_______________________________________________________________
TRANSFER AND ADMINISTRATION AGREEMENT
between
ENTERPRISE FUNDING CORPORATION,
as Company
and
LADD FUNDING CORP.
as Transferor
and
LADD FURNITURE, INC.
as Collection Agent
Dated as of March 30, 1995
_______________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms . . . . . . 1
SECTION 1.2. Other Terms . . . . . . . . . . . 26
SECTION 1.3. Computation of Time Periods . . . 26
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1. Facility . . . . . . . . . . . . . 27
SECTION 2.2. Transfers; Company Certificate;
Eligible Receivables. . . . . . . 27
SECTION 2.3. Selection of Tranche Periods and
Tranche Rates . . . . . . . . . . 30
SECTION 2.4. Fees and Other Costs and Expenses 31
SECTION 2.5. Non-Liquidation Settlement and
Reinvestment Procedures . . . . . 31
SECTION 2.6. Liquidation Settlement Procedures 32
SECTION 2.7. Fees . . . . . . . . . . . . . . . 34
SECTION 2.8. Protection of Ownership Interest
of the Company . . . . . . . . . . 34
SECTION 2.9. Deemed Collections; Application
of Payments . . . . . . . . . . . 35
SECTION 2.10. Payments and Computations, Etc. . 36
SECTION 2.11. Reports . . . . . . . . . . . . . 37
SECTION 2.12. Collection Account . . . . . . . 37
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of
the Transferor . . . . . . . . . . 39
SECTION 3.2. Reaffirmation of Representations
and Warranties by the Transferor . 43
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Effectiveness . . . 44
i
SECTION 4.2. Post Closing Condition . . . . . 48
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants of Trans-
feror and the Collection Agent . . 49
SECTION 5.2. Negative Covenants of Transferor and
the Collection Agent . . . . . . . 54
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1. Appointment of Collection Agent . 57
SECTION 6.2. Duties of Collection Agent . . . . 57
SECTION 6.3. Rights After Designation of New
Collection Agent . . . . . . . . . 59
SECTION 6.4. Responsibilities of the Tr-
ansferor . . . . . . . . . . . . . 60
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. Termination Events . . . . . . . . 61
SECTION 7.2. Termination . . . . . . . . . . . 63
ARTICLE VIII
INDEMNIFICATION; EXPENSES AND
RELATED MATTERS
SECTION 8.1. Indemnities by the Transferor . . . 64
SECTION 8.2. Indemnity for Taxes, Reserves and
Expenses . . . . . . . . . . . . . 66
SECTION 8.3. Other Costs, Expenses and Related
Matters . . . . . . . . . . . . . 69
SECTION 8.4. Reconveyance Under Certain Cir-
cumstances . . . . . . . . . . . . 69
ii
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Term of Agreement . . . . . . . . 71
SECTION 9.2. Waivers; Amendments . . . . . . . 71
SECTION 9.3. Notices . . . . . . . . . . . . . 71
SECTION 9.4. Governing Law; Submission to Ju-
risdiction; Integration . . . . . 73
SECTION 9.5. Severability; Counterparts . . . . 74
SECTION 9.6. Successors and Assigns . . . . . . 74
SECTION 9.7. Waiver of Confidentiality . . . . 74
SECTION 9.8. Confidentiality Agreement . . . . 75
SECTION 9.9. Confidentiality Agreement of the
Company. . . . . . . . . . . . . . 75
SECTION 9.10. No Bankruptcy Petition Against
the Company . . . . . . . . . . . 76
SECTION 9.11. No Recourse Against Stockhold-
ers, Officers or Directors . . . 76
SECTION 9.12. Characterization of the Transac-
tions Contemplated by the Agree-
ment . . . . . . . . . . . . . . 76
SECTION 9.13. Company Certificate . . . . . . . 77
EXHIBITS
EXHIBIT A Form of Contract
EXHIBIT B Credit and Collection Policies and Practices
EXHIBIT C List of Lock-Box Banks
EXHIBIT D Form of Lock-Box Agreement
EXHIBIT E Form of Investor Report
EXHIBIT F Transfer Certificate
EXHIBIT G Form of Weekly Report
EXHIBIT H List of Actions and Suits
EXHIBIT I Location of Records
EXHIBIT J List of Subsidiaries, Divisions and Tradenames
EXHIBIT K-1 Form of Designated Subsidiary's Counsel Opin-
ion
EXHIBIT K-2 Form of LADD's and Transferor's Counsel Opin-
ion
EXHIBIT L Responsible Officer's Certificate
EXHIBIT M Form of Company Certificate
EXHIBIT N Transferor's Fiscal Month Ending Dates
EXHIBIT O Form of Agreed Upon Procedures Report
iii
TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (this
"Agreement"), dated as of March 30, 1995, between LADD
FUNDING CORP., a Delaware corporation, as transferor (in
such capacity, the "Transferor"), LADD FURNITURE, INC., a
North Carolina corporation ("LADD"), as collection agent
(in such capacity, the "Collection Agent"), and ENTER-
PRISE FUNDING CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the Transferor may desire to convey,
transfer and assign, from time to time, undivided per-
centage interests in certain accounts receivable, and the
Company may desire to accept such conveyance, transfer
and assignment of such undivided percentage interests,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used
in this Agreement, the following terms shall have the
following meanings:
"Administrative Agent" means NationsBank,
National Association (Carolinas), as administrative
agent.
"Adverse Claim" means a lien, security inter-
est, charge or encumbrance, or other right or claim in,
of or on any Person's assets or properties in favor of
any Person other than the Company.
"Affiliate" of any Person means any Person di-
rectly or indirectly controlling, controlled by, or under
direct or indirect common control with such Person. A
Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management
or policies of the controlled Person, whether through
ownership of voting stock, by contract or otherwise.
"Affiliated Obligor" means any Obligor which is
an Affiliate of another Obligor.
"Aggregate Unpaids" means, at any time, an
amount equal to the sum of (i) the aggregate accrued and
unpaid Discount with respect to all Tranche Periods at
such time, (ii) the Net Investment at such time, and
(iii) all amounts owed (whether due or accrued) hereunder
by Transferor to the Company at such time.
"Arrangement Fee" means the fee payable by the
Transferor to the Administrative Agent pursuant to Sec-
tion 2.7 hereof, the terms of which are set forth in the
Fee Letter.
"Average Collection Period" means at any time a
period of days equal to the product of (i) a fraction the
numerator of which shall be the amount set forth in the
most recent Investor Report as the "Beginning Balance" of
the Receivables and the denominator of which shall be the
Collections as set forth in the most recent Investor
Report and (ii) thirty (30).
"Base Rate" or "BR" means, a rate per annum
equal to the greater of (i) the prime rate of interest
announced by the Liquidity Provider from time to time,
changing when and as said prime rate changes (such rate
not necessarily being the lowest or best rate charged by
the Liquidity Provider) and (ii) the rate equal to the
weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System
arranged by Federal funds brokers, 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 that is a Business Day, the average of the quotations
for such day for such transactions received by the Li-
quidity Provider from three Federal funds brokers of
recognized standing selected by it, plus 2%.
"BR Tranche" means a Tranche as to which Dis-
count is calculated at the Base Rate.
2
"BR Tranche Period" means, with respect to a BR
Tranche, prior to the Termination Date, a period of up to
30 days requested by the Transferor and agreed to by the
Company or the Liquidity Provider, as the case may be,
commencing on a Business Day requested by the Transferor
and agreed to by the Company or the Liquidity Provider,
as the case may be, and after the Termination Date, a
period of one day. If such BR Tranche Period would end
on a day which is not a Business Day, such BR Tranche
Period shall end on the next succeeding Business Day.
"Business Day" means any day excluding Satur-
day, Sunday and any day on which banks in New York, New
York or Charlotte, North Carolina are authorized or re-
quired by law to close, and, when used with respect to
the determination of any Eurodollar Rate or any notice
with respect thereto, any such day which is also a day
for trading by and between banks in United States dollar
deposits in the London interbank market.
"Capitalized Lease" of a Person means any lease
of property by such Person as lessee which would be
capitalized on a balance sheet of such Person prepared in
accordance with generally accepted accounting principles.
"CD Rate" shall mean, with respect to any CD
Tranche Period, a rate which is .75% in excess of a rate
per annum equal to the sum (rounded upward to the nearest
1/100 of 1%) of (A) the rate obtained by dividing (x) the
Certificate of Deposit Rate for such CD Tranche Period by
(y) a percentage equal to 100% minus the stated maximum
rate for all reserve requirements as specified in Regula-
tion D (including without limitation any marginal, emer-
gency, supplemental, special or other reserves) that
would be applicable during such Tranche Period to a
negotiable certificate of deposit in excess of $100,000,
with a maturity approximately equal to such Tranche
Period, of any member bank of the Federal Reserve System
plus (B) the then daily net annual assessment rate (rou-
nded upward, if necessary, to the nearest 1/100 of 1%) as
estimated in good faith using commercially reasonable
means by the Liquidity Provider for determining the
current annual assessment payable by the Liquidity Pro-
vider to the Federal Deposit Insurance Corporation for
insuring such certificates of deposit.
3
"CD Tranche" means a Tranche as to which Dis-
count is calculated at the CD Rate.
"CD Tranche Period" means, with respect to a CD
Tranche, prior to the Termination Date, a period of up to
30 days requested by the Transferor and agreed to by the
Company or the Liquidity Provider, as the case may be,
commencing on a Business Day requested by the Transferor
and agreed to by the Company or the Liquidity Provider,
as the case may be, and after the Termination Date, a
period of one day. If such CD Tranche Period would end
on a day which is not a Business Day, such CD Tranche
Period shall end on the next succeeding Business Day.
"Certificate of Deposit Rate" means, with
respect to any CD Tranche Period, the average of the bid
rates determined in good faith using commercially reason-
able means by the Liquidity Provider to be bid rates per
annum, at approximately 10:00 a.m. (New York City time)
on the Business Day before the first day of the CD
Tranche Period for which such CD Rate is to be applica-
ble, of two or more New York certificate of deposit
dealers of recognized standing selected by the Liquidity
Provider for the purchase in New York from the Liquidity
Provider at face value of certificates of deposit of the
Liquidity Provider in an aggregate amount approximately
comparable to the amount of the CD Tranche to which such
CD Rate is to be applicable and with a maturity approxi-
mately equal to the applicable CD Tranche Period.
"Closing Date" means March 30, 1995.
"Collateral Agent" means NationsBank, National
Association (Carolinas), as collateral agent for any Li-
quidity Provider, any Credit Support Provider, the hold-
ers of Commercial Paper and certain other parties.
"Collection Account" means the account, estab-
lished by the Collateral Agent, for the benefit of the
Company, pursuant to Section 2.12.
"Collection Agent" means at any time the Person
then authorized pursuant to Section 6.1 to service,
administer and collect Receivables.
"Collection Agent Subsidiary" shall mean any
Person that the Collection Agent or one or more of its
4
Subsidiaries (or the Collection Agent and one or more of
its Subsidiaries) controls, directly or indirectly, by
either (i) shares of stock having by the terms thereof
ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether or
not at the time stock of any other class or classes of
such corporation have or might have voting power by
reason of the happening of any contingency) or (ii)
possessing, directly or indirectly, power to direct or
cause the direction of the voting of a majority of secu-
rities or partnership or other ownership interests, by
contract or otherwise.
"Collections" means, with respect to any Re-
ceivable, all cash collections and other cash proceeds of
such Receivable, including, without limitation, all
Finance Charges, if any, and cash proceeds of Related
Security with respect to such Receivable and any Deemed
Collections of such Receivable.
"Commercial Paper" means the promissory notes
of the Company issued by the Company in the commercial
paper market.
"Company Certificate" means the certificate
issued to the Company pursuant to Section 2.2 hereof.
"Concentration Factor" means for any Designated
Obligor 3% of the Outstanding Balance of all Eligible Re-
ceivables; provided, however, that (i) with respect to
any Designated Obligor and its affiliates whose long term
unsecured debt obligations are rated at least "A1" by
Moody's and at least "A+" by Standard & Poor's and with
respect to which rating neither Moody's nor Standard &
Poor's shall have made a public announcement anticipating
a downgrading of such Designated Obligor's long term
unsecured debt obligations to a rating less than the
aforementioned ratings ("A1/A+ Rated Obligors") and (ii)
with respect to the Obligors Montgomery Ward and Company,
Inc., J.C. Penney Company, Inc., Sears, Roebuck and Co.,
and each of their respective Affiliates, the Concentra-
tion Factor shall mean 5% of the Outstanding Balance of
all Eligible Receivables at such time; and provided,
further, that with respect to subclause (ii) hereof, the
Company at its sole discretion may, upon written notice
delivered to the Transferor and the Collection Agent,
5
lower the Concentration Factor applicable thereto, but
not lower than 3%.
"Contract" means an agreement or invoice in
substantially the form of one of the forms set forth in
Exhibit A or otherwise approved by the Company, pursuant
to or under which an Obligor shall be obligated to pay
for merchandise purchased or services rendered.
"CP Rate" means, with respect to any CP Tranche
Period, the rate equivalent to the rate (or if more than
one rate, the weighted average of the rates) at which
Commercial Paper having a term equal to such CP Tranche
Period may be sold by any placement agent or commercial
paper dealer selected by the Company, provided, however,
that if the rate (or rates) as agreed between any such
agent or dealer and the Company is a discount rate, then
the rate (or if more than one rate, the weighted average
of the rates) resulting from the Company's converting
such discount rate (or rates) to an interest-bearing
equivalent rate per annum.
"CP Tranche" means a Tranche as to which Dis-
count is calculated at a CP Rate.
"CP Tranche Period" means, with respect to a CP
Tranche, a period of days not to exceed 180 days commenc-
ing on a Business Day requested by the Transferor and
agreed to by the Company pursuant to Section 2.3. If
such CP Tranche Period would end on a day which is not a
Business Day, such CP Tranche Period shall end on the
next succeeding Business Day.
"Credit and Collection Policy" shall mean
LADD's and the Designated Subsidiaries' credit and col-
lection policy or policies and practices, relating to
Contracts and Receivables existing on the date hereof and
referred to in Exhibit B attached hereto, as modified,
amended or supplemented from time to time in compliance
with Section 5.2(c).
"Credit Support Agreement" means the agreement
between the Company and the Credit Support Provider
evidencing the obligation of the Credit Support Provider
to provide credit support to the Company in connection
with the issuance by the Company of Commercial Paper.
6
"Credit Support Provider" means the Person or
Persons who will provide credit support to the Company in
connection with the issuance by the Company of Commercial
Paper.
"Dealer Fee" means the fee payable by the
Transferor to the Collateral Agent, pursuant to Section
2.4 hereof, the terms of which are set forth in the Fee
Letter.
"Debt Service Coverage Ratio" shall mean, for
any period, the ratio of (i) EBIT for such period to (ii)
the sum of (A) Interest Expense for such period plus (B)
scheduled maturities of long term debt for such period
(other than scheduled payments of principal under the
Term Loan and payments of principal made with respect to
the term loan under the Former Credit Agreement).
"Deemed Collections" means any Collections on
any Receivable deemed to have been received pursuant to
Section 2.9(a) or (b).
"Defaulted Receivable" means a Receivable: (i)
as to which any payment, or part thereof, remains unpaid
for 91 days or more from the original due date for such
Receivable; (ii) as to which an Event of Bankruptcy has
occurred with respect to the Obligor thereof; (iii) if
the Transferor or an Affiliate is the Collection Agent,
which has been identified by the Collection Agent as
uncollectible; or (iv) which, consistent with the Credit
and Collection Policy, should be written off as uncol-
lectible.
"Delinquency Ratio" means, the ratio (expressed
as a percentage) computed as of the last day of each
Fiscal Month by dividing (i) the sum of the aggregate
Outstanding Balance of all outstanding Delinquent Receiv-
ables plus the aggregate amount of Receivables designated
as "disputed" or a "deduction" on the Collection Agent's
books and records, by (ii) the aggregate Outstanding Bal-
ance of all Receivables as of such date less Defaulted
Receivables as of such date.
"Delinquent Receivable" means a Receivable:
(i) as to which any payment, or part thereof, remains
unpaid for more than 30 days from the original due date
7
for such Receivable and (ii) which is not a Defaulted
Receivable.
"Designated Obligor" means, at any time, each
Obligor; provided, however, that any Obligor shall cease
to be a Designated Obligor upon notice from the Company
to the Transferor and the Collection Agent, delivered at
any time in good faith and based upon reasonable criteria
relating to such Obligor's financial performance or
financial condition.
"Designated Subsidiaries Receivables Purchase
Agreement" means the Receivables Purchase Agreement,
dated as of March 30, 1995, among LADD and the Designated
Subsidiaries, as the same may be amended, supplemented or
otherwise modified.
"Designated Subsidiary" means each of Clayton-
Marcus Company, Inc., a North Carolina corporation,
Barclay Furniture Co., a Mississippi corporation, and
Pilliod Furniture, Inc., a North Carolina corporation,
and such other wholly-owned subsidiaries of LADD as (i)
become parties to the Designated Subsidiaries Receivables
Purchase Agreement and (ii) are consented to in writing
by the Company to be "Designated Subsidiaries" hereunder.
"Dilution Ratio" means, the ratio (expressed as
a percentage) computed as of the last day of each Fiscal
Month by dividing (i) the aggregate amount of credits,
rebates, discounts, disputes, warranty claims, repos-
sessed or returned goods, charge back allowances, other
dilution factors, and any other billing or other adjust-
ment by the Transferor or the Collection Agent, provided
to Obligors in respect of Receivables during the pre-
ceding three Fiscal Months (including such Fiscal Month)
by (ii) the aggregate Outstanding Balance of all Receiv-
ables which arose during such three Fiscal Months.
"Dilution Reserve" means, at any time, an
amount equal to the product of (i) 1.5, (ii) the highest
Dilution Ratio as of the last day on any of the preceding
twelve (12) months and (iii) the sum of the Net Invest-
ment, the Loss Reserve, the Discount Reserve and the
Servicing Fee Reserve, all at such time.
"Discount" means, with respect to any Tranche
Period:
8
(TR x TNI x AD )
360
Where:
TR = the Tranche Rate applicable to such Tranche
Period.
TNI = the portion of the Net Investment allocated to
such Tranche Period.
AD = the actual number of days during such Tranche
Period.
provided, however, that no provision of this Agreement
shall require the payment or permit the collection of
Discount in excess of the maximum permitted by applicable
law; and provided, further, that Discount shall not be
considered paid by any distribution if at any time such
distribution is rescinded or must be returned for any
reason.
"Discount Reserve" means, at any time, an
amount equal to:
TD + LY
Where:
TD = the sum of the unpaid Discount for all Tranche
Periods.
LY = the Liquidation Yield
"Early Collection Fee" means, for any Tranche
Period (such Tranche Period to be determined without
regard to the last sentence in Section 2.3(a)) during
which the portion of the Net Investment that was allocat-
ed to such Tranche Period is reduced, the excess, if any,
of (i) the additional Discount that would have accrued
during such Tranche Period if such reductions had not
occurred, minus (ii) the income, if any, received by the
Company from investing the proceeds of such reductions.
"EBIT" shall mean, for any period, for the
Collection Agent and the Collection Agent Subsidiaries on
9
a consolidated basis operating income computed in accor-
dance with GAAP; that is, the difference between (i) net
sales minus (ii) the sum of (A) the total costs of sales,
(B) selling, general and administrative expenses and (C)
all other costs or charges attributable to operating
activities of the Collection Agent and the Collection
Agent Subsidiaries.
"Effective Date" shall mean the Business Day,
which day shall not be earlier than April 10, 1995, on
which all the conditions precedent set forth in Section
4.1 hereof shall be satisfied.
"Eligible Investments" shall mean (a) negotia-
ble instruments or securities represented by instruments
in bearer, registered or book-entry form which evidence
(i) obligations fully guaranteed by the United States of
America; (ii) time deposits in, or bankers acceptances
issued by, any depositary institution or trust company
incorporated under the laws of the United States of
America or any state thereof and subject to supervision
and examination by Federal or state banking or depositary
institution authorities; provided, however, that at the
time of investment or contractual commitment to invest
therein, the certificates of deposit or short-term depos-
its, if any, or long-term unsecured debt obligations
(other than such obligation whose rating is based on
collateral or on the credit of a Person other than such
institution or trust company) of such depositary institu-
tion or trust company shall have a credit rating from
Moody's and S&P of at least "P-1" and "A-1", respective-
ly, in the case of the certificates of deposit or short-
term deposits, or a rating not lower than one of the two
highest investment categories granted by Moody's and by
S&P; (iii) certificates of deposit having, at the time of
investment or contractual commitment to invest therein, a
rating from Moody's and S&P of at least "P-1" and "A-1",
respectively; (iv) investments in money market funds
rated in the highest investment category or otherwise
approved in writing by the applicable rating agencies,
(b) demand deposits in any depositary institution or
trust company referred to in (a)(ii) above, (c) commer-
cial paper (having original or remaining maturities of no
more than 30 days) having, at the time of investment or
contractual commitment to invest therein, a credit rating
from Moody's and S&P of at least "P-1" and "A-1", respec-
tively, (d) Eurodollar time deposits having a credit
10
rating from Moody's and S&P of at least "P-1" and "A-1",
respectively, and (e) repurchase agreements involving any
of the Eligible Investments described in clauses (a)(i),
(a)(iii) and (d) hereof so long as the other party to the
repurchase agreement has at the time of investment there-
in, a rating from Moody's and S&P of at least "P-1" and
"A-1", respectively.
"Eligible Receivable" means, at any time, any
Receivable:
(i) which either (x) has been
originated by a Designated Obligor and sold by
such Designated Subsidiary to LADD and sold by
LADD to the Transferor or (y) originated by the
LADD and sold to the Transferor and, in either
case to which the Transferor has good title
thereto, free and clear of all Adverse Claims;
(ii) the Obligor of which is a
United States resident, is a Designated Obligor
at the time of the initial creation of an in-
terest therein hereunder, is not an Affiliate
of any of the parties hereto, and is not a gov-
ernment or a governmental subdivision or agen-
cy; provided, however, that Receivables with an
aggregate Outstanding Balance not greater than
4% of the aggregate Outstanding Balance of all
Receivables may be originated by Obligors which
are Canadian residents;
(iii) which is not a Defaulted
Receivable at the time of the initial creation
of an interest of the Company therein;
(iv) which is not a Delinquent
Receivable at the time of the initial creation
of an interest of the Company therein (other
than regarding Receivables transferred on the
date of the initial Incremental Transfer here-
under);
(v) which, according to the
Contract related thereto, is required to be
paid in full within 180 days of the original
billing date therefor;
11
(vi) which is an "eligible as-
set" as defined in Rule 3a-7 under the Invest-
ment Company Act of 1940, as amended;
(vii) a purchase of which with
the proceeds of Commercial Paper would consti-
tute a "current transaction" within the meaning
of Section 3(a)(3) of the Securities Act of
1933, as amended;
(viii) which is an "account" with-
in the meaning of Article 9 of the UCC of all
applicable jurisdictions;
(ix) which is denominated and
payable only in United States dollars in the
United States;
(x) which arises under a Con-
tract that, together with the Receivable relat-
ed thereto, is in full force and effect and
constitutes the legal, valid and binding obli-
gation of the related Obligor enforceable
against such Obligor in accordance with its
terms and is not subject to any offset, coun-
terclaim or other defense at such time;
(xi) 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 truth in lending, fair credit bill-
ing, fair credit reporting, equal credit oppor-
tunity, fair debt collection practices and
privacy) and with respect to which no part of
the Contract related thereto is in violation of
any such law, rule or regulation in any materi-
al respect;
(xii) which (A) satisfies, in all
material respects, all applicable requirements
of the applicable Credit and Collection Policy,
and (B) is assignable without the consent of,
or notice to, the Obligor thereunder;
12
(xiii) which was generated in the
ordinary course of LADD's or a Designated Subs-
idiary's business; and
(xiv) the Obligor of which has
been directed to make all payments to a speci-
fied account of the Collection Agent with re-
spect to which there shall be a Lock-Box Agree-
ment in effect.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and
the regulations promulgated thereunder.
"Estimated Maturity Period" means, at any time,
the period, rounded to the nearest whole number of days,
equal to the weighted average days until due of the
Receivables as calculated by the Collection Agent in good
faith and set forth in the most recent Investor Report,
such calculation to be based on the assumptions that (a)
each Receivable within a particular aging category, (as
set forth in the Investor Report) will be paid on the
last day of such aging category and (b) the last day of
the last such aging category coincides with the last date
on which any Outstanding Balance of any Receivables would
be written off as uncollectible or charged against any
applicable reserve or similar account in accordance with
the requirements of the Credit and Collection Policy as
applied by the Collection Agent and the Transferor's
normal accounting practices applied on a basis consistent
with those reflected in the Transferor's financial state-
ments, provided, however, that if the Company shall dis-
agree with any such calculation on the basis that an
error in the calculation exists, the Company may recalcu-
late the Estimated Maturity Period in accordance with the
foregoing and based on reasonable assumptions based on
fact, and such recalculation, in the absence of manifest
error, shall be conclusive.
"Eurodollar Rate" means, with respect to any
Eurodollar Tranche Period, a rate which is .625% in
excess of a rate per annum equal to the sum (rounded
upwards, if necessary, to the next higher 1/100 of 1%) of
(A) the rate obtained by dividing (i) the applicable
LIBOR Rate by (ii) a percentage equal to 100% minus the
reserve percentage used for determining the maximum re-
serve requirement as specified in Regulation D (includ-
13
ing, without limitation, any marginal, emergency, supple-
mental, special or other reserves) that is applicable to
the Liquidity Provider during such Eurodollar Tranche
Period in respect of eurocurrency or eurodollar funding,
lending or liabilities (or, if more than one percentage
shall be so applicable, the daily average of such per-
centage for those days in such Eurodollar Tranche Period
during which any such percentage shall be applicable)
plus (B) the then daily net annual assessment rate (roun-
ded upwards, if necessary, to the nearest 1/100 of 1%) as
estimated by the Liquidity Provider for determining the
current annual assessment payable by the Liquidity Pro-
vider to the Federal Deposit Insurance Corporation in
respect of eurocurrency or eurodollar funding, lending or
liabilities.
"Eurodollar Tranche" means a Tranche as to
which Discount is calculated at the Eurodollar Rate.
"Eurodollar Tranche Period" means, with respect
to a Eurodollar Tranche, prior to the Termination Date, a
period of up to 30 days requested by the Transferor and
agreed to by the Company or the Liquidity Provider, as
the case may be, commencing on a Business Day requested
by the Transferor and agreed to by the Company; provided,
however, that if such Eurodollar Tranche Period would
expire on a day which is not a Business Day, such Euro-
dollar Tranche Period shall expire on the next succeeding
Business Day; provided, further, that if such Eurodollar
Tranche Period would expire on (a) a day which is not a
Business Day but is a day of the month after which no
further Business Day occurs in such month, such Eurodol-
lar Tranche Period shall expire on the next preceding
Business Day or (b) a Business Day for which there is no
numerically corresponding day in the applicable subse-
quent calendar month, such Eurodollar Tranche Period
shall expire on the last Business Day of such month.
"Event of Bankruptcy", with respect to any Per-
son, shall mean (i) that such Person 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 such
Person seeking to adjudicate it as bankrupt or insolvent,
or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composi-
14
tion of it or its debts under any law relating to bank-
ruptcy, insolvency or reorganization or relief of debt-
ors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar
official for it or any substantial part of its property,
that results in the entry of an order which, in the case
of a Person other than the Transferor, remains undismiss-
ed, unbonded or unstayed pending appeal and in effect for
a period of 60 days from the date of entry thereof or
(ii) if such Person is a corporation, such Person or any
Subsidiary shall take any corporate action to authorize
any of the actions set forth in the preceding clause (i).
"Fee Letter" means the letter agreement dated
the date hereof between the Transferor and the Company,
as amended, modified or supplemented from time to time.
"Finance Charges" means, with respect to a
Contract, any finance, interest, late or similar charges
owing by an Obligor pursuant to such Contract.
"Fiscal Month" shall mean each fiscal month of
the Transferor as set forth on Exhibit N hereto.
"Former Credit Agreement" shall mean that cer-
tain Amended and Restated Credit Agreement dated as of
January 15, 1993, among LADD Furniture, Inc., the banks
party thereto, the guarantors party thereto and Chase
Manhattan Bank, N.A., as agent thereunder, as modified,
supplemented and in effect on the date on which all of
the conditions precedent set forth in Section 6 of the
Amended and Restated Credit Agreement dated as of October
19, 1994, between LADD Furniture, Inc. and NationsBank of
North Carolina, N.A., as Agent shall have been met and
the Term Loan shall have been made thereunder.
"GAAP" shall mean generally accepted accounting
principles applied on a basis consistent with those which
are to be used in making the calculations for purposes of
determining compliance with the terms of this Agreement.
"Guaranty" of a Person means any agreement by
which such Person assumes, guarantees, endorses, contin-
gently agrees to purchase or provide funds for the pay-
ment of, or otherwise becomes liable upon, the obligation
of any other Person, or agrees to maintain the net worth
15
or working capital or other financial condition of any
other Person or otherwise assures any other creditor of
such other Person against loss, including, without limi-
tation, any comfort letter, operating agreement or take-
or-pay contract and shall include, without limitation,
the contingent liability of such Person in connection
with any application for a letter of credit.
"Incremental Transfer" means a Transfer which
is made pursuant to Section 2.2(a).
"Indebtedness" of a Person means such Person's
(i) obligations for borrowed money, (ii) obligations
representing the deferred purchase price of property
other than accounts payable arising in the ordinary
course of such Person's business on terms customary in
the trade, (iii) obligations, whether or not assumed,
secured by liens or payable out of the proceeds or pro-
duction from property now or hereafter owned or acquired
by such Person, (iv) obligations which are evidenced by
notes, acceptances, or other instruments, (v) Capitalized
Lease obligations and (vi) obligations for which such
Person is obligated pursuant to a Guaranty.
"Indemnified Amounts" has the meaning specified
in Section 8.1.
"Indemnified Parties" has the meaning specified
in Section 8.1.
"Interest Expense" shall mean, for any period,
the sum, for the Collection Agent and the Collection
Agent Subsidiaries on a consolidated basis in accordance
with GAAP, of all interest in respect of Indebtedness.
"Investor Report" means a report, in substan-
tially the form of Exhibit E or in such other form as is
mutually agreed to by the Transferor and the Company,
furnished by the Collection Agent to the Company and the
Administrative Agent pursuant to Section 2.11(b).
"Law" shall mean any law (including common
law), constitution, statute, treaty, regulation, rule,
ordinance, order, injunction, writ, decree or award of
any Official Body.
16
"LIBOR Rate" shall mean, with respect to any
Eurodollar Tranche Period, the rate at which deposits in
dollars are offered to the Liquidity Provider in the
London interbank market at approximately 11:00 a.m.
(London time) two Business Days before the first day of
such Eurodollar Tranche Period in an amount approximately
equal to the Eurodollar Tranche to which the Eurodollar
Rate is to apply and for a period of time approximately
equal to the applicable Eurodollar Tranche Period.
"Liquidation Yield" means, at any time, an
amount equal to:
(RVF x LBR x NI) x (EM x 1.5)
360
Where:
RVF = the Rate Variance Factor.
LBR = the Base Rate which is applicable to the liqui-
dation period of the Net Investment at such
time.
NI = the Net Investment.
EM = the Estimated Maturity Period of the Receiv-
ables.
"Liquidity Provider" means the Person or Per-
sons who will provide liquidity support to the Company in
connection with the issuance by the Company of Commercial
Paper.
"Liquidity Provider Agreement" means the agree-
ment between the Company and the Liquidity Provider
evidencing the obligation of the Liquidity Provider to
provide liquidity support to the Company in connection
with the issuance by the Company of Commercial Paper.
"Lock-Box Account" means an account maintained
by the Collection Agent, LADD or any Designated Subsid-
iary at a Lock-Box Bank for the purpose of receiving
Collections from Receivables.
17
"Lock-Box Agreement" means an agreement among
the Collateral Agent, the Collection Agent and a Lock-Box
Bank in substantially the form of Exhibit D hereto.
"Lock-Box Bank" means each of the banks set
forth in Exhibit C hereto and such banks as may be added
thereto or deleted therefrom pursuant to Section 2.8.
"Loss Percentage" means on any day the greater
of (i) five (5) times the highest Loss-to-Liquidation
Ratio as of the last day of the twelve (12) months pre-
ceding the then current month, (ii) three (3) times the
highest Concentration Factor of all Designated Obligors
(exclusive of A1/A+ Rated Obligors) and (iii) ten (10)
percent.
"Loss Reserve" means, on any day, an amount
equal to:
LP x (NI + DLR + DR + SFR)
Where:
LP = the Loss Percentage at the close of business of
the Collection Agent on such day.
NI = the Net Investment at the close of business of
the Collection Agent on such day.
DLR = the Dilution Reserve at the close of business
of the Collection Agent on such day.
DR = the Discount Reserve at the close of business
of the Collection Agent on such day.
SFR = the Servicing Fee Reserve at the close of busi-
ness of the Collection Agent on such day.
Notwithstanding the foregoing, the Loss Reserve shall at
all times be at least equal to $3,000,000.
"Loss-to-Liquidation Ratio" means, for any
period of determination, the ratio (expressed as a per-
centage) computed as of the last day of such period by
dividing (i) the aggregate Outstanding Balance of all
Receivables which became Defaulted Receivables during
such period, by (ii) the aggregate amount of Collections
18
received by the Collection Agent during such period less
Deemed Collections for the period.
"Material Subsidiary" means, as at any date of
determination, any Subsidiary whose net sales for the
rolling four quarter period ending on the Quarterly Date
falling on or immediately preceding such date of deter-
mination exceed $20,000,000 or whose assets exceed $15,0-
00,000 as at such date.
"Maximum Net Investment" means $40,000,000.
"Maximum Percentage Factor" means 95%.
"Moody's" means Moody's Investors Service, Inc.
"Net Investment" means the sum of the Transfer
Prices for each Incremental Transfer less the aggregate
amount of Collections received and applied by the Company
to reduce such Net Investment pursuant to Section 2.6 or
Section 2.9; provided that the Net Investment shall be
restored in the amount of any Collections so received and
applied if at any time the distribution of such Collec-
tions is rescinded or must otherwise be returned for any
reason.
"Net Receivables Balance" means at any time the
Outstanding Balance of the Eligible Receivables at such
time reduced by the sum of (without duplication of any
particular Eligible Receivable) (i) the aggregate amount
by which the Outstanding Balance of all Eligible Receiv-
ables of each Designated Obligor exceeds the Concentra-
tion Factor for such Designated Obligor, plus (ii) the
aggregate Outstanding Balance of all Eligible Receivables
which are Defaulted Receivables, plus (iii) the aggregate
Outstanding Balance of all Eligible Receivables of each
Obligor with respect to which either 10% or more of such
Obligor's Receivables are Defaulted Receivables or 50% or
more of such Obligor's Receivables are Delinquent Receiv-
ables plus (iv) an amount equal to the excess (if any) of
(a) the Outstanding Balance of Eligible Receivables which
are required to be paid in full within more than 31 days
of the original billing date therefor over (b) 20% of the
aggregate Outstanding Balance of the Receivables.
19
"Obligor" means a Person obligated to make
payments for the provision of goods and services pursuant
to a Contract.
"Official Body" shall mean any government or
political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality
of either, or any court, tribunal, grand jury or arbitra-
tor, in each case whether foreign or domestic.
"Other Transferor" means any Person other than
the Transferor that has entered into a receivables pur-
chase agreement or transfer and administration agreement
with the Company.
"Outstanding Balance" of any Receivable at any
time means the then outstanding principal amount thereof
including any accrued and outstanding Finance Charges
related thereto.
"Percentage Factor" means the percentage com-
puted at any time of determination as follows:
NI + LR + DLR + DR + SFR
NRB
Where:
NI = the Net Investment at the time of such computa-
tion.
LR = the Loss Reserve at the time of such computa-
tion.
DLR = the Dilution Reserve at the time of such compu-
tation.
DR = the Discount Reserve at the time of such compu-
tation.
SFR = the Servicing Fee Reserve at the time of such
computation.
NRB = the Net Receivables Balance at the time of such
computation.
Notwithstanding the foregoing computation, the
Percentage Factor shall not exceed one hundred percent
20
(100%). The Percentage Factor shall be calculated by the
Collection Agent on the day of the initial Incremental
Transfer hereunder. Thereafter, until the Termination
Date, the Collection Agent shall daily recompute the Per-
centage Factor and report such recomputations to the
Company monthly in the Investor Report or as requested by
the Company. The Percentage Factor shall remain constant
from the time as of which any such computation or recomp-
utation is made until the time as of which the next such
recomputation shall be made, notwithstanding any addi-
tional Receivables arising, any Incremental Transfer made
pursuant to Section 2.2(a) or any reinvestment Transfer
made pursuant to Section 2.2(b) and 2.5 during any period
between computations of the Percentage Factor. The
Percentage Factor, as calculated at the close of business
on the Termination Date, shall remain constant at all
times thereafter until such time as the Company shall
have received the Aggregate Unpaids, at which time the
Percentage Factor shall be recomputed in accordance with
Section 2.6.
"Person" means any corporation, natural person,
firm, joint venture, partnership, trust, unincorporated
organization, enterprise, government or any department or
agency of any government.
"Potential Termination Event" means an event
which but for the lapse of time or the giving of notice,
or both, would constitute a Termination Event.
"Proceeds" means "proceeds" as defined in
Section 9-306(1) of the UCC.
"Program Fee" means the fee payable by the
Transferor to the Company pursuant to Section 2.7 hereof,
the terms of which are set forth in the Fee Letter.
"Purchase Agreement" means the Receivables
Purchase Agreement, dated as of March 30, 1995, between
the Transferor and LADD, as the same may be amended, sup-
plemented or otherwise modified.
"Purchased Interest" means the interest in the
Receivables acquired by the Liquidity Provider through
purchase pursuant to the terms of the Liquidity Provider
Agreement.
21
"Quarterly Dates" shall mean the Saturday on or
nearest to the last calendar day of each of March, June,
September and December in each year and the first such
Quarterly Date shall be Saturday, April 1, 1995.
"Quarterly Period" shall mean the quarterly
fiscal period of the Collection Agent ending on each
Quarterly Date.
"Rate Variance Factor" means the number, com-
puted from time to time in good faith by the Company,
that reflects the largest potential variance (from mini-
mum to maximum) in selected interest rates over a period
of time selected by the Company from time to time, set
forth in a written notice by the Company to the Transfer-
or and the Collection Agent.
"Receivable" means the indebtedness originally
owed to LADD or a Designated Subsidiary by any Obligor
and sold to the Transferor pursuant to the Purchase
Agreement (without giving effect to any purchase here-
under by the Company at any time) under a Contract wheth-
er constituting an account, chattel paper, instrument or
general intangible, arising in connection with the sale
of merchandise or services by LADD or a Designated Sub-
sidiary and thereafter sold to the Transferor by LADD,
and includes the right to payment of any Finance Charges
and other obligations of such Obligor with respect there-
to. Notwithstanding the foregoing, once a Receivable has
been deemed collected pursuant to Section 2.9 hereof, it
shall no longer constitute a Receivable hereunder.
"Records" means all Contracts and other docu-
ments, books, records and other information (including,
without limitation, computer programs, tapes, discs,
punch cards, data processing software and related proper-
ty and rights) maintained with respect to Receivables and
the related Obligors.
"Related Security" means with respect to any
Receivable:
(i) all of the Transferor's in-
terest, if any, in the merchandise (including
returned merchandise), if any, the sale of
which by LADD or a Designated Subsidiary gave
rise to such Receivable;
22
(ii) all other security inter-
ests or liens and property subject thereto from
time to time, if any, purporting to secure
payment of such Receivable, whether pursuant to
the Contract related to such Receivable or
otherwise, together with all financing state-
ments signed by an Obligor describing any col-
lateral securing such Receivable;
(iii) all guarantees, insurance
or other agreements or arrangements of any kind
from time to time supporting or securing pay-
ment of such Receivable whether pursuant to the
Contract related to such Receivable or other-
wise; and
(iv) all Records.
"Section 8.2 Costs" has the meaning specified
in Section 8.2(d).
"Servicing Fee" shall mean the fee payable by
the Company to the Collection Agent, with respect to a
Tranche, in an amount equal to 0.50% per annum on the
amount of the Net Investment allocated to such Tranche
pursuant to Section 2.3. Such fee shall accrue from the
date of the initial purchase of an ownership interest in
the Receivables to the later of the Termination Date or
the date on which the Net Investment is reduced to zero.
On or prior to the Termination Date such fee shall be
payable only from Collections pursuant to, and subject to
the priority of payments set forth in, Section 2.5.
After the Termination Date such fee shall be payable only
from Collections pursuant to, and subject to the priority
of payments set forth in, Section 2.6.
"Servicing Fee Reserve" means at any time of
determination an amount equal to:
(OBR x SFP) x (30 + (EM x 1.5)
360
Where:
OBR = aggregate Outstanding Balance of all Receiv-
ables at the time of such computation.
SFP = Servicing Fee percentage.
23
EM = Estimated Maturity Period.
"Standard & Poor's" or "S&P" means Standard &
Poor's Ratings Group.
"Subsidiary" of a Person means any corporation
more than 50% of the outstanding voting securities of
which shall at any time be owned or controlled, directly
or indirectly, by such Person or by one or more Subsid-
iaries of such Person or any similar business organiza-
tion which is so owned or controlled.
"Term Loan" shall mean the loan provided for by
Section 2.02 of the Amended and Restated Credit Agreement
dated as of October 19, 1994, between LADD Furniture,
Inc. and NationsBank, National Association (Caroli-
nas)(formerly known as NationsBank of North Carolina,
N.A.), as Agent.
"Termination Date" means the earliest of (i)
that Business Day designated by the Transferor to the
Company as the Termination Date at any time following 60
days' written notice to the Company, (ii) the date of
termination of the commitment of the Liquidity Provider
under the Liquidity Provider Agreement, (iii) the date of
termination of the commitment of the Credit Support
Provider under the Credit Support Agreement, (iv) the day
on which the Company delivers a notice of termination
pursuant to Section 7.2, or (v) March 29, 1996, unless
extended not later than 60 days prior to such date for
any additional period by consent of the Company, the
Transferor and the Collateral Agent.
"Termination Event" means an event described in
Section 7.1.
"Tranche" means a portion of the Aggregate Net
Investment allocated to a Tranche Period pursuant to
Section 2.3.
"Tranche Period" means a CP Tranche Period, a
BR Tranche Period, a CD Tranche Period or a Eurodollar
Tranche Period.
"Tranche Rate" means the CP Rate, the Base
Rate, the CD Rate or the Eurodollar Rate.
24
"Transaction Costs" has the meaning specified
in Section 8.3(a).
"Transfer" means a conveyance, transfer and
assignment by the Transferor to the Company of an undi-
vided percentage ownership interest in Receivables here-
under.
"Transfer Certificate" has the meaning given to
it in Section 2.2(a).
"Transfer Date" means, with respect to each
Transfer, the Business Day on which such Transfer is
made.
"Transfer Price" means with respect to any
Incremental Transfer, the amount paid to the Transferor
by the Company as described in the Transfer Certificate.
"Transferred Interest" means, at any time of
determination, an undivided percentage ownership interest
in (i) each and every then outstanding Receivable, (ii)
all Related Security with respect to each such Receiv-
able, (iii) all Collections with respect thereto, and
(iv) other Proceeds of the foregoing, equal to the Per-
centage Factor at such time, and only at such time (with-
out regard to prior calculations). The Transferred
Interest in each Receivable, together with Related Secu-
rity and Collections with respect thereto, shall at all
times be equal to the Transferred Interest in each other
Receivable, together with Related Security and Collec-
tions. To the extent that the Transferred Interest shall
decrease as a result of a recalculation of the Percentage
Factor, the Company shall be considered to have recon-
veyed to the Transferor an undivided percentage ownership
interest in each Receivable, together with Related Secu-
rity and Collections, in an amount equal to such decrease
such that in each case the Transferred Interest in each
Receivable shall be equal to the Transferred Interest in
each other Receivable.
"UCC" means, with respect to any state, the
Uniform Commercial Code as from time to time in effect in
such state.
"Unused Facility Fee" means the fee payable by
the Transferor to the Company pursuant to Section 2.7
25
hereof, the terms of which are set forth in the Fee
Letter.
"Weekly Report" means a report, in substan-
tially the form of Exhibit G or in such other form as is
mutually agreed to by the Transferor and the Company,
furnished by the Collection Agent to the Company and the
Administrative Agent pursuant to Section 2.11(a).
SECTION 1.2. Other Terms. All accounting
terms not specifically defined herein shall be construed
in accordance with generally accepted accounting princi-
ples. All terms used in Article 9 of the UCC in the
State of North Carolina, and not specifically defined
herein, are used herein as defined in such Article 9.
SECTION 1.3. Computation of Time Periods.
Unless otherwise stated in this Agreement, in the compu-
tation of a period of time from a specified date to a
later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to
but excluding."
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1. Facility. Upon the terms and
subject to the conditions herein set forth the Transferor
may, at its option, convey, transfer and assign to the
Company, and the Company shall accept such conveyance,
transfer and assignment from the Transferor, without
recourse except as provided herein, undivided percentage
ownership interests in the Receivables, together with
Related Security and Collections with respect thereto,
from time to time.
SECTION 2.2. Transfers; Company Certificate;
Eligible Receivables. (a) Incremental Transfers. On and
after the Effective Date, upon the terms and subject to
the conditions herein set forth the Transferor may, at
its option, convey, transfer and assign to the Company,
and the Company shall accept such conveyance, transfer
and assignment from the Transferor, without recourse
except as provided herein, undivided percentage ownership
interests in the Receivables, together with Related
Security and Collections with respect thereto (each, an
"Incremental Transfer") from time to time for an aggre-
gate Transfer Price not to exceed the Maximum Net Invest-
ment; provided that the Company shall not accept any such
transfer if it is unable to obtain funds therefor in the
commercial paper market or under the Liquidity Provider
Agreement. The Transferor shall by notice given by
telefax offer to convey, transfer and assign to the
Company undivided percentage ownership interests in the
Receivables at least three (3) Business Days prior to the
proposed date of transfer. Each such notice shall speci-
fy the desired Transfer Price (which shall be at least
$1,000,000 and integral multiples of $100,000 in excess
thereof) and the desired date of such Incremental Trans-
fer, together with the desired Tranche Period (or range)
related thereto as required by Section 2.3. The Company
shall, by notice given by telephone or telefax, accept
such offer to convey, transfer and assign undivided
percentage ownership interests. Each notice of proposed
Transfer shall be irrevocable and binding on the Trans-
feror and the Transferor shall indemnify the Company
against any loss or expense incurred by the Company,
either directly or through the Liquidity Provider Agree-
ment as a result of any failure by the Transferor to
27
complete such Incremental Transfer including, without
limitation, any loss (including loss of anticipated
profits) or expense incurred by the Company, either
directly or pursuant to the Liquidity Provider Agreement,
by reason of the liquidation or reemployment of funds ac-
quired by the Company or the Liquidity Provider (includ-
ing, without limitation, funds obtained by issuing com-
mercial paper or promissory notes or obtaining deposits
as loans from third parties) for the Company to fund such
Incremental Transfer.
On the date of the initial Incremental Trans-
fer, the Company shall deliver written confirmation to
the Transferor of the Transfer Price, the Tranche Period
and the Tranche Rate relating to such Transfer and the
Transferor shall deliver to the Company the Transfer
Certificate in the form of Exhibit F hereto (the "Trans-
fer Certificate"). The Company shall indicate the amount
of the initial Incremental Transfer together with the
date thereof on the grid attached to the Transfer Certif-
icate. On the date of each subsequent Incremental Trans-
fer, the Company shall send written confirmation to the
Transferor of the Transfer Price, the Tranche Period, the
Transfer Date and the Tranche Rate applicable to such
Incremental Transfer. The Company shall indicate the
amount of the Incremental Transfer together with the date
thereof as well as any decrease in the Net Investment on
the grid attached to the Transfer Certificate. The
Transfer Certificate shall evidence the Incremental
Transfers. Following each Incremental Transfer, the
Company shall deposit to the Transferor's account at the
location indicated in Section 9.3 hereof, or as provided
by the Transferor from time to time by written notice, in
immediately available funds, an amount equal to the
Transfer Price for such Incremental Transfer.
(b) Reinvestment Transfers. On each
Business Day occurring after the initial Incremental
Transfer hereunder and prior to the Termination Date, the
Transferor hereby agrees to convey, transfer and assign
to the Company, and in consideration of Transferor's
agreement to maintain at all times prior to the Termina-
tion Date a Net Receivables Balance in an amount at least
sufficient to maintain the Percentage Factor at an amount
not greater than the Maximum Percentage Factor, the
Company hereby agrees to purchase from the Transferor
undivided percentage ownership interests in each and
28
every Receivable, together with Related Security and
Collections with respect thereto, to the extent that
Collections are available for such Transfer in accordance
with Section 2.5, such that after giving effect to such
Transfer, (i) the amount of the Company's Net Investment
at the close of business on such Business Day shall be
equal to the amount of the Company's Net Investment at
the close of business on the Business Day immediately
preceding such Business Day plus the Transfer Price of
any Incremental Transfer made on such day, if any, and
(ii) the Company's Transferred Interest in each Receiv-
able, together with Related Security and Collections with
respect thereto, shall be equal to its Transferred Inter-
est in each other Receivable, together with Related
Security and Collections with respect thereto.
(c) All Transfers. Each Transfer shall
constitute a purchase of undivided percentage ownership
interests in each and every Receivable, together with
Related Security and Collections with respect thereto,
then existing, as well as in each and every Receivable,
together with Related Security and Collections with
respect thereto, which arises at any time after the date
of such Transfer. The Company's aggregate undivided
percentage ownership interest in the Receivables, togeth-
er with Related Security and Collections with respect
thereto, shall equal the Percentage Factor in effect from
time to time.
(d) Company Certificate. The Transferor
shall issue to the Company the Company Certificate, in
the form of Exhibit M, on or prior to the date hereof.
(e) Percentage Factor. The Percentage
Factor shall be initially computed as of the opening of
business of the Collection Agent on the date of the
initial Incremental Transfer hereunder. Thereafter until
the Termination Date, the Percentage Factor shall be
automatically recomputed as of the close of business of
the Collection Agent on each day (other than a day after
the Termination Date). The Percentage Factor shall
remain constant from the time as of which any such compu-
tation or recomputation is made until the time as of
which the next such recomputation, if any, shall be made.
The Percentage Factor, as computed as of the day imme-
diately preceding the Termination Date, shall remain
constant at all times on and after such Termination Date
29
until the date on which the Net Investment shall become
zero and the Aggregate Unpaids shall have been paid in
full.
(f) Assignment. The Transferor hereby
irrevocably assigns to the Company all of its right,
title and interest in, to and under the Purchase Agree-
ment and the Designated Subsidiaries Receivables Purchase
Agreement.
SECTION 2.3. Selection of Tranche Periods and
Tranche Rates. (a) At all times hereafter, but prior to
the occurrence of a Termination Event, the Transferor
shall, subject to the limitations described below, re-
quest Tranche Periods and allocate a portion of the Net
Investment to each selected Tranche Period, so that the
aggregate amounts allocated to outstanding Tranche Peri-
ods at all times shall equal the Net Investment. The
Transferor shall give the Company irrevocable notice by
telephone of the new requested Tranche Period and whether
the requested Tranche Rate applicable thereto shall be
the CP Rate, the BR Rate, the CD Rate or the Eurodollar
Rate (a "Tranche Selection Notice") at least (i) three
(3) Business Days prior to the expiration of any then
existing Tranche Period if the Tranche Rate to be appli-
cable to the new requested Tranche Period shall be the
Eurodollar Rate, (ii) two (2) Business Days prior to the
expiration of any then existing Tranche Period if the
Tranche Rate to be applicable to the new requested
Tranche Period shall be the BR Rate or the CD Rate, and
(iii) one (1) Business Day prior to the expiration of any
then existing Tranche Period if the Tranche Rate to be
applicable to the new requested Tranche Period shall be
the CP Rate; provided, however, that the Company may
select, in its sole discretion, any such new Tranche
Period and Tranche Rate if (i) the Transferor fails to
provide such notice on a timely basis or (ii) the Company
determines, in its sole discretion, that the Tranche Rate
requested by the Transferor is unavailable or for any
reason commercially undesirable or the Company deter-
mines, in its sole discretion, that the Tranche Period
requested by the Transferor is not available. If the
Company determines that the Tranche Period requested by
the Transferor is not available, the Company shall, to
the extent practicable, consult with the Transferor as to
the desired Tranche Period. If, as a result of a lack of
liquidity in respect of the Commercial Paper or other-
30
wise, the Liquidity Provider acquires a Purchased Inter-
est with respect to the Receivables pursuant to the terms
of the Liquidity Provider Agreement, the Liquidity Pro-
vider may exercise the right of selection granted to the
Company hereby, and the portion of the Net Investment
allocated to each selected Tranche Period shall equal, to
the extent practicable, the portion of the Net Investment
allocated to the Tranche Period that immediately preceded
such new Tranche Period. The Company confirms that it is
its intention to allocate all or substantially all of the
Net Investment to one or more CP Tranche Periods; provid-
ed that the Company may determine from time to time, in
its sole discretion, that funding such Net Investment by
means of one or more CP Tranche Periods is not commer-
cially desirable. In the case of any Tranche Period out-
standing upon the occurrence of a Termination Event, such
Tranche Period shall end on the date of such occurrence.
(b) At all times on and after the occur-
rence of a Termination Event, the Company or the Liquidi-
ty Provider, as applicable, shall select all Tranche
Periods and Tranche Rates applicable thereto.
SECTION 2.4. Fees and Other Costs and Expens-
es. Notwithstanding the limitation on recourse under
Section 2.1, the Transferor shall pay, as and when due in
accordance with this Agreement, all fees hereunder, all
amounts payable pursuant to Article VIII hereof, if any,
and the Servicing Fee. The Transferor shall pay to the
Collateral Agent on each maturity of Commercial Paper an
amount equal to the discount accrued on the Company's
Commercial Paper notes to the extent such notes were
issued in order to fund the Transferred Interest in an
amount in excess of the Transfer Price of an Incremental
Transfer. The Transferor shall pay to the Collateral
Agent, on each day on which Commercial Paper is issued by
the Company, the Dealer Fee as set forth in the Fee
Letter. Discount shall accrue with respect to each
Tranche on each day occurring during the Tranche Period
related thereto. Nothing in this Agreement shall limit
in any way the obligations of the Transferor to pay the
amounts set forth in this Section 2.4.
SECTION 2.5. Non-Liquidation Settlement and
Reinvestment Procedures. On each day after the date of
any Incremental Transfer but prior to the Termination
Date and provided that no Potential Termination Event
31
shall have occurred and be continuing, the Collection
Agent shall out of the Percentage Factor of Collections
received on or prior to such day and not previously
applied or accounted for: (i) set aside and hold in
trust for the Company (or deposit into the Collection
Account if so required pursuant to Section 2.12) an
amount equal to all Discount, the Program Fee, the Unused
Fee and the Servicing Fee accrued through such day and
not so previously set aside or paid and (ii) apply the
balance of such Percentage Factor of Collections remain-
ing after application of Collections as provided in
clause (i) of this Section 2.5 to the Transferor, for the
benefit of the Company for the purchase of additional
undivided percentage interests in each Receivable pursu-
ant to Section 2.2(b). On the last day of each Tranche
Period, from the amounts set aside as described in clause
(i) of the first sentence of this Section 2.5, the Col-
lection Agent shall deposit to the Company's account, an
amount equal to the accrued and unpaid Discount for such
Tranche Period and shall deposit to its account an amount
equal to the accrued and unpaid Servicing Fee for such
Tranche Period. As provided in Section 6.2(b), the
Collection Agent shall remit to the Transferor, as soon
as practicable after receipt, such portion of Collections
not allocated to the Company.
SECTION 2.6. Liquidation Settlement Proce-
dures. If on the Termination Date, the Percentage Factor
is greater than the Maximum Percentage Factor, then the
Transferor shall immediately pay to the Company from
previously received Collections, an amount equal to the
amount such that, when applied in reduction of the Net
Investment, will result in a Percentage Factor less than
or equal to the Maximum Percentage Factor. Such amount
shall be applied by the Company to the reduction of the
Net Investment of Tranche Periods selected by the Compa-
ny. On the Termination Date and on each day thereafter,
and on each day on which a Potential Termination Event
has occurred and is continuing, the Collection Agent
shall set aside and hold in trust for the Company (or
deposit into the Collection Account if so required pursu-
ant to Section 2.12) the Percentage Factor of all Collec-
tions received on such day. On the Termination Date or
the day on which a Potential Termination Event occurs,
the Collection Agent shall deposit to the Company's
account any remaining amounts set aside pursuant to
Section 2.5(i) above. On the last day of each Tranche
32
Period to occur on or after the Termination Date or
during the continuance of a Potential Termination Event,
the Collection Agent shall deposit to the Company's
account, the amounts set aside pursuant to the preceding
sentence, together with any remaining amounts set aside
pursuant to Section 2.5(i) prior to the Termination Date
or the day on which a Potential Termination Event occurs
but not to exceed the sum of (i) the accrued Discount for
such Tranche Period, (ii) the portion of the Net Invest-
ment allocated to such Tranche Period, and (iii) the
aggregate of all other amounts then owed (whether due or
accrued) hereunder by Transferor to the Company. On such
day, the Collection Agent shall deposit to its account,
from the amounts set aside pursuant to the preceding
sentence which remain after payment in full of the afore-
mentioned amounts, the accrued Servicing Fee for such
Tranche Period. If there shall be insufficient funds on
deposit for the Collection Agent to distribute funds in
payment in full of the aforementioned amounts, the Col-
lection Agent shall distribute funds first, in payment of
the accrued Discount, second, in payment of all fees and
expenses payable to the Company hereunder, third, if the
Transferor or an Affiliate thereof is not the Collection
Agent, to the Collection Agent's account, in payment of
the Servicing Fee payable to the Collection Agent,
fourth, in reduction of the Net Investment allocated to
such Tranche Period, fifth, in payment of all other
amounts payable to the Company and sixth, if the Trans-
feror or an Affiliate thereof is the Collection Agent, to
its account as Collection Agent, in payment of the Ser-
vicing Fee payable to the Transferor as Collection Agent.
Following the date on which the Net Investment has been
reduced to zero, all accrued Discount and Servicing Fees
have been paid in full and all other Aggregate Unpaids
have been paid in full, (i) the Collection Agent shall
recompute the Percentage Factor, (ii) the Company shall
be considered to have reconveyed to the Transferor any
interest in the Receivables (including the Transferred
Interest), (iii) the Collection Agent shall pay to Trans-
feror any remaining Collections set aside and held by the
Collection Agent pursuant to the second sentence of this
Section 2.6 and (iv) the Company shall execute and deliv-
er to the Transferor, at the Transferor's expense, such
documents or instruments as are necessary to terminate
the Company's interest in the Receivables. Any such
documents shall be prepared by or on behalf of the Trans-
feror.
33
SECTION 2.7. Fees. Notwithstanding any limi-
tation on recourse contained in this Agreement, the
Transferor shall pay or cause to be paid the following
non-refundable fees:
(a) On the last day of each month (or if
such day is not a Business Day, the next succeeding
Business Day), to the Company, the Program Fee and the
Unused Facility Fee. The Administrative Agent shall
provide prior written notice to the Transferor as to the
amount of such fees.
(b) On the date of execution hereof, to
the Administrative Agent, the Arrangement Fee.
SECTION 2.8. Protection of Ownership Interest
of the Company. (a) The Transferor agrees that from time
to time, at its expense, it will promptly execute and
deliver all instruments and documents and take all ac-
tions as may be necessary or as the Company may reason-
ably request in order to perfect or protect the Trans-
ferred Interest or to enable the Company to exercise or
enforce any of its rights hereunder. Without limiting
the foregoing, the Transferor will, upon the request of
the Company, in order to accurately reflect this purchase
and sale transaction, execute and file such financing or
continuation statements or amendments thereto or assign-
ments thereof (as permitted pursuant to Section 9.6
hereof) as may be requested by the Company and mark its
master data processing records and other documents with a
legend describing the purchase by the Company of the
Transferred Interest and stating "An interest in these
accounts receivable has been conveyed to Enterprise
Funding Corporation pursuant to a Transfer and Adminis-
tration Agreement dated March 30, 1995." The Transferor
shall, upon request of the Company, obtain such addition-
al search reports as the Company shall request. To the
fullest extent permitted by applicable law, the Company
shall be permitted to sign and file continuation state-
ments and amendments thereto and assignments thereof
without the Transferor's signature. Carbon, photographic
or other reproduction of this Agreement or any financing
statement shall be sufficient as a financing statement.
The Transferor shall neither change its name, identity or
corporate structure (within the meaning of Section 9-
402(7) of the UCC as in effect in the State of North
Carolina) nor relocate its chief executive office or any
34
office where Records are kept unless it shall have: (i)
given the Company at least thirty (30) days prior notice
thereof and (ii) prepared at the Transferor's expense and
delivered to the Company all financing statements, in-
struments and other documents necessary to preserve and
protect the Transferred Interest or requested by the
Company in connection with such change or relocation.
Any filings under the UCC or otherwise that are occa-
sioned by such change in name or location shall be made
at the expense of the Transferor.
(b) The Collection Agent shall instruct
all Obligors to cause all Collections to be deposited
directly with a Lock-Box Bank. Any Lock-Box Account
maintained by a Lock-Box Bank pursuant to the related
Lock-Box Agreement shall be under the ownership and
control of the Collateral Agent. The Collateral Agent
shall be permitted to give instructions to the Lock-Box
Banks in the event that (i) a Collection Agent default or
any other Termination Event has occurred hereunder or
(ii) the Debt Service Coverage Ratio shall be less than
1.0 to 1.0 for each rolling four Quarterly Period ending
on any Quarterly Date and in the case of this clause (ii)
five (5) days shall have elapsed after the earlier of the
date on which (A) notice of the occurrence of such condi-
tion shall have been given to the Collection Agent by the
Administrative Agent or (B) the Collection Agent knew or
should have known in the exercise of reasonable care of
the occurrence of such condition. The Collection Agent
shall not add any bank as a Lock-Box Bank to those listed
on Exhibit C unless such bank has entered into a Lock-Box
Agreement. The Collection Agent shall not terminate any
bank as a Lock-Box Bank unless the Administrative Agent
shall have received fifteen (15) days' prior notice of
such termination. If the Transferor or the Collection
Agent receives any Collections or the Transferor is
deemed to receive any Collections pursuant to Section
2.9, the Transferor or the Collection Agent, as applica-
ble, shall immediately, but in any event within two
Business Days of receipt, remit such Collections to a
Lock-Box Account.
SECTION 2.9. Deemed Collections; Application
of Payments. (a) If on any day the Outstanding Balance
of a Receivable is either (x) reduced as a result of any
defective, rejected or returned goods or services, any
cash discount, credit, rebate, allowance or other dilu-
35
tion factor, any billing adjustment or other adjustment,
or (y) reduced or canceled as a result of a setoff or
offset in respect of any claim by any Person (whether
such claim arises out of the same or a related transac-
tion or an unrelated transaction), the Transferor shall
be deemed to have received on such day a collection of
such Receivable in the amount of such reduction or can-
cellation and the Transferor shall pay to the Collection
Agent an amount equal to such reduction or cancellation
which shall be applied by the Collection Agent as a
Collection in accordance with Section 2.5 or 2.6, as
applicable. The Net Investment shall be reduced by the
amount of such payment actually received by the Company.
(b) If on any day any of the representa-
tions or warranties in Article III is no longer true with
respect to a Receivable, the Transferor shall be deemed
to have received on such day a Collection of such Receiv-
able in full and the Transferor shall on such day pay to
the Collection Agent an amount equal to the aggregate
Percentage Factor of the Outstanding Balance of such
Receivable and such amount shall be allocated to the
Company by the Collection Agent and applied by the Col-
lection Agent as a Collection allocable to the Trans-
ferred Interest in accordance with Section 2.5 or 2.6, as
applicable. The Net Investment shall be reduced by the
amount of such payment actually received by the Company.
(c) Any payment by an Obligor in respect
of any indebtedness owed by it to the Transferor shall,
except as otherwise specified by such Obligor or other-
wise required by contract or law and unless otherwise in-
structed by the Company, be applied as a Collection of
any Receivable of such Obligor included in the Trans-
ferred Interest (starting with the oldest such Receiv-
able) to the extent of any amounts then due and payable
thereunder before being applied to any other receivable
or other indebtedness of such Obligor.
SECTION 2.10. Payments and Computations, Etc.
All amounts to be paid or deposited by the Transferor or
the Collection Agent hereunder shall be paid or deposited
in accordance with the terms hereof no later than 11:00
a.m. (New York City time) on the day when due in immedi-
ately available funds; if such amounts are payable to the
Company they shall be paid or deposited in the account
indicated in Section 9.3 hereof, until otherwise notified
36
by the Company. The Transferor shall, to the extent
permitted by law, pay to the Company upon demand, inter-
est on all amounts not paid or deposited when due to the
Company hereunder at a rate equal to 2% per annum plus
the Base Rate. All computations of discount, interest
and all per annum 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.
Any computations of amounts payable by the Transferor
hereunder to the Company, the Liquidity Provider or the
Credit Support Provider shall be binding absent manifest
error.
SECTION 2.11. Reports. (a) On each Wednesday
of each calendar week (or if such day is not a Business
Day, the next succeeding Business Day), the Collection
Agent shall prepare and forward to the Administrative
Agent a Weekly Report certifying as to the calculation of
the Net Receivables Balance and the Percentage Factor
each as of the close of business on the immediately pre-
ceding Business Day. No Weekly Report shall be required
to be delivered during any calendar week pursuant to the
preceding sentence if (i) a Weekly Report has been previ-
ously delivered by the Transferor pursuant to Section 3.2
during such calendar week or (ii) the Transferor has
requested a Transfer and pursuant to Section 3.2 hereof
in connection with such Transfer a Weekly Report will be
required to be delivered by the Transferor during such
calendar week.
(b) Prior to the fifteenth (15th) day of
each month, the Collection Agent shall prepare and for-
ward to the Company and the Administrative Agent (i) an
Investor Report as of the end of the last day of the
immediately preceding Fiscal Month, (ii) if requested by
the Company or the Administrative Agent, a listing by
Obligor of all Receivables together with an aging of such
Receivables and (iii) such other information as the
Company or the Administrative Agent may reasonably re-
quest.
SECTION 2.12. Collection Account. There shall
be established on the day of the initial Incremental
Transfer hereunder and maintained, for the benefit of the
Company, with the Collateral Agent, a segregated account
(the "Collection Account"), bearing a designation clearly
indicating that the funds deposited therein are held for
37
the benefit of the Company. The Collection Agent shall
remit daily within two Business Days of receipt to the
Collection Account all Collections received with respect
to any Receivables which are allocable to the Company
pursuant to Section 2.5(i) and Section 2.6; provided,
however, the Collection Agent shall be permitted to make
payments to the Company on the last day of each Tranche
Period instead of depositing funds into the Collection
Account on a daily basis for so long as, and only for so
long as no Collection Agent default and no other Termina-
tion Event has occurred hereunder. Funds on deposit in
the Collection Account (other than investment earnings)
shall be invested by the Collateral Agent in Eligible
Investments that will mature so that such funds will be
available prior to the last day of each successive
Tranche Period following such investment. On the last
day of each calendar month, all interest and earnings
(net of losses and investment expenses) on funds on
deposit in the Collection Account shall be retained in
the Collection Account and be available to make any
payments required to be made hereunder (including Dis-
count) to the Company. On the date on which the Net
Investment is zero and all amounts payable hereunder have
been paid to the Company, any funds remaining on deposit
in the Collection Account shall be paid to the Transfer-
or.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of
the Transferor. The Transferor represents and warrants
to the Company that:
(a) Corporate Existence and Power. The
Transferor is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power
and all material governmental licenses, authorizations,
consents and approvals required to carry on its business
in each jurisdiction in which its business is now con-
ducted.
(b) Corporate and Governmental Autho-
rization; Contravention. The execution, delivery and
performance by the Transferor of this Agreement, the
Purchase Agreement, the Fee Letter, the Company Certifi-
cate and the Transfer Certificate are within the Transfe-
ror's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency
or official (except as contemplated by Section 2.8), and
do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the
Certificate of Incorporation or Bylaws of the Transferor
or of any agreement, judgment, injunction, order, decree
or other instrument binding upon the Transferor or result
in the creation or imposition of any lien on assets of
the Transferor or any of its Subsidiaries (except as
contemplated by Section 2.8).
(c) Binding Effect. Each of this Agree-
ment, the Purchase Agreement, the Fee Letter and the
Company Certificate constitutes and the Transfer Certifi-
cate upon payment by the Company of the Transfer Price
set forth therein will constitute the legal, valid and
binding obligation of the Transferor, enforceable in
accordance with its terms, subject to applicable bank-
ruptcy, insolvency, moratorium or other similar laws
affecting the rights of creditors.
(d) Perfection. Immediately preceding
each Transfer hereunder, the Transferor shall be the
39
owner of all of the Receivables, free and clear of all
liens, encumbrances, security interests, preferences or
other security arrangement of any kind or nature whatso-
ever. On or prior to each Transfer and each recomputat-
ion of the Transferred Interest, all financing statements
and other documents required to be recorded or filed in
order to perfect and protect the Transferred Interest
against all creditors of and purchasers from the Trans-
feror, LADD and any Designated Subsidiary will have been
duly filed in each filing office necessary for such
purpose and all filing fees and taxes, if any, payable in
connection with such filings shall have been paid in
full.
(e) Accuracy of Information. All infor-
mation heretofore furnished by the Transferor (including
without limitation, the Investor Reports, the Weekly
Reports and the Transferor's financial statements) to
the Company or the Administrative Agent for purposes of
or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereaf-
ter furnished by the Transferor to the Company or the
Administrative Agent will be, true and accurate in every
material respect, on the date such information is stated
or certified.
(f) Taxes. The Transferor and its Sub-
sidiaries have filed all United States Federal income tax
returns and all other material tax returns which are
required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment
received by the Transferor or any of its Subsidiaries
except to the extent that failure to file or pay would
not have a material adverse effect on the consolidated
financial condition of the Transferor or the Company's
interest in the Receivables and except for any tax which
is being contested in good faith and by proper proceed-
ings and against which adequate reserves are being main-
tained. The charges, accruals and reserves on the books
of the Transferor and its Subsidiaries in respect of
taxes and other governmental charges are, in the opinion
of the Transferor, adequate.
(g) Action, Suits. Except as set forth
in Exhibit H, there are no actions, suits or proceedings
pending, or to the knowledge of the Transferor threat-
ened, against or affecting the Transferor or any Affili-
40
ate of the Transferor or their respective properties, in
or before any court, arbitrator or other body, which may
materially adversely affect the financial condition of
the Transferor and its Subsidiaries taken as a whole or
materially adversely affect the ability of Transferor to
perform its obligations under this Agreement.
(h) Use of Proceeds. No proceeds of any
Transfer will be used by the Transferor to acquire any
security in any transaction which is subject to Section
13 or 14 of the Securities Exchange Act of 1934, as
amended.
(i) Place of Business. The chief place
of business and chief executive office of the Transferor
are located at the address of the Transferor indicated in
Section 9.3 hereof and the offices where the Transferor
keeps all its Records, are located at the address(es)
described on Exhibit I or such other locations notified
to the Company in accordance with Section 2.8 in juris-
dictions where all action required by Section 2.8 has
been taken and completed.
(j) Good Title. Upon each Transfer and
each recomputation of the Transferred Interest, the
Company shall acquire a valid and perfected first priori-
ty undivided percentage ownership interest to the extent
of the Transferred Interest or a first priority perfected
security interest in each Receivable that exists on the
date of such Transfer and recomputation and in the Relat-
ed Security and Collections with respect thereto free and
clear of any Adverse Claim.
(k) Tradenames, Etc. As of the date
hereof: (i) the Transferor's chief executive office is
located at the address for notices set forth in Section
9.3 hereof; (ii) the Transferor has only the subsidiaries
and divisions listed on Exhibit J hereto; and (iii) the
Transferor has, within the last five (5) years, operated
only under the tradenames identified in Exhibit J hereto,
and, within the last five (5) years, has not changed its
name, merged with or into or consolidated with any other
corporation or been the subject of any proceeding under
Title 11, United States Code (Bankruptcy), except as
disclosed in Exhibit J hereto.
41
(l) Nature of Receivables. Each Receiv-
able included in the Net Receivable Balance is an Eligi-
ble Receivable and as "eligible asset" as defined in Rule
3a-7 under the Investment Company Act, of 1940, as amend-
ed.
(m) Coverage Requirement; Amount of
Receivables. The Percentage Factor does not exceed the
Maximum Percentage Factor.
(n) Credit and Collection Policy. Since
January 13, 1994, there have been no material changes in
the Credit and Collection Policy; since such date, no
material adverse change has occurred in the overall rate
of collection of the Receivables.
(o) Collections and Servicing. Since
December 31, 1994, there has been no material adverse
change in the ability of the Transferor to service and
collect the Receivables.
(p) No Termination Event. No event has
occurred and is continuing and no condition exists which
constitutes a Termination Event or a Potential Termina-
tion Event.
(q) Not an Investment Company. The
Transferor is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amend-
ed, or is exempt from all provisions of such Act.
(r) ERISA. The Transferor is in compli-
ance in all material respects with ERISA and no ERISA
lien on any of the Receivables shall exist.
(s) Lock-Box Accounts. The names and ad-
dresses 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 C hereto (or at such
other Lock-Box Banks and/or with such other Lock-Box
Accounts as have been notified to the Collateral Agent
and for which Lock-Box Agreements have been executed in
accordance with Section 2.8(b) and delivered to the
Collection Agent).
42
Any document, instrument, certificate or notice
delivered to the Company hereunder shall be deemed a
representation and warranty by the Transferor.
SECTION 3.2. Reaffirmation of Representations
and Warranties by the Transferor. On each day that a
Transfer is made hereunder, the Transferor, by accepting
the proceeds of such Transfer, whether delivered to the
Transferor pursuant to Section 2.2(a) or Section 2.5,
shall be deemed to have certified that all representa-
tions and warranties described in Section 3.1 are correct
on and as of such day as though made on and as of such
day. Each Incremental Transfer shall be subject to the
further condition precedent that by 4:30 p.m. (New York
City time) on the Business Day prior to the date of such
Incremental Transfer, the Collection Agent shall have
delivered to the Administrative Agent a completed Weekly
Report dated as of the second Business Day prior to the
date of such Incremental Transfer (which report may be
preliminary to the extent that data and or computations
set forth therein are dependent upon final determination
of applicable Tranche Rates and the Net Investment allo-
cable to Tranches to be associated with such Incremental
Transfer, provided, that a final completed Weekly Report
is delivered to the Administrative Agent by 4:00 p.m.
(New York City time) on the date of such Incremental
Transfer), together with a listing of all Receivables by
Obligor, if requested, and such additional information as
may be reasonably requested by the Administrative Agent;
and the Transferor shall be deemed to have represented
and warranted that such conditions precedent have been
satisfied.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
43
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Effectiveness. The
Transferor shall deliver to the Company, prior to this
Agreement becoming effective, the following documents,
instruments and fees all of which shall be in a form and
substance acceptable to the Company:
(a) A copy of the Resolutions of the
Board of Directors of the Transferor certified by its
Secretary approving the Agreement and the other documents
to be delivered by the Transferor hereunder.
(b) A copy of the Resolutions of the
Boards of Directors of LADD and each Designated Subsid-
iary certified by its Secretary approving the Purchase
Agreement, the Designated Subsidiaries Receivables Pur-
chase Agreement, and the other documents to be delivered
by LADD and such Designated Subsidiary hereunder.
(c) The Articles of Incorporation of the
Transferor certified by the Secretary of State or other
similar official of the Transferor's jurisdiction of
incorporation.
(d) The Articles of Incorporation of LADD
and each Designated Subsidiary certified by the Secretary
of State or other similar official of each such Designat-
ed Subsidiary's jurisdiction of incorporation.
(e) A Good Standing Certificate for the
Transferor issued by the Secretary of State or a similar
official of the Transferor's jurisdiction of incorpora-
tion and certificates of qualification as a foreign
corporation issued by the Secretaries of State or other
similar officials of each jurisdiction when such qualifi-
cation is material to the transactions contemplated by
this Agreement.
(f) A Good Standing Certificate for LADD
and each Designated Subsidiary issued by the Secretary of
State or a similar official of each such Designated
Subsidiary's jurisdiction of incorporation and certifi-
cates of qualification as a foreign corporation issued by
the Secretaries of State or other similar officials of
44
each jurisdiction when such qualification is material to
the transactions contemplated by this Agreement, the Pur-
chase Agreement or the Designated Subsidiaries Receiv-
ables Purchase Agreement.
(g) Copies of proper financing statements
(Form UCC-1), dated a date reasonably near to the date of
the execution of the initial Incremental Transfer naming
(i) LADD as the debtor in favor of the Transferor as
secured party with the Company as assignee and (ii) each
Designated Subsidiary as debtor in favor of LADD as
secured party with the Transferor as assignee or other
similar instruments as may be necessary or in the opinion
of the Company desirable under the UCC of all appropriate
jurisdictions or any comparable law to perfect the Trans-
feror's ownership interest in all Receivables.
(h) Copies of proper financing statements
(Form UCC-3), if any, necessary to terminate all security
interests and other rights of any person in Receivables
previously granted by the Transferor, LADD or any Desig-
nated Subsidiary.
(i) Certified copies of request for
information or copies (Form UCC-11) (or a similar search
report certified by parties acceptable to the Company)
dated a date reasonably near the date of the date of the
initial Incremental Transfer listing all effective fi-
nancing statements which name LADD or any Designated Sub-
sidiary (under its present name and any previous name) as
debtor and which are filed in jurisdictions in which the
filings were made pursuant to item (i) above together
with copies of such financing statements (none of which
shall cover any Receivables or Contracts).
(j) Copies of proper financing statements
(Form UCC-1), dated a date reasonably near to the date of
the initial Incremental Transfer naming the Transferor as
the debtor in favor of the Company and showing the Col-
lateral Agent as assignee of the secured party or other
similar instruments or documents as may be necessary or
in the reasonable opinion of the Company desirable under
the UCC of all appropriate jurisdictions or any compara-
ble law to perfect the Company's ownership interest in
all Receivables.
45
(k) Copies of proper financing statements
(Form UCC-3), if any, necessary to terminate all security
interests and other rights of any person in Receivables
previously granted by Transferor, LADD or any Designated
Subsidiary.
(l) Certified copies of request for
information or copies (Form UCC-11) (or a similar search
report certified by parties acceptable to the Company)
dated a date reasonably near the date of the initial
Incremental Transfer listing all effective financing
statements which name the Transferor (under its present
name and any previous name) as debtor and which are filed
in jurisdictions in which the filings were made pursuant
to item (l) above together with copies of such financing
statements (none of which shall cover any Receivables or
Contracts).
(m) Executed copies of the Lock-Box
Agreements.
(n) An opinion of Petree Stockton, L.L.-
P., special counsel to the Designated Subsidiaries,
covering the matters set forth in Exhibit K-1 hereto.
(o) An opinion of Petree Stockton, L.L.-
P., special counsel to LADD and the Transferor, covering
the matters set forth in Exhibit K-2 hereto.
(p) An opinion of Petree Stockton, L.L.-
P., special counsel to the Transferor, covering certain
bankruptcy matters, in form and substance acceptable to
the Company and its counsel.
(q) A certificate of the Transferor in
substantially the form of Exhibit L hereto executed by
the Secretary or Assistant Secretary of the Transferor.
(r) A certificate of LADD and each Desig-
nated Subsidiary in substantially the form of Exhibit L
hereto executed by the Secretary or Assistant Secretary
of each LADD and each such Designated Subsidiary.
(s) A computer tape setting forth all
Receivables and the Outstanding Balances as of the close
of business on the second Business Day prior to the
46
Effective Date and such other information as the Company
may reasonably request.
(t) An executed copy of the Fee Letter.
(u) The Transfer Certificate, duly exe-
cuted by the Transferor.
(v) The Company Certificate, duly execut-
ed by the Transferor and appropriately completed.
(w) The Arrangement Fee in accordance
with Section 2.7(b).
(x) An Investor Report for the Fiscal
Month ended February 25, 1995 and a Weekly Report as at
the close of business on the second Business Day prior to
the Effective Date.
(y) A certification by the Transferor,
dated the day of the initial Transfer hereunder, wherein
the Transferor shall represent and warrant as to the
aggregate Outstanding Balance of the Receivables and as
to the Net Receivables Balance each as of the close of
business on the second Business Day prior to the date of
such initial transfer and that the closing documents
delivered hereunder prior to such date are still true,
correct and complete.
(z) Such other documents as the Company
shall reasonably request.
In addition, it shall be a condition precedent
to the effectiveness of this Agreement that all outstand-
ing Tranches existing under that certain Transfer and
Administration Agreement dated as of January 28, 1994
among LADD, the Company, Clayton-Marcus Company, Inc.,
Barclay Furniture Co., LADD Transportation, Inc., and
Pilliod Furniture, Inc., as amended and modified from
time to time, shall have terminated .
In the event that the Effective Date shall not
have occurred on or prior to April 17, 1995, the Company
shall have the right to request up-to-date documentation
in respect of clauses (a), (b), (c), (d), (e), (f), (n),
(o), (p), (q), and (r) above.
47
SECTION 4.2. Post Closing Condition. Within
15 days of the Closing Date, the Transferor shall deliver
to the Administrative Agent a good faith calculation of
the costs (including penalties, if applicable) applicable
under present Arizona law necessary to be paid by LADD in
the event that LADD were to apply, in the future, for
qualification as a foreign corporation authorized to con-
duct business in Arizona, assuming for the purpose of
such calculations, that LADD should have been, but was
not, so qualified as of the Closing Date. After receipt
by the Administrative Agent of such calculation, the
Administrative Agent shall have the right, to be exer-
cised in its reasonable discretion, to require that
within 30 days of such request, the Transferor deliver to
the Administrative Agent either (A) a certificate of
qualification of LADD as a foreign corporation issued by
the Secretary of State or other similar official of
Arizona or (B) a legal opinion, reasonably acceptable to
the Administrative Agent, of counsel admitted to practice
in such state substantially to the effect that such
qualification is not required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
48
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants of Trans-
feror and the Collection Agent. At all times from the
date hereof to the later to occur of (i) the Termination
Date or (ii) the date on which the Net Investment shall
be equal to zero and the Aggregate Unpaids have been paid
in full, unless the Company shall otherwise consent in
writing:
(a) Financial Reporting. The Transferor
will maintain, for itself and each Subsidiary, a system
of accounting established and administered in accordance
with generally accepted accounting principles, and fur-
nish to the Administrative Agent:
(i) Annual Reporting. Within
ninety (90) days after the close of each of
LADD's fiscal years, audited financial state-
ments, prepared in accordance with generally
accepted accounting principles on a consolidat-
ed and consolidating basis (consolidating st-
atements need not be audited by such accoun-
tants) for LADD and its Subsidiaries, including
balance sheets as of the end of such period,
related statements of operations, shareholder's
equity and cash flows (consolidating statements
of shareholder's equity and cash flows need not
be delivered), accompanied by an unqualified
audit report signed by independent certified
public accountants, acceptable to the Adminis-
trative Agent, prepared in accordance with gen-
erally accepted auditing standards and any man-
agement letter prepared by said accountants and
a letter of said accountants that, in the
course of the foregoing, they have obtained no
knowledge of any Termination Event or Potential
Termination Event, or if, in the opinion of
such accountants, any Termination Event or
Potential Termination Event shall exist, stat-
ing the nature and status thereof.
(ii) Quarterly Reporting. With-
in forty-five (45) days after the close of the
first three quarterly periods of each of LADD's
49
fiscal years, for LADD and its Subsidiaries,
consolidated and consolidating unaudited bal-
ance sheets as at the close of each such period
and consolidated and consolidating related
statements of operations, shareholder's equity
and cash flows for the period from the begin-
ning of such fiscal year to the end of such
quarter, all certified by its chief financial
officer (consolidating statements of sharehold-
er's equity and cash flows need not be deliv-
ered).
(iii) Compliance Certificate.
Together with the financial statements required
hereunder, a compliance certificate signed by
its chief financial officer stating that no
Termination Event or Potential Termination
Event exists, or if any Termination Event or
Potential Termination Event exists, stating the
nature and status thereof and showing the com-
putation of the Debt Service Coverage Ratio.
(iv) Shareholders Statements and
Reports. Promptly upon the furnishing thereof
to the shareholders of LADD, copies of all fi-
nancial statements, reports and proxy state-
ments so furnished.
(v) S.E.C. Filings. Promptly
upon the filing thereof, copies of all regis-
tration statements and annual, quarterly, mont-
hly or other regular reports which LADD or any
subsidiary files with the Securities and Ex-
change Commission, except that such statements
and reports may be delivered without exhibits
until and unless otherwise instructed.
(vi) Notice of Termination
Events or Potential Termination Events. As
soon as possible and in any event within two
(2) days after the occurrence of each Termi-
nation Event or each Potential Termination
Event, a statement of the chief financial offi-
cer or chief accounting officer of the Trans-
feror setting forth details of such Termination
Event or Potential Termination Event and the
50
action which the Transferor proposes to take
with respect thereto.
(vii) Change in Credit and Col-
lection Policy and Debt Ratings. Within ten
(10) days after the date any material change in
or amendment to the Credit and Collection Poli-
cy is made, a copy of the Credit and Collection
Policy then in effect indicating such change or
amendment.
(viii) Credit and Collection Poli-
cy. Upon request of the Administrative Agent,
a complete copy of the Credit and Collection
Policy then in effect.
(ix) Other Information. Such
other information (including non-financial in-
formation) as the Administrative Agent may from
time to time reasonably request.
(b) Conduct of Business. The Transferor
will, and the Collection Agent will cause each of its
Subsidiaries to, carry on and conduct its business in
substantially the same manner and in substantially the
same fields of enterprise as it is presently conducted
and do all things necessary to remain duly incorporated,
validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and
maintain all requisite authority to conduct its business
in each jurisdiction in which its business is conducted.
(c) Compliance with Laws. The Transferor
will, and the Collection Agent will cause each of its
Subsidiaries to, comply in all material respects with all
laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be sub-
ject.
(d) Furnishing of Information and Inspec-
tion of Records. The Transferor and the Collection Agent
will furnish to the Company from time to time such infor-
mation with respect to the Receivables as the Company may
reasonably request, including, without limitation, list-
ings identifying the Obligor and the Outstanding Balance
for each Receivable. The Transferor and the Collection
Agent will at any time and from time to time during regu-
51
lar business hours permit the Company, or its agents or
representatives upon three Business Days notice, (i) to
examine and make copies of and abstracts from all Records
and (ii) to visit the offices and properties of the
Transferor or the Collection Agent's for the purpose of
examining such Records, and to discuss matters relating
to Receivables or the Transferor's or the Collection
Agent's performance hereunder with any of the officers,
directors, employees or independent public accountants of
the Transferor or the Collection Agent's having knowledge
of such matters.
(e) Keeping of Records and Books of
Account. The Transferor and the Collection Agent will
maintain and implement administrative and operating
procedures (including, without limitation, an ability to
recreate records evidencing Receivables in the event of
the destruction of the originals thereof), and keep and
maintain, all documents, books, records and other infor-
mation reasonably necessary or advisable for the collec-
tion of all Receivables (including, without limitation,
records adequate to permit the daily identification of
each new Receivable and all Collections of and adjust-
ments to each existing Receivable). The Transferor and
the Collection Agent will give the Company notice of any
material change in the administrative and operating
procedures referred to in the previous sentence.
(f) Performance and Compliance with
Receivables and Contracts. The Transferor will at its
expense timely and fully perform and comply with all
material provisions, covenants and other promises re-
quired to be observed by it under the Contracts related
to the Receivables.
(g) Credit and Collection Policies. The
Transferor and the Collection Agent will comply in all
material respects with the Credit and Collection Policy
in regard to each Receivable and the related Contract.
(h) Collections. The Transferor and the
Collection Agent shall instruct all Obligors to cause all
Collections to be deposited directly to a Lock-Box Ac-
count. The Transferor may, however, in connection with
Obligors which would otherwise be over their credit limit
if goods were shipped prior to payment, direct Obligors
to make payments directly to the Collection Agent which
52
shall deposit such Collections in a Lock-Box Account
pursuant to Section 5.1(i) below.
(i) Collections Received. The Transferor
and the Collection Agent shall hold in trust, and depos-
it, immediately, but in any event not later than two
Business Days of its receipt thereof, to a Lock-Box
Account all Collections received from time to time by the
Transferor or the Collection Agent (including without
limitation, in the case of the Transferor, all Collec-
tions deemed to have been received by the Transferor
under Section 2.9(a)).
(j) Sale Treatment. The Transferor shall
report the transactions contemplated by the Agreement on
its financial statements as a sale of the Transferred
Interest to the Company.
(k) Separate Business. The Transferor
shall at all times (a) to the extent the Transferor's
office is located in the offices of LADD or any Affiliate
of LADD, pay fair market rent for its executive office
space located in the offices of LADD or any Affiliate of
LADD, (b) maintain the Transferor's books, financial
statements, accounting records and other corporate docu-
ments and records separate from those of LADD or any
other entity, (c) not commingle the Transferor's assets
with those of LADD or any other entity, (d) act solely in
its corporate name and through its own authorized offi-
cers and agents, (e) make investments directly or by
brokers engaged and paid by the Transferor or its agents
(provided that if any such agent is an Affiliate of the
Transferor it shall be compensated at a fair market rate
for its services), (f) separately manage the Transferor's
liabilities from those of LADD or any Affiliates of LADD
and pay its own liabilities, including all administrative
expenses, from its own separate assets, except that LADD
may pay the organizational expenses of the Transferor,
and (g) pay from the Transferor's assets all obligations
and indebtedness of any kind incurred by the Transferor.
The Transferor shall abide by all corporate formalities,
including the maintenance of current minute books, and
the Transferor shall cause its financial statements to be
prepared in accordance with generally accepted accounting
principles in a manner that indicates the separate exis-
tence of the Transferor and its assets and liabilities.
The Transferor shall (i) pay all its liabilities, (ii)
53
not assume the liabilities of LADD or any Affiliate of
LADD and (iii) not guarantee the liabilities of LADD or
any Affiliates of LADD. The officers and directors of
the Transferor (as appropriate) shall make decisions with
respect to the business and daily operations of the
Transferor independent of and not dictated by any con-
trolling entity. The Transferor shall not engage in any
business not permitted by its Certificate of Incorpora-
tion as in effect on the Closing Date.
(l) Corporate Documents. The Transferor
shall only amend, alter, change or repeal Articles III,
IV, XV or XVI of its Certificate of Incorporation with
the prior written consent of the Administrative Agent.
SECTION 5.2. Negative Covenants of Transferor
and the Collection Agent. During the term of this Agree-
ment, unless the Company shall otherwise consent in
writing:
(a) No Sales, Liens, Etc. Except as
otherwise provided herein, neither the Transferor nor the
Collection Agent will sell, assign (by operation of law
or otherwise) or otherwise dispose of, or create or
suffer to exist any Adverse Claim upon (or the filing of
any financing statement) or with respect to, any invento-
ry or goods, the sale of which may give rise to a Receiv-
able or any Receivable or related Contract, or upon or
with respect to any account which concentrates in a Lock-
Box Bank to which any Collections of any Receivable are
sent, or assign any right to receive income in respect
thereof.
(b) No Extension or Amendment of Receiv-
ables. Except as otherwise permitted in Section 6.2,
neither the Transferor nor the Collection Agent will ex-
tend, amend or otherwise modify the terms of any Receiv-
able, or amend, modify or waive any term or condition of
any Contract related thereto.
(c) No Change in Business or Credit and
Collection Policy. Neither the Transferor, nor the Col-
lection Agent will make any change in the character of
its business or in the Credit and Collection Policy,
which change would, in either case, impair the collectib-
ility of any Receivable.
54
(d) No Mergers, Etc. Neither the Trans-
feror nor the Collection Agent will (i) consolidate or
merge with or into any other Person, or (ii) sell, lease
or transfer all or substantially all of its assets to any
other person; provided, however, that the Collection
Agent may consolidate or merge with a Person if the
Collection Agent shall be the surviving entity and such
merger or consolidation does not cause a Termination
Event or Potential Termination Event.
(e) Change in Payment Instructions to
Obligors. Neither the Transferor nor the Collection
Agent will add or terminate any bank as a Lock-Box Bank
or any account as a Lock-Box Account to or from those
listed in Exhibit C hereto or make any change in its
instructions to Obligors regarding payments to be made to
any Lock-Box Account, unless (i) such instructions are to
deposit such payments to another existing Lock-Box Ac-
count or (ii) the Administrative Agent shall have re-
ceived written notice of such addition, termination or
change at least 30 days prior thereto and the Administra-
tive Agent shall have received a Lock-Box Agreement exe-
cuted by each new Lock-Box Bank or an existing Lock-Box
Bank with respect to each new Lock-Box Account, as appli-
cable.
(f) Deposits to Lock-Box Accounts.
Neither the Transferor nor the Collection Agent will
deposit or otherwise credit, to any Lock-Box Account cash
or cash proceeds other than Collections of Receivables.
(g) Change of Name, Etc. Neither the
Transferor nor the Collection Agent will change its name,
identity or structure or its chief executive office,
unless at least 10 days prior to the effective date of
any such change the Transferor and/or Collection Agent
delivers to the Collateral Agent (i) executed UCC financ-
ing statements necessary to reflect such change and to
continue the perfection of the Company's ownership inter-
ests or security interests in the Receivables and (ii)
new or revised Lock-Box Agreements executed by the Lock-
Box Banks which reflect such change and which enable the
Collateral Agent to exercise its rights contained in
Section 2.8.
(h) Amendment to Purchase Agreement. The
Transferor will not amend, modify, or supplement the
55
Purchase Agreement, except with the prior written consent
of the Company; nor shall the Transferor take any other
action under the Purchase Agreement that shall have a
material adverse affect on the Company.
(i) Other Debt. Except as provided for
herein, the Transferor will not create, incur, assume or
suffer to exist any indebtedness whether current or
funded, or any other liability other than (i) indebted-
ness of the Transferor representing fees, expenses and
indemnities arising hereunder or under the Purchase
Agreement or otherwise owing to LADD (or to LFI Capital
Management, Inc. as assignee of any note made by the
Transferor in favor of LADD in partial payment for the
purchase price of the Receivables under the Purchase
Agreement and assigned to LFI Capital Management, Inc.),
the Company or the Administrative Agent, and (ii) indebt-
edness for services supplied or furnished to the Trans-
feror (including reasonable accountants' and attorneys'
fees); provided, that the aggregate amount of the indebt-
edness or liabilities described in this subpart (ii)
shall not exceed $4,750 at any one time outstanding.
56
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1. Appointment of Collection Agent.
The servicing, administering and collection of the Re-
ceivables shall be conducted by such Person (the "Collec-
tion Agent") so designated from time to time in accor-
dance with this Section 6.1. Until the Company gives
notice to LADD of the designation of a new Collection
Agent, LADD is hereby designated as, and hereby agrees to
perform the duties and obligations of, the Collection
Agent pursuant to the terms hereof. The Company may,
upon the occurrence of any Termination Event designate
as Collection Agent any Person (including itself) to
succeed LADD or any successor Collection Agent, on the
condition in each case that any such Person so designated
shall agree to perform the duties and obligations of the
Collection Agent pursuant to the terms hereof. Upon the
occurrence of a Potential Termination Event or a Termina-
tion Event, the Company may notify any Obligor of the
Transferred Interest.
SECTION 6.2. Duties of Collection Agent. (a)
The Collection Agent shall take or cause to be taken all
such action as may be necessary or advisable to collect
each Receivable from time to time, all in accordance with
applicable laws, rules and regulations, and with the care
and diligence which the Collection Agent employs in
servicing similar receivables for its own account, in
accordance with the Credit and Collection Policy. Each
of the Transferor and the Company hereby appoints as its
agent the Collection Agent, from time to time designated
pursuant to Section 6.1, to enforce its respective rights
and interests in and under the Receivables, the Related
Security and the Contracts. The Collection Agent shall
set aside for the account of the Transferor and the
Company their respective allocable shares of the Collec-
tions of Receivables in accordance with Sections 2.5 and
2.6. The Collection Agent shall segregate and deposit to
the Company's account the Company's allocable share of
Collections of Receivables when required pursuant to
Article II hereof. So long as no Termination Event shall
have occurred and be continuing, the Transferor may, in
accordance with the Credit and Collection Policy, extend
the maturity of Receivables, but not beyond sixty (60)
days, and extend the maturity or adjust the Outstanding
57
Balance as the Transferor may determine to be appropriate
to maximize Collections thereof; provided, however, that
such extension or adjustment shall not alter the status
of such Receivable as a Delinquent Receivable or a De-
faulted Receivable. The Transferor shall deliver to the
Collection Agent and the Collection Agent shall hold in
trust for the Transferor and the Company in accordance
with their respective interests, all Records which evi-
dence or relate to Receivables or Related Security.
Notwithstanding anything to the contrary contained here-
in, from and after the occurrence of a Termination Event
or a Potential Termination Event the Company shall have
the absolute and unlimited right to direct the Collection
Agent (whether the Collection Agent is the Transferor or
any other Person) to commence or settle any legal action
to enforce collection of any Receivable or to foreclose
upon or repossess any Related Security.
(b) The Collection Agent shall hold for
the benefit of the Transferor Collections received minus
the Percentage Factor of such Collections. On the last
day of each Tranche Period, the Collection Agent shall
deduct from such Collections and pay to the Company in
reduction of the Net Investment any amounts due under
Section 2.9 hereof and unpaid from the Transferor or any
Designated Subsidiary and turn the remainder of such
Collections over to the Transferor. In addition, the
Collection Agent shall, as soon as practicable following
receipt thereof, turn over to the Transferor any collec-
tions of any indebtedness of any Obligor which is not a
Receivable. If the Transferor or LADD is not the Collec-
tion Agent, the Collection Agent, by giving three Busi-
ness Days' prior written notice to the Company, may
revise the percentage used to calculate the Servicing Fee
so long as the revised percentage will not result in a
Servicing Fee that exceeds 110% of the reasonable and
appropriate out-of-pocket costs and expenses of such
Collection Agent incurred in connection with the perfor-
mance of its obligations hereunder as documented to the
reasonable satisfaction of the Company. The Collection
Agent, if other than the Transferor, shall as soon as
practicable upon demand, deliver to the Transferor all
Records in its possession which evidence or relate to
indebtedness of an Obligor which is not a Receivable.
(c) On or before 90 days after the end of
each fiscal year of the Collection Agent, beginning with
58
the fiscal year ending December 31, 1994, the Collection
Agent shall cause a firm of independent public accoun-
tants (who may also render other services to the Collec-
tion Agent or the Transferor) to furnish a report to the
Administrative Agent to the effect that they have com-
pared the information contained in the Investor Reports
delivered during such fiscal year with the information
contained in the Contracts and the Collection Agent's re-
cords and computer systems for such period, and that, on
the basis of the agreed upon procedures set forth in
Exhibit O and such comparison, such firm will issue an
agreed upon procedures report to the Collection Agent
stating that such accountants have performed the proce-
dures outlined on Exhibit O hereto and stating the re-
sults thereof.
(d) Notwithstanding anything to the
contrary contained in this Article VI, the Collection
Agent, if not the Transferor or an Affiliate thereof,
shall have no obligation to collect, enforce or take any
other action described in this Article VI with respect to
any Receivable that is not included in the Transferred
Interest other than to deliver to the Transferor the
Collections and documents with respect to any such Re-
ceivable as described in Section 6.2(b).
SECTION 6.3. Rights After Designation of New
Collection Agent. At any time following the designation
of a Collection Agent (other than the Transferor or LADD)
pursuant to Section 6.1:
(i) The Company may direct that
payment of all amounts payable under any Re-
ceivable be made directly to the Company or its
designee.
(ii) The Transferor shall, at
the Company's request and at the Transferor's
expense, give notice of the Company's ownership
of Receivables to each Obligor and direct that
payments be made directly to the Company or its
designee.
(iii) The Transferor and LADD
shall, at the Company's request, (A) assemble
all of the Records, and shall make the same
available to the Company at a place selected by
59
the Company or its designee, and (B) segregate
all cash, checks and other instruments received
by it from time to time constituting Collec-
tions of Receivables in a manner acceptable to
the Company and shall, promptly upon receipt,
remit all such cash, checks and instruments,
duly endorsed or with duly executed instruments
of transfer, to the Company or its designee.
(iv) The Transferor hereby au-
thorizes the Company to take any and all steps
in the Transferor's name and on behalf of the
Transferor necessary or desirable, in the de-
termination of the Company, to collect all
amounts due under any and all Receivables,
including, without limitation, endorsing the
Transferor's or any Designated Subsidiary's
name on checks and other instruments represent-
ing Collections and enforcing such Receivables
and the related Contracts.
SECTION 6.4. Responsibilities of the Transfer-
or. Anything herein to the contrary notwithstanding, the
Transferor shall (i) exercise its rights under the Pur-
chase Agreement to cause LADD and each Designated Subsid-
iary to perform all of its obligations under the Con-
tracts related to the Receivables to the same extent as
if interests in such Receivables had not been sold here-
under, under the Purchase Agreement or under the Desig-
nated Subsidiaries Receivables Purchase Agreement and the
exercise by the Company of its rights hereunder shall not
relieve the Transferor from such obligations and (ii) pay
when due any taxes, including without limitation, any
sales taxes payable in connection with the Receivables
and their creation and satisfaction. The Company shall
not have any obligation or liability with respect to any
Receivable or related Contracts, nor shall it be obligat-
ed to perform any of the obligations of the Transferor,
LADD or any Designated Subsidiary thereunder.
60
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. Termination Events. The occur-
rence of any one or more of the following events shall
constitute a Termination Event:
(a) (i) the Collection Agent shall fail
to perform or observe any term, covenant or agreement
hereunder (other than as referred to in clause (ii) of
this Section 7.1(a)) and such failure shall remain unrem-
edied for ten (10) days, or (ii) either the Collection
Agent or the Transferor shall fail to make any payment or
deposit to be made by it hereunder when due or the Col-
lection Agent shall fail to observe or perform any term,
covenant or agreement on the Collection Agent's part to
be performed under Section 2.8(b) hereof; or
(b) any representation, warranty, certif-
ication or statement made by the Transferor in this
Agreement or in any other document delivered pursuant
hereto shall prove to have been incorrect in any material
respect when made or deemed made; or
(c) the Transferor shall default in the
observance or performance of the terms, covenants, condi-
tions or agreements on the Transferor's part (i) to be
performed or observed under Sections 5.1(a)(vi), 5.1(b),
5.1(g), 5.1(h), 5.1(i), 5.1(k), 5.1(l), 5.2(a), 5.2(c),
5.2(d), 5.2(e), 5.2(f), 5.2(g), 5.2(h) or 5.2(i) or (ii)
to be performed or observed under Sections 5.1(a)(i),
5.1(a)(ii), 5.1(a)(iii), 5.1(a)(iv), 5.1(a)(v) or 5.1(a)-
(ix) and such default in the case of this clause (ii)
shall remain unremedied for a period of fifteen (15) days
after the earlier of (A) notice thereof shall have been
given to the Transferor by the Company or the Administra-
tive Agent and (B) the date on which the Transferor knew
or should have known in the exercise of reasonable care
of the default, or (iii) to be performed or observed
under any other provision hereof and such default in the
case of this clause (iii) shall remain unremedied for a
period of ten (10) days after the earlier of (A) notice
thereof shall have been given to the Transferor by the
Company or the Administrative Agent and (B) the date on
which the Transferor knew or should have known in the
exercise of reasonable care of the default; or
61
(d) any Indebtedness of the Transferor,
LADD or any of its Subsidiaries greater than $1,000,000
shall be declared to be due and payable or required to be
prepaid (other than by a regularly scheduled payment)
prior to the date of maturity thereof; or
(e) any Event of Bankruptcy shall occur
with respect to the Transferor, LADD, the Collection
Agent or any Designated Subsidiary or any Material Sub-
sidiary of either the Transferor or the LADD; or
(f) the Company shall, for any reason,
fail to have a valid and perfected first priority securi-
ty interest in the Receivables; or
(g) the Transferor shall enter into any
transaction or merger whereby it is not the surviving
entity; or
(h) there shall have occurred any event
which materially affects the Transferor's ability to
either collect the Receivables or to perform under this
Agreement or under the Purchase Agreement; or
(i) the Liquidity Provider or the Credit
Support Provider shall have given notice that an event of
default has occurred and is continuing under its agree-
ments with the Company; or
(j) the Commercial Paper issued by the
Company shall not be rated at least "A-2" by Standard &
Poor's and at least "P-2" by Moody's, unless such down-
grading is the result of the Credit Support Provider
being downgraded; or
(k) the Percentage Factor exceeds the
Maximum Percentage Factor unless the Transferor reduces
the Net Investment on the next day, bringing the Percent-
age Factor to less than or equal to 95% or the Percentage
Factor equals or exceeds 100% at any time; or
(l) the Dilution Ratio for any Fiscal
Month exceeds 10.0%; or
(m) the Loss to Liquidation Ratio aver-
aged for any three (3) consecutive Fiscal Months exceeds
1.5%;
62
(n) the Delinquency Ratio averaged for
any two (2) consecutive Fiscal Months exceeds 11.0%; or
(o) the Purchase Agreement shall be
terminated or the Transferor or LADD shall default in any
material respect in the performance of its obligations
thereunder; or
(p) the Designated Subsidiaries Receiv-
ables Purchase Agreement shall be terminated or LADD or
any Designated Subsidiary shall default in any material
respect in the performance of its obligations thereunder.
SECTION 7.2. Termination. (a) If a Termina-
tion Event occurs, the Company may, by notice to the
Transferor, declare all outstanding Tranche Periods to be
ended and designate the Base Rate plus 2% to be applica-
ble to the Net Investment.
(b) In addition, if any Termination Event
occurs the Company and the Collateral Agent shall have
all of the rights and remedies provided to a secured
creditor or a purchaser of accounts under the UCC by
applicable law in respect thereto.
63
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1. Indemnities by the Transferor.
Without limiting any other rights which the Company may
have hereunder or under applicable law, the Transferor
hereby agrees to indemnify the Company, the Liquidity
Provider and the Credit Support Provider and any per-
mitted assigns and their respective officers, directors
and employees (collectively, "Indemnified Parties") from
and against any and all damages, losses, claims, liabili-
ties, costs and expenses, including reasonable attorneys'
fees (which such attorneys may be employees of the Li-
quidity Provider, the Credit Support Provider or the
Company) and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") award-
ed against or incurred by any of them arising out of or
as a result of a breach of any representation or warranty
or covenant made by Transferor of this Agreement or the
ownership, either directly or indirectly, by the Company
of the Transferred Interest excluding, however, (i)
Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of an Indem-
nified Party or (ii) recourse (except as otherwise spe-
cifically provided in this Agreement) for uncollectible
Receivables. Without limiting the generality of the
foregoing, the Transferor shall indemnify each Indemni-
fied Party for Indemnified Amounts relating to or result-
ing from:
(i) reliance on any represen-
tation or warranty made by the Transferor,
LADD, or any Designated Subsidiary (or any
officers of any of them) under or in connection
with this Agreement, the Purchase Agreement,
the Designated Subsidiaries Receivables Pur-
chase Agreement, any Investor Report or any
other information or report delivered by the
Transferor, LADD, or a Designated Subsidiary
pursuant hereto or pursuant to the Purchase
Agreement or the Designated Subsidiaries Re-
ceivables Purchase Agreement, which shall have
been false or incorrect in any material respect
when made or deemed made;
64
(ii) the failure by the Trans-
feror, LADD, or any Designated Subsidiary to
comply with any applicable law, rule or regula-
tion with respect to any Receivable or the
related Contract, or the nonconformity of any
Receivable or the related Contract with any
such applicable law, rule or regulation;
(iii) the failure to vest and
maintain vested in the Company an undivided
percentage ownership interest, to the extent of
the Transferred Interest, in the Receivables
free and clear of any Adverse Claim;
(iv) the failure to file, or any
delay in filing, financing statements, continu-
ation statements, or other similar instruments
or documents under the UCC of any applicable
jurisdiction or other applicable laws with re-
spect to any Receivable;
(v) any dispute, claim, offset
or defense (other than discharge in bankruptcy)
of the Obligor to the payment of any Receivable
(including, without limitation, a defense based
on such Receivable or the related Contract not
being legal, valid and binding obligation of
such Obligor enforceable against it in accor-
dance with its terms), or any other claim re-
sulting from the sale of merchandise or ser-
vices related to such Receivable or the fur-
nishing or failure to furnish such merchandise
or services;
(vi) any failure of the Trans-
feror or LADD, as Collection Agent or other-
wise, to perform its duties or obligations in
accordance with the provisions of Article VI;
or
(vii) any products liability
claim or personal injury or property damage
suit or other similar or related claim or ac-
tion of whatever sort arising out of or in
connection with merchandise or services which
are the subject of any Receivable;
65
provided, however, that if the Company enters into agree-
ments for the purchase of interests in receivables from
one or more Other Transferors, the Company shall allocate
such Indemnified Amounts which are in connection with the
Liquidity Provider Agreement, the Credit Support Agree-
ment or the credit support furnished by the Credit Sup-
port Provider ratably to the Transferor and each Other
Transferor; and provided, further, that if such Indemni-
fied Amounts are attributable to the Transferor and not
attributable to any Other Transferor, the Transferor
shall be solely liable for such Indemnified Amounts or if
such Indemnified Amounts are attributable to Other Trans-
ferors and not attributable to the Transferor such Other
Transferors shall be solely liable for such Indemnified
Amounts.
SECTION 8.2. Indemnity for Taxes, Reserves and
Expenses. (a) If after the date hereof, the adoption of
any Law or bank regulatory guideline or any amendment or
change in the interpretation of any existing or future
Law or bank regulatory guideline by any Official Body
charged with the administration, interpretation or appli-
cation thereof, or the compliance with any directive of
any Official Body (in the case of any bank regulatory
guideline, whether or not having the force of Law):
(i) shall subject any Indemni-
fied Party to any tax, duty or other charge
with respect to this Agreement, the Transferred
Interest, the Receivables or payments of
amounts due hereunder, or shall change the
basis of taxation of payments to any Indemni-
fied Party of amounts payable in respect of
this Agreement, the Transferred Interest, the
Receivables or payments of amounts due hereun-
der or its obligation to advance funds under
the Liquidity Provider Agreement or the credit
support furnished by the Credit Support Provid-
er or otherwise in respect of this Agreement,
the Transferred Interest or the Receivables
(except for changes in the rate of general
corporate, franchise, net income or other in-
come tax imposed on such Indemnified Party by
the jurisdiction in which such Indemnified
Party's principal executive office is located);
66
(ii) shall impose, modify or
deem applicable any reserve, special deposit or
similar requirement (including, without limita-
tion, any such requirement imposed by the Board
of Governors of the Federal Reserve System)
against assets of, deposits with or for the
account of, or credit extended by, any Indemni-
fied Party or shall impose on any Indemnified
Party or on the United States market for cer-
tificates of deposit or the London interbank
market any other condition affecting this Agre-
ement, the Transferred Interest, the Receiv-
ables or payments of amounts due hereunder or
its obligation to advance funds under the Li-
quidity Provider Agreement or the credit sup-
port provided by the Credit Support Provider or
otherwise in respect of this Agreement, the
Transferred Interest or the Receivables; or
(iii) imposes upon any Indemni-
fied Party any other expense (including, with-
out limitation, reasonable attorneys' fees and
expenses, and expenses of litigation or prepa-
ration therefor in contesting any of the fore-
going) with respect to this Agreement, the
Transferred Interest, the Receivables or pay-
ments of amounts due hereunder or its obliga-
tion to advance funds under the Liquidity Pro-
vider Agreement or the credit support furnished
by the Credit Support Provider or otherwise in
respect of this Agreement, the Transferred
Interests or the Receivables,
and the result of any of the foregoing is to increase the
cost to such Indemnified Party with respect to this
Agreement, the Transferred Interest, the Receivables, the
obligations hereunder, the funding of any purchases
hereunder, the Liquidity Provider Agreement or the Credit
Support Agreement, by an amount deemed by such Indemni-
fied Party to be material, then, within ten (10) days
after demand by the Company, the Transferor shall be
obligated to pay to the Company such additional amount or
amounts as will compensate such Indemnified Party for
such increased cost or reduction.
(b) If any Indemnified Party shall have
determined that after the date hereof, the adoption of
67
any applicable Law or bank regulatory guideline regarding
capital adequacy, or any change therein, or any change in
the interpretation thereof by any Official Body, or any
directive regarding capital adequacy (in the case of any
bank regulatory guideline, whether or not having the
force of law) of any such Official Body, has or would
have the effect of reducing the rate of return on capital
of such Indemnified Party (or its parent) as a conse-
quence of such Indemnified Party's obligations hereunder
or with respect hereto to a level below that which such
Indemnified Party (or its parent) could have achieved but
for such adoption, change, request or directive (taking
into consideration its policies with respect to capital
adequacy) by an amount deemed by such Indemnified Party
to be material, then from time to time, within ten (10)
days after demand by the Company, the Transferor shall be
obligated to pay to the Company such additional amount or
amounts as will compensate such Indemnified Party (or its
parent) for such reduction.
(c) The Company will promptly notify the
Transferor of any event of which it has knowledge, occur-
ring after the date hereof, which will entitle an Indem-
nified Party to compensation pursuant to this Section. A
notice by the Company claiming compensation under this
Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such
amount, the Company may use any reasonable averaging and
attributing methods.
(d) Anything in this Section 8.2 to the
contrary notwithstanding, if the Company enters into
agreements for the acquisition of interests in receiv-
ables from one or more Other Transferors, the Company
shall allocate the liability for any amounts under this
Section 8.2 ("Section 8.2 Costs") to the Transferor and
each Other Transferor; and provided, further, that if
such Section 8.2 Costs are attributable to the Transferor
and not attributable to any Other Transferor, the Trans-
feror shall be solely liable for such Section 8.2 Costs
or if such Section 8.2 Costs are attributable to Other
Transferors and not attributable to the Transferor, such
Other Transferors shall be solely liable for such Section
8.2 Costs.
68
SECTION 8.3. Other Costs, Expenses and Related
Matters. (a) The Transferor shall be obligated to pay,
upon receipt of a written invoice, and to save the Compa-
ny and the Administrative Agent harmless against liabili-
ty for the payment of, all reasonable out-of-pocket
expenses (including, without limitation, attorneys',
accountant's and other third parties' fees and expenses,
any filing fees and expenses incurred by officers or
employees of the Company) incurred by or on behalf of the
Company and the Administrative Agent (i) in connection
with the negotiation, execution, delivery and preparation
of this Agreement and any documents or instruments deliv-
ered pursuant hereto and the transactions contemplated
hereby (including, without limitation, the perfection or
protection of the Transferred Interest) and (ii) from
time to time (a) relating to any amendments, waivers or
consents under this Agreement, the Purchase Agreement or
the Designated Subsidiaries Receivables Purchase Agree-
ment, (b) arising in connection with the Company's or its
agent's enforcement or preservation of rights (including,
without limitation, the perfection and protection of the
Transferred Interest under this Agreement), or (c) aris-
ing in connection with any audit, dispute, disagreement,
litigation or preparation for litigation involving this
Agreement the Purchase Agreement or the Designated Sub-
sidiaries Receivables Purchase Agreement (all of such
amounts, collectively, "Transaction Costs").
(b) The Transferor and the Designated
Subsidiaries, jointly and severally, shall be obligated
to pay to the Company on demand any Early Collection Fee
due on account of the reduction of a Tranche on a day
prior to the last day of its Tranche Period.
SECTION 8.4. Reconveyance Under Certain Cir-
cumstances. (a) Transferor agrees to accept the recon-
veyance from the Company of the Transferred Interest if
the Company notifies Transferor of a material breach of
any representation or warranty made or deemed made pursu-
ant to Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(i),
3.1(k) or 3.1(q) of this Agreement and Transferor shall
fail to cure such breach within 30 days of such notice.
The reconveyance price shall be paid by the Transferor to
the Company in immediately available funds on such 30th
day in an amount equal to the Aggregate Unpaids.
(b) In the event of a material breach of
any representation or warranty made or deemed made pursu-
ant to Sections 3.1(d), 3.1(e), 3.1(g), 3.1(h), 3.1(j),
69
3.1(l), 3.1(m), 3.1(p) or 3.1(r), the Transferor agrees
to accept the reconveyance from the Company of the Trans-
ferred Interest in any Receivable created on and after
the date of such breach if the Company notifies Transfer-
or of such breach and the Transferor shall fail to cure
such breach within 30 days (or, in the case of the repre-
sentations and warranties in Sections 3.1(d) and 3.1(j),
3 days) of such notice. The reconveyance price shall be
paid by the Transferor to the Company in immediately
available funds on such 30th day (or 3rd day, if appli-
cable) in an amount equal to the Outstanding Balance of
any such Receivable.
70
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Term of Agreement. This Agree-
ment shall terminate following the Termination Date when
the Net Investment has been reduced to zero, all accrued
Discount has been paid in full and all other Aggregate
Unpaids have been paid in full; provided, however, that
(i) the rights and remedies of the Company with respect
to any representation and warranty made or deemed to be
made by Transferor pursuant to this Agreement, (ii) the
indemnification and payment provisions of Article VIII,
and (iii) the agreement set forth in Section 9.9, shall
be continuing and shall survive any termination of this
Agreement.
SECTION 9.2. Waivers; Amendments. No failure
or delay on the part of any party to this Agreement in
exercising any power, right or remedy under this Agree-
ment shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or
remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights
and remedies herein provided shall be cumulative and
nonexclusive of any rights or remedies provided by law.
Any provision of this Agreement may be amended if, but
only if, such amendment is in writing and is signed by
the Transferor, the Company and the Designated Subsidiar-
ies.
SECTION 9.3. Notices. Except as provided
below, all communications and notices provided for here-
under shall be in writing (including bank wire, telex,
telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other party at its
address or telecopy number set forth below or at such
other address or telecopy number as such party may here-
after specify for the purposes of notice to such party.
Each such notice or other communication shall be effec-
tive (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this
Section and confirmation is received, (ii) if given by
mail 3 Business Days following such posting, or (iii) if
given by any other means, when received at the address
specified in this Section. However, anything in this
Section to the contrary notwithstanding, the Transferor
hereby authorizes the Company to effect Transfers,
Tranche Period and Tranche Rate selections based on
71
telephonic notices made by any Person which the Company
in good faith believes to be acting on behalf of the
Transferor. The Transferor agrees to deliver promptly to
the Company a written confirmation of each telephonic
notice signed by an authorized officer of Transferor.
However, the absence of such confirmation shall not
affect the validity of such notice. If the written
confirmation differs in any material respect from the
action taken by the Company, the records of the Company
shall govern absent manifest error.
If to the Company:
Enterprise Funding Corporation
c/o Merrill Lynch Money Markets Inc.
World Financial Center--South Tower
225 Liberty Street
New York, New York 10218
Telephone: (212) 236-7200
Telecopy: (212) 236-7584
Account Information:
Bankers Trust Company
ABA No.:021001033
Account No.:01419647
Reference:Enterprise Funding Attn. JR
Angelo, FFC EFC-LADD Funding Corp.
(with a copy to the Administrative Agent)
If to the Transferor:
LADD Funding Corp.
William S. Creekmuir
Vice President, Treasurer and Secretary
One Plaza Center
Box HP3
High Point, NC 27261-1500
Telephone: (910) 410-6601
Telecopy: (910) 888-6344
Account Information:
NationsBank, N.A. (Carolinas)
ABA No.:053000196
Account No.:000286799
Reference:LADD Funding Corp.
(with a copy to LADD)
72
If to LADD or the Designated Subsidiaries:
LADD Furniture, Inc.
William S. Creekmuir
Senior V.P. and CFO
One Plaza Center
Box HP3
High Point, NC 27261-1500
Telephone: (910) 889-0333
Telecopy: (910) 888-6344
with copy to:
Petree Stockton, L.L.P.
3500 One First Union Center
Charlotte, NC 28202-6001
Attention: Eileen M. Taylor
Telephone: (704) 338-5000
Telecopy: (704) 338-5125
If to the Collateral Agent:
NationsBank, National Association
(Carolinas)
NationsBank Corporate Center--7th Floor
Charlotte, NC 28255
Attention: Michelle M. Heath--
Investment Banking
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Administrative Agent:
NationsBank, National Association
(Carolinas)
NationsBank Corporate Center--7th Floor
Charlotte, NC 28255
Attention: Michelle M. Heath--
Investment Banking
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
SECTION 9.4. Governing Law; Submission to
Jurisdiction; Integration. (a) THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NORTH CAROLINA. THE PARTIES HERETO HEREBY
SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
73
YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY
OF NEW YORK AND OF ANY FEDERAL OR STATE COURT SITTING IN
CHARLOTTE, NORTH CAROLINA FOR PURPOSES OF ALL LEGAL PRO-
CEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY. The parties hereto
hereby irrevocably waive, to the fullest extent it may
effectively do so, any objection which they may now or
hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought
in an inconvenient forum. Nothing in this Section 9.4
shall affect the right of the Company to bring any action
or proceeding against the Transferor, any Designated
Subsidiary or its property in the courts of other juris-
dictions.
(b) This Agreement contains the final and
complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof
and shall constitute the entire Agreement among the
parties hereto with respect to the subject matter hereof
superseding all prior oral or written understandings.
SECTION 9.5. Severability; Counterparts. This
Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an
original and all of which when taken together shall
constitute one and the same Agreement. Any provisions of
this Agreement which are prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenfo-
rceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unen-
forceable such provision in any other jurisdiction.
SECTION 9.6. Successors and Assigns. (a) This
Agreement shall be binding on the parties hereto and
their respective successors and assigns; provided, howev-
er, that the Transferor may not assign any of its rights
or delegate any of its duties hereunder without the prior
written consent of the Company. No provision of this
Agreement shall in any manner restrict the ability of the
Company to assign, participate, grant security interests
in, or otherwise transfer any portion of the Transferred
Interest.
74
(b) The Transferor hereby agrees and
consents to the complete assignment by the Company of all
of its rights under, interest in, title to and obliga-
tions under this Agreement to the Collateral Agent.
SECTION 9.7. Waiver of Confidentiality. The
Transferor hereby consents to the disclosure of any non-
public information with respect to it received by the
Company or the Administrative Agent to any of the Compa-
ny, any nationally recognized rating agency rating the
Company's commercial paper, the Administrative Agent, the
Collateral Agent, the Liquidity Provider or the Credit
Support Provider in relation to this Agreement.
SECTION 9.8. Confidentiality Agreement. The
Transferor, LADD and each Designated Subsidiary hereby
agrees that it will not disclose the contents of this
Agreement or any other proprietary or confidential infor-
mation of the Company, the Collateral Agent, the Adminis-
trative Agent, the Liquidity Provider or the Credit
Support Provider to any other Person except (i) its
auditors and attorneys, directors, employees, financial
advisors (other than any commercial bank, except as
provided below) and any nationally recognized rating
agency, provided such auditors, attorneys, employees,
financial advisors or rating agencies are informed of the
highly confidential nature of such information or (ii) as
otherwise required by applicable law or order of a court
of competent jurisdiction or generally acceptable ac-
counting principles. If this Agreement shall be other-
wise publicly available, the Transferor may provide a
copy thereof to any person upon such person's reasonable
request. Notwithstanding the foregoing, if this Agree-
ment is not otherwise publicly available, with respect to
lenders to LADD, LADD may provide a copy of this Agree-
ment to such lenders only if required to do so pursuant
to the terms at any agreement between LADD and such
lenders existing on the date hereof. If not so required
to do so pursuant to the terms of such an agreement with
lenders and if this Agreement is not otherwise publicly
available, LADD shall be permitted to disclose the terms
of this Agreement, to the extent such terms relate to the
amount of the Net Investment and the Facility Limit and
the tenor hereof; provided, however, that LADD shall not
disclose the fees set forth in the Fee Letter or the
calculation of the Percentage Interest.
SECTION 9.9. Confidentiality Agreement of the
Company. Subject to Section 9.7, the Company hereby
75
agrees, and covenants to use its best efforts to cause
the Administrative Agent to agree, that it will not dis-
close the contents of this Agreement or any other propri-
etary or confidential information of the Transferor,
LADD, and the Designated Subsidiaries to any other Person
except (i) the Company's auditors and attorneys, employ-
ees, and financial advisors provided, such auditors,
attorneys, employees, or financial advisors are informed
of the highly confidential nature of such information or
(ii) as otherwise required by applicable law or order of
a court of competent jurisdiction or generally accepted
accounting principles.
SECTION 9.10. No Bankruptcy Petition Against
the Company. The Transferor, LADD and each Designated
Subsidiary hereby covenants and agrees that, prior to the
date which is one year and one day after the payment in
full of all outstanding Commercial Paper or other indebt-
edness of the Company, it will not institute against, or
join any other Person in instituting against, the Company
any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the
United States.
SECTION 9.11. No Recourse Against Stockhold-
ers, Officers or Directors. No recourse under any obli-
gation, covenant or agreement of the Company contained in
this Agreement shall be had against Merrill Lynch Money
Markets Inc. (or any affiliate thereof), or any stock-
holder, officer or director of the Company, as such, by
the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or other-
wise; it being expressly agreed and understood that this
Agreement is solely a corporate obligation of the Compa-
ny, and that no personal liability whatever shall attach
to or be incurred by Merrill Lynch Money Markets Inc. (or
any affiliate thereof), or the stockholders, officers or
directors of the buyer, as such, or any of them, under or
by reason of any of the obligations, covenants or agree-
ments of the Company contained in this Agreement, or
implied therefrom, and that any and all personal liabili-
ty for breaches by the Company of any of such obliga-
tions, covenants or agreements, either at common law or
at equity, or by statute or constitution, of Merrill
Lynch Money Markets Inc. (or any affiliate thereof) and
every such stockholder, officer or director is hereby
expressly waived as a condition of and consideration for
the execution of this Agreement.
76
SECTION 9.12. Characterization of the Transac-
tions Contemplated by the Agreement. It is the intention
of the parties that the transactions contemplated hereby
constitute the sale of the Transferred Interest, convey-
ing good title thereto free and clear of any Adverse
Claims to the Company and that the Transferred Interest
not be part of the Transferor's estate in the event of an
insolvency. If, notwithstanding the foregoing, the
transactions contemplated hereby should be deemed a
financing, the parties intend that the Transferor shall
be deemed to have granted to the Company, and the Trans-
feror hereby grants to the Company, a first priority
perfected security interest in all of the Transferor's
right, title and interest in, to and under the Receiv-
ables, together with Related Security and Collections
with respect thereto and together with all of the Transf-
eror's rights under the Purchase Agreement with respect
to the Receivables and LADD's obligations thereunder as
seller of the Receivables (including all of the Transfer-
or's rights under the Designated Subsidiaries Receivables
Purchase Agreement with respect to the Receivables and
any Designated Subsidiary's obligations thereunder as
seller of the Receivables), and that this Agreement shall
constitute a security agreement under applicable law.
The Transferor hereby assigns to the Company all of its
rights under the Purchase Agreement with respect to the
Receivables and with respect to any obligations thereun-
der of LADD as seller of the Receivables (including all
of the Transferor's rights under the Designated Subsid-
iaries Receivables Purchase Agreement with respect to the
Receivables and with respect to obligations thereunder of
any Designated Subsidiary as a seller of Receivables).
SECTION 9.13. Company Certificate. The Trans-
feror shall maintain a register in which it shall record
the name and address of each holder of the Company Cer-
tificate. The initial holder thereof shall be the Compa-
ny. Each holder of the Company Certificate agrees to
give the Transferor prompt notice of any transfer of the
Company Certificate as well as the name and address of
any subsequent holder thereof. Prior to the presentation
of the Company Certificate for registration of transfer,
the Company may treat the Person in whose name the Compa-
ny Certificate is registered as owner hereunder for all
purposes whatsoever.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
77
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Transfer and Administration
Agreement as of the date first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By:
Name:
Title:
LADD FUNDING CORP.,
as Transferor
By: (Signature of William S. Creekmuir)
Name: William S. Creekmuir
Title: V.P., Secr. & Treas.
LADD FURNITURE, INC.,
as Collection Agent
By: (Signature of William S. Creekmuir)
Name: William S. Creekmuir
Title: Sr. V.P., Secr., Treas. & Co.