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  TABLE OF CONTENTS

RECEIVABLES PURCHASE AGREEMENT  

 Dated as of October 26, 2001  

 Among  

 DTSC, INC.  

as the Seller

 and  

 ATLANTIC ASSET SECURITIZATION CORP.  

as the Investor

 and  

 CREDIT LYONNAIS NEW YORK BRANCH  

as a Bank

 and  

 CREDIT LYONNAIS NEW YORK BRANCH  

as the Agent

 and  

 DAL-TILE CORPORATION  

as Collection Agent and Originator

 
  

    TABLE OF CONTENTS    
  

      
 

	 
	 	 
	 	 

	PRELIMINARY STATEMENT
	

ARTICLE I 4	
 	

DEFINITIONS
	 	 	SECTION 1.01.	 	Certain Defined Terms
	 	 	SECTION 1.02.	 	Other Terms
	

ARTICLE II	
 	

AMOUNTS AND TERMS OF THE PURCHASES
	 	 	SECTION 2.01.	 	Purchase Facility
	 	 	SECTION 2.02.	 	Making Purchases
	 	 	SECTION 2.03.	 	Receivable Interest Computation
	 	 	SECTION 2.04.	 	Settlement Procedures
	 	 	SECTION 2.05.	 	Fees
	 	 	SECTION 2.06.	 	Payments and Computations, Etc.
	 	 	SECTION 2.07.	 	Dividing or Combining Receivable Interests
	 	 	SECTION 2.08.	 	Increased Costs
	 	 	SECTION 2.09.	 	Additional Yield on Receivable Interests Bearing a Eurodollar Rate
	 	 	SECTION 2.10.	 	Taxes
	 	 	SECTION 2.11.	 	Security Interest
	 	 	SECTION 2.12.	 	Repurchase Option
	

ARTICLE III	
 	

CONDITIONS OF PURCHASES
	 	 	SECTION 3.01.	 	Conditions Precedent to Initial Purchase
	 	 	SECTION 3.02.	 	Conditions Precedent to All Purchases and Reinvestments
	

ARTICLE IV	
 	

REPRESENTATIONS AND WARRANTIES
	 	 	SECTION 4.01.	 	Representations and Warranties of the Seller
	 	 	SECTION 4.02.	 	Representations and Warranties of the Collection Agent
	

ARTICLE V	
 	

COVENANTS
	 	 	SECTION 5.01.	 	Covenants of the Seller
	 	 	SECTION 5.02.	 	Covenants of the Seller and Collection Agent Regarding Inspections
	

ARTICLE VI	
 	

ADMINISTRATION AND COLLECTION OF POOL RECEIVABLES
	 	 	SECTION 6.01.	 	Designation of Collection Agent
	 	 	SECTION 6.02.	 	Duties of Collection Agent
	 	 	SECTION 6.03.	 	Certain Rights of the Agent
	 	 	SECTION 6.04.	 	Rights and Remedies
	 	 	SECTION 6.05.	 	Further Actions Evidencing Purchases
	 	 	SECTION 6.06.	 	Changes in Credit and Collection Policy; Changes in Store Accounts
	 	 	SECTION 6.07.	 	Indemnities by the Collection Agent
	

ARTICLE VII	
 	

EVENTS OF TERMINATION
	 	 	SECTION 7.01.	 	Events of Termination

ii

 

	

ARTICLE VIII	
 	

THE AGENT
	 	 	SECTION 8.01.	 	Authorization and Action
	 	 	SECTION 8.02.	 	Agent's Reliance, Etc.
	 	 	SECTION 8.03.	 	Credit Lyonnais and Affiliates
	 	 	SECTION 8.04.	 	Bank's Purchase Decision
	

ARTICLE IX	
 	

INDEMNIFICATION
	 	 	SECTION 9.01.	 	Indemnities by the Seller
	

ARTICLE X	
 	

MISCELLANEOUS
	 	 	SECTION 10.01.	 	Amendments, Etc.
	 	 	SECTION 10.02.	 	Notices, Etc.
	 	 	SECTION 10.03.	 	Assignability
	 	 	SECTION 10.04.	 	Costs, Expenses and Taxes
	 	 	SECTION 10.05.	 	United States Federal Income Tax Treatment
	 	 	SECTION 10.06.	 	No Proceedings
	 	 	SECTION 10.07.	 	Confidentiality
	 	 	SECTION 10.08.	 	GOVERNING LAW
	 	 	SECTION 10.09.	 	Execution in Counterparts
	 	 	SECTION 10.10.	 	Survival of Termination
	 	 	SECTION 10.11.	 	Consent to Jurisdiction
	 	 	SECTION 10.12.	 	WAIVER OF JURY TRIAL
	 	 	SECTION 10.13.	 	Excess Funds

	
 SCHEDULES
	

SCHEDULE I	
 	

-Lock-Box Banks and Collection Account
	SCHEDULE II	 	-Credit and Collection Policy
	SCHEDULE III	 	-Normal Concentration Limits
	SCHEDULE IV	 	-Store Accounts

iii

 

	
ANNEXES
	

ANNEX A	
 	

-Form of Monthly Report
	ANNEX B	 	-Form of Weekly Report
	ANNEX C	 	-Forms of Opinions of Counsel to the Seller
	ANNEX D	 	-Form of Bank Direction Agreement
	ANNEX E-1	 	-Form of Lock-Box Agreement
	ANNEX E-2	 	-Form of Account Agreement

iv

 
 

RECEIVABLES
  PURCHASE AGREEMENT
  
    Dated as of October 26, 2001    
  

    DTSC, INC., a Delaware corporation (the "Seller"),ATLANTIC ASSET SECURITIZATION CORP., a Delaware
corporation, CREDIT LYONNAIS NEW YORK BRANCH, as agent (the "Agent") for the Investors and the Banks (as defined herein) and as a Bank, and
DAL-TILE CORPORATION, a Pennsylvania corporation, as Collection Agent and as Originator, agree as follows: 

 
 
 

    PRELIMINARY
STATEMENT. The Seller has acquired, and may continue to acquire, Receivables (as hereinafter defined) from the Originator (as hereinafter defined), either by purchase or
by contribution to the capital of the Seller, as determined from time to time by the Seller and the Originator. The Seller is prepared to sell undivided fractional ownership interests (referred to and
defined herein as "Receivable Interests") in the Receivables. Atlantic may, in its sole discretion, purchase such Receivable Interests, and the Banks
shall, if Atlantic does not, purchase such Receivable Interests, in each case on the terms set forth herein. Accordingly, the parties agree as follows: 

 
 

ARTICLE I
  
    DEFINITIONS    
  

 
 

      SECTION 1.01.  Certain Defined Terms.   As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms
of the terms defined): 

    "Account Agreement" means an agreement with respect to the Collection Account, in substantially the form of Annex E-2. 

    "Adjusted Eurodollar Rate" means, for any Fixed Period, an interest rate per annum equal to the rate per annum obtained by dividing
(i) the Eurodollar Rate for such Fixed Period by (ii) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Fixed Period. 

    "Adverse Claim" means a lien, security interest or other charge or encumbrance, or any other type of preferential arrangement. 

    "Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under
common control with such Person or, as used in Sections 6.07, 8.03 (other than the first sentence of Section 8.03), 8.04, 9.01 and 10.04, is a director or officer of such Person. 

    "Affiliated Obligor" means any Obligor that is an Affiliate of another Obligor. 

    "Agent's Account" means the special account (account number 01-25680-001-00-001) of the
Agent maintained at the office of Credit Lyonnais at 1301 Avenue of the Americas, New York, New York. 

    "Alternate Base Rate" means, as of any date, a fluctuating interest rate per annum, which rate shall be equal to the higher of: 

    (a) the
rate of interest announced by Credit Lyonnais from time to time as its base rate (it being understood that such rate is not necessarily intended to be the
lowest rate of interest determined by Credit Lyonnais in connection with extensions of credit); and 

    (b) 0.50%
per annum above the Federal Funds Rate for such date. 

    "Asset Purchase Agreement" means, in the case of any Bank, the liquidity asset purchase agreement entered into by such Bank
concurrently with its execution of this Agreement or of the Assignment and Acceptance pursuant to which it became party to this Agreement. The Asset Purchase Agreement with Credit Lyonnais shall have
an initial term expiring on October 25, 2002. 

 

    "Assignee Rate" for any Fixed Period for any Receivable Interest means an interest rate per annum equal to 1.775% per annum above the
Eurodollar Rate for such Fixed Period; provided, however, that in case of: 

	(ii)
	any
Fixed Period on or prior to the first day of which an Investor or Bank shall have notified the Agent that the introduction of or any change in
or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Investor or Bank to fund such Receivable
Interest at the Assignee Rate set forth above (and such Investor or Bank shall not have subsequently notified the Agent that such circumstances no longer exist),

	(iii)
	any
Fixed Period of one to (and including) 35 days (it being understood and agreed that this clause (ii) shall not be applicable to
a Fixed Period for which Yield is to be computed by reference to the Eurodollar Rate that is intended to have a one-month duration),

	(iv)
	any
Fixed Period as to which the Agent does not receive notice, by no later than 12:00 noon (New York City time) on the third Business Day
preceding the first day of such Fixed Period, that the related Receivable Interest will not be funded by issuance of commercial paper, or

	(v)
	any
Fixed Period for a Receivable Interest the Capital of which allocated to the Investors or the Banks is less than $500,000, 

the
"Assignee Rate" for such Fixed Period shall be an interest rate per annum equal to the Alternate Base Rate in effect from time to time during such
Fixed Period; provided further that the Agent and the Seller may agree in writing from time to time upon a different " Assignee
Rate."

    "Assignment and Acceptance" means an assignment and acceptance agreement, in form and substance satisfactory to the Agent, entered into
by a Bank, an Eligible Assignee and the Agent, pursuant to which such Eligible Assignee shall become a party to this Agreement. 

    "Atlantic" means Atlantic Asset Securitization Corp. and any successor or permitted assign of Atlantic that is a receivables investment
company which in the ordinary course of its business issues commercial paper or other securities to fund its acquisition and maintenance of receivables. 

    "Bank Commitment" of any Bank means, (a) with respect to Credit Lyonnais, $75,000,000 or such amount as reduced by any
Assignment and Acceptance entered into between Credit Lyonnais and other Banks; or (b) with respect to a Bank that has entered into an Assignment and Acceptance, the amount set forth therein as
such Bank's Bank Commitment, in each case as such amount may be reduced by an
Assignment and Acceptance entered into between such Bank and an Eligible Assignee, and as may be further reduced (or terminated) pursuant to the next sentence. Any reduction (or termination) of the
Purchase Limit pursuant to the terms of this Agreement shall reduce ratably (or terminate) each Bank's Bank Commitment. 

    "Bank Direction Agreement" means an agreement, in substantially the form of Annex D hereto, among the Originator, the Agent and a Store
Account Bank, pursuant to which such Store Account Bank agrees to remit all funds deposited in the Store Account maintained by it to the Collection Account. 

    "Banks" means Credit Lyonnais and each Eligible Assignee that shall become a party to this Agreement pursuant to Section 10.03. 

    "Business Day" means any day on which (i) banks are not authorized or required to close in New York City or Dallas, Texas, and
(ii) if this definition of "Business Day" is utilized in connection with the Eurodollar Rate, dealings are carried out in the London interbank market. 

2

 

    "Capital" of any Receivable Interest means the original amount paid to the Seller for such Receivable Interest at the time of its
purchase by Atlantic or a Bank pursuant to this Agreement, or such amount divided or combined in accordance with Section 2.07, in each case reduced from time to time by Collections distributed
on account of such Capital pursuant to Section 2.04(d); provided that if such Capital shall have been reduced by any distribution and thereafter
all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Capital shall be increased by the amount of such rescinded or returned distribution, as though it
had not been made. 

    "Collection Account" means the bank account maintained by the Seller for the purpose of receiving funds remitted from all of the Store
Accounts. 

    "Collection Agent" means at any time the Person then authorized pursuant to Section 6.01 to administer and collect Pool
Receivables, in its capacity as Collection Agent, which initially will be the Originator. 

    "Collection Agent Fee" has the meaning specified in Section 2.05(a). 

    "Collections" means, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including,
without limitation, all cash proceeds of Related Security with respect to such Receivable, and any Collection of such Receivable deemed to have been received pursuant to Section 2.04. 

    "Commitment Termination Date" means the earliest of (a) October 25, 2002, unless,  prior to such date (or the date so extended
pursuant to this clause), upon the Seller's request, made not more than 90 nor less than 45 days prior to the then effective
Commitment Termination Date, one or more Banks having Bank Commitments equal to 100% of the Purchase Limit shall in their sole discretion consent, which consent shall be given within 30 days of
the receipt by each Bank of such request, to the extension of the Commitment Termination Date to the date occurring 364 days after the then Commitment Termination Date;  provided, however, that any
failure of any Bank to respond to the Seller's request for such extension within 30 days of the receipt by such Bank
of such request shall be deemed a denial of such request by such Bank, (b) the Facility Termination Date, (c) the date determined pursuant to Section 7.01, and (d) the date
the Purchase Limit reduces to zero pursuant to Section 2.01(b). 

    "Concentration Limit" means (i) at any time for any Obligor (other than an Obligor referred to in clause (ii) below), the  "Normal Concentration
Limit" set forth on Schedule III hereto corresponding to such Obligor's Debt Rating at such time, and (ii) at any
time for Home Depot Corporation, together with any of its Affiliates, 15% or such other percentage ("Special Concentration Limit") for such Obligor
designated by the Agent in a writing delivered to the Seller; provided, that if the Debt Rating of Home Depot Corporation is withdrawn at any time by
either Moody's or S&P or reduced at any time by either Moody's or S&P below the Debt Rating for Home Depot Corporation on the date hereof, then the Special Concentration Limit described above in
respect of Home Depot Corporation shall be canceled and replaced by the Normal Concentration Limit set forth on Schedule III hereto corresponding to such Obligor's Debt Rating at such time; and  provided, further,
that in the case of an Obligor with any Affiliated Obligor, the Concentration Limit shall be calculated as if such Obligor and all
such Affiliated Obligors are one Obligor; provided, however, that if the "Normal Concentration Limit"
set forth on Schedule III hereto corresponding to the Debt Rating of such Obligor and Affiliated Obligors are different, then the lowest such Normal Concentration Limit shall apply to such
Obligor and Affiliated Obligors; and provided further that the Agent may cancel any Special Concentration Limit upon three Business Days' notice to the
Seller. 

    "Contract" means an agreement between the Originator and an Obligor, substantially in the form of one of the written contracts or (in
the case of any open account agreement) one of the invoices 

3

 

approved by the Agent, pursuant to or under which such Obligor shall be obligated to pay for merchandise or services from time to time. 

    "Credit Agreement" means the Amended and Restated Credit and Guarantee Agreement dated as of October 26, 2001 (without giving
effect to any amendments or waivers thereto except as specifically
provided herein) among Dal-Tile Group, Dal-Tile International, the lenders listed therein, Bank of America, N.A., as syndication agent, Credit Lyonnais New York Branch, First
Union National Bank and Mizuho Financial Group, as co-documentation agents and The Chase Manhattan Bank, as administrative agent. 

    "Credit and Collection Policy" means those receivables credit and collection policies and practices of the Seller and the Originator in
effect on the date of this Agreement and described in Schedule II hereto, as modified in compliance with this Agreement. 

    "Credit Lyonnais" means Credit Lyonnais New York Branch, a branch licensed under the laws of the State of New York of a banking
corporation organized under the laws of the Republic of France. 

    "Dal-Tile Group" means Dal-Tile Group Inc., a Delaware corporation. 

    "Dal-Tile International" means Dal-Tile International Inc., a Delaware corporation. 

    "Days Sales Outstanding" means, on any date, an amount equal to 

	OBPR	 	×	 	D
	S	 	 	 	 

where:

	

OBPR	
 	

=	
 	

the aggregate Outstanding Balance of all Pool Receivables at the end of the most recently ended Fiscal Month.
	

S	
 	

=	
 	

the aggregate amount of all Pool Sales created during the most recently ended Fiscal Month.
	

D	
 	

=	
 	

the number of days in the most recently ended Fiscal Month.

    "Debt" means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of property or services (other than current unsecured accounts payable incurred in the ordinary course of business),
(iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (v) obligations
under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. 

    "Debt Rating" means, for any Person, the rating by S&P or Moody's of such Person's short-term senior unsecured
non-credit-enhanced debt. 

    "Default Ratio" means the ratio (expressed as a percentage) computed as of the last day of each Fiscal Month by dividing (i) the
aggregate Outstanding Balance of all Originator Receivables that were Defaulted Receivables on such day or that would have been Defaulted Receivables on such day had they not been written off the
books of the Originator or the Seller during such Fiscal Month by (ii) the aggregate Outstanding Balance of all Originator Receivables on such day. 

4

 

    "Defaulted Receivable" means an Originator Receivable: 

	(i)
	as
to which any payment, or part thereof, remains unpaid for 91 or more days from the original due date for such payment;

	(ii)
	as
to which the Obligor thereof or any other Person obligated thereon or owning any Related Security in respect thereof has taken any action, or
suffered any event to occur, of the type described in Section 7.01(g); or

	(iii)
	which
has been or, consistent with the Credit and Collection Policy, would be written off the Originator's or the Seller's books as uncollectible. 

    "Deferred Purchase Price" has the meaning specified in the PCA. 

    "Delinquency Ratio" means the ratio (expressed as a percentage) computed as of the last day of each Fiscal Month by dividing
(i) the aggregate Outstanding Balance of all Originator Receivables that were Delinquent Receivables on such day by (ii) the aggregate Outstanding Balance of all Originator Receivables
on such day. 

    "Delinquent Receivable" means an Originator Receivable that is not a Defaulted Receivable and: 

	(i)
	as
to which any payment, or part thereof, remains unpaid for 61 or more days from the original due date for such payment; or

	(ii)
	which
has been or, consistent with the Credit and Collection Policy, would be classified as delinquent by the Originator or the Seller. 

    "Diluted Receivable" means that portion (and only that portion) of any Originator Receivable which is either (a) reduced or
canceled as a result of (i) any defective, rejected or returned merchandise or services or any failure by the Originator to deliver any merchandise or provide any services or otherwise to
perform under the underlying Contract, (ii) any change in the terms of or cancellation of a Contract or any cash discount, discount for quick payment or other adjustment by the Originator or
any other Person which reduces the amount payable by the Obligor on the related Originator Receivable (except any such change or cancellation resulting from or relating to the financial inability to
pay or insolvency of the Obligor of such Originator Receivable) or (iii) any set-off by an Obligor in respect of any claim by such Obligor as to amounts owed by it on the related
Originator Receivable (whether such claim arises out of the same or a related transaction or an unrelated transaction) or (b) subject to any specific dispute, offset, counterclaim or defense
whatsoever (except the discharge in bankruptcy of the Obligor thereof), including, without limitation, any non-payment by the Obligor due to failure by the Originator to deliver any
merchandise or provide any services; provided that Diluted Receivables are calculated assuming that all chargebacks are resolved in the Obligor's favor
and do not include contractual adjustments to the amount payable by an Obligor that are eliminated from an
Originator Receivables balance sold to the Seller through a reduction in the purchase price paid by the Seller for the related Originator Receivable. 

    "Dilution Horizon Factor" means, as of any date, a ratio (expressed as a percentage) computed by dividing (i) the aggregate
Outstanding Balance (in each case, at the time of creation) of all Originator Receivables created by the Originators during the most recently ended Fiscal Month by (ii) the Outstanding Balance
of Eligible Receivables in the Receivables Pool as at the last day of the most recently ended Fiscal Month. 

    "Dilution Percentage" means, as of any date, the product of (i) the sum of (A) the product of (1) two multiplied
by (2) the average of the Dilution Ratios for each of the twelve most recently ended Fiscal Months, plus (B) the Dilution Volatility Ratio as at the last day of the most recently ended
Fiscal Month, multiplied by (ii) the Dilution Horizon Factor as of such date. 

5

 

    "Dilution Ratio" means, as of any date, the ratio (expressed as a percentage) computed for the most recently ended Fiscal Month by
dividing (i) the aggregate amount of Originator Receivables which became Diluted Receivables during such Fiscal Month by (ii) the aggregate Outstanding Balance (in each case, at the time
of creation) of all Originator Receivables created during the Fiscal Month immediately preceding such Fiscal Month. 

    "Dilution Reserve" means, for any Receivable Interest on any date, an amount equal to: 

	DP	 	×	 	C

where:

	DP	 	=	 	the Dilution Percentage on such date.
	

C	
 	

=	
 	

the Capital of such Receivable Interest on such date.

    "Dilution Volatility Ratio" means, as of any date, a ratio (expressed as a percentage) equal to the product of (a) the highest
of the Dilution Ratios calculated for each of the twelve most recently ended Fiscal Months minus the average of the Dilution Ratios for each of the twelve most recently ended Fiscal Months, and
(b) a ratio calculated by dividing the highest of the Dilution Ratios calculated for each of the twelve most recently ended Fiscal Months by the average of the Dilution Ratios for each of the
twelve most recently ended Fiscal Months. 

    "DTC Store" means any sales service center operated by the Originator. 

    "Eligible Assignee" means (i) Credit Lyonnais or any of its Affiliates or (ii) any financial or other institution
acceptable to the Agent and having a Debt Rating of at least A-1/P-1 that is approved in writing by the Seller (such approval not to be unreasonably withheld or delayed);
provided that if an Event of Termination or Incipient Event of Termination has occurred and is continuing at the time of such assignment, no approval by the Seller shall be required under
clause (ii). 

    "Eligible Receivable" means, at any time, a Receivable: 

	(i)
	the
Obligor of which (A) is a United States resident, (B) is not an Affiliate of Dal-Tile International,
Dal-Tile Group, the Originator or the Seller and (C) is not a government or a governmental subdivision or agency that has the benefit of an anti-assignment statute or
other statute imposing restrictions on the assignment of Receivables due from it;

	(ii)
	which
is not a Defaulted Receivable or a Delinquent Receivable;

	(iii)
	which,
according to the Contract related thereto, is required to be paid in full either (A) within less than 60 days of the original
billing date therefor or (B) within 60 days of the original billing date therefor if the aggregate Outstanding Balance of such Receivable and all other Receivables having similar payment
terms does not exceed 50% of the Outstanding Balance of all Originator Receivables;

	(iv)
	which
is an "account" within the meaning of Article 9 of the UCC of the applicable jurisdictions governing the perfection of the interest
created by a Receivable Interest;

	(v)
	which
is denominated and payable only in United States dollars in the United States;

	(vi)
	which
arises under a Contract which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Receivable and is not subject to any Adverse Claim or any dispute, offset, counterclaim or defense whatsoever (except the potential discharge in bankruptcy of such
Obligor); 

6

 

	(vii)
	which,
together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which none of the Seller, the Originator or the Obligor is in violation of any such law, rule or regulation in any material respect;

	(viii)
	which
arises under a Contract which (A) does not require the Obligor thereunder to consent to the transfer, sale or
assignment of the rights and duties of the Seller or the Originator thereunder and (B) does not contain a confidentiality provision that purports to restrict the ability of the Agent, the
Investors or the Banks to exercise their rights under this Agreement, including, without limitation, their right to review the Contract;

	(ix)
	which
was generated in the ordinary course of the Originator's business;

	(x)
	which
has not been extended, rewritten or otherwise modified from the original terms thereof (except as permitted by Section 6.02(c);

	(xi)
	the
transfer, sale or assignment of which does not contravene any applicable law, rule or regulation;

	(xii)
	which
satisfies all applicable requirements of the Credit and Collection Policy;

	(xiii)
	which
does not constitute a "bill and hold" sale; and

	(xiv)
	as
to which, prior to the Origination Date of such Receivable, the Agent has not notified the Seller that such Receivable (or the
Obligor of such Receivable) is, in the reasonable good faith judgment of Atlantic and the Banks, no longer acceptable for purchase by Atlantic and the Banks hereunder for credit-related reasons. 

    "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. 

    "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time. 

    "Eurodollar Rate" means, for any Fixed Period, an interest rate per annum determined by the Agent equal to the offered rate per annum
for deposits in U.S. dollars in an amount substantially equal to the Capital associated with such Fixed Period on the first day of such Fixed Period and for a period equal to such Fixed Period, as of
11:00 A.M., London time, two Business Days prior to the first day of the applicable Fixed Period, that appears on the display designated as "Page 3750" on the Telerate Service (or such other
page as may replace "Page 3750" on that service for the purpose of displaying London interbank offered rates of major banks); provided, that if such
rate is not available on any date when the Eurodollar Rate is to be determined, then the rate shall be an interest rate per annum determined by the Agent equal to the rate at which it would offer
deposits in U.S. dollars to prime banks in the London interbank market for a period equal to such Fixed Period and in an amount substantially equal to the Capital associated with such Fixed Period at
or about 11:00 A.M. (London Time) on the second Business Day before (and for value on) the first day of such Fixed Period. 

    "Eurodollar Rate Reserve Percentage" of any Investor or Bank for any Fixed Period in respect of which Yield is computed by reference to
the Eurodollar Rate means the reserve percentage applicable two Business Days before the first day of such Fixed Period under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) (or if more than one such percentage shall be applicable, the daily average of such percentages for those days in such Fixed Period during which any such
percentage shall be so applicable) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve 

7

 

requirement) for such Investor or Bank with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes
deposits by
reference to which the interest rate on Eurocurrency Liabilities is determined) having a term equal to such Fixed Period. 

    "Event of Termination" has the meaning specified in Section 7.01. 

    "Facility Termination Date" means the earliest of (a) October 22, 2004 or (b) the date determined pursuant to
Section 7.01 or (c) the date the Purchase Limit reduces to zero pursuant to Section 2.01(b) or (d) the date that the Asset Purchase Agreement expires without being renewed. 

    "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. 

    "Fee Agreement" has the meaning specified in Section 2.05(b). 

    "Fees" has the meaning specified in Section 2.05(b). 

    "Fiscal Month" means a fiscal month of Dal-Tile International containing four or five weeks as determined under the
accounting policies and procedures of Dal-Tile International and its Affiliates, as in effect on the date hereof. 

    "Fixed Period" means with respect to any Receivable Interest: 

    (a) initially
the period commencing on the date of purchase of such Receivable Interest and ending such number of days as the Seller shall select and the Agent shall
approve pursuant to Section 2.02, up to three months from such date; and 

    (b) thereafter
each period commencing on the last day of the immediately preceding Fixed Period for such Receivable Interest and ending such number of days (not to
exceed three months) as the Seller shall select and the Agent shall approve on notice by the Seller received by the Agent (including notice by telephone, confirmed in writing) not later than
11:00 A.M. (New York City time) on such last day,  except that if the Agent shall not have received such notice or approved such period on or before 11:00 A.M. (New York City time) on such last
day, such period shall be one day; 

provided that (i) any Fixed Period in respect of which Yield is computed by reference to the Assignee Rate shall be a period from one to and
including 35 days, or a period of one, two or three months, as the Seller may select as provided above; (ii) any Fixed Period (other than of one day) which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding Business Day (provided, however, if Yield in respect of such Fixed Period is
computed by reference to the Eurodollar Rate, and such Fixed Period would otherwise end on a day which is not a Business Day, and there is no subsequent Business Day in the same calendar month as such
day, such Fixed Period shall end on the next preceding Business Day); (iii) in the case of any Fixed Period of one day, (A) if such Fixed Period is the initial Fixed Period for a
Receivable Interest, such Fixed Period shall be the day of purchase of such Receivable Interest; (B) any subsequently occurring Fixed Period which is one day shall, if the immediately preceding
Fixed Period is more than one day, be the last day of such immediately preceding Fixed Period, and, if the immediately preceding Fixed Period is one day, be the day next following such immediately
preceding Fixed Period; and (C) if such Fixed Period occurs on a day immediately preceding a day which is not a Business Day, such Fixed Period shall be extended to 

8

 

the next succeeding Business Day; and (iv) in the case of any Fixed Period for any Receivable Interest which commences before the Termination Date for such Receivable Interest and would
otherwise end on a date occurring after such Termination Date, such Fixed Period shall end on such Termination Date and the duration of each Fixed Period which commences on or after the Termination
Date for such Receivable Interest shall be of such duration as shall be selected by the Agent or, in the absence of any such selection, each period of thirty days from the last day of the immediately
preceding Fixed Period. 

    "Incipient Event of Termination" means an event that but for notice or lapse of time or both would constitute an Event of Termination. 

    "Investor" means Atlantic and all other owners by permitted assignment of a Receivable Interest originally purchased by Atlantic. 

    "Investor Rate" for any Fixed Period for any Receivable Interest means to the extent Atlantic funds such Receivable Interest for such
Fixed Period by issuing commercial paper, the rate per annum (or if more than one rate, the weighted average of the rates) at which commercial paper notes of Atlantic having a term equal to such Fixed
Period and to be issued to fund such Receivable Interest may be sold by any placement agent or commercial paper dealer selected by the Agent on behalf of Atlantic, as agreed between each such agent or
dealer and the Agent and notice of which has been given by the Agent to the Seller; provided if the rate (or rates) as agreed between any such agent or
dealer and the Agent for any Fixed Period for any Receivable Interest is a discount rate (or rates), then such rate shall
be the rate (or if more than one rate, the weighted average of the rates) resulting from converting such discount rate (or rates) to an interest-bearing equivalent rate per annum. 

    "Liquidation Day" means, for any Receivable Interest, (i) each day during a Fixed Period for such Receivable Interest on which
the conditions set forth in Section 3.02 are not satisfied, and (ii) each day which occurs on or after the Termination Date for such Receivable Interest. 

    "Liquidation Fee" means, for (i) any Fixed Period during which a Liquidation Day occurs or (ii) any Fixed Period for
which Yield is computed by reference to the Investor Rate or the Eurodollar Rate and a reduction of Capital is made for any reason on any day other than the last day of such Fixed Period, the amount
(the calculation of which shall be made by the Agent and reported in reasonable detail to the Seller), if any, by which (A) the additional Yield (calculated without taking into account any
Liquidation Fee or any shortened duration of such Fixed Period pursuant to clause (iv) of the definition thereof) which would have accrued during such Fixed Period on the reductions of Capital
of the Receivable Interest relating to such Fixed Period had such reductions remained as Capital, exceeds (B) the income, if any, received (or receivable, acting in a commercially reasonable
manner and, in the case of the Investors, subject to the guidelines of the Relevant Rating Agencies) by the Investors or the Banks which hold such Receivable Interest from the investment of the
proceeds of such reductions of Capital. 

    "Lock-Box Account" means a post office box administered by a Lock-Box Bank and the associated account
maintained at a Lock-Box Bank, in each case for the purpose of receiving Collections. 

    "Lock-Box Agreement" means an agreement, in substantially the form of Annex E-1. 

    "Lock-Box Bank" means any of the banks holding one or more Lock-Box Accounts. 

    "Loss Horizon Factor" means, as of any date, a ratio (expressed as a percentage) computed by dividing (i) the aggregate
Outstanding Balance (in each case, at the time of creation) of all Originator Receivables created by the Originators during the three most recently ended Fiscal Months by (ii) the Net
Receivables Pool Balance as at the last day of the most recently ended Fiscal Month. 

9

 

    "Loss Percentage" means, as of any date, the greater of (a) the product of (i) two multiplied by (ii) the Loss
Horizon Factor as of the last day of the most recently ended Fiscal Month multiplied by (iii) the highest of the Loss Ratios for the twelve most recently ended Fiscal Months and (b) 12%. 

    "Loss Ratio" means, as of any date, the average of the ratios (each expressed as a percentage) for each of the three most recently
ended Fiscal Months computed for each such Fiscal Month by dividing (a) the sum of the aggregate Outstanding Balance of Originator Receivables which were 61-90 days past due
as at the last day of such Fiscal Month plus (without duplication) the aggregate write-offs during such Fiscal Month, by (b) the aggregate Outstanding Balance (in each case, at the
time of creation) of Originator Receivables created during the fourth preceding Fiscal Month. 

    "Loss Reserve" means, for any Receivable Interest on any date, an amount equal to: 

	LP	 	×	 	NRPB	 	×	 	C

	 	 	 	 	 	 	 	 	AC

where:

	

LP	
 	

=	
 	

the Loss Percentage on such date.
	

NRPB	
 	

=	
 	

the Net Receivables Pool Balance on such date.
	

C	
 	

=	
 	

the Capital of such Receivable Interest on such date.
	

AC	
 	

=	
 	

the aggregate Capital of all Receivable Interests on such date.

    "Monthly Report" means a report in substantially the form of Annex A hereto and containing such additional information as the Agent may
reasonably request from time to time, furnished by the Collection Agent to the Agent pursuant to Section 6.02(g). 

    "Moody's" means Moody's Investors Service, Inc. 

    "Net Receivables Pool Balance" means at any time the Outstanding Balance of Eligible Receivables then in the Receivables Pool reduced
by the sum of (i) the aggregate amount by which the Outstanding Balance of Eligible Receivables of each Obligor then in the Receivables Pool exceeds the product of (A) the Concentration
Limit for such Obligor multiplied by (B) the Outstanding Balance of Eligible Receivables then in the Receivables Pool, (ii) the aggregate amount of Collections on hand at such time for
payment on account of any Eligible Receivables, the Obligor of which has not been identified and (iii) the aggregate Outstanding Balance of all Eligible Receivables in respect of which any
credit memo issued by the Originator or the Seller is outstanding at such time to the extent deemed Collections have not been paid pursuant to Section 2.04(e). 

    "Obligor" means a Person obligated to make payments pursuant to a Contract. 

    "Origination Date" means (i) the date of this Agreement, with respect to Receivables existing on such date and (ii) the
date on which such Receivable is created, with respect to all other Receivables. 

    "Originator" means Dal-Tile Corporation, a Pennsylvania corporation. 

    "Originator Receivable" means the indebtedness of any Obligor (other than an Obligor which is an Affiliate of Dal-Tile
International or the Originator) resulting from the provision or sale of merchandise or services by the Originator under a Contract, and includes the right to payment of any interest or finance
charges and other obligations of the Obligor with respect thereto; provided, however, that "Originator Receivable" does not include any such
indebtedness created by the Corporate Strategic Business Unit or the R&M Strategic Business Unit of the Originator. 

10

 

    "Other Companies" means Dal-Tile International, the Originator and all of their respective Subsidiaries except the Seller. 

    "Outstanding Balance" of any Receivable or Originator Receivable, as the case may be, at any time means the then outstanding principal
balance thereof. 

    "Parent Undertaking Agreement" means the Parent Undertaking Agreement dated as of the date of this Agreement by each of
Dal-Tile International and Dal-Tile Group in favor of the Seller, the Agent, the Investors and the Banks, pursuant to which Dal-Tile International and
Dal-Tile Group, jointly and severally, guaranty the performance of the obligations of the Originator and the Collection Agent under the Transaction Documents, as the same may be amended,
modified or restated from time to time pursuant to the terms thereof. 

    "PCA" means the Purchase and Contribution Agreement dated as of the date of this Agreement between the Originator, as seller, and the
Seller, as purchaser, as the same may be amended, modified or restated from time to time pursuant to the terms thereof and hereof. 

    "Percentage" of any Bank means, (a) with respect to Credit Lyonnais, the percentage set forth on the signature page to this
Agreement, or such amount as reduced by any Assignment and Acceptance entered into with an Eligible Assignee, or (b) with respect to a Bank that has entered into an Assignment and Acceptance,
the amount set forth therein as such Bank's Percentage, or such amount as reduced by an Assignment and Acceptance entered into between such Bank and an Eligible Assignee. 

    "Performance Dilution Ratio" means, as of any date, the ratio (expressed as a percentage) computed for the most recently ended Fiscal
Month by dividing (i) the aggregate amount of Originator Receivables which became Diluted Receivables during such Fiscal Month by (ii) the aggregate Outstanding Balance, as of the last
day of such Fiscal Month, of all Originator Receivables created during such Fiscal Month. 

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

    "Pool Receivable" means a Receivable in the Receivables Pool. 

    "Pool Sale" means a sale under a Contract which results in the creation of an Originator Receivable. 

    "Purchase Limit" means $75,000,000, as such amount may be reduced pursuant to Section 2.01(b). References to the unused portion
of the Purchase Limit shall mean, at any time, the Purchase Limit, as then reduced pursuant to Section 2.01(b), minus the then outstanding Capital of Receivable Interests under this Agreement. 

    "Receivable" means any Originator Receivable which has been acquired by the Seller from the Originator by purchase or by capital
contribution pursuant to the PCA. 

    "Receivable Interest" means, at any time, an undivided percentage ownership interest in (i) all then outstanding Pool
Receivables arising prior to the time of the most recent computation or recomputation of such undivided percentage interest pursuant to Section 2.03, (ii) all Related Security with
respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables. Such undivided percentage interest shall be computed as 

C + YFR + LR + DR

NRPB 

11

 

where: 

	C	 	=	 	the Capital of such Receivable Interest at the time of computation.
	

YFR	
 	

=	
 	

the Yield and Fee Reserve of such Receivable Interest at the time of computation.
	

LR	
 	

=	
 	

the Loss Reserve of such Receivable Interest at the time of computation.
	

DR	
 	

=	
 	

the Dilution Reserve of such Receivable Interest at the time of computation.
	

NRPB	
 	

=	
 	

the Net Receivables Pool Balance at the time of computation.

Each
Receivable Interest shall be determined from time to time pursuant to the provisions of Section 2.03. 

    "Receivables Pool" means at any time the aggregation of all then outstanding Receivables. 

    "Related Security" means with respect to any Receivable 

	(i)
	all
of the Seller's interest in any merchandise (including returned merchandise) the sale of which gives rise to such Receivable;

	(ii)
	all
security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to
the Contract related to such Receivable or otherwise, together with all financing statements signed by an Obligor describing any collateral securing such Receivable;

	(iii)
	all
guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such
Receivable whether pursuant to the Contract related to such Receivable or otherwise; and

	(iv)
	the
Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data
processing software and similar property and rights) to the extent relating to such Receivable and the related Obligor. 

    "Relevant Rating Agency" means, at any time, a statistical rating agency that rates the commercial paper of any Investor at the request
of such Investor at such time. 

    "S&P" means Standard and Poors, a division of the McGraw-Hill Companies, Inc. 

    "SEC" means the Securities and Exchange Commission. 

    "Settlement Date" for any Receivable Interest means the last day of each Fixed Period for such Receivable Interest. 

    "Store Account" means a bank account maintained by the Originator for the purpose of receiving Collections, funds constituting cash
sales of merchandise and other funds of any DTC Store. 

    "Store Account Bank" means the bank holding any Store Account. 

    "Subsidiary" of a specified Person means any corporation or other entity of which securities having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person, or one or more of such Person's Subsidiaries, or by such
Person and one or more of such Person's Subsidiaries. 

    "Tangible Net Worth" means at any time the excess of (i) the sum of (a) the product of (x) 100% minus the Discount
(as such term is defined in the PCA) multiplied by (y) the Outstanding Balance of all Receivables other than Defaulted Receivables plus (b) cash and cash equivalents of the Seller plus 

12

 

(c) the outstanding principal amount of Purchaser Loans (as such term is defined in the PCA), minus (ii) the sum of (a) Capital plus (b) the Deferred Purchase Price. 

    "Termination Date" for any Receivable Interest means (i) in the case of a Receivable Interest owned by an Investor, the earlier
of (a) the Business Day which the Seller or the Agent so designates by notice to the other at least one Business Day in advance for such Receivable Interest and (b) the Facility
Termination Date and (ii) in the case of a Receivable Interest owned by a Bank, the earlier of (a) the Business Day which the Seller so designates by notice to the Agent at least one
Business Day in advance for such Receivable Interest and (b) the Commitment Termination Date. 

    "Transaction Document" means any of this Agreement, the PCA, the Lock-Box Agreements, the Account Agreement, the Fee
Agreement, the Bank Direction Agreements, the Parent Undertaking Agreement and all other agreements and documents designated by the mutual agreement of the parties hereto as "Transaction Documents"
from time to time, and all amendments and supplements hereto or thereto. 

    "Transferee" means any Person to whom any Investor or Bank has transferred all or any portion of its rights and obligations under this
Agreement by way of an assignment or participation as described in Section 10.03. 

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

    "Weekly Report" means a report in substantially the form of Annex B hereto and containing such additional information as the Agent may
reasonably request from time to time, furnished by the Collection Agent to the Agent pursuant to Section 6.02(h). 

    "Yield" means: 

	(i)
	for
each Receivable Interest for any Fixed Period to the extent Atlantic will be funding such Receivable Interest through the issuance of commercial
paper notes, 

	IR	 	×	 	C	 	×	 	ED	 	+	 	LF
	 	 	 	 	 	 	 	 	
 360	 	 	 	 

	(ii)
	for
each Receivable Interest for any Fixed Period to the extent (x) Atlantic will not be funding such Receivable Interest through the
issuance of commercial paper notes, or (y) the Banks will be funding such Receivable Interest, 

	AR	 	×	 	C	 	×	 	ED
	 	+	 	LF
	 	 	 	 	 	 	 	 	360	 	 	 	 

where:

	AR	 	=	 	the Assignee Rate for such Receivable Interest for such Fixed Period
	

C	
 	

=	
 	

the Capital of such Receivable Interest during such Fixed Period
	

IR	
 	

=	
 	

the Investor Rate for such Receivable Interest for such Fixed Period
	

ED	
 	

=	
 	

the actual number of days elapsed during such Fixed Period
	

LF	
 	

=	
 	

the Liquidation Fee, if any, for such Receivable Interest for such Fixed Period

provided that no provision of this Agreement shall require the payment or permit the collection of Yield in excess of the maximum permitted by
applicable law; and provided further that Yield for any 

13

 

Receivable Interest shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason. 

    "Yield and Fee Reserve" means, for any Receivable Interest on any date, an amount equal to 

(C × YFRP) + AUYF

where:

	C	 	=	 	the Capital of such Receivable Interest at the close of business of the Collection Agent on such date.
	

YFRP	
 	

=	
 	

the Yield and Fee Reserve Percentage on such date.
	

AUYF	
 	

=	
 	

accrued and unpaid Yield, Collection Agent Fee and Fees on such date, in each case for such Receivable Interest.

    "Yield and Fee Reserve Percentage" means, on any date, a percentage equal to 

 (AER + CAF) × 2 × DSO

360 

where:

	AER	 	=	 	the one-month Adjusted Eurodollar Rate in effect on such date.
	

CAF	
 	

=	
 	

the percentage per annum used in the calculation of the Collection Agent Fee in effect on such date.
	

DSO	
 	

=	
 	

the Days Sales Outstanding on such date.

14

  

 
 

       SECTION 1.02.  Other Terms.   All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting
principles. All terms used in
Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. 

 
 

ARTICLE II    
    
    AMOUNTS AND TERMS OF THE PURCHASES    
  

 
 

       SECTION 2.01.  Purchase Facility.   (a) On the terms and conditions hereinafter set forth, Atlantic may, in its sole discretion, and the Banks
shall, ratably in accordance with their
respective Bank Commitments, purchase Receivable Interests from the Seller from time to time during the period from the date hereof to the Facility Termination Date (in the case of Atlantic) and to
the Commitment Termination Date (in the case of the Banks). Under no circumstances shall Atlantic make any such purchase, or the Banks be obligated to make any such purchase, if after giving effect to
such purchase the aggregate outstanding Capital of Receivable Interests (after giving effect to any reduction of Capital of Receivable Interests held by any Investor to be made on the date of such
purchase from the proceeds of any purchases by the Banks) would exceed the Purchase Limit. 

    (b) The
Seller may at any time, upon at least 30 days' notice to the Agent, terminate the facility provided for in this Agreement in whole or, from time to time,
reduce in part the unused portion of the Purchase Limit; provided that each partial reduction shall be in the amount of at least $10,000,000 or an
integral multiple of $1,000,000 in excess thereof. 

    (c) Until
the Agent gives the Seller the notice provided in Section 3.02(c)(iii), the Agent, on behalf of the Investors which own Receivable Interests, shall
have the Collections attributable to such Receivable Interests automatically reinvested pursuant to Section 2.04 in additional undivided percentage interests in the Pool Receivables by making
an appropriate readjustment of such Receivable Interests. The Agent, on behalf of the Banks which own Receivable Interests, shall have the Collections attributable to such Receivable Interests
automatically reinvested pursuant to Section 2.04 in additional undivided percentage interests in the Pool Receivables by making an appropriate readjustment of such Receivable Interests. 

 
 

       SECTION 2.02.  Making Purchases.   (a) Each purchase by Atlantic or the Banks shall be made on at least three Business Days' notice from the Seller
to the Agent. Each such notice of a
purchase shall specify (i) the amount requested to be paid to the Seller (such amount, which shall not be less than $1,000,000, being referred to herein as the initial "Capital" of the
Receivable Interest then being purchased), (ii) the date of such purchase (which shall be a Business Day), and (iii) the requested duration of the initial Fixed Period for such
Receivable Interest. The Agent shall promptly thereafter notify the Seller whether Atlantic has determined to make a purchase and, if so, whether all of the terms specified by the Seller are
acceptable to Atlantic. 

    If
Atlantic has determined not to make a proposed purchase, the Agent shall promptly send notice of the proposed purchase to all of the Banks concurrently by telecopier, telex or
cable specifying the date of such purchase, each Bank's Percentage multiplied by the aggregate amount of Capital of Receivable Interest being purchased, whether the Yield for the Fixed Period for such
Receivable Interest is calculated based on the Eurodollar Rate (which may be selected by the Seller only if the notice referred to in the first sentence of this Section is given at least three
Business Days prior to the purchase date) or the Alternate Base Rate, and the duration of the Fixed Period for such Receivable Interest (which shall be one day if the Seller has not selected another
period). 

    (b) On
the date of each such purchase of a Receivable Interest, Atlantic or the Banks, as the case may be, shall, upon satisfaction of the applicable conditions set
forth in Article III, make available to the Seller in same day funds an amount equal to the initial Capital of such Receivable Interest, to the 

15

 

Seller's account no. 3751842080, at Bank of America, N.A., 901 Main Street, P.O. Box 832409, Dallas, Texas 75202, ABA No. 111000012 or such other account of the Seller as the
Seller may hereafter direct the Agent in writing; provided, however, if such purchase is being made by the Banks following the designation by the Agent
of a Termination Date for a Receivable Interest owned by an Investor pursuant to clause (i)(a) of the definition of Termination Date and any Capital of such Receivable Interest is outstanding
on such date of purchase, the Seller hereby directs the Banks to pay the proceeds of such purchase (to the extent of the outstanding Capital and accrued Yield on such Receivable Interest of the
Investor) to the Agent's Account, for application to the reduction of the outstanding Capital and accrued Yield on such Receivable Interest of the Investor. 

    (c) Effective
on the date of each purchase pursuant to this Section 2.02 and each reinvestment pursuant to Section 2.04, the Seller hereby sells and
assigns to the Agent, for the benefit of the parties making such purchase, an undivided percentage ownership interest, to the extent of the Receivable Interest then being purchased, in each Pool
Receivable then existing and in the Related Security and Collections with respect thereto. 

    (d) Notwithstanding
the foregoing, a Bank shall not be obligated to make purchases under this Section 2.02 at any time in an amount which would exceed such
Bank's Bank Commitment less such Bank's ratable share of the aggregate outstanding Capital held by Atlantic (whether or not any portion thereof has been assigned by Atlantic pursuant to the Asset
Purchase Agreement), after giving effect to any reductions of the Capital held by Atlantic to be made on the date of such purchase from the proceeds of purchases by the Banks. Each Bank's obligation
shall be several, such that the failure of any Bank to make available to the Seller any funds in connection with any purchase shall not relieve any other Bank of its obligation, if any, hereunder to
make funds available on the date of such purchase, but no Bank shall be responsible for the failure of any other Bank to make funds available in connection with any purchase. 

 
 

      SECTION 2.03.  Receivable Interest Computation.   Each Receivable Interest shall be initially computed on its date of purchase. Thereafter until the
Termination Date for such Receivable Interest, such
Receivable Interest shall be automatically recomputed (or deemed to be recomputed) on each day other than a Liquidation Day. Any Receivable Interest, as computed (or deemed recomputed) as of the day
immediately preceding the Termination Date for such Receivable Interest, shall thereafter remain constant; provided, however, that from and after the
date on which the Termination Date shall have occurred for all Receivable Interests and until each Receivable Interest becomes zero in accordance with the next sentence, each Receivable Interest shall
be calculated as the percentage equivalent of a fraction the numerator of which is the percentage representing such Receivable Interest immediately prior to such date and the denominator of which is
the sum of the percentages representing all Receivable Interests which were outstanding immediately prior to such date. Each Receivable Interest shall become zero when Capital thereof and Yield
thereon shall have been paid in full, and all Fees and other amounts owed by the Seller hereunder to the Investors, the Banks or the Agent are paid and the Collection Agent shall have received the
accrued Collection Agent Fee thereon. 

 
 

      SECTION 2.04.  Settlement Procedures.   (a) Collection of the Pool Receivables shall be administered by a Collection Agent, in accordance with the
terms of Article VI of this
Agreement. The Seller shall provide to the Collection Agent (if other than the Seller) on a timely basis all information needed for such administration, including notice of the occurrence of any
Liquidation Day and current computations of each Receivable Interest. 

    (b) The
Collection Agent shall, on each day on which Collections of Pool Receivables are received by it: 

     (i) with
respect to each Receivable Interest, set aside on its books and hold in trust (and, at the request of the Agent on any Liquidation Day with respect to such
Receivable Interest (but not prior to such request), segregate into an account acceptable to the Agent) for the Investors or the 

16

 

Banks that hold such Receivable Interest, out of the percentage of such Collections represented by such Receivable Interest, an amount equal to the Yield, Fees and Collection Agent Fee accrued through
such day for such Receivable Interest and not previously set aside; 

    (ii) with
respect to each Receivable Interest, if such day is not a Liquidation Day for such Receivable Interest, reinvest with the Seller on behalf of the Investors or
the Banks that hold such Receivable Interest the percentage of such Collections represented by such Receivable Interest, to the extent representing a return of Capital, by recomputation of such
Receivable Interest pursuant to Section 2.03; 

    (iii) if
such day is a Liquidation Day for any one or more Receivable Interests, set aside on its books and hold in trust (and, at the request of the Agent, segregate)
for the Investors or the Banks that hold such Receivable Interests (x) if such day is a Liquidation Day for less than all of the Receivable Interests, the percentage of such Collections
represented by such Receivable Interests, and (y) if such day is a Liquidation Day for all of the Receivable Interests, all of the remaining Collections (but not in excess of the Capital of
such Receivable Interests); provided that if amounts are set aside and held in trust on any Liquidation Day occurring prior to the Termination Date, and
thereafter prior to the Settlement Date for such Fixed Period the conditions set forth in Section 3.02 are satisfied or waived by the Agent, such previously set aside amounts shall, to the
extent representing a return of Capital, be reinvested in accordance with the preceding subsection (ii) on the day of such subsequent satisfaction or waiver of conditions; and 

    (iv) during
such times as amounts are required to be reinvested in accordance with the foregoing subsection (ii) or the proviso to subsection (iii), release to
the Seller for its own account any Collections in excess of both such amounts and of the amounts that are required to be set aside pursuant to subsection (i) above. 

    (c) The
Collection Agent shall deposit into the Agent's Account, on the Settlement Date for each Receivable Interest, Collections held for the Investors or the Banks
that relate to such Receivable Interest pursuant to Section 2.04(b). 

    (d) Upon
receipt of funds deposited into the Agent's Account, the Agent shall distribute them as follows: 

     (i) if
such distribution occurs on a day that is not a Liquidation Day, first to the Investors or the Banks that hold the relevant Receivable Interest and to the Agent
in payment in full of all accrued Yield and Fees and then to the Collection Agent in payment in full of all accrued Collection Agent Fee. 

    (ii) if
such distribution occurs on a Liquidation Day, first to the Investors or the Banks that hold the relevant Receivable Interest and to the Agent in payment in
full of all accrued Yield and Fees, second to such Investors or Banks in reduction to zero of all Capital, third to such Investors, Banks or the
Agent in payment of any other amounts owed by the Seller hereunder, and fourth to the Collection Agent in payment in full of all accrued Collection Agent Fee. 

    After
the Capital, Yield, Fees and Collection Agent Fee with respect to a Receivable Interest, and any other amounts payable by the Seller to the Investors, the Banks or the Agent
hereunder, have been paid in full and any contingent obligations of the Agent under any Account Agreement, Lock-Box Agreement or Bank Direction Agreement have been released, all additional
Collections with respect to such Receivable Interest shall be paid to the Seller for its own account. 

    (e) For
the purposes of this Section 2.04: 

     (i) if
on any day any Pool Receivable becomes (in whole or in part) a Diluted Receivable, the Seller shall be deemed to have received on such day a Collection of such
Pool Receivable in the amount of such Diluted Receivable; 

17

 

    (ii) if on any day any of the representations or warranties contained in Section 4.01(h) is no longer true with respect to any Pool Receivable, the Seller shall
be deemed to have received on such day a Collection of such Pool Receivable in full; 

    (iii) except
as provided in subsection (i) or (ii) of this Section 2.04(e), or as otherwise required by applicable law or the relevant Contract,
all Collections received from an Obligor of any Receivables shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable,
unless such Obligor designates its payment for application to specific Receivables; and 

    (iv) if
and to the extent the Agent, the Investors or the Banks shall be required for any reason to pay over to an Obligor any amount received on its behalf hereunder,
such amount shall be deemed not to have been so received but rather to have been retained by the Seller and, accordingly, the Agent, the Investors or the Banks, as the case may be, shall have a claim
against the Seller for such amount, payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof. 

 
 

      SECTION 2.05.  Fees.   (a) Each Investor and Bank shall pay to the Collection Agent a fee (the "Collection Agent
Fee") of
0.50% per annum on the average daily Capital of each Receivable Interest owned by such Investor or
Bank, from the date of purchase of such Receivable Interest until the later of the Termination Date for such Receivable Interest or the date on which such Capital is reduced to zero, payable on the
Settlement Date for such Receivable Interest. Upon three Business Days' notice to the Agent, the Collection Agent (if not the Originator, the Seller or its designee or an Affiliate of the Seller) may
elect to be paid, as such fee, another percentage per annum on the average daily Capital of such Receivable Interest, but in no event in excess for all Receivable Interests relating to the Receivables
Pool of the lesser of (i) 110% of the reasonable costs and expenses of the Collection Agent in administering and collecting the Receivables in the Receivables Pool and (ii) 1.00% per
annum on the average daily Capital of all outstanding Receivable Interests. The Collection Agent Fee shall be payable only from Collections pursuant to, and subject to the priority of payment set
forth in, Section 2.04. So long as the Originator is acting as the Collection Agent hereunder, amounts paid as the Collection Agent Fee pursuant to this Section 2.05(a) shall reduce, on
a dollar-for-dollar basis, the obligation of the Seller to pay the "Collection Agent Fee" pursuant to Section 6.03 of the PCA, provided that such obligation of the
Seller shall in no event be reduced below zero. 

    (b) The
Seller shall pay to the Agent certain fees (collectively, the "Fees") in the amounts and on the dates set forth
in a separate fee agreement of even date between the Seller and the Agent, as the same may be amended or restated from time to time (the "Fee
Agreement"). 

 
 

      SECTION 2.06.  Payments and Computations, Etc.   (a) All amounts to be paid or deposited by the Seller or the Collection Agent hereunder shall be
paid or deposited no later than 12:00 noon (New York
City time) on the day when due in same day funds to the Agent's Account. 

    (b) Each
of the Seller and the Collection Agent shall, to the extent permitted by law, pay interest on any amount not paid or deposited by it when due hereunder, at an
interest rate per annum equal to 2% per annum above the Alternate Base Rate, payable on demand. 

    (c) All
computations of interest under subsection (b) above and all computations of Yield, fees, and other amounts hereunder shall be made on the basis of a year
of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit. 

 
 

       SECTION 2.07.  Dividing or Combining Receivable Interests.   Either the Seller or the Agent may, upon notice to the other party received at least three
Business Days prior to the last day of any Fixed 

18

 

Period in the case of the Seller giving notice, or up to the last day of such Fixed Period in the case of the Agent giving notice, either (i) divide any Receivable Interest into two or more
Receivable Interests having aggregate Capital equal to the Capital of such divided Receivable Interest, or (ii) combine any two or more Receivable Interests originating on such last day or
having Fixed Periods ending on such last day into a single Receivable Interest having Capital equal to the aggregate of the Capital of such Receivable Interests; provided,
however, that no Receivable Interest owned by Atlantic may be combined with a Receivable Interest owned by any Bank. 

 
 

       SECTION 2.08.  Increased Costs.   (a) If Credit Lyonnais, any Investor, any Bank, any entity which enters into a commitment to purchase Receivable
Interests or interests therein, or any
of their respective Affiliates (each, an "Affected Person") determines that compliance with any law or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of the capital required or expected to be maintained by such Affected Person
and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of or otherwise to maintain the investment in Pool
Receivables or interests therein related to this Agreement or to the funding thereof and other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Agent), the
Seller shall immediately pay to the Agent for the account of such Affected Person (as a third-party beneficiary), from time to time as specified by such Affected Person, additional amounts sufficient
to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of
such commitments. A certificate as to such amounts (which shall include calculations in reasonable detail) submitted to the Seller and the Agent by such Affected Person shall be conclusive and binding
for all purposes, absent manifest error. 

    (b) If,
due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements referred to in
Section 2.09) in or in the interpretation of any law or regulation or (ii) compliance with any guideline or request from any central bank or other governmental authority (whether or not
having the force of law), there shall be any increase in the cost to any Investor or Bank of agreeing to purchase or purchasing, or maintaining the ownership of, Receivable Interests in respect of
which Yield is computed by reference to the Eurodollar Rate, then, upon demand by such Investor or Bank (with a copy to the Agent), the Seller shall immediately pay to the Agent, for the account of
such Investor or Bank (as a third-party beneficiary), from time to time as specified by such Investor or Bank, additional amounts sufficient to compensate such Investor or Bank for such increased
costs. A certificate as to such amounts submitted to the Seller and the Agent by such Investor or Bank shall be conclusive and binding for all purposes, absent manifest error. 

 
 

       SECTION 2.09.  Additional Yield on Receivable Interests Bearing a Eurodollar Rate.   The Seller shall pay to any Investor or Bank, so long as such
Investor or Bank shall be required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional Yield on the unpaid Capital of each Receivable Interest of
such Investor or Bank during each Fixed Period in respect of which Yield is computed by reference to the Eurodollar Rate, for such Fixed Period, at a rate per annum equal at all times during such
Fixed Period to the remainder obtained by subtracting (i) the Eurodollar Rate for such Fixed Period from (ii) the rate obtained by dividing such Eurodollar Rate referred to in
clause (i) above by that percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Investor or Bank for such Fixed Period, payable on each date on which Yield is
payable on such Receivable Interest. Such additional Yield shall be determined by such Investor or Bank and notice thereof given to the Seller through the Agent within 30 days after any Yield
payment is made with respect to which such additional Yield is requested. A certificate as to such additional Yield submitted to the Seller and the Agent by such Investor or Bank shall be conclusive
and binding for all purposes, absent manifest error. 

19

 

 
 

       SECTION 2.10.  Taxes.   (a) Any and all payments and deposits required to be made hereunder or under any other Transaction Document by the
Collection Agent or the Seller shall
be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto,  excluding
(x) net income taxes, franchise taxes, branch profits taxes and any other taxes imposed on an Affected Person as a result of a present
or former connection between such Affected Person and the jurisdiction of the governmental authority imposing such tax or any political subdivision or taxing authority thereof or therein other than a
connection arising solely from the transactions contemplated hereby, (y) all taxes that are attributable to such Affected Person's failure to comply with the requirements of
paragraph (d) of this section, and (z) all taxes that are taxes imposed other than as a result of a change in treaty, law or regulation (or the application or interpretation thereof)
after the date such Affected Person becomes a party to this Agreement (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Seller or the Collection Agent shall be required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Affected Person, (i) the Seller shall make an additional payment to such Affected Person, in an amount sufficient so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.10), such Affected Person receives an amount equal to the sum it would have received had no such deductions been made,
(ii) the Seller or the Collection Agent, as the case may be, shall make such deductions and (iii) the Seller or the Collection Agent, as the case may be, shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance with applicable law. 

    (b) In
addition, the Seller agrees to pay any present or future stamp or other documentary taxes or any other excise or property taxes, charges or similar levies which
arise from or under any Transaction Document or from the execution, delivery or registration of this Agreement or any other Transaction Document (hereinafter referred to as
"Other Taxes"). 

    (c) The
Seller will indemnify each Affected Person for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.10) paid by such Affected Person and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto
whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty days from the date the Affected Person makes written demand therefor (and
a copy of such demand shall be delivered to the Agent). A certificate as to the amount of such indemnification submitted to the Seller and the Agent by such Affected Person, setting forth, in
reasonable detail, the basis for and the calculation thereof, shall be conclusive and binding for all purposes absent manifest error. 

    (d) (1)
Each Investor and Bank and any Transferee that is not a "U.S. person" as that term is defined in Section 7701(a)(30) of the United States Internal
Revenue Code (a "Non-U.S. Person") shall deliver to the Seller and the Collection Agent, and if applicable, the assigning Investor or Bank
(or, in the case of a Transferee that holds a participation, to the Investor or Bank from which the related participation shall have been transferred) on or before the date on which it becomes a party
to this Agreement or becomes a Transferee (or, in the case of a Transferee that holds a participation, on or before the date on which such Transferee receives the related participation) two duly
completed and signed copies of either Internal Revenue Service Form W-8BEN (relating to such Non-U.S. Person and entitling it to a complete exemption from withholding of
U.S. Taxes on all amounts to be received by such Non-U.S. Person pursuant to this Agreement and the other Transaction Documents) or Form W-8ECI (relating to all amounts
to be received by such Non-U.S. Person pursuant to this Agreement and the other Transaction Documents), or successor and related applicable forms, as the case may be;  provided, however, that in the
event that a Non-U.S. Person is not a corporation for U.S. federal income tax purposes, such
Non-U.S. Person agrees to take any actions necessary, and to deliver all additional (or alternative) Internal Revenue Service forms necessary to establish such Non-U.S.
Person's entitlement to a complete exemption from withholding of U.S. Taxes on all amounts to be 

20

 

received by such Non-U.S. Person pursuant to this Agreement and the other Transaction Documents (including causing its partners, members, beneficiaries or owners, and their beneficial
owners, to take any actions and deliver any forms necessary to establish such exemption). 

    (2) Further,
each Non-U.S. Person agrees (i) to deliver to the Seller and the Collection Agent, and if applicable, the assigning Investor or Bank
(or, in the case of a Transferee that holds a participation, to the Investor or Bank from which the related participation shall have been transferred) two further duly completed and signed copies of
such Form W-8BEN or W-8ECI or such other Internal Revenue Service forms required to be delivered pursuant to the proviso following clause (1) of this
Section 2.10(d), as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any
event requiring a change from the most recent form(s) previously delivered by it to the Seller and Collection Agent, and, if applicable, the assigning Investor or Bank (or, in the case of a Transferee
that holds a participation, to the Investor or Bank from which the related participation shall have been transferred) in accordance with applicable U.S. laws and regulations or (ii) to notify
promptly the Seller and the Collection Agent, and, if applicable, the assigning Investor or Bank (or, in the case of a Transferee that holds a participation, the Investor or Bank from which the
related participation shall have been transferred) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to
subsection 2.10(d)(1) and (d)(2) including reliance on any forms provided to it pursuant to the proviso following clause (1) of subsection 2.10(d). 

    (3) Each
Investor and Bank and any Transferee that is not a Non-U.S. Person shall deliver to the Seller and the Collection Agent and, if applicable, the
assigning Investor or Bank (or, in the case of a Transferee that holds a participation, to the Investor or Bank from which the related participation shall have been transferred) two duly completed
copies of United States Internal Revenue Service Form W-9 (or applicable successor form) unless it establishes to the satisfaction of the Seller that it is otherwise
eligible for an exemption from backup withholding tax or other applicable withholding tax. Each such Investor, Bank or Transferee shall deliver to the Seller and the Collection Agent and, if
applicable, the assigning Investor or Bank (or, in the case of a Transferee that holds a participation, to the Investor or Bank from which the related participation shall have been transferred) two
further properly completed and duly executed forms and statements (or applicable successor forms) at or before the time any such form or statement becomes obsolete. 

 
 

       SECTION 2.11.  Security Interest.   As collateral security for the performance by the Seller of all the terms, covenants and agreements on the part of
the Seller (whether as Seller or otherwise)
to be performed under this Agreement or any document delivered in connection with this Agreement in accordance with the terms thereof, including the punctual payment when due of all obligations of the
Seller hereunder or thereunder, whether for indemnification payments, fees, expenses or otherwise, the Seller hereby assigns to the Agent for its benefit and the ratable benefit of the Investors and
the Banks, and hereby grants to the Agent for its benefit and the ratable benefit of the Investors and the Banks, a security interest in, all of the Seller's right, title and interest in and to
(A) the PCA and the Parent Undertaking Agreement, including, without limitation, (i) all rights of the Seller to receive moneys due or to become due under or pursuant to the PCA or the
Parent Undertaking Agreement, (ii) all security interests and property subject thereto from time to time purporting to secure payment of monies due or to become due under or pursuant to the PCA
or the Parent Undertaking Agreement, (iii) all rights of the Seller to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the PCA or the Parent Undertaking
Agreement, (iv) claims of the Seller for damages arising out of or for breach of or default under the PCA or the Parent Undertaking Agreement, and (v) the right of the Seller to compel
performance and otherwise exercise all remedies thereunder, (B) all Receivables, whether now owned and existing or hereafter acquired or arising, the Related Security with respect thereto, the
Lock-Box Accounts, the Collection Account and the Collections and all other assets, including, without limitation, accounts, chattel paper, instruments and general intangibles (as 

21

 

those terms are defined in the UCC), including undivided interests in any of the foregoing, owned by the Seller and not otherwise purchased under this Agreement, and (C) to the extent not
included in the foregoing, all proceeds of any and all of the foregoing. In the event that any purchase of Receivable Interests hereunder is not characterized as a sale, the Seller shall, effective as
of the date hereof, be deemed to have granted (and the Seller hereby does grant) to the Agent (for its benefit and the ratable benefit of the Investors and the Banks) a security interest in all
Receivables whether now owned and existing or hereafter acquired or arising and all Related Security and Collections with respect thereto, to secure payment of Capital, Yield, Fees and all other
amounts payable by the Seller hereunder, and this Agreement shall be deemed to be a security agreement. 

 
 

       SECTION 2.12.  Repurchase Option.   So long as no Event of Termination or Incipient Event of Termination would occur or be continuing after giving
effect thereto, the Seller shall have the right
(the "Call Right") to repurchase all, but not less than all, of the Receivable Interests held by the Investors and the Banks upon not less than thirty
Business Days' prior written notice to the Agent. Such notice shall specify the date that the Seller desires that such repurchase occur (such date, the "Repurchase
Date"). On the Repurchase Date, the Seller shall transfer to the Agent's Account in immediately available funds an amount equal to (i) the
Capital of the Receivable Interests held by the Investors and the Banks, (ii) all accrued and unpaid Yield thereon to the Repurchase Date, (iii) all accrued and unpaid Fees owing to the
Investors and the Banks, (iv) the Liquidation Fee owing to the Investors and the Banks in respect of such repurchase and (v) all expenses and other amounts payable hereunder to any of
the Agent, the Investors and the Banks (including, without limitation, attorneys' fees and disbursements). Any repurchase pursuant to this Section 2.12 shall be made without recourse to or
warranty by the Agent, the Investors or the Banks (except for a warranty that all Receivable Interests repurchased are transferred free of any lien, security interest or Adverse Claim created solely
by the actions of the Agent, the Investors or the Banks). Further, on the Repurchase Date the Bank Commitments for all the Banks shall terminate, each of the Commitment Termination Date and Facility
Termination Date shall have occurred, the Termination Date for all Banks and the Investors shall have occurred and no further purchases or reinvestments of Collections shall be made hereunder. 

 
 

ARTICLE III    
    
    CONDITIONS OF PURCHASES    
  

 
 

      SECTION 3.01.  Conditions Precedent to Initial Purchase.   The initial purchase of a Receivable Interest under this Agreement is subject to the
conditions precedent that the Agent shall have received on or before the
date of such purchase the following, each (unless otherwise indicated) dated as of such date of purchase, in form and substance satisfactory to the Agent: 

    (a) (i) Certified
copies of the resolutions of the Board of Directors of the Seller and the Originator approving this Agreement and the PCA and certified copies
of all documents evidencing other necessary corporate action, as the case may be, and governmental approvals, if any, with respect to this Agreement and the PCA and (ii) certified copies of the
resolutions of the Board of Directors of Dal-Tile International and Dal-Tile Group approving the Parent Undertaking Agreement and certified copies of all documents evidencing
other necessary corporate action and governmental approvals, if any, with respect to the Parent Undertaking Agreement. 

    (b) (i) A
certificate of the Secretary or Assistant Secretary of the Seller and of the Originator certifying the names and true signatures of the officers of the
Seller and of the Originator authorized to sign the PCA and this Agreement and the other documents to be delivered by it hereunder and thereunder and (ii) a certificate of the Secretary or
Assistant Secretary of Dal-Tile International and Dal-Tile Group certifying the names and true signatures of the officers of Dal-Tile International and
Dal-Tile Group authorized to sign the Parent Undertaking Agreement and any other documents to be delivered by it thereunder. 

22

 

    (c) Acknowledgment copies or time stamped receipt copies (or other evidence of filing) of proper financing statements, duly filed on or before the date of such initial
purchase under the UCC of all jurisdictions that the Agent may deem necessary or desirable in order to perfect the ownership and security interests contemplated by this Agreement and the PCA. 

    (d) Proper
financing statements (together with such written authorizations to file such financing statements or such other written statements with respect to the filing
of such financing statements as the Agent may request), if any, necessary to release all security interests and other rights of any Person (other than the interests evidenced by the financing
statement filings referred to in the second sentence of Section 4.01(h)) in (i) the Receivables, Contracts or Related Security previously granted by the Seller or the Originator and
(ii) the collateral security referred to in Section 2.11 previously granted by the Seller. 

    (e) Completed
requests for information, dated on or before the date of such initial purchase, listing all effective financing statements filed in Texas and the
jurisdictions referred to in subsection (c) above that name the Seller or the Originator as debtor, together with copies of such financing statements (none of which shall cover any Receivables,
Contracts, Related Security or the collateral security referred to in Section 2.11). 

    (f)  Executed
copies of Lock-Box Agreements with each Lock-Box Bank and the Account Agreement with the bank holding the Collection Account. 

    (g) Executed
copies of Bank Direction Agreements with respect to the Store Accounts maintained at Bank of America-East, Bank of America-West,
Bank One Chicago, Bank One Michigan, Bank One Texas, First Union and Wells Fargo Bank. 

    (h) Favorable
opinions of (i) Fried, Frank, Harris, Shriver & Jacobson, (ii) Dechert and (iii) Mark A. Solls, each as counsel for the
Seller, the Originator, Dal-Tile International and Dal-Tile Group substantially in the forms of Annex C hereto and as to such other matters as the Agent may reasonably request. 

    (i)  An
executed copy of the Fee Agreement. 

    (j)  An
executed copy of the PCA. 

    (k) A
copy of the by-laws of the Seller, certified by the Secretary or Assistant Secretary of the Seller, and of the by-laws of the Originator,
certified by the Secretary or Assistant Secretary of the Originator. 

    (l)  A
copy of the certificate of incorporation of the Seller and of the certificate of incorporation of the Originator, certified as of a recent date by the Secretary
of State or other appropriate official of the state of its organization, and a certificate as to the good standing of each of the Seller and the Originator from such Secretary of State or other
official, dated as of a recent date. 

    (m) The
opening pro forma balance sheet of the Seller referred to in Section 4.01(e). 

    (n) Confirmation
(informally but to the reasonable satisfaction of the Agent) by each of S&P and Moody's that the commercial paper notes of Atlantic issued in
connection with this Agreement will be, or will continue to be, rated at least A-1 and P-1, respectively. 

    (o) An
executed copy of the Parent Undertaking Agreement. 

 
 

       SECTION 3.02.  Conditions Precedent to All Purchases and Reinvestments.   Each purchase (including the initial purchase) and each reinvestment shall be
subject to the further conditions precedent that (a) in the case of each
purchase, the Collection Agent shall have delivered to the Agent at least one Business Day prior to such purchase, in form and substance satisfactory to the Agent, a completed Monthly Report (or, in
the case of the initial purchase, a pro forma Monthly Report for the 

23

 

period ending September 28, 2001) containing information covering the most recently ended reporting period for which information is required pursuant to Section 6.02(g) and demonstrating
that after giving effect to such purchase no Event of Termination or Incipient Event of Termination under Section 7.01(i) would occur, (b) in the case of each reinvestment, the
Collection Agent shall have delivered to the Agent on or prior to the date of such reinvestment, in form and substance satisfactory to the Agent, a completed Monthly Report containing information
covering the most recently ended reporting period for which information is required pursuant to Section 6.02(g), (c) on the date of such purchase or reinvestment the following statements
shall be true, except that the statement in clause (iii) below is required to be true only if such purchase or reinvestment is by an Investor (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller and the Collection Agent (each as to itself) that such statements are then true): 

     (i) The
representations and warranties contained in Section 4.01 (in the case of the Seller) and 4.02 (in the case of the Collection Agent) are correct on and as
of the date of such purchase or reinvestment as though made on and as of such date, 

    (ii) No
event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes an Event of Termination or an Incipient Event of
Termination, 

    (iii) The
Agent shall not have given the Seller at least one Business Day's notice that the Investors have terminated the reinvestment of Collections attributable to
their Receivable Interests in Receivable Interests, and 

    (iv) The
Originator shall have sold or contributed to the Seller, pursuant to the PCA, all Originator Receivables outstanding on the date hereof and thereafter arising
through and including such purchase or reinvestment date, and 

    (d) the
Agent shall have received such other approvals, opinions or documents as it may reasonably request. 

24

  

 
 

ARTICLE IV    
    
    REPRESENTATIONS AND WARRANTIES    
  

 
 

       SECTION 4.01.  Representations and Warranties of the Seller.   The Seller hereby represents and warrants as follows: 

    (a) The
Seller is a corporation duly formed, validly existing and in good standing under the laws of Delaware, and is duly qualified to do business, and is in good
standing, in every jurisdiction where the nature of its business requires it to be so qualified. 

    (b) The
execution, delivery and performance by the Seller of the Transaction Documents to which it is a party and the other documents to be delivered by it hereunder,
including the Seller's use of the proceeds of purchases and reinvestments, (i) are within the Seller's corporate powers, (ii) have been duly authorized by all necessary corporate action,
(iii) do not contravene (1) the Seller's certificate of incorporation or bylaws, (2) any law, rule or regulation applicable to the Seller, (3) any contractual restriction
binding on or affecting the Seller or its property, including, without limitation, the Credit Agreement and the documents related thereto, or (4) any order, writ, judgment, award, injunction or
decree binding on or affecting the Seller or its property, and (iv) do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect
to any of its properties (except for the interest created pursuant to this Agreement). Each of the Transaction Documents to which the Seller is a party has been duly executed and delivered by the
Seller. 

    (c) No
authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution,
delivery and performance by the Seller of the Transaction Documents to which the Seller is a party or any other document to be delivered thereunder, except for the filing of UCC financing statements
which are referred to herein. 

    (d) Each
of the Transaction Documents to which the Seller is a party constitutes the legal, valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms except that
such enforceability may be subject to bankruptcy, insolvency, reorganization, moratorium (whether general or specific) and other similar laws now or hereafter in effect affecting creditors rights
generally. 

    (e) The
opening pro forma balance sheet of the Seller as of September 28, 2001, giving effect to the initial purchase to be made under this Agreement, a copy of
which has been furnished to the Agent, fairly presents, in all material respects, the financial condition of the Seller as at such date, in accordance with generally accepted accounting principles,
and since September 28, 2001 there has been no material adverse change in the business, operations, property or financial or other condition of the Seller. 

    (f)  There
is no pending or threatened action or proceeding affecting the Seller before any court, governmental agency or arbitrator which may reasonably be expected to
materially adversely affect the financial condition or operations of the Seller or the ability of the Seller to perform its obligations under the Transaction Documents, or which purports to affect the
legality, validity or enforceability of the Transaction Documents. 

    (g) No
proceeds of any purchase or reinvestment will be used, whether directly or indirectly, to purchase or carry Margin Stock (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System of the United States, as in effect from time to time) or to extend credit to others for the purpose of purchasing or
carrying Margin Stock or to refund indebtedness originally incurred for such purpose. 

    (h) Immediately
prior to the purchase by the Investor or the Banks, as the case may be, the Seller is the legal and beneficial owner of the Pool Receivables and Related
Security free and clear of any Adverse Claim; upon each purchase or reinvestment, the Investors or the Banks, as the case may be, 

25

 

shall acquire a valid and perfected first priority undivided percentage ownership interest to the extent of the pertinent Receivable Interest in each Pool Receivable then existing or thereafter
arising and in the Related Security and Collections with respect thereto. No effective financing statement or other instrument similar in effect covering any Contract or any Pool Receivable or the
Related Security or Collections with respect thereto is on file in any recording office, except those filed in favor of the Agent relating to this Agreement and those filed against the Originator
pursuant to the PCA. 

    (i)  Each
Monthly Report and Weekly Report (if prepared by the Seller or one of its Affiliates, or to the extent that information contained therein is supplied by the
Seller or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller to the Agent, the Investors
or the Banks in connection with this Agreement is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Agent, Investors or the Banks, as the case may
be, at such time) as of the date so furnished, and no such
document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading. 

    (j)  The
principal place of business and chief executive office of the Seller and the office where the Seller keeps its records concerning the Pool Receivables are
located at the address or addresses referred to in Section 5.01(b). 

    (k) The
names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts of the Seller at such
Lock-Box Banks, are as specified in Schedule I hereto, as such Schedule I may be updated from time to time pursuant to Section 5.01(g). The name and address of the
bank holding the Collection Account, together with the account number of the Collection Account, are as specified in Schedule I hereto, as such Schedule I may be updated from time to
time pursuant to Section 5.01(g). The names and addresses of all the Store Account Banks, together with the account numbers of the Store Accounts at such Store Account Banks, are as specified
in Schedule IV hereto, as such Schedule IV may be updated from time to time pursuant to Section 6.06(c). 

    (l)  The
Seller is not known by and does not use any tradename or doing-business-as name. 

    (m) The
Seller was incorporated on September 4, 2001, and the Seller did not engage in any business activities prior to the date of this Agreement. The Seller
has no Subsidiaries. 

    (n) (i) The
fair value of the property of the Seller is greater than the total amount of liabilities, including contingent liabilities, of the Seller,
(ii) the present fair salable value of the assets of the Seller is not less than the amount that will be required to pay all probable liabilities of the Seller on its debts as they become
absolute and matured, (iii) the Seller does not intend to, and does not believe that it will, incur debts or liabilities beyond the Seller's abilities to pay such debts and liabilities as they
mature and (iv) the Seller is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which the Seller's property would constitute
unreasonably small capital. 

    (o) With
respect to each Pool Receivable, the Seller (i) shall have received such Pool Receivable as a contribution to the capital of the Seller by the
Originator or (ii) shall have purchased such Pool Receivable from the Originator in exchange for payment (made by the Seller to the Originator in accordance with the provisions of the PCA) of
cash, Deferred Purchase Price, or a combination thereof in an amount which constitutes fair consideration and reasonably equivalent value. Each such sale referred to in clause (ii) of the
preceding sentence shall not have been made for or on account of an antecedent debt owed by the Originator to the Seller and no such sale is or may be voidable or subject to avoidance under any
section of the Federal Bankruptcy Code. 

26

 

 
 

       SECTION 4.02.  Representations and Warranties of the Collection Agent.   The Collection Agent hereby represents and warrants as follows: 

    (a) The
Collection Agent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Pennsylvania, and is duly qualified to
do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified would not reasonably be
expected to have a material adverse effect on the business, operations, property or financial or other condition of the Collection Agent. 

    (b) The
execution, delivery and performance by the Collection Agent of this Agreement and any other documents to be delivered by it hereunder (i) are within the
Collection Agent's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) the Collection Agent's charter or
by-laws, (2) any law, rule or regulation applicable to the Collection Agent, (3) any material contractual restriction binding on or affecting the Collection Agent or its
property, including, without limitation, the Credit Agreement and the documents related thereto or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the
Collection Agent or its property, and (iv) do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its properties
pursuant to any material agreement. This Agreement has been duly executed and delivered by the Collection Agent. 

    (c) No
authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution,
delivery and performance by the Collection Agent of this Agreement or any other document to be delivered by it hereunder. 

    (d) This
Agreement constitutes the legal, valid and binding obligation of the Collection Agent enforceable against the Collection Agent in accordance with its terms
except that such enforceability may be subject to bankruptcy, insolvency, reorganization, moratorium (whether general or specific) and other similar laws now or hereafter in effect affecting creditors
rights generally. 

    (e) The
consolidated balance sheet of Dal-Tile International and its consolidated Subsidiaries as at December 29, 2000, and the related consolidated
statements of income and retained earnings of Dal-Tile International and its consolidated Subsidiaries for the fiscal year then ended, copies of which have been furnished to the Agent,
fairly present, in all material respects, the financial condition of Dal-Tile International and its consolidated Subsidiaries as at such date and the results of the operations of
Dal-Tile International and its consolidated Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since
December 29, 2000 there has been no material adverse change in the business, financial condition or operations of Dal-Tile International and its consolidated Subsidiaries taken as a
whole that could reasonably be expected to adversely affect the value or collectibility of the Receivable Interests or the Receivables
Pool or the ability of the Seller, the Originator or the Collection Agent to collect Pool Receivables or otherwise perform its obligations under this Agreement or the other Transaction Documents. 

    (f)  There
is no pending or threatened action or proceeding affecting the Collection Agent or any of its Subsidiaries before any court, governmental agency or
arbitrator which may reasonably be expected to materially adversely affect the financial condition or operations of the Collection Agent and its consolidated Subsidiaries taken as a whole or the
ability of the Collection Agent to perform its obligations under this Agreement, or which purports to affect the legality, validity or enforceability of this Agreement. 

    (g) On
the date of each purchase and reinvestment (and after giving effect thereto), the sum of the Receivable Interests is not greater than 100%. 

    (h) The
Collection Agent has a system in place which allows it to determine (and adjust) the Outstanding Balance of each particular Receivable in respect of which a
credit memo issued by the Originator or the Seller is outstanding. 

27

 
 
 

ARTICLE V    
    
    COVENANTS    
  

 
 

       SECTION 5.01.  Covenants of the Seller.   Until the latest of the Facility Termination Date or the date on which no Capital of or Yield on any
Receivable Interest shall be outstanding or the date all
other amounts owed by the Seller hereunder to the Investors, the Banks or the Agent are paid in full: 

 
 

       (a)  Compliance with Laws, Etc.   The Seller will comply in all material respects with all applicable laws, rules, regulations and orders and preserve
and maintain its corporate existence,
rights, franchises, qualifications, and privileges except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such rights,
franchises, qualifications, and privileges would not materially
adversely affect the collectibility of the Receivables Pool or the ability of the Seller to perform its obligations under the Transaction Documents. 

 
 

       (b)  Offices, Records and Books of Account.   The Seller will keep its principal place of business and chief executive office and the office where it
keeps its records concerning the Pool Receivables at
the address of the Seller set forth under its name on the signature pages to this Agreement or, upon 30 days' prior written notice to the Agent, at any other locations within the United States.
The Seller will not change its name or its state of organization, unless (i) the Seller shall have provided the Agent with at least 30 days' prior written notice thereof,(ii) no
later than the effective date of such change, all actions reasonably requested by the Agent to protect and perfect the interest in the Pool Receivables have been taken and completed and
(iii) such name change would not be reasonably likely to mislead a Person as to the separate identity of the Originator and the Seller. The Seller also will maintain and implement
administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Pool Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Pool Receivables (including, without
limitation, records adequate to permit the daily identification of each Pool Receivable and all Collections of and adjustments to each existing Pool Receivable). 

 
 

       (c)  Performance and Compliance with Contracts and Credit and Collection Policy.   The Seller will, at its expense, timely and fully perform and comply
with all material provisions, covenants and other promises required to be observed by it
under the Contracts related to the Pool Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Pool Receivable and the related
Contract. 

 
 

      (d)  Sales, Liens, Etc.   Except for the interests created hereunder in favor of the Agent, the Seller will not sell, assign (by operation of law or
otherwise) or otherwise dispose of,
or create or suffer to exist any Adverse Claim upon or with respect to, the Seller's undivided interest in any Pool Receivable, Related Security, related Contract or Collections, or upon or with
respect to any account to which any Collections of any Pool Receivable are sent, or assign any right to receive income in respect thereof, other than as contemplated by the Transaction Documents. 

 
 

      (e)  Extension or Amendment of Receivables.   Except as provided in Section 6.02(c), the Seller will not (and will not permit the Collection Agent
or the Originator to) extend, amend or otherwise
modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any Contract related thereto. 

 
 

       (f)  Change in Business or Credit and Collection Policy.   The Seller will not make any change in the character of its business or in the Credit and
Collection Policy that would, in either case, materially adversely
affect the collectibility of the Receivables Pool or the ability of the Seller to perform its obligations under this Agreement. 

28

 

 
 

       (g)  Change in Payment Instructions to Obligors.   The Seller will not add or terminate any bank or bank account as a Lock-Box Bank or Lock-Box Account
from those listed in
Schedule I to this Agreement, or make any change in its instructions to Obligors regarding payments to be made to the Seller or payments to be made to any Lock-Box Bank, unless the
Agent shall have received notice of such addition, termination or change (including an updated Schedule I) and a fully executed Lock-Box Agreement with each new Lock-Box
Bank or with respect to each new Lock-Box Account. The Seller will not change the Collection Account, unless the Agent shall have received notice of such change (including an updated
Schedule I) and a fully executed Account Agreement with respect to such new Collection Account. 

 
 

      (h)  Deposits of Collections.   The Seller will instruct or cause the Collection Agent to instruct all Obligors to remit all their payments in respect of
Receivables to a Lock-Box
Account. The Seller will instruct or cause the Collection Agent to instruct the appropriate responsible employees at each DTC Store to remit all payments in respect of Receivables which,
notwithstanding the aforementioned instructions given to the Obligors, are received at such DTC Store on any Business Day to a Store Account at the end of such Business Day or by 12:00 noon on the
next Business Day. If the Seller shall receive any Collections directly (rather than at a DTC Store), it shall immediately (and in any event within two Business Days) deposit the same to a
Lock-Box Account or the Collection Account. The Seller will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or
cash proceeds other than Collections of Receivables. The Seller will instruct or otherwise cause, or cause the Collection Agent to instruct or otherwise cause, each bank holding a Store Account to
remit, on each Business Day from and after the date of this Agreement, by wire transfer, ACH debit or other electronic method, all funds deposited and collected in each Store Account to the Collection
Account. 

 
 

       (i)  Marking of Records.   At its expense, the Seller will cause the master data processing records evidencing Pool Receivables to be marked to indicate
that Receivable Interests related
to such Pool Receivables have been sold in accordance with this Agreement. 

 
 

       (j)  Further Assurances.   (i) The Seller agrees from time to time, at its expense, upon the request of the Agent, promptly to execute and deliver
all further instruments and
documents, and to take all further actions, that may be necessary or desirable, or that the Agent may reasonably request, to perfect, protect or more fully evidence the Receivable Interests purchased
under this Agreement, or to enable the Investors, the Banks or the Agent to exercise and enforce their respective rights and remedies under this Agreement. Without limiting the foregoing, the Seller
will, upon the request of the Agent, execute and file such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be necessary or desirable, or
that the Agent may reasonably request, to perfect, protect or evidence such Receivable Interests. 

    (ii) The
Seller authorizes the Agent to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the Pool Receivables and
the Related Security, the related Contracts and the Collections with respect thereto without the signature of the Seller where permitted by law. 

 
 

      (k)  Reporting Requirements.   The Seller will provide to the Agent (in multiple copies, if requested by the Agent) the following: 

     (i) as
soon as available and in any event within 45 days after the end of the first three quarters of each fiscal year of Dal-Tile International, an
unaudited consolidated balance sheet of Dal-Tile International and its consolidated Subsidiaries as of the end of such quarter and consolidated statements of income and retained earnings
of Dal-Tile International and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal year of Dal-Tile International and ending with the end
of such quarter, certified by the chief financial officer of Dal-Tile International; 

29

 

    (ii) as soon as available and in any event within 90 days after the end of each fiscal year of Dal-Tile International, a copy of the annual report
for such fiscal year of Dal-Tile International and its consolidated Subsidiaries, containing consolidated financial statements for such year audited by an independent public accountant
acceptable to the Agent; 

    (iii) as
soon as available and in any event within 45 days after the end of the first three quarters and within 90 days after the end of the fourth fiscal
quarter of each fiscal year of the Seller, an unaudited balance sheet of the Seller as of the end of such quarter and an unaudited statement of income and retained earnings of the Seller for the
period commencing at the end of the previous fiscal year of the Seller and ending with the end of such quarter, certified by the chief financial officer of the Seller; 

    (iv) as
soon as possible and in any event within three Business Days after the occurrence of each Event of Termination or Incipient Event of Termination, a statement of
the chief financial officer of the Seller setting forth details of such Event of Termination or Incipient Event of Termination and the action that the Seller has taken and proposes to take with
respect thereto; 

    (v) promptly
after the sending or filing thereof, copies of all reports that Dal-Tile International sends to any of its security holders generally, and
copies of all Form 10-K, Form 10-Q and Form 8-K reports and all other reports and registration statements that Dal-Tile
International or any Subsidiary thereof files with the SEC or any national securities exchange; 

    (vi) promptly
after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives from any of the foregoing or from any multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) to which the Seller or any Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of
withdrawal liability or an event or condition which could, in the aggregate, result in the imposition of liability on the Seller and/or any such Affiliate in excess of $5,000,000; 

   (vii) at
least 30 days prior to any change in the name or jurisdiction of organization of the Originator or the Seller a notice setting forth the new name or
jurisdiction of organization and the effective date thereof; 

   (viii) as
soon as possible and in any event within three Business Days after the Seller obtains knowledge thereof, notice of any "Event of Termination" or "Facility
Termination Date" under the PCA or any "Event of Default" under the Credit Agreement; 

    (ix) so
long as any Capital shall be outstanding, as soon as possible and in any event no later than the day of occurrence thereof, notice that the Originator has
stopped selling or contributing to the Seller, pursuant to the PCA, all newly arising Originator Receivables; 

    (x) at
the time of the delivery of the financial statements provided for in clauses (i) and (ii) of this paragraph, a certificate of the chief financial
officer or treasurer of the Seller, to the effect that, to the best of such officer's knowledge, no Event of Termination has occurred and is continuing or, if any Event of Termination has occurred and
is continuing, specifying the nature and extent thereof; 

    (xi) promptly
after receipt thereof, copies of all notices received by the Seller from the Originator under the PCA; and 

   (xii) such
other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller, Dal-Tile International,
Dal-Tile Group or the Originator as the Agent may from time to time reasonably request. 

30

 

 
 

       (l)  Separateness.   (i) The Seller shall at all times maintain at least one independent director who (x) is not currently and has not been
during the five years
preceding the date of this Agreement an officer, director or employee of an Affiliate of the Seller or any Other Company, (y) is not a current or former officer or employee of the Seller and
(z) is not a stockholder of any Other Company or any of their respective Affiliates and otherwise meets the requirements of an independent director under the Seller's certificate of
incorporation. 

    (ii) The
Seller shall not direct or participate in the management of any of the Other Companies' operations. 

    (iii) The
Seller shall conduct its business from an office separate from that of the Other Companies (but which may be located in the same facility as one or more of
the Other Companies, provided that such office would not be reasonably likely to mislead a Person as to the separate identity of the Originator and the Seller). The Seller shall have stationery and
other business forms and a mailing address and a telephone number separate from that of the Other Companies. 

    (iv) The
Seller shall at all times be adequately capitalized in light of its contemplated business. 

    (v) The
Seller shall at all times provide for its own operating expenses and liabilities from its own funds. 

    (vi) The
Seller shall maintain its assets and transactions separately from those of the Other Companies and reflect such assets and transactions in financial statements
separate and distinct from those of the Other Companies and evidence such assets and transactions by appropriate entries in books and records separate and distinct from those of the Other Companies. 

   (vii) The
Seller shall hold itself out to the public under the Seller's own name as a legal entity separate and distinct from the Other Companies. 

   (viii) The
Seller shall not hold itself out as having agreed to pay, or as being liable, primarily or secondarily, for, any obligations of the Other Companies. 

    (ix) The
Seller shall not maintain any joint account with any Other Company or become liable as a guarantor or otherwise with respect to any Debt or contractual
obligation of any Other Company. 

    (x) The
Seller shall not make any payment or distribution of assets with respect to any obligation of any Other Company or grant an Adverse Claim on any of its assets
to secure any obligation of any Other Company. 

    (xi) The
Seller shall not make loans, advances or otherwise extend credit to any of the Other Companies other than Purchaser Loans (as defined in the PCA) on the terms
and conditions set forth in the PCA. 

   (xii) The
Seller shall hold regular duly noticed meetings of its directors and make and retain minutes of such meetings (or otherwise duly effect the same by means of
written consents). 

   (xiii) The
Seller shall have bills of sale (or similar instruments of assignment) and, if appropriate, UCC-1 financing statements, with respect to all
assets purchased from any of the Other Companies. 

   (xiv) The
Seller shall not engage in any transaction with any of the Other Companies, except as permitted by this Agreement and as contemplated by the PCA and the other
Transaction Documents. 

31

 

   (xv) The Seller shall comply with (and cause to be true and correct) each of the facts and assumptions contained in the "Assumption of Facts" section of the opinion of
Olshan Grundman Frome Rosenzweig and Woloskly LLP delivered pursuant to Section 3.01(g) and designated as Annex C to this Agreement. 

 
 

       (m)  PCA and Parent Undertaking Agreement.   The Seller will not amend, waive or modify any provision of the PCA or the Parent Undertaking Agreement
(provided that the Seller may (i) extend the "Facility Termination Date" under the PCA or (ii) increase or reduce the Discount (as defined
under the PCA) within the range of 3.0% to 5.0%) or waive the occurrence of any "Event of Termination" under the PCA, without in each case the prior written consent of the Agent. The Seller will
perform all of its obligations under the PCA in all material respects and will enforce the PCA in accordance with its terms in all material respects. 

 
 

       (n)  Nature of Business.   The Seller will not engage in any business other than the purchase of Originator Receivables, Related Security and
Collections from the Originator and the
transactions contemplated by this Agreement and the other Transaction Documents. The Seller will not create or form any Subsidiary. 

 
 

      (o)  Mergers, Etc.   The Seller will not merge with or into or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in
one transaction or in a
series of transactions), all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets or capital stock or other ownership
interest of, or enter into any joint venture or partnership agreement with, any Person, other than as contemplated by this Agreement and the PCA. 

 
 

      (p)  Distributions, Etc.   The Seller will not declare or make any dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any
shares of any class of capital stock of the Seller, or return any capital to its shareholders as such, or purchase, retire, defease, redeem or otherwise acquire for value or make any payment in
respect of any shares of any capital stock of the Seller or any warrants, rights or options to acquire any such shares, now or hereafter outstanding; provided,
however, that the Seller may declare and pay cash dividends on its capital stock to its shareholders so long as (i) no Event of Termination shall then exist or would
occur as a result thereof, (ii) such dividends are in compliance with all applicable law including the corporate law of the state of Seller's incorporation, and (iii) such dividends have
been approved by all necessary and appropriate corporate action of the Seller. 

 
 

       (q)  Debt.   The Seller will not incur any Debt, other than any Debt incurred pursuant to this Agreement and the Deferred Purchase Price. 

 
 

      (r)  Certificate of Incorporation.   The Seller will not amend or delete Articles Third, Sixth, Seventh or Ninth of its certificate of incorporation.

 
 

       (s)  Tangible Net Worth.   The Seller will maintain Tangible Net Worth at all times equal to at least 3% of the Outstanding Balance of the Receivables
at such time. 

 
 

      (t)  Taxes.   The Seller will file all Federal and other material tax returns and reports required by law to be filed by it and will promptly pay all
Federal and other
material taxes and governmental charges at any time owing, except such as are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established in
accordance with, and to the extent required by, generally accepted accounting principles in the United States. The Seller will pay when due any taxes payable in connection with the Receivables,
exclusive of taxes on or measured by income or gross receipts of the Agent, the Investors and the Banks. 

 
 

      SECTION 5.02.  Covenants of the Seller and Collection Agent Regarding Inspections.   Until the latest of the Facility Termination Date or the date on
which no Capital of or Yield on any Receivable 

32

 

Interest shall be outstanding or the date all other amounts owed by the Seller hereunder to the Investors, the Banks or the Agent are paid in full, each of the Seller and the Collection Agent will, at
their respective expense, from time to time during regular business hours as reasonably requested by the Agent, permit the Agent or its agents or representatives (including independent public
accountants, which may be the Seller's or the Collection Agent's independent public accountants), (i) to conduct periodic audits of the Receivables, the Related Security and the related books
and records and collections systems of the Seller and/or the Collection Agent, as the case may be, (ii) to examine and make copies of and abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in the possession or under the control of the Seller or the Collection Agent, as the case may be, relating to Pool Receivables and the Related
Security, including, without limitation, the Contracts, and (iii) to visit the offices and properties of the Seller or the Collection Agent, as the case may be, for the purpose of examining
such materials described in clause (ii) above, and to discuss matters relating to Pool Receivables and the Related Security or the Seller's or the Collection Agent's performance under the
Transaction Documents or under the Contracts with any of the officers or employees of the Seller or the Collection Agent, as the case may be, having knowledge of such matters;  provided however, that so
long as no Event of Termination or Incipient Event of Termination shall have occurred and be continuing, the liability of the
Seller for the expenses of such periodic auditing during any one calendar year shall not exceed $6,000. 

33

  

 
 

ARTICLE VI    
    
    ADMINISTRATION AND COLLECTION OF POOL RECEIVABLES    
  

 
 

      SECTION 6.01.  Designation of Collection Agent.   The servicing, administration and collection of the Pool Receivables shall be conducted by the
Collection Agent so designated hereunder from time to time.
Until the Agent gives notice to the Seller of the designation of a new Collection Agent (which notice may only be given following the occurrence and during the continuation of an Event of
Termination), the Originator is hereby designated as, and hereby agrees to perform the duties and obligations of, the Collection Agent pursuant to the terms hereof. The Agent at any time during the
existence of an Event of Termination may designate as Collection Agent itself or any Person that is a financial institution and/or in the business of servicing pools of receivables to succeed the
Originator or any successor Collection Agent, if such Person shall consent and agree to the terms hereof. The Collection Agent may, with the prior consent of the Agent, subcontract with any other
Person or Persons for the servicing, administration or collection of the Pool Receivables. Any such subcontract shall not affect the Collection Agent's liability for performance of its duties and
obligations pursuant to the terms hereof. 

 
 

       SECTION 6.02.  Duties of Collection Agent.   (a) The Collection Agent shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Pool Receivable from time to
time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. The Seller and the Agent hereby
appoint the Collection Agent, from time to time designated pursuant to Section 6.01, as agent for themselves and for the Investors and the Banks to enforce their respective rights and interests
in the Pool Receivables, the Related Security and the Collections with respect thereto. In performing its duties as Collection Agent, the Collection Agent shall exercise the same care and apply the
same policies as it would exercise and apply if it owned such Receivables and shall act in the best interests of the Seller, the Investors and the Banks. 

    (b) The
Collection Agent shall administer the Collections in accordance with the procedures described in Section 2.04. 

    (c) If
no Event of Termination or Incipient Event of Termination shall have occurred and be continuing, the Originator, while it is the Collection Agent, may, in
accordance with the Credit and Collection Policy, extend the maturity or adjust the Outstanding Balance of any Receivable as the Originator deems appropriate to maximize Collections thereof, or
otherwise amend or modify the terms of any Receivable, provided that the classification of any such Receivable as a Delinquent Receivable or Defaulted
Receivable shall not be affected by any such extension. 

    (d) The
Collection Agent shall hold in trust for the Seller and each Investor and Bank, in accordance with their respective interests, all documents, instruments and
records (including, without limitation, computer tapes or disks) which evidence or relate to Pool Receivables. The Collection Agent shall cause the master data processing records evidencing the Pool
Receivables to be marked to indicate that Receivable Interests therein have been sold in accordance with this Agreement. 

    (e) The
Collection Agent shall, as soon as practicable following receipt, turn over to the Seller or other Person entitled thereto any cash collections or other cash
proceeds received with respect to Receivables or other property not constituting Pool Receivables. 

    (f)  The
Collection Agent shall, from time to time at the request of the Agent, furnish to the Agent (promptly after any such request) a calculation of the amounts set
aside for the Investors and the Banks pursuant to Section 2.04. 

34

 

    (g) Prior to the 10th Business Day of each Fiscal Month, the Collection Agent shall prepare and forward to the Agent a Monthly Report relating to the Receivable
Interests outstanding on the last day of the immediately preceding Fiscal Month. 

    (h) So
long as any Event of Termination or Incipient Event of Termination shall have occurred and be continuing, and if the Agent shall so request, the Collection Agent
shall, on or prior to the second Business Day of each week, prepare and forward to the Agent a Weekly Report relating to the Receivable Interests outstanding on the last day of the immediately
preceding week. 

 
 

       SECTION 6.03.  Certain Rights of the Agent.   (a) The Agent is authorized at any time during the existence of an Event of Termination or Incipient
Event of Termination, to date, and to deliver to
the Lock-Box Banks, a notice in the form attached to the Lock-Box Agreements. The Seller hereby transfers to the Agent, effective when the Agent delivers such notices, the
exclusive ownership of the Lock-Box Accounts. The Seller shall take any actions reasonably requested by the Agent to effect such transfer. The Agent may notify the Obligors of Pool
Receivables, at any time and at the Seller's expense, of the ownership of Receivable Interests under this Agreement. 

    (b) At
any time during the existence of an Event of Termination or Incipient Event of Termination: 

     (i) The
Agent may direct the Obligors of Pool Receivables that all payments thereunder be made directly to the Agent or its designee. 

    (ii) At
the Agent's request and at the Seller's expense, the Seller shall notify each Obligor of Pool Receivables of the ownership of Receivable Interests under this
Agreement and direct that payments be made directly to the Agent or its designee. 

    (iii) At
the Agent's request and at the Seller's expense, the Seller and the Collection Agent shall (A) assemble all of the documents, instruments and other
records (including, without limitation, computer tapes and disks) that evidence or relate to the Pool Receivables and the related Contracts and Related Security, or that are otherwise necessary or
desirable to collect the Pool Receivables, and shall make the same available to the Agent at a place selected by the Agent or its designee, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting Collections of Pool Receivables in a manner acceptable to the Agent and, promptly upon receipt, remit all such cash, checks and instruments,
duly indorsed or with duly executed instruments of transfer, to the Agent or its designee. 

    (iv) The
Seller authorizes the Agent to take any and all steps in the Seller's name and on behalf of the Seller that are necessary or desirable, in the determination of
the Agent, to collect amounts due under the Pool Receivables, including, without limitation, endorsing the Seller's name on checks and other instruments representing Collections of Pool Receivables
and enforcing the Pool Receivables and the Related Security and related Contracts. 

 
 

      SECTION 6.04.  Rights and Remedies.   (a) If the Collection Agent fails to perform any of its obligations under this Agreement, the Agent may (but
shall not be required to) itself perform,
or cause performance of, such obligation; and the Agent's costs and expenses incurred in connection therewith shall be payable by the Collection Agent. 

    (b) The
Seller and the Originator shall perform their respective obligations under the Contracts related to the Pool Receivables to the same extent as if Receivable
Interests had not been sold and the exercise by the Agent on behalf of the Investors and the Banks of their rights under this Agreement shall not release the Collection Agent or the Seller from any of
their duties or obligations with respect to any Pool Receivables or related Contracts. Neither the Agent, the Investors nor the Banks shall have any obligation or liability with respect to any Pool
Receivables or related Contracts, nor shall any of them be obligated to perform the obligations of the Seller thereunder. 

35

 

    (c) In the event of any conflict between the provisions of Article VI of this Agreement and Article VI of the PCA, the provisions of this Agreement shall
control. 

 
 

       SECTION 6.05.  Further Actions Evidencing Purchases.   The Originator agrees from time to time, at its expense, upon the request of the Agent, to
promptly execute and deliver all further instruments and documents,
and to take all further actions, that may be necessary or desirable, or that the Agent may reasonably request, to perfect, protect or more fully evidence the Receivable Interests purchased hereunder,
or to enable the Investors, the Banks or the Agent to exercise and enforce their respective rights and remedies hereunder. Without limiting the foregoing, the Originator will (i) upon the
request of the Agent, execute and file, or cause to be executed and filed, such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be
necessary or desirable, or that the Agent may reasonably request, to perfect, protect or evidence such Receivable Interests; and (ii) cause the master data processing records evidencing the
Pool Receivables to be marked to indicate that Receivable Interests therein have been sold in accordance with this Agreement. 

 
 

       SECTION 6.06.  Changes in Credit and Collection Policy; Changes in Store Accounts.   (a) The Originator will not make any change in the Credit and
Collection Policy that would impair the collectibility of any Pool Receivable or the
ability of the Originator (if it is acting as Collection Agent) to perform its obligations under this Agreement. In the event that the Collection Agent or the Originator makes any change to the Credit
and Collection Policy, it shall, contemporaneously with such change, provide the Agent with an updated Credit and Collection Policy and a summary of all material changes. 

    (b) The
Originator will not open or close any Store Account, unless the Agent shall have received prior notice of such change (including an updated Schedule IV)
and a fully executed Bank Direction Agreement with respect to each new Store Account. 

    (c) On
or prior to March 31, 2002, the Originator will deliver to the Agent fully executed Bank Direction Agreements in form reasonably acceptable to the Agent
with respect to each Store Account other than those Store Accounts for which (i) the Agent may waive the requirements of this Section 6.06(c) or (ii) Bank Direction Agreements
have already been delivered pursuant to Section 3.01(g). 

 
 

       SECTION 6.07.  Indemnities by the Collection Agent.   Without limiting any other rights that the Agent, any Investor, any Bank or any of their
respective Affiliates (each, a "Special
Indemnified Party") may have hereunder or under applicable law, and in
consideration of its appointment as Collection Agent, the Collection Agent hereby agrees to indemnify each Special Indemnified Party from and against any and all claims, losses and liabilities
(including reasonable attorneys' fees) (all of the foregoing being collectively referred to as "Special Indemnified Amounts") arising out of or
resulting from any of the following (excluding, however, (a) Special Indemnified Amounts to the extent found in a final non-appealable judgment of a court of competent jurisdiction
to have resulted from gross negligence or willful misconduct on the part of such Special Indemnified Party, (b) recourse for uncollectible Receivables or (c) any taxes (other than Taxes
or Other Taxes)incurred by such Special Indemnified Party arising out of or as a result of this Agreement or the ownership of Receivable Interests or in respect of any Receivable or any Contract): 

     (i) any
representation or warranty made or deemed made by the Collection Agent pursuant to Section 4.02(g) hereof which shall have been incorrect in any respect
when made or any other representation or warranty or statement made or deemed made by the Collection Agent under or in connection with this Agreement which shall have been incorrect in any material
respect when made; 

36

 

    (ii) the failure by the Collection Agent to comply with any applicable law, rule or regulation with respect to any Pool Receivable or Contract; or the failure of any
Pool Receivable or Contract to conform to any such applicable law, rule or regulation; 

    (iii) the
failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool, the Contracts and the Related Security and Collections in respect thereof, whether at the time
of any purchase or reinvestment or at any subsequent time; 

    (iv) any
failure of the Collection Agent to perform its duties or obligations in accordance with the provisions of this Agreement; 

    (v) the
commingling of Collections of Pool Receivables at any time by the Collection Agent with other funds; 

    (vi) any
action or omission by the Collection Agent reducing or impairing the rights of the Investors or the Banks with respect to any Pool Receivable or the value of
any Pool Receivable; 

   (vii) any
Collection Agent Fees or other costs and expenses payable to any replacement Collection Agent, to the extent a current market rate fee and to the extent in
excess of the Collection Agent Fees payable to the Collection Agent hereunder; or 

   (viii) any
claim brought by any Person other than a Special Indemnified Party arising from any activity by the Collection Agent or its Affiliates in servicing,
administering or collecting any Receivable. 

 
 

ARTICLE VII    
    
    EVENTS OF TERMINATION    
  

 
 

      SECTION 7.01.  Events of Termination.   If any of the following events ("Events of Termination") shall
occur and be continuing: 

    (a) The
Collection Agent (i) shall fail to perform or observe any term, covenant or agreement under this Agreement (other than as referred to in
clause (ii) of this subsection (a)) and such failure shall remain unremedied for five Business Days, or in the case of a failure of the Collection Agent to deliver any Monthly Report or Weekly
Report when required hereunder, three Business Days or (ii) shall fail to make when due any payment or deposit to be made by it under this Agreement; or 

    (b) The
Seller shall fail to make any payment required under Section 2.04(e); or 

    (c) Any
representation or warranty made or deemed made by the Seller, the Originator, Dal-Tile International, Dal-Tile Group or the Collection
Agent (or any of their respective officers) under or in connection with this Agreement or any other Transaction Document or any information or report delivered by the Seller, the Originator,
Dal-Tile International, Dal-Tile Group or the Collection Agent pursuant to this Agreement or any other Transaction Document shall prove to have been incorrect or untrue in any
material respect when made or deemed made or delivered and, solely in the case of the representation made or deemed made by the Collection Agent pursuant to Section 4.02(g) hereof, such
representation shall remain incorrect on the fifth Business Day following the end of the Fiscal Month in which such representation is made; or 

    (d) The
Seller, the Originator, Dal-Tile International or Dal-Tile Group shall fail to perform or observe any other term, covenant or agreement
contained in any Transaction Document on its part to be
performed or observed and any such failure shall remain unremedied for 10 Business Days (provided, however, that no grace period shall be permitted for
(X) any failure by the Seller or the 

37

 

Originator (as Collection Agent or otherwise) under any of Sections 5.01(a), (d), (e), (f), (g), (h), (k)(iv), (k)(viii), (l), (m), (n), (o), (p), (q), (r) or (t) hereof) or
(Y) any failure of Dal-Tile International under Sections 7(a),(b) or (c) of the Parent Undertaking Agreement; or 

    (e) Dal-Tile
International, Dal-Tile Group or the Originator shall fail to pay any principal of or premium or interest on any of its Debt (other
than Debt outstanding under the Credit Agreement) which is outstanding in a principal amount of at least $5,000,000 in the aggregate when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such failure is not waived by the applicable lenders or other Persons and shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Debt; or any such Debt
shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or
defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or 

    (f)  Other
than pursuant to the terms hereof, any purchase or any reinvestment pursuant to this Agreement shall for any reason cease to create, or any Receivable
Interest shall for any reason cease to be, a valid and perfected first priority undivided percentage ownership interest to the extent of the pertinent Receivable Interest in each applicable Pool
Receivable and the Related Security and Collections with respect thereto; or the security interest created pursuant to Section 2.11 shall for any reason cease to be a valid and perfected first
priority security interest in the collateral security referred to in that section; or 

    (g) Dal-Tile
International, Dal-Tile Group, the Originator or the Seller shall generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Dal-Tile
International, Dal-Tile Group, the Originator or the Seller seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against
Dal-Tile International, Dal-Tile Group, the Originator or the Seller (but not instituted by Dal-Tile International, Dal-Tile Group, the Originator or
the Seller), either such proceeding shall remain undismissed or unstayed for a period of 45 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an
order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, Dal-Tile International, Dal-Tile Group, the Originator or the
Seller or for any substantial part of the Seller's,
Dal-Tile International's, Dal-Tile Group's or the Originator's property) shall occur; or Dal-Tile International, Dal-Tile Group, the Originator or the
Seller shall take any corporate or other action to authorize any of the actions set forth above in this subsection (g); or 

    (h) As
of the last day of any Fiscal Month, (i) the Default Ratio for such Fiscal Month shall exceed 4.50%; (ii) the average of the Default Ratio for each
of such Fiscal Month and the two prior Fiscal Months shall exceed 4.40%; (iii) the Delinquency Ratio for such Fiscal Month shall exceed 6.75%; (iv) the average of the Delinquency Ratio
for each of such Fiscal Month and the two prior Fiscal Months shall exceed 6.50%; (v) the Performance Dilution Ratio for such Fiscal Month shall exceed 5.50%; or (vi) the average of the
Performance Dilution Ratio for each of such Fiscal Month and the two prior Fiscal Months shall exceed 4.50% or 

38

 

    (i)  The sum of the Receivable Interests shall be greater than 100% as of the end of any Fiscal Month and shall remain greater than 100% on the fifth Business Day
thereafter; or 

    (j)  There
shall have occurred any material adverse change in the business, financial condition or operations of the Seller since September 28, 2001, the
Originator since June 29, 2001, or Dal-Tile International and its consolidated Subsidiaries taken as a whole since June 29, 2001, that could reasonably be expected to
adversely affect the value or collectibility of the Receivable Interests or the Receivables Pool or the ability of the Seller, the Originator or the Collection Agent to collect Pool Receivables or
otherwise perform its obligations under this Agreement or the other Transaction Documents; or 

    (k) An
"Event of Termination" or "Facility Termination Date" shall occur under the PCA, or the PCA or the Parent Undertaking Agreement shall cease to be in full force
and effect; or 

    (l)  100%
of the capital stock of Dal-Tile Group shall cease to be owned, of record and beneficially, directly or indirectly, by Dal-Tile
International unless Dal-Tile Group shall have been merged with and into Dal-Tile International; or 

    (m) 100%
of the capital stock of the Originator shall cease to be owned, of record and beneficially, directly or indirectly, by Dal-Tile Group or
Dal-Tile International; or 

    (n) 100%
of the capital stock of the Seller shall cease to be owned, of record and beneficially, directly, by the Originator; or 

    (o) At
any time when the Agent is a party to the Credit Agreement, there shall have occurred any Event of Default under the Credit Agreement, as in effect on the date
hereof and giving effect solely to any subsequent amendments or waivers thereto which are granted at a time when the Agent is a party to the Credit Agreement but only to the extent that a written
statement (which such statement shall be requested by the Agent to the extent the Agent deems such statement to be required under the terms of any agreement governing the activities of any Investor)
has been obtained from each Relevant Rating Agency that the rating of the commercial paper of each Investor that is rated by such Relevant Rating Agency will not be downgraded or withdrawn solely as a
result of such amendment or waiver; or 

    (p) At
any time when the Agent is not a party to the Credit Agreement, there shall have occurred any (i) default under the financial condition covenants
contained in Section 8.1 of the Credit Agreement, as in effect on the date hereof and giving effect solely to any subsequent amendments or waivers thereto which were granted at a time when the
Agent was a party to the Credit Agreement (but only to the extent that a written statement (which such statement shall be requested by the Agent to the extent the Agent deems such statement to be
required under the terms of any agreement governing the activities of any Investor) has been obtained from each Relevant Rating Agency that the rating of the commercial paper of each Investor that is
rated by such Relevant Rating Agency will not be downgraded or withdrawn solely as a result of such amendment or waiver) or which are specifically approved in writing by the Agent at a time when the
Agent is not a party to the Credit Agreement, or (ii) default under any other provision of the Credit Agreement which is not waived by the applicable lenders thereunder; then, and in any such
event, any or all of the following actions may be taken by notice to the Seller: (x) the Investor or the Agent may declare the Facility Termination Date to have occurred (in which case the
Facility Termination Date shall be deemed to have occurred), (y) the Agent may declare the Commitment Termination Date to have occurred (in which case the Commitment Termination Date shall be
deemed to have occurred), and (z) without limiting any right under this Agreement to replace the Collection Agent, the Agent may designate another Person to succeed the Originator as the
Collection Agent; provided, that, automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of
notice) described in paragraph (g) of this Section 7.01, the Facility Termination Date and the Commitment Termination Date shall occur, the 

39

 

Originator (if it is then serving as the Collection Agent) shall cease to be the Collection Agent, and the Agent or its designee shall become the Collection Agent; and  provided, further, that,
automatically upon the occurrence of any event described in paragraph (i) of this Section 7.01 which continues
for 5 Business Days, the Facility Termination Date and the Commitment Termination Date shall occur. Upon any such declaration or designation or upon such automatic termination, the Investors, the
Banks and the Agent shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided after default under the UCC and under other
applicable law, which rights and remedies shall be cumulative. 

 
 

ARTICLE VIII    
    
    THE AGENT    
  

 
 

       SECTION 8.01.  Authorization and Action.   Each Investor and each Bank hereby appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. 

 
 

       SECTION 8.02.  Agent's Reliance, Etc.   Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them as Agent
under or in connection with this Agreement (including, without limitation, the Agent's servicing, administering or collecting Pool Receivables as Collection Agent), except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent: (a) may consult with legal counsel (including counsel for the Seller, the Originator and the
Collection Agent), independent certified public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (b) makes no warranty or representation to any Investor or Bank (whether written or oral) and shall not be responsible to any Investor or
Bank for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (c) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Seller or the Collection Agent or to inspect the property (including the books and records)
of the Seller or the Collection Agent; (d) shall not be responsible to any Investor or Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; and (e) shall incur no liability under or in respect of this Agreement by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing (which may be by telecopier or telex) believed by it to be genuine and signed or sent by the proper party or parties. 

 
 

       SECTION 8.03.  Credit Lyonnais and Affiliates.   The obligation of Credit Lyonnais to purchase Receivable Interests under this Agreement may be
satisfied by Credit Lyonnais or any of its Affiliates. With
respect to any Receivable Interest or interest therein owned by it, Credit Lyonnais shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were
not the Agent. Credit Lyonnais and any of its Affiliates may generally engage in any kind of business with the Seller, Dal-Tile International, the Originator, the Collection Agent or any
Obligor, any of their respective Affiliates and any Person who may do business with or own securities of the Seller, Dal-Tile International, the Originator, the Collection Agent or any
Obligor or any of their respective Affiliates, all as if Credit Lyonnais were not the Agent and without any duty to account therefor to the Investors or the Banks. 

 
 

       SECTION 8.04.  Bank's Purchase Decision.   Each Bank acknowledges that it has, independently and without reliance upon the Agent, any of its Affiliates
or any other Bank and based on such documents and
information as it has deemed appropriate, made its own evaluation and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without 

40

 

reliance upon the Agent, any of its Affiliates or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or
not taking action under this Agreement. 

 
 

ARTICLE IX    
    
    INDEMNIFICATION    
  

 
 

       SECTION 9.01.  Indemnities by the Seller.   Without limiting any other rights that the Agent, the Investors, the Banks or any of their respective
Affiliates (each, an "Indemnified
Party") may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all claims, losses and liabilities
(including reasonable attorneys' fees) (all of the foregoing being collectively referred to as "Indemnified Amounts") arising out of or resulting from
this Agreement or the other Transaction Documents or the use of proceeds of purchases or reinvestments or the ownership of Receivable Interests or in respect of any Receivable or any Contract,
excluding, however, (a) Indemnified Amounts to the extent found in a final, non-appealable judgment of a court of competent jurisdiction to have resulted from gross negligence or
willful misconduct on the part of such Indemnified Party, (b) recourse for uncollectible Receivables or (c) any taxes (other than Taxes or Other Taxes)incurred by such Indemnified Party
arising out of or as a result of this Agreement or the ownership of Receivable Interests or in respect of any Receivable or any Contract. Without limiting the foregoing, the Seller shall pay on demand
to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from any of the following (subject
to the exclusions included in clauses (a) and (c) of the previous sentence): 

     (i) the
characterization in any Monthly Report, Weekly Report or other written statement made by or on behalf of the Seller of any Receivable as an Eligible Receivable
or as included in the Net Receivables Pool Balance which, as of the date of such Monthly Report, Weekly Report or other statement, is not an Eligible Receivable or should not be included in the Net
Receivables Pool Balance; 

    (ii) any
representation or warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement or any of the
other Transaction Documents which shall have been incorrect in any material respect when made; 

    (iii) the
failure by the Seller or the Originator to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract; or
the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation; 

    (iv) the
failure to vest in the Investors or the Banks, as the case may be, (a) a perfected undivided percentage ownership interest, to the extent of each
Receivable Interest, in the Receivables in, or purporting to be in, the Receivables Pool and the Related Security and Collections in respect thereof, or (b) a perfected security interest as
provided in Section 2.11, in each case free and clear of any Adverse Claim; 

    (v) the
failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the Related Security and Collections in respect thereof, whether at the time of any purchase
or reinvestment or at any subsequent time; 

    (vi) any
dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor or other financial inability of the Obligor to pay) of the Obligor to the
payment of any Receivable in, or purporting to be in, the Receivables Pool (including, without limitation, a defense based on 

41

 

such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale
of the merchandise or services related 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 the Seller or any of its Affiliates acting as Collection Agent); 

   (vii) any
failure of the Seller to perform its duties or obligations in accordance with the provisions hereof or to perform its duties or obligations under the
Contracts; 

   (viii) any
products liability or other claim arising out of or in connection with merchandise, insurance or services which are the subject of any Contract; 

    (ix) the
commingling of Collections of Pool Receivables at any time with other funds; 

    (x) any
investigation, litigation or proceeding related to this Agreement or the use of proceeds of purchases or reinvestments or the ownership of Receivable Interests
or in respect of any Receivable or Related Security or Contract; 

    (xi) any
failure of the Seller to comply with its covenants contained in this Agreement or any other Transaction Document; or 

   (xii) any
claim brought by any Person other than an Indemnified Party arising from any activity by the Seller or any Affiliate of the Seller in servicing, administering
or collecting any Receivable. 

It
is expressly agreed and understood by the parties hereto (i) that the foregoing indemnification is not intended to, and shall not, constitute a guarantee of or other recourse for the
collectibility or payment of the Receivables and (ii) that nothing in this Section 9.01 shall require the Seller to indemnify any Person for Receivables which are not collected, not paid
or uncollectible solely on account of the insolvency, bankruptcy, or financial inability to pay of the applicable Obligor. 

42

  

 
 

ARTICLE X    
    
    MISCELLANEOUS    
  

 
 

       SECTION 10.01.  Amendments, Etc.   No amendment or waiver of any provision of this Agreement or consent to any departure by the Seller therefrom shall
be effective unless in a writing signed by
the Agent, as agent for the Investors and the Banks (and, in the case of any amendment, also signed by the Seller and the Originator), and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by the Collection Agent in addition to the Agent, affect the rights or duties of the Collection Agent under this Agreement. Notwithstanding the foregoing (but only to the extent
required by any Relevant Rating Agency), no material amendment to or material waiver of any provision of this Agreement, nor consent to any material departure by the Seller or Collection Agent
therefrom, shall be effective unless a written statement is obtained from such Relevant Rating Agency that the rating of the commercial paper of each Investor that is rated by such Relevant Rating
Agency will not be downgraded or withdrawn solely as a result of such amendment, waiver or consent (provided that no such statement shall be required in connection with an amendment the sole purpose
of which is to extend the Commitment Termination Date or the Facility Termination Date or to cure any ambiguity). No failure on the part of the Investors, the Banks or the Agent to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. 

 
 

       SECTION 10.02.  Notices, Etc.   All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include
facsimile communication) and faxed or
delivered, to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other
parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications sent by other means shall
be effective when received. 

 
 

       SECTION 10.03.  Assignability.   (a) This Agreement and the Investors' rights and obligations herein (including ownership of each Receivable
Interest) shall be assignable by the
Investors and their successors and assigns. Each assignor of a Receivable Interest or any interest therein shall notify the Agent and the Seller of any such
assignment. Each assignor of a Receivable Interest or any interest therein may, in connection with the assignment or participation, disclose to the assignee or participant any information relating to
the Seller, Dal-Tile International, Dal-Tile Group or the Originator, including the Receivables, furnished to such assignor by or on behalf of the Seller or by the Agent;
provided that such assignee agrees in writing to be bound by the provisions of Section 10.07(b). 

    (b) Each
Bank may assign to any Eligible Assignee all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion
of its Bank Commitment and any Receivable Interests or interests therein owned by it). The parties to each such assignment shall execute and deliver to the Agent an Assignment and Acceptance. In
addition, each Bank may grant a participation to any Eligible Assignee or any Person which would be an Eligible Assignee but for the fact that its Debt Rating is not at least
A-1/P-1 in all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Bank Commitment and any Receivable
Interests or interests therein owned by it). 

    (c) This
Agreement and the rights and obligations of the Agent herein shall be assignable by the Agent and its successors and assigns. 

    (d) The
Seller may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the Agent. 

43

 

    (e) No Transferee that holds a participation shall receive any greater amount with respect to such participation pursuant to Section 2.10 of this Agreement than
the Investor or Bank from whom such participation was transferred would have been entitled to receive in respect of the amount of the participation transferred by such Investor or Bank to such
participant had no such transfer occurred. 

 
 

       SECTION 10.04.  Costs, Expenses and Taxes.   (a) In addition to the rights of indemnification granted under Section 9.01 hereof, the Seller
agrees to pay on demand all reasonable costs and
expenses in connection with the preparation, execution, delivery and administration (including periodic auditing and the other activities contemplated in Section 5.02;  provided, that so long as no
Event of Termination or Incipient Event of Termination shall have occurred and be continuing, the liability of the Seller
with respect to such periodic auditing during any one calendar year shall not exceed $6,000) of this Agreement, any Asset Purchase Agreement and the other documents and agreements to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent, Credit Lyonnais, Atlantic, and their respective Affiliates
with respect thereto and with respect to advising the Agent, Credit Lyonnais, Atlantic, and their respective Affiliates as to their rights and remedies under this Agreement, and all costs and
expenses, if any (including reasonable counsel fees and expenses), of the Agent, Credit
Lyonnais, the Investors, the Banks and their respective Affiliates, in connection with the enforcement of this Agreement and the other documents and agreements to be delivered hereunder. 

    (b) In
addition, the Seller shall pay, to the extent not included in the calculation of Yield, (i) any and all commissions of placement agents and dealers in
respect of commercial paper notes issued by Atlantic to fund the purchase or maintenance of any Receivable Interest, and (ii) any and all costs and expenses of any issuing and paying agent or
other Person responsible for the administration of Atlantic's commercial paper program in connection with the preparation, completion, issuance, delivery or payment of commercial paper notes issued to
fund the purchase or maintenance of any Receivable Interest. 

 
 

       SECTION 10.05.  United States Federal Income Tax Treatment.   Each of the Seller, the Agent, the Collection Agent, each Investor, each Bank, and each
Transferee, if any, agrees to treat (i) each transfer of a
Receivable Interest by Seller in exchange for Capital with respect to such Receivable Interest pursuant to Article II of this Agreement as a loan of such Capital to Seller secured by such
Receivable Interest and (ii) Seller's payment of Yield to each Investor, each Bank, or each Transferee, if any, as a payment of interest, in the case of (i) and (ii), for all United
States federal income tax purposes and neither the Seller, the Agent, the Collection Agent, any Investor, any Bank, nor any Transferee shall take any action inconsistent with such treatment for United
States federal income tax purposes. 

 
 

       SECTION 10.06.  No Proceedings.   Each of the Seller, the Agent, the Collection Agent, each Investor, each Bank, each assignee of a Receivable Interest
or any interest therein and each entity
which enters into a commitment to purchase Receivable Interests or interests therein hereby agrees that it will not institute or join or encourage or assist any other Person in instituting against
Atlantic any proceeding of the type referred to in Section 7.01(g) for one year and a day after the latest maturing commercial paper note issued by Atlantic is paid. 

 
 

       SECTION 10.07.  Confidentiality.   (a) Each of the Seller and the Collection Agent agrees to maintain the confidentiality of this Agreement and the
other Transaction Documents in
communications with third parties and otherwise; provided that this Agreement and the other Transaction Documents may be disclosed (i) to the
Originator, Dal-Tile Group and Dal-Tile International if they agree to hold such documents confidential, (ii) to the legal counsel and auditors of the Seller,
Dal-Tile International, the Originator and the Collection Agent if they agree to hold such documents confidential, (iii) to the extent required by applicable law or regulation or by
any court, regulatory body or agency having jurisdiction over such party and (iv) to other Persons to the extent 

44

 

such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Agent; and provided,
further, that such party shall have no obligation of
confidentiality in respect of any information which may be generally available to the public or becomes available to the public through no fault of such party. 

    (b) Each
Investor, each Bank and the Agent agrees to maintain the confidentiality of all information with respect to the Seller, Dal-Tile International, the
Originator or the Receivables Pool (including the Monthly Reports and Weekly Reports) furnished or delivered to it pursuant to this Agreement; provided,
that such information may be disclosed (i) to such party's legal counsel and auditors and to such party's assignees and participants and potential assignees and participants and their
respective counsel if they agree to hold it confidential on the same terms as the disclosing party, (ii) to the Relevant Rating Agencies and the providers of liquidity or credit enhancement for
each Investor, and (iii) to the extent required by applicable law or regulation or by any court, regulatory body or agency having jurisdiction over such party; and  provided, further, that such
party shall have no obligation of confidentiality in respect of any information which may be generally available to the
public or becomes available to the public through no fault of such party. 

 
 

      SECTION 10.08.  GOVERNING LAW.   THIS AGREEMENT SHALL, IN ACCORDANCE
WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION, EXCEPT TO THE EXTENT THAT, PURSUANT TO THE UCC OF THE STATE OF NEW YORK, THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE INTERESTS OF THE INVESTORS AND
THE BANKS IN THE RECEIVABLES AND THE PCA ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

 
 

       SECTION 10.09.  Execution in Counterparts.   This Agreement may be executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken
together shall constitute one and the same agreement. 

 
 

      SECTION 10.10.  Survival of Termination.   The provisions of Sections 2.08, 2.09, 6.07, 9.01, 10.04, 10.06, 10.07 and 10.13 shall survive any
termination of this Agreement. 

 
 

       SECTION 10.11.  Consent to Jurisdiction.   (a) Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of any New York State
or Federal court sitting in New
York City in any action or proceeding arising out of or relating to this Agreement, and each party hereto hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard
and determined in such New York State court or, to the extent permitted by law, in such Federal court. The parties hereto hereby irrevocably waive, to the fullest extent they may effectively do so,
the defense of an inconvenient forum to the maintenance of such action or proceeding. The parties hereto agree that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 

    (b) Each
of the Seller and the Collection Agent consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process
to it at its address specified in Section 10.02. Nothing in this Section 10.10 shall affect the right of the parties hereto to serve legal process in any other manner permitted by law. 

 
 

       SECTION 10.12.  WAIVER OF JURY TRIAL.   EACH PARTY HERETO HEREBY
WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED  

45

 

 TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED OR DELIVERED PURSUANT HERETO. 

 
 

       SECTION 10.13.  Excess Funds.   Each of the Seller, the Collection Agent, the Originator, the Banks and the Agent agrees that any Investor shall be
liable for any claims that such party may
have against such Investor only to the extent that such Investor has excess funds and to the extent such excess funds are insufficient to satisfy the obligations of such Investor hereunder, such
Investor shall have no liability with respect to any amount of such obligations remaining unpaid and such unpaid amount shall not constitute a claim against such Investor. Any and all claims against
any Investor shall be subordinate to the claims against such Investor of the holders of such Investor's commercial paper notes and any Person providing liquidity support to such Investor. 

    IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. 

	SELLER	 	DTSC, INC.
	

 	
 	

By:	
 	

 	
 	

 
	 	 	 	 	
 Title:
	

 	
 	

 	
 	

c/o Global Securitization Services, LLC

103 Foulk Road, Suite 205-11

Wilmington, Delaware 19803

Attention: Frank B. Bilotta

Facsimile No. (302) 652-8667
	

INVESTOR:	
 	

ATLANTIC ASSET SECURITIZATION CORP.
	

 	
 	

By:	
 	

Credit Lyonnais New York Branch, as Attorney-in-Fact
	

 	
 	

 	
 	

By	
 	

 
	 	 	 	 	 	 	
 Vice President
	

 	
 	

 	
 	

 	
 	

c/o Lord Securities Corporation

2 Wall Street, 19th Floor

New York, N.Y. 10006

Attention: Dwight Jenkins

Facsimile No. (212)346-9012
	

AGENT:	
 	

CREDIT LYONNAIS NEW YORK BRANCH, as Agent
	

 	
 	

By	
 	

 	
 	

 
	 	 	 	 	
 Vice President
	

 	
 	

 	
 	

1301 Avenue of the Americas

New York, N.Y. 10019

Attention: Gary Miller

Facsimile No. (212)459-3258

46

 

	

BANK:	
 	

CREDIT LYONNAIS NEW YORK BRANCH
	

 	
 	

By:	
 	

 	
 	

 
	 	 	 	 	
 Percentage Interest: 100%
	

 	
 	

 	
 	

1301 Avenue of the Americas

New York, N.Y. 10019

Attention: Gary Miller

Facsimile No. (212)459-3258
	

COLLECTION AGENT AND ORIGINATOR:	
 	

DAL-TILE CORPORATION
	

 	
 	

By:	
 	

 	
 	

 
	 	 	 	 	
 Title:
	

 	
 	

 	
 	

7834 C.F. Hawn Freeway

P.O. Box 170130

Dallas, Texas 75217

Attention: Scott Veldman

Facsimile Number: (214) 309-3499

47

 
 
 

Schedule I to
Receivables Purchase Agreement    
  

 
 

Lock-Box Banks    
  

	Bank
	 	P.O. Box
	 	Account Number

	Bank One, N.A. 1717 Main Street

Dallas, Texas 75201	 	70671	 	5596297

 
 

Collection Account    
  

	Bank
	 	P.O. Box
	 	Account Number

	Bank of America, N.A.

901 Main Street

P.O. Box 832409

Dallas, Texas 75202	 	N.A.	 	3751842080

48

 
 
 

SCHEDULE III    
    
    Normal Concentration Limits    
    
    Debt Rating of Obligor (S&P/Moody's)    
  

	 	 	Level I
	 	Level II
	 	Level III
	 	Level IV

	 	 	A-1+/P-1
	 	A-1 /P-1
	 	A-2/P-2
	 	lower than A-2/P-2

	Normal Concentration Limit	 	10%	 	8%	 	6%	 	3%

    In
the event that (a) the Debt Ratings fall within different Levels, the higher-numbered Level shall apply, and (b) the Debt Rating of either S&P or Moody's (but not
both) is available or no Debt Rating is available from either S&P or Moody's, then Level IV shall apply. 

49

 
 
 

Schedule IV to
Receivables Purchase Agreement    
  

 
 

Store Accounts    
  

	DTC Store
 
	 	Bank
	 	Address
	 	Account No.

50Prepared by MERRILL CORPORATION

Use these links to rapidly review the document

  TABLE OF CONTENTS

PURCHASE AND CONTRIBUTION AGREEMENT  

 Dated as of October 26, 2001  

 Between

DAL-TILE CORPORATION
  as Seller

 and  

 DTSC, INC.
  as Purchaser

 
  

    TABLE OF CONTENTS    
  

 

	 
	 	 
	 	 

	PRELIMINARY STATEMENTS
	

ARTICLE I	
 	

DEFINITIONS
	 	 	SECTION 1.01.	 	Certain Defined Terms
	 	 	SECTION 1.02.	 	Other Terms
	

ARTICLE II	
 	

AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS
	 	 	SECTION 2.01.	 	Facility
	 	 	SECTION 2.02.	 	Making Purchases
	 	 	            (a) Initial Purchase
	 	 	            (b) Subsequent Purchases
	 	 	            (c) Payment of Purchase Price
	 	 	            (d) Ownership of Receivables and Related Security
	 	 	SECTION 2.03.	 	Collections.
	 	 	SECTION 2.04.	 	Settlement Procedures
	 	 	SECTION 2.05.	 	Payments and Computations, Etc
	 	 	SECTION 2.06.	 	Contributions
	

ARTICLE III	
 	

CONDITIONS OF PURCHASES
	 	 	SECTION 3.01.	 	Conditions Precedent to Initial Purchase from the Seller
	 	 	SECTION 3.02.	 	Conditions Precedent to All Purchases
	

ARTICLE IV	
 	

REPRESENTATIONS AND WARRANTIES
	 	 	SECTION 4.01.	 	Representations and Warranties of the Seller
	

ARTICLE V	
 	

COVENANTS
	 	 	SECTION 5.01.	 	Covenants of the Seller
	 	 	SECTION 5.02.	 	Grant of Security Interest
	 	 	SECTION 5.03.	 	Covenant of the Seller and the Purchaser
	

ARTICLE VI	
 	

ADMINISTRATION AND COLLECTION
	 	 	SECTION 6.01.	 	Designation of Collection Agent
	 	 	SECTION 6.02.	 	Duties of Collection Agent
	 	 	SECTION 6.03.	 	Collection Agent Fee
	 	 	SECTION 6.04.	 	Certain Rights of the Purchaser
	 	 	SECTION 6.05.	 	Rights and Remedies.
	 	 	SECTION 6.06.	 	Transfer of Records to Purchaser.
	

ARTICLE VII	
 	

EVENTS OF TERMINATION
	 	 	SECTION 7.01.	 	Events of Termination
	

ARTICLE VIII	
 	

INDEMNIFICATION
	 	 	SECTION 8.01.	 	Indemnities by the Seller

i

 

	

ARTICLE IX	
 	

MISCELLANEOUS
	 	 	SECTION 9.01.	 	Amendments, Etc
	 	 	SECTION 9.02.	 	Notices, Etc
	 	 	SECTION 9.03.	 	Binding Effect; Assignability
	 	 	SECTION 9.04.	 	Costs, Expenses and Taxes
	 	 	SECTION 9.05.	 	No Proceedings
	 	 	SECTION 9.06.	 	Confidentiality
	 	 	SECTION 9.07.	 	GOVERNING LAW
	 	 	SECTION 9.08.	 	Third Party Beneficiary
	 	 	SECTION 9.09.	 	Execution in Counterparts
	 	 	SECTION 9.10.	 	Consent to Jurisdiction
	 	 	SECTION 9.11.	 	WAIVER OF JURY TRIAL

	

EXHIBITS	
 	

 
	

EXHIBIT A	
 	

Credit and Collection Policy	
 	

 
	EXHIBIT B	 	Lock-Box Banks and Collection Account	 	 
	EXHIBIT C	 	Form of Promissory Note for Deferred Purchase Price	 	 
	EXHIBIT D	 	Form of Promissory Note for Purchaser Loans	 	 
	EXHIBIT E	 	Store Accounts	 	 
	EXHIBIT F	 	Tradenames and Doing-Business-As Names	 	 

ii

 
 

PURCHASE AND CONTRIBUTION AGREEMENT
  
    Dated as of October 26, 2001    
  

    DAL-TILE CORPORATION, a Pennsylvania corporation (the "Seller"), and DTSC, INC., a Delaware
corporation (the "Purchaser"), agree as follows: 

 
 
 

      PRELIMINARY STATEMENTS.  (1)
  Certain terms which are capitalized and used throughout this Agreement (in addition to those defined above) are defined in Article I of this Agreement. 

    (2) The
Seller has Receivables that it wishes to sell to the Purchaser, and the Purchaser is prepared to purchase such Receivables on the terms set forth herein. 

    (3) The
Seller may also wish to contribute Receivables to the capital of the Purchaser on the terms set forth herein. 

    NOW,
THEREFORE, the parties agree as follows: 

 
 
 

ARTICLE I
  
    DEFINITIONS    
  

 
 
      SECTION 1.01.  Certain Defined Terms.   As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally
  applicable to both the singular and plural forms
of the terms defined): 

    "Account Agreement" means an agreement with respect to the Collection Account, in substantially the form of Annex E-2 to
the Sale Agreement. 

    "Adverse Claim" means a lien, security interest, or other charge or encumbrance, or any other type of preferential arrangement. 

    "Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under
common control with such Person or is a director or officer of such Person. 

    "Alternate Base Rate" means, as of any date, a fluctuating interest rate per annum, which rate shall be equal to the higher of: 

    (a) the
rate of interest announced by Credit Lyonnais from time to time as its base rate (it being understood that such rate is not necessarily intended to be the
lowest rate of interest determined by Credit Lyonnais in connection with extensions of credit); and 

    (b) 0.50%
per annum above the Federal Funds Rate for such date. 

    "Bank Direction Agreement" means an agreement, in substantially the form of Annex D to the Sale Agreement, among the Seller, Credit
Lyonnais and a Store Account Bank, pursuant to which such Store Account Bank agrees to remit all funds deposited in the Store Account maintained by it to the Collection Account. 

    "Business Day" means any day on which banks are not authorized or required to close in New York City or Dallas, Texas. 

    "Collection Account" means the bank account maintained by the Purchaser for the purpose of receiving funds remitted from all of the
Store Accounts. 

    "Collection Agent" means at any time the Person then authorized pursuant to Section 6.01 to service, administer and collect
Transferred Receivables. 

    "Collection Agent Fee" has the meaning specified in Section 6.03. 

    "Collections" means, with respect to any Transferred Receivable, all cash collections and other cash proceeds of such Transferred
Receivable, including, without limitation, all cash proceeds of 

 

Related Security with respect to such Receivable, and all funds deemed to have been received by the Seller or any other Person as a Collection pursuant to Section 2.04. 

    "Contract" means an agreement between the Seller and an Obligor, substantially in the form of one of the written contracts or (in the
case of any open account agreement) one of the invoices approved by the Purchaser, pursuant to or under which such Obligor shall be obligated to pay for merchandise or services from time to time. 

    "Contributed Receivable" has the meaning specified in Section 2.06. 

    "Credit and Collection Policy" means those receivables credit and collection policies and practices of the Seller in effect on the date
of this Agreement applicable to the Receivables and described in Exhibit A hereto, as modified in compliance with this Agreement. 

    "Credit Lyonnais" means Credit Lyonnais New York Branch, a branch licensed under the laws of the State of New York of a banking
corporation organized under the laws of the Republic of France. 

    "Dal-Tile Group" means Dal-Tile Group Inc., a Delaware corporation. 

    "Dal-Tile International" means Dal-Tile International Inc., a Delaware corporation. 

    "Debt" means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of property or services (other than current unsecured accounts payable incurred in the ordinary course of business),
(iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (v) obligations
under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. 

    "Defaulted Receivable" means a Receivable: 

     (i) as
to which any payment, or part thereof,  remains unpaid for 91 or more days from the original due date for such payment; 

    (ii) as
to which the Obligor thereof or any other Person obligated thereon or owning any Related Security in respect thereof has taken any action, or suffered any event
to occur, of the type described in Section 7.01(g); or 

    (iii) which
has been or, consistent with the Credit and Collection Policy, would be written off on the books of the Seller or the Purchaser as uncollectible. 

    "Deferred Purchase Price" means the portion of the Purchase Price of Purchased Receivables purchased on any Purchase Date exceeding the
amount of the Purchase Price under Section 2.02 to be paid in cash, which portion when added to the cumulative amount of all previous Deferred Purchase Prices (after giving effect to any
payments made on account thereof) shall not exceed 50% of the Outstanding Balance of the Transferred Receivables. The obligations of the Purchaser in respect of the Deferred Purchase Price shall be
evidenced by the Purchaser's subordinated promissory note in the form of Exhibit C hereto. 

    "Delinquent Receivable" means a Receivable that is not a Defaulted Receivable and: 

     (i) as
to which any payment, or part thereof, remains unpaid for 61 or more days from the original due date for such payment or 

2

 

    (ii) which has been or, consistent with the Credit and Collection Policy, would be classified as delinquent by the Seller. 

    "Diluted Receivable" means that portion (and only that portion) of any Transferred Receivable which is either (a) reduced or
canceled as a result of (i) any defective, rejected or returned merchandise or services or any failure by the Seller to deliver any merchandise or provide any services or otherwise to
perform under the underlying Contract, (ii) any change in the terms of or cancellation of a Contract or any cash discount, discount for quick payment or other adjustment by the Seller or any
other Person which reduces the amount payable by the Obligor on the related Transferred Receivable (except any such change or cancellation resulting from or relating to the financial inability to pay
or insolvency of the Obligor of such Transferred Receivable) or (iii) any set-off by an Obligor in respect of any claim by such Obligor as to amounts owed by it on the related
Receivable (whether such claim arises out of the same or a related transaction or an unrelated transaction) or (b) subject to any specific dispute, offset, counterclaim or defense whatsoever
(except the discharge in bankruptcy of the Obligor thereof), including, without limitation, any non-payment by the Obligor due to failure by the Seller to deliver any merchandise or
provide any services; provided that Diluted Receivables are calculated assuming that all chargebacks are resolved in the Obligor's favor. 

    "Discount" means, in respect of each Purchase, 3.0% of the Outstanding Balance of the Receivables that are the subject of such
Purchase; provided, however, the foregoing Discount may be revised prospectively by request of either of the parties hereto to reflect changes in recent experience with respect to
write-offs, timing and cost of Collections and cost of funds, provided that such revision is consented to by both of the parties (it being understood that each party agrees to duly
consider such request but shall have no obligation to give such consent). The then current Discount shall be set forth on each Monthly Report. 

    "DTC Store" means any sales service center operated by the Seller. 

    "Eligible Receivable" means a Receivable: 

     (i) the
Obligor of which (A) is a United States resident, (B) is not an Affiliate of Dal-Tile International, Dal-Tile Group or the
Seller and (C) is not a government or a governmental subdivision or agency that has the benefit of an anti-assignment statute or other statute imposing restrictions on the
assignment of Receivables due from it; 

    (ii) which,
at the time of the transfer thereof to the Purchaser under this Agreement, is not a Defaulted Receivable or a Delinquent Receivable; 

    (iii) which,
according to the Contract related thereto, is required to be paid in full either (A) within less than 60 days of the original billing date
therefor or (B) within 60 days of the original billing date therefor if the aggregate Outstanding Balance of such Receivable and all other Receivables having similar payment terms does
not exceed 50% of the Outstanding Balance of all Transferred Receivables; 

    (iv) which
is an "account" within the meaning of Article 9 of the UCC of the applicable jurisdictions governing the perfection of the Purchaser's ownership of
and security interest in such Receivable; 

    (v) which
is denominated and payable only in United States dollars in the United States; 

    (vi) which
arises under a Contract which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the
Obligor of such Receivable and is not subject to any Adverse Claim or any dispute, offset, counterclaim or defense whatsoever (except the potential discharge in bankruptcy of such Obligor); 

3

 

   (vii) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including,
without limitation, laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the Contract related thereto is in violation of any such law, rule or regulation in any material respect; 

   (viii) which
arises under a Contract which (A) does not require the Obligor under such Contract to consent to the transfer, sale or assignment of the rights and
duties of the Seller under such Contract and (B) does not contain a confidentiality provision that purports to restrict the ability of the Purchaser and its assignees to exercise their rights
under this Agreement, including, without limitation, their right to review the Contract; 

    (ix) which
was generated in the ordinary course of the Seller's business; 

    (x) which,
at the time of the transfer of such Receivable under this Agreement, has not been extended, rewritten or otherwise modified from the original terms thereof,
except, with respect to a Receivable that is Purchased by, or contributed to, the Purchaser on the date of the initial Purchase hereunder, as permitted under Section 6.02(d), but only for
non-credit-related reasons; 

    (xi) the
transfer, sale or assignment of which does not contravene any applicable law, rule or regulation; 

   (xii) which
satisfies all applicable requirements of the Credit and Collection Policy; 

   (xiii) which
does not constitute a "bill and hold" sale; and 

   (xiv) as
to which, prior to the time of the transfer of such Receivable under this Agreement, the Purchaser or its assignee has not notified the Seller that such
Receivable (or the Obligor of such Receivable) is, in the reasonable good faith judgment of the Purchaser or such assignee, no longer acceptable for transfer hereunder for credit-related reasons. 

    "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. 

    "Event of Termination" has the meaning specified in Section 7.01. 

    "Facility" means the willingness of the Purchaser to consider making Purchases of Receivables from the Seller from time to time
pursuant to the terms of this Agreement. 

    "Facility Termination Date" means the earliest of (i) October 26, 2004, (ii) the date of termination of the
Facility pursuant to Section 7.01 and (iii) the date which the Seller designates by at least two Business Days' notice to the Purchaser. 

    "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day
on such transactions received by Credit Lyonnais from three Federal funds brokers of recognized standing selected by it. 

    "Fiscal Month" means a fiscal month of Dal-Tile International containing four or five weeks as determined under the
accounting policies and procedures of Dal-Tile International Inc. and its Affiliates, as in effect on the date hereof. 

4

 

    "General Trial Balance" of the Seller on any date means the Seller's accounts receivable trial balance (whether in the form of a
computer printout, magnetic tape or diskette) on such date, listing Obligors and the Receivables respectively owed by such Obligors on such date together with the aged Outstanding Balances of such
Receivables, in form and substance satisfactory to the Purchaser. 

    "Incipient Event of Termination" means an event that but for notice or lapse of time or both would constitute an Event of Termination. 

    "Indemnified Amounts" has the meaning specified in Section 8.01. 

    "Lock-Box Account" means a post office box administered by a Lock-Box Bank and the associated account
maintained at a Lock-Box Bank, in each case maintained for the purpose of receiving Collections. 

    "Lock-Box Agreement" means an agreement among the Seller, the Purchaser (or its assignees or designees) and any
Lock-Box Bank in form and substance satisfactory to the Purchaser (or its assignees or designees). 

    "Lock-Box Bank" means any of the banks holding one or more Lock-Box Accounts. 

    "Monthly Report" means a report, in form and substance satisfactory to the Purchaser, furnished by the Collection Agent to the
Purchaser pursuant to Section 6.02(b). 

    "Obligor" means a Person obligated to make payments to the Seller pursuant to a Contract. 

    "Outstanding Balance" of any Receivable at any time means the then outstanding principal balance thereof. 

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

    "Purchase" means a purchase by the Purchaser of Receivables from the Seller pursuant to Article II. 

    "Purchase Date" means each day on which a Purchase is made pursuant to Article II. 

    "Purchase Price" for any Purchase means an amount equal to the Outstanding Balance of the Receivables that are the subject of such
Purchase as set forth in the Seller's General Trial Balance, minus the Discount for such Purchase. 

    "Purchased Receivable" means any Receivable which is purchased by the Purchaser pursuant to Section 2.02. 

    "Purchaser Loan" means any loan made by the Purchaser, at its option, to the Seller, upon the Seller's request, provided that no such
Purchaser Loans may be made if an Event of Termination or an Incipient Event of Termination has occurred and is continuing, or would occur after giving effect thereto, or if any amounts are
outstanding under the Deferred Purchase Price. Purchaser Loans made by the Purchaser hereunder shall be evidenced by the promissory note of the Seller in substantially the form of Exhibit D
hereto. 

    "Receivable" means the indebtedness of any Obligor (other than an Obligor which is an Affiliate of Dal-Tile International
or the Seller) under a Contract, and includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto; provided,
however, that "Receivable" does not include any such indebtedness created by the Corporate Strategic Business Unit or the R&M Strategic Business Unit of the Seller. 

    "Receivables Purchase Request" has the meaning specified in Section 2.02(a). 

5

 

    "Related Security" means with respect to any Receivable: 

     (i) all
of the Seller's interest in any merchandise (including returned merchandise) the sale of which gives rise to such Receivable; 

    (ii) all
security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise, together with all financing statements signed by an Obligor describing any collateral securing such Receivable; 

    (iii) all
guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether
pursuant to the Contract related to such Receivable or otherwise; and 

    (iv) the
Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing
software and similar property and rights) to the extent relating to such Receivable and the related Obligor. 

    "Sale Agreement" means that certain Receivables Purchase Agreement, dated as of the date hereof, among the Purchaser, as seller,
Atlantic Asset Securitization Corp., as an investor, Credit Lyonnais, as a bank and as agent, and the Seller, as collection agent and originator, as amended or restated from time to time. 

    "Settlement Date" means the tenth Business Day of each Fiscal Month; provided, however,  that following the occurrence of an Event of Termination, Settlement Dates shall
occur on such days as are selected from time to time by the Purchaser or its designee in a
written notice to the Collection Agent. 

    "Store Account" means a bank account maintained by the Seller for the purpose of receiving Collections, funds constituting cash sales
of merchandise and other funds of any DTC Store. 

    "Store Account Bank" means the bank holding any Store Account. 

    "Transferred Receivable" means a Purchased Receivable or a Contributed Receivable. 

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

    "Weekly Report" means a report, in form and substance satisfactory to the Purchaser, furnished by the Collection Agent to the Purchaser
pursuant to Section 6.02(c). 

 
 

       SECTION 1.02.  Other Terms.   All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting
principles. All terms used in
Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. 

 
 

ARTICLE II
  
    AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS    
  

 
 

       SECTION 2.01.  Facility.   On the terms and conditions hereinafter set forth and without recourse to the Seller (except to the extent specifically
provided herein), the Seller may at its
option sell or contribute to the Purchaser all Receivables originated by it from time to time and the Purchaser may at its option purchase or accept as a contribution from the Seller all Receivables
of the Seller from time to time, in each case during the period from the date hereof to the Facility Termination Date. 

6

 

 
 

      SECTION 2.02.  Making Purchases.   

 
 

      (a)  Initial Purchase.   The Seller shall give the Purchaser at least one Business Day's notice of its request for the initial Purchase hereunder, which
request shall specify the date
of such Purchase (which shall be a Business Day) and the proposed Purchase Price for such Purchase. The Purchaser shall promptly notify the Seller whether it has determined to make such Purchase. On
the date of such Purchase, the Purchaser shall, upon satisfaction of the applicable conditions set forth in Article III, pay the Purchase Price for such Purchase in the manner provided in
Section 2.02(c). 

 
 

       (b)  Subsequent Purchases.   On each Business Day following the initial Purchase, unless either party shall notify the other party to the contrary, the
Seller shall sell to the Purchaser
and the Purchaser shall purchase from the Seller, upon satisfaction of the applicable conditions set forth in Article III, all Receivables originated by the Seller which have not previously
been sold or contributed to the Purchaser; provided, however, that the Seller may, at its option on any Purchase Date, contribute all or any of such
Receivables to the Purchaser pursuant to Section 2.06, instead of selling such Receivables to the Purchaser pursuant to this Section 2.02(b). On or within five Business Days after the
date of each such Purchase, the Purchaser shall pay the Purchase Price for such Purchase in the manner provided in Section 2.02(c). 

 
 

       (c)  Payment of Purchase Price.   The Purchase Price for each Purchase shall be paid on or within five Business Days after the Purchase Date therefor by
means of any one or a combination of the
following: (i) a deposit in same day funds to the Seller's account designated by the Seller, (ii) an increase in the Deferred Purchase Price (subject at all times to the limitations
contained in the definition thereof), or (iii) a credit against interest and/or principal owed by the Seller with respect to any Purchaser Loan. The allocation of the Purchase Price as among
such methods of payment shall be subject in each instance to the approval of the Purchaser and the Seller. 

 
 

       (d)  Ownership of Receivables and Related Security.   On each Purchase Date, after giving effect to the Purchase (and any contribution of Receivables)
on such date, the Purchaser shall own all Receivables
originated by the Seller as of such date (including Receivables which have been previously sold or contributed to the Purchaser hereunder). The Purchase or contribution of any Receivable shall include
all Related Security with respect to such Receivable. 

 
 

       SECTION 2.03.  Collections.   (a) Unless otherwise agreed, the Collection Agent shall, on each Settlement Date, deposit into an account of the
Purchaser or the Purchaser's assignee
all Collections of Transferred Receivables then held by the Collection Agent. 

    (b) In
the event that the Seller believes that funds which are not Collections of Transferred Receivables have been deposited into an account of the Purchaser or the
Purchaser's assignee, the Seller shall so advise the Purchaser and, on the Business Day following such identification, the Purchaser shall remit, or shall cause to be remitted, to the Seller all funds
so deposited which are identified, to the Purchaser's satisfaction, as not being Collections of Transferred Receivables. 

    (c) On
each Settlement Date, the Purchaser shall pay to the Seller accrued interest on the Deferred Purchase Price and the Purchaser may, at its option, prepay in whole
or in part the principal amount of the Deferred Purchase Price; provided that each such payment shall be made solely from (i) Collections of Transferred Receivables after all other amounts then
due from the Purchaser under the Sale Agreement have been paid in full and all amounts then required to be set aside by the Purchaser or the Collection Agent, on their respective books, under the Sale
Agreement have been so set aside or (ii) excess cash flow from operations of the Purchaser which is not required to be applied to the payment of other obligations of the Purchaser; and provided
further, that no such payment shall be made at any time when an Event of Termination shall have occurred and be continuing. At such time following the Facility Termination Date when all Capital, Yield
and other amounts owed by the Purchaser under the Sale Agreement shall have been paid in full, the Purchaser shall apply, on each 

7

 

Settlement Date, all Collections of Transferred Receivables received by the Purchaser pursuant to Section 2.03(a) (and not previously distributed) first to the payment of accrued interest on
the Deferred Purchase Price, and then to the reduction of the principal amount of the Deferred Purchase Price. 

 
 

       SECTION 2.04.  Settlement Procedures.   (a) If on any day any Purchased Receivable becomes (in whole or in part) a Diluted Receivable, the Seller
shall be deemed to have received on such day
a Collection of such Purchased Receivable in the amount of such Diluted Receivable. The Seller shall pay to the Collection Agent on or prior to the earlier of (i) the next Settlement Date or
(ii) the occurrence of an Event of Termination all amounts deemed to have been received pursuant to this subsection. 

    (b) Upon
discovery by the Seller or the Purchaser of a breach of any of the representations and warranties made by the Seller in Section 4.01(j) with respect to
any Transferred Receivable, such party shall give prompt written notice thereof to the other party, as soon as practicable and in any event within three Business Days following such discovery. The
Seller shall, upon not less than two Business Days' notice from the Purchaser or its assignee or designee, repurchase such Transferred Receivable on the next succeeding Settlement Date for a
repurchase price equal to the Outstanding Balance of such Transferred Receivable. Each repurchase of a Transferred Receivable shall include the Related Security with respect to such Transferred
Receivable. The proceeds of any such repurchase shall be deemed to be a Collection in respect of such Transferred Receivable. If the Seller is not the Collection Agent, the Seller shall pay to the
Collection Agent on or prior to the next Settlement Date the repurchase price required to be paid pursuant to this subsection. 

    (c) Except
as stated in subsection (a) or (b) of this Section 2.04 or as otherwise required by law or the underlying Contract, all Collections from
an Obligor of any Transferred Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor
designates its payment for application to specific Receivables. 

 
 

       SECTION 2.05.  Payments and Computations, Etc.   (a) All amounts to be paid or deposited by the Seller or the Collection Agent hereunder shall be
paid or deposited no later than 12:00 noon (New York
City time) on the day when due in same day funds to an account or accounts designated by the Purchaser from time to time, which accounts, during the existence of the Sale Agreement, shall be those set
forth in the Sale Agreement. 

    (b) The
Seller shall, to the extent permitted by law, pay to the Purchaser interest on any amount not paid or deposited by the Seller (whether as Collection Agent or
otherwise) when due hereunder at an interest rate per annum equal to 2.00% per annum above the Alternate Base Rate, payable on demand. 

    (c) All
computations of interest and all computations of fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including
the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next
succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit. 

 
 

       SECTION 2.06.  Contributions.   The Seller may from time to time at its option, by notice to the Purchaser on or prior to the date of the proposed
contribution, identify Receivables which it
proposes to contribute to the Purchaser as a capital contribution. On the date of each such contribution and after giving effect thereto, the Purchaser shall own the Receivables so identified and
contributed (collectively, the "Contributed Receivables") and all Related Security with respect thereto. The foregoing notwithstanding, on the date of
the initial Purchase hereunder the Seller agrees to contribute to the Purchaser all Receivables which are not included in such initial Purchase. 

8

  

 
 

ARTICLE III
  
    CONDITIONS OF PURCHASES    
  

 
 

       SECTION 3.01.  Conditions Precedent to Initial Purchase from the Seller.   The initial Purchase of Receivables from the Seller hereunder is subject to
the conditions precedent that the Purchaser shall have received on or before the
date of such Purchase the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Purchaser: 

    (a) Certified
copies of the resolutions of the Board of Directors of the Seller approving this Agreement and certified copies of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to this Agreement. 

    (b) A
certificate of the Secretary or Assistant  Secretary of the Seller certifying the names and true signatures of the officers of the Seller
authorized to sign this Agreement and the other documents to be delivered by it hereunder. 

    (c) Acknowledgment
copies or time stamped receipt copies (or other evidence of filing) of proper financing statements, duly filed on or before the date of the initial
Purchase, naming the Seller as the seller/debtor and the Purchaser as the purchaser/secured party, or other similar instruments or documents, as the Purchaser may deem necessary or desirable under the
UCC of all appropriate jurisdictions or other applicable law to perfect the Purchaser's ownership of and security interest in the Receivables and Related Security and Collections with respect thereto. 

    (d) Proper
financing statements (together with such written authorizations to file such financing statements or such other written statements with respect to the filing
of such financing statements as the Agent may request), if any, necessary to release all security interests and other rights of any Person in the Transferred Receivables, Contracts or Related Security
previously granted by the Seller. 

    (e) Completed
requests for information, dated on or before the date of such initial Purchase, listing the effective financing statements filed in Pennsylvania and Texas
that name the Seller as debtor, together
with copies of such other financing statements (none of which shall cover any Transferred Receivables, Contracts or Related Security). 

    (f)  Favorable
opinions of (i) Fried, Frank, Harris, Shriver & Jacobson, (ii) Olshan, Grundman, Frome, Rosenzweig & Wolosky LLP,
(iii) Dechert and (iv) Mark A. Solls, each as counsel for the Seller, in form and substance satisfactory to the Purchaser, as to such matters as the Purchaser may reasonably request. 

    (g) Executed
copies of Lock-Box Agreements with each Lock-Box Bank and the Account Agreement with the bank holding the Collection Account. 

    (h) Executed
copies of Bank Direction Agreements with respect to the Store Accounts maintained at Bank of America-East, Bank of America-West,
Bank One Chicago, Bank One Michigan, Bank One Texas, First Union and Wells Fargo Bank. 

 
 

       SECTION 3.02.  Conditions Precedent to All Purchases.   Each Purchase (including the initial Purchase) hereunder shall be subject to the further
conditions precedent that: 

    (a) with
respect to any such Purchase, on or prior to the date of such Purchase, the Seller shall have delivered to the Purchaser, if requested by the Purchaser,
(i) the Seller's General Trial Balance (which if in magnetic tape or diskette format shall be compatible with the Purchaser's computer equipment) as of a date not more than 31 days prior
to the date of such Purchase, and (ii) a written report identifying, among other things, the Receivables to be included in such 

9

 

Purchase and such additional information concerning such Receivables as may reasonably be requested by the Purchaser; 

    (b) with
respect to any such Purchase, on or prior to the date of such Purchase, the Collection Agent shall have delivered to the Purchaser, in form and substance
satisfactory to the Purchaser, a completed Monthly Report (or, in the case of the initial Purchase, a pro forma Monthly Report for the period ending September 28, 2001) for the most recently
ended reporting period for which information is required pursuant to Section 6.02(b) and containing such additional information as may reasonably be requested by the Purchaser; 

    (c) at
its expense, the Seller shall have caused the master data processing records evidencing Transferred Receivables to be marked to indicate that such Receivables,
the Related Security and Collections with respect thereto have been sold and/or contributed in accordance with this Agreement; and 

    (d) on
the date of such Purchase or contribution the following statements shall be true (and the Seller, by accepting the Purchase Price for such Purchase, shall be
deemed to have certified that): 

     (i) The
representations and warranties contained in Section 4.01 are correct on and as of the date of such Purchase as though made on and as of such date, 

    (ii) No
event has occurred and is continuing, or would result from such Purchase, that constitutes an Event of Termination or an Incipient Event of Termination and 

    (iii) The
Purchaser shall not have delivered to the Seller a notice that the Purchaser shall not make any further Purchases hereunder; and 

    (e) the
Purchaser shall have received such other approvals, opinions or documents as the Purchaser may reasonably request. 

 
 

ARTICLE IV
  
    REPRESENTATIONS AND WARRANTIES    
  

 
 

       SECTION 4.01.  Representations and Warranties of the Seller.   The Seller represents and warrants as follows: 

    (a) The
Seller is a corporation duly incorporated, validly existing and in good standing under the laws of Pennsylvania, and is duly qualified to do business, and is in
good standing, in every jurisdiction where the nature of its business requires it to be so qualified, unless the failure to so qualify would not reasonably be expected to have a material adverse
effect on (i) the interests of the Purchaser hereunder, (ii) the collectibility of the Transferred Receivables, or (iii) the ability of the Seller or the Collection Agent to
perform their respective obligations hereunder. 

    (b) The
execution, delivery and performance by the Seller of this Agreement and the other documents to be delivered by it hereunder, including the Seller's sale and
contribution of Receivables hereunder and the Seller's use of the proceeds of Purchases, (i) are within the Seller's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) do not contravene (1) the Seller's certificate of incorporation or by-laws, (2) any law, rule or regulation applicable to the Seller,
(3) any material contractual restriction binding on or affecting the Seller or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the
Seller or its property, and (iv) do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its properties (except for
the transfer of the Seller's interest in the Transferred Receivables pursuant to this Agreement) 

10

 

pursuant to any material agreement. This Agreement has been duly executed and delivered by the Seller. 

    (c) No
authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution,
delivery and performance by the Seller of this Agreement or any other document to be delivered by it hereunder. 

    (d) This
Agreement constitutes the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium (whether general or specific) and other similar laws now or hereafter in effect affecting creditors' rights generally. 

    (e) Sales
and contributions made pursuant to this Agreement will constitute a valid sale, transfer, and assignment of the Transferred Receivables to the Purchaser,
enforceable against creditors of, and purchasers from, the Seller. The Seller shall have no remaining property interest in any Transferred Receivable. 

    (f)  The
consolidated balance sheet of Dal-Tile International and its consolidated Subsidiaries as at December 29, 2000, and the related consolidated
statements of income and retained earnings of Dal-Tile International and its consolidated Subsidiaries for the fiscal year then ended, copies of which have been furnished to the Purchaser,
fairly present, in all material respects, the financial condition of Dal-Tile International and its consolidated Subsidiaries as at such date and the results of the operations of
Dal-Tile International and its consolidated Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since
December 29, 2000, there has been no material adverse change in the business, financial condition or operations of Dal-Tile International and its consolidated Subsidiaries taken as
a whole that could reasonably be expected to adversely affect the value or collectibility of the Transferred Receivables or the ability of the Seller to collect Transferred Receivables or otherwise
perform its obligations under this Agreement; 

    (g) There
is no pending or threatened action or proceeding affecting the Seller or any of its subsidiaries before any court, governmental agency or arbitrator which may
reasonably be expected to materially adversely affect the financial condition or operations of the Seller or any of its subsidiaries or the ability of the Seller to perform its obligations under this
Agreement, or which purports to affect the legality, validity or enforceability of this Agreement. 

    (h) No
proceeds of any Purchase will be used, whether directly or indirectly, to purchase or carry Margin Stock (as such term is defined in Regulation U of the
Board of Governors of the Federal Reserve System of the United States, as in effect from time to time) or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose. 

    (i)  No
transaction contemplated hereby requires compliance with any bulk sales act or similar law. 

    (j)  Each
Receivable characterized as an Eligible Receivable in a Monthly Report, a Weekly Report (or any other statement made by the Collection Agent or the Seller) is
an Eligible Receivable as of the date of such Monthly Report, Weekly Report or statement, and each such Receivable and each Transferred Receivable, together with the Related Security, is owned
(immediately prior to its sale or contribution hereunder) by the Seller free and clear of any Adverse Claim (other than any Adverse Claim arising solely as the result of any action taken by the
Purchaser). When the Purchaser makes a Purchase it shall acquire valid and perfected first priority ownership of each Purchased Receivable and the Related Security and Collections with respect thereto
free and clear of any Adverse Claim (other than any Adverse Claim arising solely 

11

 

as the result of any action taken by the Purchaser), and no effective financing statement or other instrument similar in effect covering any Transferred Receivable, any interest therein, the Related
Security or Collections with respect thereto is on file in any recording office except such as may be filed in favor of Purchaser in accordance with this Agreement or in connection with any Adverse
Claim arising solely as the result of any action taken by the Purchaser. 

    (k) Each
Monthly Report and Weekly Report (if prepared by the Seller or one of its Affiliates, or to the extent that information contained therein is supplied by the
Seller or one of its Affiliates), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller to the Purchaser in
connection with this Agreement is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Purchaser at such time) as of the date so furnished, and no such
document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading. 

    (l)  The
principal place of business and chief executive office of the Seller and the office where the Seller keeps its records concerning the Transferred Receivables
are located at the address or addresses referred to in Section 5.01(b). 

    (m) The
names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box
Banks, are specified in Exhibit B (as the same may be updated from time to time pursuant to Section 5.01(g)). The name and address of the bank holding the Collection Account, together
with the account number of the Collection Account, are as specified in Exhibit B (as the same may be updated from time to time pursuant to Section 5.01(g)). The names and addresses of
all the Store Account Banks, together with the account numbers of the Store Accounts at such Store Account Banks, are as specified in Exhibit E hereto, as such Exhibit E may be updated
from time to time pursuant to Section 5.01(i). 

    (n) Other
than as set forth on Exhibit F hereto, the Seller has not been since January 1, 1996, and is not currently, known by any tradename or
doing-business-as name. Other than as set forth on Exhibit F hereto, the Seller has not used since January 1, 1996, and does not currently use, any tradename or
doing-business-as name. 

    (o) With
respect to any programs used by the Seller in the servicing of the Receivables, no sublicensing agreements are necessary in connection with the designation of
a new Collection Agent pursuant to Section 6.01(b) so that such new Collection Agent shall have the benefit of such programs (it being understood that,  however, the Collection Agent, if other than
the Seller, shall be required to be bound by a confidentiality agreement reasonably acceptable to the Seller). 

    (p) The
transfers of Transferred Receivables by the Seller to the Purchaser pursuant to this Agreement, and all other transactions between the Seller and the Purchaser,
have been and will be made in good faith and without intent to hinder, delay or defraud creditors of the Seller. 

 
 

ARTICLE V
  
    COVENANTS    
  

 
 

      SECTION 5.01.  Covenants of the Seller.   From the date hereof until the first day following the Facility Termination Date on which all of the
Transferred Receivables are either collected in full or
become Defaulted Receivables: 

    (a) Compliance with Laws, Etc. The Seller will comply in all material respects with all applicable laws, rules,
regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges except to the extent that the failure so to comply 

12

 

with such laws, rules and regulations or the failure so to preserve and maintain such rights, franchises, qualifications, and privileges would not materially adversely affect the collectibility of the
Transferred Receivables or the ability of the Seller to perform its obligations under this Agreement. 

    (b) Offices, Records and Books of Account. The Seller will keep its principal place of business and chief executive
office and the office where it keeps its records concerning the Transferred Receivables at the address of the Seller set forth under its name on the signature page to this Agreement or, upon
30 days' prior written notice to the Purchaser, at any other locations within the United States. The Seller will not change its name or its state of organization, unless (i) the Seller
shall have provided the Purchaser with at least 30 days' prior written notice thereof, (ii) no later than the effective date of such change, all actions required by
Section 5.01(l) shall have been taken and completed and (iii) such name change would not be reasonably likely to mislead a Person as to the separate identity of the Purchaser and the
Seller. The Seller also will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Transferred Receivables and
related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the
collection of all Transferred Receivables (including, without limitation, records adequate to permit the daily identification of each new Transferred Receivable and all Collections of and adjustments
to each existing Transferred Receivable). The Seller shall make a notation in its books and records, including its computer files, to indicate which Receivables have been sold or contributed to the
Purchaser hereunder. 

    (c) Performance and Compliance with Contracts and Credit and Collection Policy. The Seller will, at its expense, timely
and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Transferred Receivables, and timely and fully
comply in all material respects with the Credit and Collection Policy in regard to each Transferred Receivable and the related Contract. 

    (d) Sales, Liens, Etc. Except for the sales and contributions of Receivables contemplated herein, the Seller will not
sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Transferred Receivable, Related Security, related
Contract or Collections, or upon or with respect to any account to which any Collections of any Transferred Receivable are sent, or assign any right to receive income in respect thereof. 

    (e) Extension or Amendment of Transferred Receivables. Except as provided in Section 6.02(d), the Seller will not
extend, amend or otherwise modify the terms of any Transferred Receivable, or amend, modify or waive any term or condition of any Contract related thereto. 

    (f)  Change in Business or Credit and Collection Policy. The Seller will not make any change in the character of its
business or in the Credit and Collection Policy that would, in either case, materially adversely affect the collectibility of the Transferred Receivables or the ability of the Seller to perform its
obligations under this Agreement. 

    (g) Change in Payment Instructions to Obligors. The Seller will not add or terminate any bank or bank account as a
Lock-Box Bank or Lock-Box Account from those listed in Exhibit B to this Agreement, or make any change in its instructions to Obligors regarding payments to be made to
any Lock-Box Bank, unless the Purchaser shall have received notice of such addition, termination or change (including an updated Exhibit B) and executed copies of
Lock-Box Agreements with each new Lock-Box Bank or with respect to each new Lock-Box Account. The Seller will not change the Collection Account, unless the
Purchaser shall have received notice of such change 

13

 

(including an updated Exhibit B) and a fully executed Account Agreement with respect to such new Collection Account. 

    (h) Deposits to Lock-Box Accounts. The Seller will instruct, or cause the Collection Agent (if not the
Seller) to instruct, all Obligors to remit all their payments in respect of Transferred Receivables to a Lock-Box Account. The Seller will instruct, or cause the Collection Agent (if not
the Seller) to instruct, the appropriate responsible employees at each DTC Store to remit all payments in respect of Receivables which, notwithstanding the aforementioned instructions given to the
Obligors, are received at such DTC Store on any Business Day to a Store Account at the end of such Business Day or by noon on the next Business Day. If the Seller shall receive any Collections
directly (rather than at a DTC Store), it shall immediately (and in any event within two Business Days) deposit the same to a Lock-Box Account or the Collection Account. The Seller will
not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections of Transferred Receivables. The
Seller will instruct, or cause the Collection Agent (if not the Seller) to instruct, each bank holding a Store Account to remit, on each Business Day from and after the date of this Agreement, by wire
transfer, ACH debit or other electronic method, all funds deposited and collected in each Store Account to the Collection Account. 

    (i)  Store Accounts. The Seller will not open or close any Store Account, unless the Purchaser and its assigns shall
have received prior notice of such change (including an updated Exhibit E) and a fully executed Bank Direction Agreement with respect to each new Store Account. 

    (j)  Bank Direction Agreements. On or prior to March 31, 2002, the Seller will deliver to the Purchaser fully
executed Bank Direction Agreements in form reasonably acceptable to the Purchaser and its assignee with respect to each Store Account other than those Store Accounts for which (i) the Purchaser
and its assignee may waive the requirements of this Section 5.01(j) or (ii) Bank Direction Agreements have already been delivered pursuant to Section 3.01(h). 

    (k) Audits. The Seller will, from time to time during regular business hours as reasonably requested by the Purchaser or
its assigns, permit the Purchaser, or its agents, representatives or assigns, (i) to examine and make copies of and abstracts from all books, records and documents (including, without
limitation, computer tapes and disks) in the possession or under the control of the Seller relating to Transferred Receivables and the Related Security, including, without limitation, the related
Contracts, and (ii) to visit the offices and properties of the Seller for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to
Transferred Receivables and the Related Security or the Seller's performance hereunder or under the Contracts with any of the officers or employees of the Seller having knowledge of such matters. 

    (l)  Further Assurances. (i) The Seller agrees from time to time, at its expense, promptly to execute and deliver
all further instruments and documents, and to take all further actions, that to the Seller's knowledge may be necessary, or that the Purchaser or its assignee may reasonably request, to perfect,
protect or more fully evidence the sale and contribution of Receivables under this Agreement, or to enable the Purchaser or its assignee to exercise and enforce its respective rights and remedies
under this Agreement. Without limiting the foregoing, the Seller will, upon the request of the Purchaser or its assignee, (A) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments and documents, that may be necessary or desirable to perfect, protect or evidence such Transferred Receivables; and (B) deliver to the Purchaser
copies of all Contracts relating to the Transferred Receivables and all records relating to such Contracts and the Transferred Receivables, whether in hard copy or in magnetic tape or diskette format
(which if in magnetic tape or diskette format shall be compatible with the Purchaser's computer equipment). 

14

 

    (ii) The
Seller authorizes the Purchaser or its assignee to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the
Transferred Receivables and the Related Security, the related Contracts and the Collections with respect thereto without the signature of the Seller where permitted by law. 

    (m) Reporting Requirements. The Seller will provide to the Purchaser the following: 

     (i) as
soon as available and in any event within 45 days after the end of the first three quarters of each fiscal year of Dal-Tile International, an
unaudited consolidated balance sheet of Dal-Tile International and its consolidated Subsidiaries as of the end of such quarter and consolidated statements of income and retained earnings
of Dal-Tile International and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal year of Dal-Tile International and ending with the end
of such quarter, certified by the chief financial officer of Dal-Tile International; 

    (ii) as
soon as available and in any event within 90 days after the end of each fiscal year of Dal-Tile International, a copy of the annual report
for such fiscal year of Dal-Tile International and its consolidated Subsidiaries, containing consolidated financial statements for such year audited by an independent public accountants
acceptable to the Purchaser; 

    (iii) as
soon as possible and in any event within three Business Days after the occurrence of each Event of Termination or Incipient Event of Termination, a statement
of the chief financial officer of the Seller setting forth details of such Event of Termination or Incipient Event of Termination and the action that the Seller has taken and proposes to take with
respect thereto; 

    (iv) promptly
after the sending or filing thereof, copies of all reports that Dal-Tile International sends to any of its security holders generally, and
copies of all Form 10-K, Form 10-Q and Form 8-K reports and all other reports and registration statements that Dal-Tile
International or any Subsidiary thereof files with the Securities and Exchange Commission or any national securities exchange; 

    (v) promptly
after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives from any of the foregoing or from any multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) to which the Seller or any Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of
withdrawal liability or an event or condition which could, in the aggregate, result in the imposition of liability on the Seller and/or any such Affiliate in excess of $5,000,000; 

    (vi) at
least 30 days prior to any change in the Seller's name or the Seller's state of incorporation, a notice setting forth the new name or state of
incorporation and the effective date thereof; and 

   (vii) such
other information respecting the Transferred Receivables or the condition or operations, financial or otherwise, of the Seller as the Purchaser may from time
to time reasonably request. 

    (n) Separate Conduct of Business. The Seller will: (i) maintain separate corporate records and books of account
from those of the Purchaser; (ii) conduct its business from an office separate from that of the Purchaser, which office would not be reasonably likely to mislead a Person as to the separate
identity
of the Purchaser and the Seller; (iii) ensure that all oral and written communications, including without limitation, letters, invoices, purchase orders, contracts, statements and applications,
will be made solely in its own name; (iv) have stationery and other 

15

 

business forms and a mailing address and a telephone number separate from those of the Purchaser; (v) not pay or hold itself out as having agreed to pay, or as being liable for, the obligations
of the Purchaser; (vi) not engage in any transaction with the Purchaser except as contemplated by this Agreement or as permitted by the Sale Agreement; (vii) continuously maintain as
official records the resolutions, agreements and other instruments underlying the transactions contemplated by this Agreement; and (viii) disclose on its annual financial statements (A) the
effects of the transactions contemplated by this Agreement in accordance with generally accepted accounting principles and (B) that the assets of the Purchaser are not available to pay its
creditors. 

    (o) Taxes. The Seller will file all Federal and other material tax returns and reports required by law to be filed by it
and will promptly pay all Federal and other material taxes and governmental charges at any time owing, except such as are being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established in accordance with, and to the extent required by, generally accepted accounting principles in the United States. The Seller will pay when due any taxes
payable in connection with the Receivables, exclusive of taxes on or measured by income or gross receipts of the Agent, the Investors and the Banks (as each such term is defined in the Sale Agreement)
and the Purchaser. 

 
 

       SECTION 5.02.  Grant of Security Interest.   To secure all obligations of the Seller arising in connection with this Agreement, and each other agreement
entered into in connection with this Agreement,
whether now or hereafter existing, due or to become due, direct or indirect, or absolute or contingent, including, without limitation, Indemnified Amounts, payments on account of Collections received
or deemed to be received, and any other amounts due the Purchaser hereunder, the Seller hereby assigns and grants to Purchaser a security interest in all of the Seller's right, title and interest now
or hereafter existing in, to and under all Receivables which do not constitute Transferred Receivables, the Related Security and all Collections with regard thereto and each Store Account, together
with all funds on deposit therein. 

 
 

       SECTION 5.03.  Covenant of the Seller and the Purchaser.   The Seller and the Purchaser have structured this Agreement with the intention that each
Purchase of Receivables hereunder and each contribution of Receivables
hereunder shall be treated as a sale of such Receivables by the Seller to the Purchaser and/or an absolute transfer of such Receivables by the Seller to the Purchaser for all purposes. The Seller and
the Purchaser shall record each Purchase and contribution as a sale and purchase and/or a capital contribution, on its books and records, and reflect each Purchase and contribution in its financial
statements and tax returns as a sale and purchase and/or capital contribution. In the event that, contrary to the mutual intent of the Seller and the Purchaser, any Purchase or contribution of
Receivables hereunder is not characterized as a sale and/or absolute transfer, the Seller shall, effective as of the date hereof, be deemed to have granted (and the Seller hereby does grant) to the
Purchaser a first priority security interest in and to any and all Receivables
that are intended to be or are purported to be Transferred Receivables, the Related Security and the proceeds thereof to secure the repayment of all amounts advanced to the Seller hereunder with
accrued interest thereon, and this Agreement shall be deemed to be a security agreement. 

 
 

ARTICLE VI
  
    ADMINISTRATION AND COLLECTION    
  

 
 

      SECTION 6.01.  Designation of Collection Agent.   The servicing, administration and collection of the Transferred Receivables shall be conducted by such
Person (the "Collection
Agent") so designated hereunder from time to time. Until the Purchaser or its assignee gives notice to the Seller of the designation of a new Collection Agent, the Seller is
hereby designated as, and hereby agrees to perform the duties and obligations of, the Collection Agent pursuant to the terms hereof. The Seller agrees that 

16

 

such notice may be given at any time during the existence of an Event of Termination in the Purchaser's or assignee's discretion. Upon the Seller's receipt of such notice, the Seller agrees that it
will terminate its activities as Collection Agent hereunder in a manner which the Purchaser (or its designee) believes will facilitate the transition of the performance of such activities to the new
Collection Agent, and the Seller shall use its best efforts to assist the Purchaser (or its designee) to take over the servicing, administration and collection of the Transferred Receivables,
including, without limitation, providing access to and copies of all computer tapes or disks and other documents or instruments that evidence or relate to Transferred Receivables maintained in its
capacity as Collection Agent and access to all employees and officers of the Seller responsible with respect thereto. The Purchaser at any time after giving such notice may designate as Collection
Agent itself or any Person that is a financial institution and/or in the business of servicing pools of receivables to succeed the Seller or any successor Collection Agent, if such Person shall
consent and agree to the terms hereof. The Collection Agent may, with the prior consent of the Purchaser, subcontract with any other Person for the servicing, administration or collection of
Transferred Receivables. Any such subcontract shall not affect the Collection Agent's liability for performance of its duties and obligations pursuant to the terms hereof. 

17

  

 
 

      SECTION 6.02.  Duties of Collection Agent.   (a) The Collection Agent shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Transferred Receivable from
time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. The Purchaser hereby appoints
the Collection Agent, from time to time designated pursuant to Section 6.01, as agent to enforce its ownership and other rights in the Transferred Receivables, the Related Security and the
Collections with respect thereto. In performing its duties as Collection Agent, the Collection Agent shall exercise the same care and apply the same policies as it would exercise and apply if it owned
the Transferred Receivables and shall act in the best interests of the Purchaser and its assignees. 

    (b) Prior
to the 10th Business Day of each Fiscal Month, the Collection Agent shall prepare and forward to the Purchaser (i) a Monthly Report, relating to all
then outstanding Transferred Receivables, and the Related Security and Collections with respect thereto, in each case, as of the close of business of the Collection Agent on the last day of the
immediately preceding Fiscal Month, and (ii) if requested by the Purchaser, a listing by Obligor of all Transferred Receivables, together with an aging report of such Transferred Receivables. 

    (c) So
long as any Event of Termination or Incipient Event of Termination shall have occurred and be continuing, and if the Purchaser (or its assignee) shall so
request, on or prior to the second Business Day of each week, the Collection Agent shall prepare and forward to the Purchaser or such assignee a Weekly Report, relating to all then outstanding
Transferred Receivables, and the Related Security and Collections with respect thereto, in each case, as of the close of business of the Collection Agent on the last day of the immediately preceding
week. 

    (d) If
no Event of Termination or Incipient Event of Termination shall have occurred and be continuing, the Seller, while it is the Collection Agent, may, in accordance
with the Credit and Collection Policy, extend the maturity or adjust the Outstanding Balance of any Transferred Receivable as the Seller deems appropriate to maximize Collections thereof, or otherwise
amend or modify the terms of any Transferred Receivable. 

    (e) The
Seller shall deliver to the Collection Agent, and the Collection Agent shall hold in trust for the Seller and the Purchaser in accordance with their respective
interests, all documents, instruments and records (including, without limitation, computer tapes or disks) which evidence or relate to Transferred Receivables. 

    (f)  The
Collection Agent shall as soon as practicable following receipt turn over to the Seller or any other Person entitled thereto any cash collections or other cash
proceeds received with respect to Receivables or other property not constituting Transferred Receivables. 

    (g) The
Collection Agent also shall perform the other obligations of the "Collection Agent" set forth in this Agreement with respect to the Transferred Receivables. 

 
 

       SECTION 6.03.  Collection Agent Fee.   The Purchaser shall pay to the Collection Agent, so long as it is acting as the Collection Agent hereunder, a
periodic collection fee (the
"Collection Agent Fee") of 0.50% per annum on the average daily aggregate Outstanding Balance of the Transferred Receivables, payable on each Settlement
Date or such other day during each calendar month as the Purchaser and the Collection Agent shall agree. 

 
 

       SECTION 6.04.  Certain Rights of the Purchaser.   (a) The Purchaser may, at any time, notify the Obligors of Transferred Receivables of the
Purchaser's ownership of the Transferred Receivables. The
Seller hereby transfers to the Purchaser (and its assigns and designees) the exclusive ownership and control of the Lock-Box Accounts maintained by the Seller for the purpose of receiving
Collections. 

18

 

    (b) At any time during the existence of an Event of Termination or an Incipient Event of Termination: 

     (i) The
Purchaser may direct the Obligors of Transferred Receivable that payment of all amounts payable under any Transferred Receivable shall be made directly to the
Purchaser or its designee. 

    (ii) The
Seller shall, upon the Purchaser's request and at the Seller's expense, give notice of the Purchaser's ownership to each Obligor of Transferred Receivables and
direct that payments of all amounts payable under the Transferred Receivables be made directly to the Purchaser or its designee. 

    (iii) At
the Purchaser's request and at the Seller's expense, the Seller and the Collection Agent shall (A) assemble all of the documents, instruments and other
records (including, without limitation, computer tapes and disks) that evidence or relate to the Transferred Receivables, and the related Contracts and Related Security, or that are otherwise
necessary or desirable to collect the Transferred Receivables, and shall make the same available to the Purchaser at a place selected by the Purchaser or its designee, and (B) segregate all
cash, checks and other instruments received by it from time to time constituting Collections of Transferred Receivables in a manner acceptable to the Purchaser and,
promptly upon receipt, remit all such cash, checks and instruments, duly indorsed or with duly executed instruments of transfer, to the Purchaser or its designee. The Purchaser shall also have the
right to make copies of all such documents, instruments and other records at any time. 

    (iv) The
Seller authorizes the Purchaser to take any and all steps in the Seller's name and on behalf of the Seller that are necessary or desirable, in the
determination of the Purchaser, to collect amounts due under the Transferred Receivables, including, without limitation, endorsing the Seller's name on checks and other instruments representing
Collections of Transferred Receivables and enforcing the Transferred Receivables and the Related Security and related Contracts. 

 
 

       SECTION 6.05.  Rights and Remedies.   (a) If the Seller or the Collection Agent fails to perform any of its obligations under this Agreement, the
Purchaser may (but shall not be required
to) itself perform, or cause performance of, such obligation, and, if the Seller (as Collection Agent or otherwise) fails to so perform, the costs and expenses of the Purchaser incurred in connection
therewith shall be payable by the Seller as provided in Section 8.01 or Section 9.04 as applicable. 

    (b) The
Seller shall perform all of its obligations under the Contracts related to the Transferred Receivables to the same extent as if the Seller had not sold or
contributed Transferred Receivables hereunder and the exercise by the Purchaser of its rights hereunder shall not relieve the Seller from such obligations or its obligations with respect to the
Transferred Receivables. The Purchaser shall not have any obligation or liability with respect to any Transferred Receivables or related Contracts, nor shall the Purchaser be obligated to perform any
of the obligations of the Seller thereunder. 

    (c) The
Seller shall cooperate with the Collection Agent in collecting amounts due from Obligors in respect of the Transferred Receivables. 

    (d) The
Seller hereby grants to Collection Agent an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of the
Seller all steps necessary or advisable to endorse, negotiate or otherwise realize on any writing or other right of any kind held or transmitted by the Seller or transmitted or received by Purchaser
(whether or not from the Seller) in connection with any Transferred Receivable. 

 
 

      SECTION 6.06.  Transfer of Records to Purchaser.   Each Purchase and contribution of Receivables hereunder shall include the transfer to the Purchaser of
all of the Seller's right and title to and interest in
the records relating to such Receivables and shall include an irrevocable non-exclusive license to the 

19

 

use of the Seller's computer software system to access and create such records. Such license shall be without royalty or payment of any kind, is coupled with an interest, and shall be irrevocable
until all of the Transferred Receivables are either collected in full or become Defaulted Receivables. 

    The
Seller shall take such action requested by the Purchaser, from time to time hereafter, that may be necessary or appropriate to ensure that the Purchaser has an enforceable
ownership interest in the records relating to the Transferred Receivables and rights (whether by ownership, license or sublicense) to the use of the Seller's computer software system to access and
create such records. 

    In
recognition of the Seller's need to have access to the records transferred to the Purchaser hereunder, the Purchaser hereby grants to the Seller an irrevocable license to access
such records in connection with any activity arising in the ordinary course of the Seller's business or in performance of its duties as Collection Agent, provided that (i) the Seller shall not
disrupt or otherwise interfere with the Purchaser's use of and access to such records during such license period and (ii) the Seller consents to the assignment and delivery of the records
(including any information contained therein relating to the Seller or its operations) to any assignees or transferees of the Purchaser provided they agree to hold such records confidential. 

 
 

ARTICLE VII
  
    EVENTS OF TERMINATION    
  

 
 

       SECTION 7.01.  Events of Termination.   If any of the following events ("Events of Termination") shall
occur and be continuing: 

    (a) The
Collection Agent (i) shall fail to perform or observe any term, covenant or agreement under this Agreement (other than as referred to in
clause (ii) of this subsection (a)) and such failure shall remain unremedied for five Business Days, or in the case of a failure of the Collection Agent to deliver any Monthly Report or Weekly
Report when required hereunder, three Business Days or (ii) shall fail to make when due any payment or deposit to be made by it under this Agreement; or 

    (b) The
Seller shall fail to make any payment required under Section 2.04(a) or 2.04(b); or 

    (c) Any
representation or warranty made or deemed made by or on behalf of the Seller under or in connection with this Agreement or any information or report delivered
by the Seller pursuant to this
Agreement shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered; or 

    (d) The
Seller shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such
failure shall remain unremedied for 10 Business Days after written notice thereof shall have been given to the Seller by the Purchaser or its assignees; or 

    (e) The
Seller or any of its Affiliates shall fail to pay any principal of or premium or interest on any of its Debt (other than Debt outstanding under the Credit
Agreement) which is outstanding in a principal amount of at least $5,000,000 in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect
of such event or condition is to accelerate the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or 

20

 

    (f)  Any Purchase or contribution of Receivables hereunder, the Related Security and the Collections with respect thereto shall for any reason cease to constitute valid
and perfected ownership of such Receivables, Related Security and Collections free and clear of any Adverse Claim; or 

    (g) Dal-Tile
International, Dal-Tile Group or the Seller shall generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Dal-Tile International,
Dal-Tile Group or the Seller seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by
Dal-Tile International, Dal-Tile Group or the Seller), either such proceeding shall remain undismissed or unstayed for a period of 45 days, or any of the actions sought
in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or Dal-Tile International, Dal-Tile Group or the Seller shall take any corporate action to authorize any of the actions set forth
above in this subsection (g); or 

    (h) an
Event of Termination shall have occurred under the Sale Agreement; or 

    (i)  There
shall have occurred any material adverse change in the business, financial condition or operations of the Seller since December 29, 2000, that could
reasonably be expected to adversely affect the value or collectibility of the Transferred Receivables or the ability of the Seller to collect Transferred Receivables or otherwise perform its
obligations under this Agreement; 

then,
and in any such event, the Purchaser may, by notice to the Seller, take either or both of the following actions: (x) declare the Facility Termination Date to have occurred (in which case
the Facility Termination Date shall be deemed to have occurred) and (y) without limiting any right under this Agreement to replace the Collection Agent, designate itself or another Person that
is a financial institution and/or in the business of servicing pools of receivables to succeed the Seller as Collection Agent; provided, that,
automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in paragraph (g) of this Section 7.01, the Facility
Termination Date shall occur, the Seller (if it is then serving as the Collection Agent) shall cease to be the Collection Agent, and the Purchaser (or its assigns or designees) shall become the
Collection Agent. Upon any such declaration or designation or upon such automatic termination, the Purchaser shall have, in addition to the rights and remedies under this Agreement, all other rights
and remedies with respect to the Receivables provided after default under the UCC and under other applicable law, which rights and remedies shall be cumulative. 

 
 

ARTICLE VIII
  
    INDEMNIFICATION    
  

 
 

       SECTION 8.01.  Indemnities by the Seller.   Without limiting any other rights which the Purchaser may have hereunder or under applicable law, the Seller
hereby agrees to indemnify the Purchaser and its
assigns and transferees (each, an "Indemnified Party") from and against any and all damages, claims, losses, liabilities and related costs and expenses,
including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts"), awarded against
or incurred by any Indemnified Party arising out of or as a result of this Agreement or the purchase or 

21

 

contribution of any Transferred Receivables or in respect of any Transferred Receivable or any Contract, including, without limitation, arising out of or as a result of: 

     (i) the
characterization in any Monthly Report or Weekly Report or other statement made by the Seller of any Transferred Receivable as an Eligible Receivable which is
not an Eligible Receivable as of the date of such Monthly Report or Weekly Report or statement; 

    (ii) any
representation or warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement, which shall have
been incorrect in any material respect when made; 

    (iii) the
failure by the Seller to comply with any applicable law, rule or regulation with respect to any Transferred Receivable or the related Contract; or the failure
of any Transferred Receivable or the related Contract to conform to any such applicable law, rule or regulation; 

    (iv) the
failure to vest in the Purchaser absolute ownership of the Receivables that are, or that purport to be, the subject of a Purchase or contribution under this
Agreement and the Related Security and Collections in respect thereof, free and clear of any Adverse Claim; 

    (v) the
failure of the Seller to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any Receivables that are, or that purport to be, Transferred Receivables and the Related Security and Collections in respect thereof, whether at
the time of any Purchase or contribution or at any subsequent time; 

    (vi) any
dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor or other financial inability of the Obligor to pay) of the Obligor to the
payment of any Receivable that is, or that purports to be, a Transferred Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid
and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related 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 the Seller acting as
Collection Agent); 

   (vii) any
failure of the Seller, as Collection Agent or otherwise, to perform its duties or obligations in accordance with the provisions hereof or to perform its
duties or obligations under any Contract; 

   (viii) any
products liability or other claim arising out of or in connection with merchandise, insurance or services which are the subject of any Contract; 

    (ix) the
commingling of Collections of Transferred Receivables by the Seller or a designee of the Seller, as Collection Agent or otherwise, at any time with other funds
of the Seller or an Affiliate of the Seller; 

    (x) any
investigation, litigation or proceeding related to this Agreement or the use of proceeds of Purchases or the ownership of Receivables, the Related Security, or
Collections with respect thereto or in respect of any Receivable, Related Security or Contract; 

    (xi) any
failure of the Seller to comply with its covenants contained in this Agreement; 

   (xii) any
Collection Agent Fees or other costs and expenses payable to any replacement Collection Agent which are reasonable and consistent with industry practice, to
the extent in excess of the Collection Agent Fees payable to the Seller hereunder; 

22

 

   (xiii) any claim brought by any Person other than an Indemnified Party arising from any activity by the Seller or any Affiliate of the Seller in servicing,
administering or collecting any Transferred Receivable; or 

   (xiv) any
Transferred Receivable becoming (in whole or in part) a Diluted Receivable. 

It
is expressly agreed and understood by the parties hereto (i) that the foregoing indemnification is not intended to, and shall not, constitute a guarantee of or other recourse for the
collectibility or payment of the Transferred Receivables and (ii) that nothing in this Section 8.01 shall require the Seller to indemnify any Person (A) for Receivables which are
not collected, not paid or uncollectible on account of the insolvency, bankruptcy, or financial inability to pay of the applicable Obligor, (B) for damages, losses, claims or liabilities or
related costs or expenses to the extent found in a final non-appealable judgment of a court of competent jurisdiction to have resulted from such Person's gross negligence or willful
misconduct, or (C) for any income taxes or franchise taxes incurred by such Person arising out of or as a result of this Agreement or in respect of any Transferred Receivable or any Contract. 

 
 

ARTICLE IX
  
    MISCELLANEOUS    
  

 
 

      SECTION 9.01.  Amendments, Etc.   No amendment or waiver of any provision of this Agreement or consent to any departure by the Seller therefrom shall be
effective unless in a writing signed by
the Purchaser and, in the case of any amendment, also signed by the Seller, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for
which given. No failure on the part of any party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise of any other right. 

 
 

      SECTION 9.02.  Notices, Etc.   All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include
facsimile communication) and be faxed
or delivered, to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other
parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications sent by other means shall
be effective when received. 

 
 

       SECTION 9.03.  Binding Effect; Assignability.   (a) This Agreement shall be binding upon and inure to the benefit of the Seller, the Purchaser and
their respective successors and assigns;  provided, however, that the Seller may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the
Purchaser. In connection with any sale or assignment by the Purchaser of all or a portion of the Transferred Receivables, the buyer or assignee, as the case may be, shall, to the extent of its
purchase or assignment, have all rights of the Purchaser under this Agreement (as if such buyer or assignee, as the case may be, were the Purchaser hereunder) except to the extent specifically
provided in the agreement between the Purchaser and such buyer or assignee, as the case may be. 

    (b) This
Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect
until such time, after the Facility Termination Date, when all of the Transferred Receivables are either collected in full or become Defaulted Receivables; provided, however,  that rights and remedies
with respect to any breach of any representation and warranty made by the Seller pursuant to Article IV and the provisions of
Article VIII and Sections 9.04, 9.05 and 9.06 shall be continuing and shall survive any termination of this Agreement. 

23

 

 
 

       SECTION 9.04.  Costs, Expenses and Taxes.   (a) In addition to the rights of indemnification granted to the Purchaser pursuant to Article VIII
hereof, the Seller agrees to pay on demand all
reasonable costs and expenses in connection with the preparation, execution and delivery of this Agreement and the other documents and agreements to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the Purchaser with respect thereto and with respect to advising the Purchaser as to its rights and
remedies under this Agreement, and the Seller agrees to pay all costs and expenses, if any (including reasonable counsel fees and expenses), in connection with the enforcement of this Agreement and
the other documents to be delivered hereunder excluding, however, any costs of enforcement or collection of Transferred Receivables which are not paid
on account of the insolvency, bankruptcy or financial inability to pay of the applicable Obligor. 

    (b) In
addition, the Seller agrees to pay any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this
Agreement or the other documents or agreements to be delivered hereunder, and the Seller agrees to save each Indemnified Party harmless from and against any liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees. 

 
 

       SECTION 9.05.  No Proceedings.   The Seller hereby agrees that it will not institute or join any other Person in instituting against the Purchaser any
proceeding of the type referred to in
Section 7.01(g) so long as there shall not have elapsed one year plus one day since the later of (i) the Facility Termination Date and (ii) the date on which all of the
Transferred Receivables are either collected in full or become Defaulted Receivables. 

 
 

       SECTION 9.06.  Confidentiality.   Unless otherwise required by applicable law, each party hereto agrees to maintain the confidentiality of this
Agreement in communications with third parties
and otherwise; provided that this Agreement may be disclosed to (i) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance
reasonably satisfactory to the other party hereto, and (ii) such party's legal counsel and auditors and the Purchaser's assignees, if they agree in each case to hold it confidential;  provided, that
such party shall have no obligation of confidentiality in respect of any information which may be generally available to the public or
becomes available to the public through no fault of such party. 

 
 

       SECTION 9.07.  GOVERNING LAW.   THIS AGREEMENT SHALL, IN ACCORDANCE
WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION, EXCEPT TO THE EXTENT THAT, PURSUANT TO THE UCC OF THE STATE OF NEW YORK, THE PERFECTION AND THE EFFECT OF
PERFECTION OR NON-PERFECTION OF THE PURCHASER'S OWNERSHIP OF OR SECURITY INTEREST IN THE RECEIVABLES ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.  

  
 

        SECTION 9.08.  Third Party Beneficiary.   Each of the parties hereto hereby acknowledges that the Purchaser may assign all or
any portion of its rights under this Agreement and that such assignees may
(except as otherwise agreed to by such assignees) further assign their rights under this Agreement, and the Seller hereby consents to any such assignments. All such assignees, including parties to the
Sale Agreement in the case of assignment to such parties, shall be third party beneficiaries of, and shall be entitled to enforce the Purchaser's rights and remedies under, this Agreement to the same
extent as if they were parties thereto, except to the extent specifically limited under the terms of their assignment. 

 
 

       SECTION 9.09.  Execution in Counterparts.   This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken
together shall constitute one and the same agreement. 

24

 

 
 

       SECTION 9.10.  Consent to Jurisdiction.   (a) Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of any New York State
or Federal court sitting in New
York City in any action or proceeding arising out of or relating to this Agreement, and each party hereto hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard
and determined in such New York State court or, to the extent permitted by law, in such Federal court. The parties hereto hereby irrevocably waive, to the fullest extent they may effectively do so,
the defense of an inconvenient forum to the maintenance of such action or proceeding. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 

    (b) Each
party hereto consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to it at its address
specified in Section 9.02. Nothing in this Section 9.10 shall affect the right of the parties hereto to serve legal process in any other manner permitted by law. 

 
 

       SECTION 9.11.  WAIVER OF JURY TRIAL.   EACH PARTY HERETO HEREBY
WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED OR DELIVERED PURSUANT HERETO. 

    [Remainder
of page intentionally left blank.] 

25

 
    IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. 

	SELLER:	 	DAL-TILE CORPORATION	 	 
	

 	
 	

By:	
 	

 	
 	

 
	 	 	 	 	
 Title:	 	 
	

 	
 	

7834 C.F. Hawn Freeway

P.O. Box 170130

Dallas, Texas 75217

Attention: Scott Veldman

Facsimile Number: (214) 309-4390	
 	

 
	

PURCHASER:	
 	

DTSC, INC.	
 	

 
	

 	
 	

By:	
 	

 	
 	

 
	 	 	 	 	
 Title:	 	 
	

 	
 	

c/o Global Securitization Services, LLC

103 Foulk Road, Suite 205-11

Wilmington, Delaware 19803

Attention: Frank B. Bilotta

Facsimile Number: (302) 652-8667	
 	

 

26

 
EXHIBIT A

CREDIT AND COLLECTION POLICY  

A–1

   EXHIBIT B  

 LOCK-BOX BANKS AND COLLECTION ACCOUNT  

 Lock-Box Banks  

	Bank
 
	 	P.O. Box
	 	Account Number

	Bank One, N.A.

1717 Main Street

Dallas, Texas 75201	 	70671	 	5596297

Collection Account  

	
Bank
 
	
 	

P.O. Box
	
 	

Account Number

	Bank of America, N.A.

901 Main Street

P.O. Box 832409

Dallas, Texas 75202	 	N.A.	 	3751842080

B–1

  

 
 

EXHIBIT C    
  

 
 

FORM OF DEFERRED PURCHASE PRICE NOTE    
  

    New York, New York

October 26, 2001 

    FOR
VALUE RECEIVED, DTSC, INC., a Delaware corporation (the "Purchaser"), hereby promises to pay to DAL-TILE
CORPORATION (the "Seller") the principal amount of this Note, determined as described below, together with interest thereon at a rate per annum equal at
any time to 2.00% per annum above the current rate of interest quoted for 30 day commercial paper in the Wall Street Journal under the caption Dealer Commercial Paper, in each case in lawful
money of the United States of America. Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Purchase and Contribution Agreement dated as of
October 26, 2001 between the Seller and the Purchaser (such agreement, as it may from time to time be amended, restated or otherwise modified in accordance with its terms, the
"Purchase and Contribution Agreement"). This Note is the note referred to in the definition of "Deferred Purchase
Price" in the Purchase and Contribution Agreement. 

    The
aggregate principal amount of this Note at any time shall be equal to the difference between (a) the sum of the aggregate principal amount of this Note on the date of the
issuance hereof and each addition to the principal amount of this Note pursuant to the terms of Section 2.02 of the Purchase and Contribution Agreement minus (b) the aggregate amount of
all payments made in respect of the principal amount of this Note, in each case, as recorded on the schedule annexed to and constituting a part of this Note, but failure to so record shall not affect
the obligations of the Purchaser to the Seller. 

    The
entire principal amount of this Note shall be due and payable one year and one day after the Facility Termination Date or such later date as may be agreed in writing by the Seller
and the Purchaser. The principal amount of this Note may, at the option of the Purchaser, be prepaid in whole at any time or in part from time to time. Interest on this Note shall be paid in arrears
on each Settlement Date, at maturity and thereafter on demand. All payments hereunder shall be made by wire
transfer of immediately available funds to such account of the Seller as the Seller may designate in writing. 

    Notwithstanding
any other provisions contained in this Note, in no event shall the rate of interest payable by the Purchaser under this Note exceed the highest rate of interest
permissible under applicable law. 

    The
obligations of the Purchaser under this Deferred Purchase Price Note are subordinated in right of payment, to the extent set forth in Section 2.03(c) of the Purchase and
Contribution Agreement, to the prior payment in full of all Capital, Yield, Fees and other obligations of the Purchaser under the Sale Agreement. 

    Notwithstanding
any provision to the contrary in this Deferred Purchase Price Note or elsewhere, other than with respect to payments specifically permitted by Section 2.03(c)
of the Purchase and Contribution Agreement, no demand for any payment may be made hereunder, no payment shall be due with respect hereto and the Seller shall have no claim for any payment hereunder
prior to the occurrence of the Facility Termination Date and then only on the date, if ever, when all Capital, Yield, Fees and other obligations owing under the Sale Agreement shall have been paid in
full. 

    In
the event that, notwithstanding the foregoing provision limiting such payment, the Seller shall receive any payment or distribution on this Deferred Purchase Price Note which is
not specifically permitted by Section 2.03(c) of the Purchase and Contribution Agreement, such payment shall be 

C–1

 

received and held in trust by the Seller for the benefit of the entities to whom the obligations are owed under the Sale Agreement and shall be promptly paid over to such entities. 

    The
Purchaser hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. 

    Neither
this Note, nor any right of the Seller to receive payments hereunder, shall, without the prior written consent of the Purchaser and (so long as the Sale Agreement remains in
effect or any amounts remain outstanding thereunder) the Agent under the Sale Agreement, be assigned, transferred, exchanged, pledged, hypothecated, participated or otherwise conveyed, other than the
pledge of this Note to the administrative agent under the Credit Agreement (as defined in the Sale Agreement). 

    THIS NOTE SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION.

	

 	
 	

DTSC, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	
 Title:

C–2

 
 
 

SCHEDULE TO DEFERRED PURCHASE PRICE NOTE    
  

	

	Date
	 	Addition to Principal Amount
	 	Amount of Principal Paid Paidor Prepaid
	 	Unpaid Principal Balance
	 	Notation Made By

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

C–3

  

 
 

EXHIBIT D    
  

 
 

FORM OF PURCHASER LOAN NOTE    
  

    New
York, New York

October 26, 2001 

    FOR
VALUE RECEIVED, DAL-TILE CORPORATION, a Pennsylvania corporation (the "Company"), hereby promises to pay to
DTSC, INC. (the "Lender"), no later than twelve (12) months from the date hereof or on demand if sooner made, the aggregate unpaid
principal amount of the Purchaser Loans made by the Lender to the Company under the Purchase and Contribution Agreement referred to below, and to pay on each Settlement Date interest on the unpaid
principal amount of the Purchaser Loans at a rate per annum equal at all times to 1.625% per annum above the Eurodollar Rate (as defined in the Sale Agreement) for periods of one month, in each case
in lawful money of the United States of America and in immediately available funds. 

    The
date and amount of each Purchaser Loan made by the Lender to the Company from the date hereof until the repayment of all sums due hereunder, and each payment made on account of
the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by the Lender on the schedule attached hereto or any continuation thereof. 

    This
Note is the Purchaser Loan Note referred to in the Purchase and Contribution Agreement (as amended, restated or otherwise modified from time to time, the
"Purchase and Contribution Agreement") dated as of October 26, 2001 between the Company and the Lender, as the Seller and the Purchaser,
respectively, and evidences Purchaser Loans made by the Lender thereunder. Capitalized terms used in this Note and not defined herein have the respective meanings assigned to them in the Purchase and
Contribution Agreement. 

    The
principal amount of this Note may, at the option of the Company, be prepaid in whole at any time or in part from time to time. 

    Notwithstanding
any other provisions contained in this Note, in no event shall the rate of interest payable by the Company under this Note exceed the highest rate of interest
permissible under applicable law. 

    The
Company hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever with respect to this Note. 

    In
the event the Lender shall refer this Note to an attorney for collection, the Company agrees to pay, in addition to unpaid principal and interest, all the costs and expenses
incurred in attempting or effecting collection hereunder, including reasonable attorney's fees, whether or not suit is instituted. 

    THIS NOTE SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION.

	

 	
 	

DAL-TILE CORPORATION
	

 	
 	

By:	
 	

 
	 	 	 	 	
 Name:

Title:

D–1

 
 
 

SCHEDULE TO PURCHASER LOAN NOTE    
  

	

	Date
	 	Amount of Purchaser Loan
	 	Amount of Principal Paid Paidor Prepaid
	 	Unpaid Principal Balance
	 	Notation Made By

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

D–2

  

 
 

EXHIBIT E
  
    STORE ACCOUNTS    
  

E–1

  

 
 

EXHIBIT F
  
    TRADENAMES AND DOING-BUSINESS-AS NAMES    
  

daltile

Dal-Tile

Dal Tile

American Olean

Dal-Tile International

Dal-Tile Manufacturing,Inc. 

F–1

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