a Collection Account, and
(ii) deposit or cause to be deposited promptly into a Lockbox or a Collection
Account, and in any event no later than the first Business Day after receipt
thereof, all Collections it may receive in respect of Transferred Receivables
(and until so deposited, all such Collections shall be held in trust for the
benefit of Buyer and its assigns (including the Administrative Agent and the
Lenders). The Servicer shall not make or permit to be made deposits into a
Lockbox or a Collection Account other than in accordance with this Agreement and
the other Related Documents. Without limiting the generality of the foregoing,
the Servicer shall ensure that no Collections or other proceeds with respect to
a Receivable reconveyed to any Originator pursuant to Section 4.04 hereof are
paid or deposited into any Lockbox or Collection Account.

(n) Commingling. The Servicer shall not (and shall cause each other member of
the Parent Group not to) deposit or permit the deposit of any funds that do not
constitute Collections of Transferred Receivables into any Lockbox or Collection
Account except as otherwise

 

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permitted by Section 4.03(l) hereof. If any funds not constituting Collections
of Transferred Receivables are nonetheless deposited into a Lockbox or
Collection Account and the Servicer so notifies Buyer, Buyer shall promptly
remit any such amounts to the applicable Originator. So long as any Transferred
Receivables of an Obligor remain unpaid, the Servicer shall not instruct such
Obligor to remit Collections of any Receivables to any Person or account other
than to a Lockbox or Collection Account.

(o) Separate Identity. The Servicer shall comply with Section 4.02(i) to the
same extent as if it were an Originator.

Section 7.05. Reporting Requirements of the Servicer. The Servicer hereby agrees
that, from and after the Effective Date and the Termination Date, it shall
prepare and deliver or cause to be prepared and delivered to the Lenders and the
Administrative Agent, on behalf of the Buyer, the financial statements, notices,
reports, and other information set forth in Annex 5.02(a) to the Funding
Agreement at the times, to the Persons and in the manner set forth in Annex
5.02(a) of the Funding Agreement.

ARTICLE VIII

EVENTS OF SERVICER TERMINATION

Section 8.01. Events of Servicer Termination. If any of the following events
(each, an “Event of Servicer Termination”) shall occur (regardless of the reason
therefor):

(a) the Servicer shall (i) fail to make any payment or deposit hereunder when
due and payable and the same shall remain unremedied for one (1) Business Day or
more; (ii) fail to deliver when due any of the reports required to be delivered
pursuant to Section 7.05 or any other report related to the Receivables as
required by the other Related Documents and the same shall remain unremedied for
two (2) Business Days or more; or (iii) fail or neglect to perform, keep or
observe any other provision of this Agreement or the other Related Documents
(other than any provision embodied in or covered by any other clause of this
Section 8.01) and the same shall remain unremedied for two (2) Business Days or
more following the earlier to occur of an Authorized Officer of the Servicer
becoming aware of such breach and the Servicer’s receipt of notice thereof from
the Administrative Agent; or

(b) (i) the Servicer shall fail to make any payment with respect to any of its
Debts which is in an aggregate principal amount in excess of $20,000,000 when
due, and the same shall remain unremedied for any applicable grace period with
respect thereto; or (ii) a default or breach shall occur under any agreement,
document or instrument to which the Servicer is a party or by which the Servicer
or its property is bound (other than a Related Document), and such default or
breach shall remain unremedied after any applicable grace period with respect
thereto and which involves a Debt which is in an aggregate principal amount in
excess of $20,000,000; or

(c) a case or proceeding shall have been commenced against the Servicer or any
Affiliate which acts as a Sub-Servicer seeking a decree or order in respect of
any such Person (i) under the Bankruptcy Code or any other applicable federal,
state or foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
for any such Person or for any substantial part of such Person’s

 

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assets, or (iii) ordering the winding-up or liquidation of the affairs of any
such Person, and such case or proceeding continues for 60 days unless dismissed
or discharged; provided, however, that such 60-day period shall be deemed
terminated immediately if (x) a decree or order is entered by a court of
competent jurisdiction with respect to a case or proceeding described in this
subsection (c), or (y) any of the events described in Section 8.01(d) shall have
occurred; or

(d) the Servicer or any Affiliate which acts as a Sub-Servicer shall (i) file a
petition seeking relief under the Bankruptcy Code or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii) consent or fail
to object in a timely and appropriate manner to the institution of any
proceedings under the Bankruptcy Code or any other applicable federal, state or
foreign bankruptcy or similar law or to the filing of any petition thereunder or
to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) for any such Person or
for any substantial part of such Person’s assets, (iii) make an assignment for
the benefit of creditors, or (iv) take any corporate action in furtherance of
any of the foregoing; or

(e) the Servicer or any Affiliate which acts as a Sub-Servicer generally does
not pay its debts as such debts become due or admits in writing its inability
to, or is generally unable to, pay its debts as such debts become due; or

(f) a final judgment or judgments for the payment of money in excess of
$20,000,000 in the aggregate (net of insurance proceeds) at any time outstanding
shall be rendered against the Servicer or any other Subsidiary of the Parent
which acts as a Sub-Servicer and either (i) enforcement proceedings shall have
been commenced upon any such judgment or (ii) the same shall not, within 30 days
after the entry thereof, have been discharged or execution thereof stayed or
bonded pending appeal, or shall not have been discharged prior to the expiration
of any such stay; or

(g) (i) any information contained in any Borrowing Base Certificate, Monthly
Report, Weekly Report or Daily Report is untrue or incorrect in any respect or
(ii) any representation or warranty of the Servicer herein or in any other
Related Document or in any written statement, report, financial statement or
certificate (other than a Borrowing Base Certificate) made or delivered by the
Servicer to any Secured Party hereto or thereto is untrue or incorrect in any
material respect as of the date when made or deemed made and such representation
and warranty, if relating to any Transferred Receivable, has not been cured by
the repurchase of any such Transferred Receivable pursuant to Section 4.04; or

(h) the Buyer shall have determined that any event or condition that materially
adversely affects the ability of the Servicer to collect the Transferred
Receivables or to otherwise perform hereunder has occurred; or

(i) a Termination Event shall have occurred or this Agreement shall have been
terminated; or

(j) a deterioration has taken place in the quality of servicing of Transferred
Receivables or other Receivables serviced by the Servicer that the Buyer, in its
sole discretion, determines to be material, and such material deterioration has
not been eliminated within 30 days after written notice thereof shall have been
given by the Administrative Agent to the Servicer; or

 

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(k) the Servicer shall assign or purport to assign any of its obligations
hereunder without the prior written consent of the Buyer; or

(l) a Change of Control shall occur; or

then, and in any such event, the Buyer may, by delivery of a Servicer
Termination Notice to the Servicer, terminate the servicing responsibilities of
the Servicer hereunder, without demand, protest or further notice of any kind,
all of which are hereby waived by the Servicer. Upon the delivery of any such
notice, all authority and power of the Servicer under this Agreement shall pass
to and be vested in the Successor Servicer acting pursuant to Section 9.02;
provided, that notwithstanding anything to the contrary herein, the Servicer
agrees to continue to follow the procedures set forth in Section 7.02 with
respect to Collections on the Transferred Receivables until a Successor Servicer
has assumed the responsibilities and obligations of the Servicer in accordance
with Section 9.02.

ARTICLE IX

SUCCESSOR SERVICER PROVISIONS

Section 9.01. Servicer Not to Resign. The Servicer shall not resign from the
obligations and duties hereby imposed on it except upon a determination that
(a) the performance of its duties hereunder has become impermissible under
applicable law or regulation and (b) there is no reasonable action that the
Servicer could take to make the performance of its duties hereunder become
permissible under applicable law. Any such determination shall (i) with respect
to clause (a) above, be evidenced by an opinion of counsel to such effect and
(ii) with respect to clause (b) above, be evidenced by an Officer’s Certificate
to such effect, in each case delivered to the Administrative Agent. No such
resignation shall become effective until a Successor Servicer shall have assumed
the responsibilities and obligations of the Servicer in accordance with
Section 9.02.

Section 9.02. Appointment of the Successor Servicer. In connection with the
termination of the Servicer’s responsibilities or the resignation by the
Servicer under this Agreement pursuant to Sections 8.01 or 9.01, the Buyer may
at any time appoint a successor servicer to the Servicer that shall be
acceptable to the Administrative Agent and shall succeed to all rights and
assume all of the responsibilities, duties and liabilities of the Servicer under
this Agreement (the Administrative Agent, in such capacity, or such successor
servicer being referred to as the “Successor Servicer”); provided, that the
Successor Servicer shall have no responsibility for any actions of the Servicer
prior to the date of its appointment or assumption of duties as Successor
Servicer. In selecting a Successor Servicer, the Buyer may (but shall not be
required to) obtain bids from any potential Successor Servicer and may agree to
any bid it deems appropriate. The Successor Servicer shall accept its
appointment by executing, acknowledging and delivering to the Buyer an
instrument in form and substance acceptable to the Buyer.

Section 9.03. Duties of the Servicer. The Servicer covenants and agrees that,
following the appointment of, or assumption of duties by, a Successor Servicer:

(a) The Servicer shall terminate its activities as Servicer hereunder in a
manner that facilitates the transfer of servicing duties to the Successor
Servicer and is otherwise acceptable to

 

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the Buyer and, without limiting the generality of the foregoing, shall, at its
own expense, timely deliver (i) any funds to the Administrative Agent that were
required to be remitted to the Administrative Agent for deposit in the Agent
Account under the Funding Agreement and (ii) copies of all Servicing Records and
other information with respect to the Transferred Receivables to the Successor
Servicer at a place selected by the Successor Servicer. The Servicer shall
cooperate with the Successor Servicer in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement and
shall account for all funds and shall execute and deliver such instruments and
do such other things as may be required to vest and confirm in the Successor
Servicer all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer. All reasonable costs and expenses (including
reasonable attorneys’ fees) incurred in connection with transferring all files
and other documents in respect of the Transferred Receivables to the Successor
Servicer shall be for the account of the predecessor Servicer.

(b) The Servicer shall terminate each existing Sub-Servicing Agreement and the
Successor Servicer shall not be deemed to have assumed any of the Servicer’s
interests therein or to have replaced the Servicer as a party thereto.

(c) In the event that the Servicer is terminated as Servicer hereunder but no
Successor Servicer has been appointed, the Servicer shall timely deliver to the
Administrative Agent or its designee, at a place designated by the
Administrative Agent or such designee, all Servicing Records and other
information with respect to the Transferred Receivables which otherwise would be
required to be delivered to the Successor Servicer under Section 9.03(a) above,
and all reasonable costs and expenses (including reasonable attorneys’ fees)
incurred in connection with transferring such files and other documents to the
Administrative Agent shall be for the account of the predecessor Servicer.

 

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Section 9.04. Effect of Termination or Resignation. Any termination of or
resignation by the Servicer hereunder shall not affect any claims that the Buyer
or its assigns may have against the Servicer for events or actions taken or not
taken by the Servicer arising prior to any such termination or resignation.

Section 9.05. Power of Attorney. On the Closing Date, the Servicer shall execute
and deliver a power of attorney in substantially in the form attached hereto as
Exhibit 9.05 (a “Power of Attorney”). The Power of Attorney is a power coupled
with an interest and shall be irrevocable until this Agreement has terminated in
accordance with its terms and all of the Transferred Receivables have been
indefeasibly paid or otherwise written off as uncollectible. The powers
conferred on the Buyer under each Power of Attorney are solely to protect the
interests of the Buyer in the Transferred Receivables and the ability of the
Successor Servicer to assume the servicing rights, powers and responsibilities
of the Servicer hereunder and shall not impose any duty upon the Buyer or the
Successor Servicer to exercise any such powers.

Section 9.06. No Proceedings. Each Originator and Servicer agrees that, from and
after the Closing Date and until the date one year plus one day following the
Termination Date, it will not, directly or indirectly, institute or cause to be
instituted against Buyer any proceeding of the type referred to in Sections
8.01(d) and 8.01(e) of the Funding Agreement. This Section 9.06 shall survive
the termination of this Agreement.

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IN WITNESS WHEREOF, the parties have caused this Receivables Sale and Servicing
Agreement to be executed by their respective duly authorized representatives, as
of the date first above written.

 

REXNORD INDUSTRIES, LLC, as an Originator and as the Servicer By  

/s/ George C. Moore

Name:   George C. Moore Title:   Executive VP, CFO & Secretary ZURN INDUSTRIES,
LLC, as an Originator By:  

/s/ George C. Moore

Name:   George C. Moore Title:   Executive VP & CFO ZURN PEX, INC., as an
Originator By:  

/s/ George C. Moore

Name:   George C. Moore Title:   Executive VP & CFO REXNORD FUNDING LLC, as the
Buyer By  

/s/ Todd A. Adams

Name:   Todd A. Adams Title:   President

 

Receivables Sale and Servicing Agreement