LADD FUNDING CORP.
Buyer
and
LADD FURNITURE, INC.
Seller
RECEIVABLES PURCHASE AGREEMENT
Dated as of March 30, 1995
RECEIVABLES PURCHASE AGREEMENT
RECEIVABLES PURCHASE AGREEMENT, dated as of
March 30, 1995, between LADD FURNITURE, INC., a North
Carolina corporation ("Seller") and LADD FUNDING CORP., a
Delaware corporation("the "Buyer").
W I T N E S E T H :
WHEREAS, the Buyer desires to purchase from
time to time certain trade accounts receivable of certain
Obligors existing on the Effective Date (as hereinafter
defined) and acquired or generated thereafter in the
normal course of the Seller's business pursuant to writ-
ten agreements or with invoices on open accounts;
WHEREAS, the Seller desires to sell and assign
from time to time certain trade accounts receivable to
the Buyer upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, it is hereby agreed by and
between the Buyer and the Seller as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. All capitalized
terms used herein shall have the meanings specified
herein or, if not so specified, the meaning specified in
the Transfer Agreement, and shall include in the singular
number the plural and in the plural number the singular:
"Buyer" shall mean LADD Funding Corp. and its
successors and assigns.
"Charge-Off Ratio" means, for any period of
determination, the ratio (expressed as a percentage)
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 during such
period less Deemed Collections for the period.
"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.
"Contract" means an agreement or invoice in
substantially the form of one of the forms set forth in
Exhibit A to the Transfer Agreement or otherwise approved
by the Buyer, pursuant to or under which an Obligor shall
be obligated to pay for merchandise purchased or services
rendered.
"Conveyance Papers" shall have the meaning set
forth in Section 4.1(b) hereof.
"Credit and Collection Policy" shall mean each
of the Seller's and the Designated Subsidiaries' credit
and collection policy or policies and practices, relating
to Contracts and Receivables as in effect on the Closing
Date and referred to in Exhibit B to the Transfer Agree-
ment, as modified by the Seller from time to time in
accordance with Section 5.1(l).
"Designated Subsidiary" means each of Clayton-
Marcus Company Inc., Barclay Furniture Co. and Pilliod
Furniture Inc., and such other wholly-owned subsidiaries
of the Buyer as (i) become parties to this Agreement and
(ii) are consented to in writing by the Buyer and Enter-
prise to be "Designated Subsidiaries" hereunder.
"Designated Subsidiaries Receivables Purchase
Agreement" means the Receivables Purchase Agreement,
dated as of March 30, 1995, among LADD Furniture, Inc.,
as buyer, and the Designated Subsidiaries, as sellers, as
the same may be amended, supplemented or modified from
time to time.
"Effective Date" shall have the meaning set
forth in the Transfer Agreement.
"Eligible Receivable" means, at any time, any
Receivable:
(i) which has been originated
either by (i) the Seller, or (ii) a Designated
Subsidiary and sold by such Designated Subsid-
2
iary to the Seller pursuant to the Designated
Subsidiaries Receivables Purchase Agreement and
to which such Designated Subsidiary originally
had good title thereto and, in each case, to
which the Seller has good title to, in each
case 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 Buyer therein;
(iv) which is not a Delinquent
Receivable at the time of the initial creation
of an interest of the Buyer therein;
(v) which, according to the
Contract related thereto, is required to be
paid in full within 180 days of the original
billing date therefor;
(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;
3
(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;
(xiii) which was generated in the
ordinary course of the Seller's or a Designated
Subsidiary'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.
"Enterprise" shall mean Enterprise Funding
Corporation, a Delaware corporation, and its successors
and assigns.
4
"Permitted Assignee" shall have the meaning set
forth in Section 9.5 hereof.
"Purchase Discount" shall mean for any day, an
amount, calculated in good faith by the Buyer, equal to
the decimal equivalent of the sum of (i) the product of
(A) the sum of (x) the "AA" rated commercial paper index
rate for a maturity most closely corresponding to the
Estimated Maturity Period and (y) 0.50% (servicing fee)
and (z) 1.40% and (B) a fraction the numerator of which
is the Estimated Maturity Period of the Receivables and
the denominator of which is 360, plus (ii) the decimal
equivalent of the average Charge-Off Ratio with respect
to the prior three Fiscal Months.
"Purchase Price" shall have the meaning set
forth in Section 3.1 hereof.
"Receivable" means the indebtedness originally
owed to the Seller or to a Designated Subsidiary by any
Obligor (without giving effect to any purchase hereunder
by the Buyer at any time) under a Contract whether con-
stituting an account, chattel paper, instrument or gener-
al intangible, arising in connection with the sale of
merchandise or services by the Seller or such Designated
Subsidiary, and, in the case of indebtedness owed to a
Designated Subsidiary, sold to the Seller in accordance
with the Designated Subsidiaries Receivables Purchase
Agreement, and which, in all cases shall include the
right to payment of any Finance Charges and other obliga-
tions of such Obligor with respect thereto.
"Related Security" means with respect to any
Receivable:
(i) all of the Seller's inter-
est, if any, in the merchandise (including
returned merchandise), if any, the sale of
which by the Seller or Designated Subsidiary
gave rise to such Receivable;
(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-
5
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.
"Revolving Subordinated Note" shall mean the
note executed by the Buyer in favor of the Seller sub-
stantially in the form of Exhibit A attached hereto.
"Seller" shall mean LADD Furniture, Inc. and
its respective successors and assigns.
"Secured Obligations" shall have the meaning
set forth in Section 2.1(d) hereof.
"Transfer Agreement" shall mean the Transfer
and Administration Agreement dated as of March 30, 1995
among the Buyer, as transferor, LADD Furniture, Inc., as
collection agent and Enterprise, as such agreement may be
amended, modified or supplemented from time to time.
Section 1.2 Other Terms. All accounting terms
not specifically defined herein shall be construed in
accordance with generally accepted accounting principles.
All terms used in Article 9 of the UCC in the State of
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]
6
ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES
Section 2.1 Sale. (a) Upon the terms and
subject to the conditions set forth herein, the Seller
hereby sells, assigns, transfers and conveys to the
Buyer, and the Buyer hereby purchases from the Seller, on
the terms and subject to the conditions specifically set
forth herein, all of the Seller's right, title and inter-
est, whether now owned or hereafter acquired, in, to and
under all Receivables outstanding on the Effective Date
and thereafter owned by the Seller, whether created by
Seller or by a Designated Subsidiary, in each case, to-
gether with all Related Security and Collections with
respect thereto and all proceeds of the foregoing. The
foregoing sale, assignment, transfer and conveyance does
not constitute an assumption by the Buyer of any obliga-
tions of the Seller, any Designated Subsidiary or any
other Person to Obligors or to any other Person in con-
nection with the Receivables or under any Related Securi-
ty or other agreement and instrument relating to the
Receivables.
(b) In connection with the foregoing sale, the
Seller agrees to record and file on or prior to the
Closing Date, at its own expense, a financing statement
or statements with respect to the Receivables (including
Receivables originated by any Designated Subsidiary) and
the other property described in Section 2.1(a) sold by
the Seller hereunder meeting the requirements of appli-
cable state law in such manner and in such jurisdictions
as are necessary to perfect and protect the interests of
the Buyer created hereby under the applicable UCC against
all creditors of and purchasers from the Seller and each
Designated Subsidiary, and to deliver either the origi-
nals of such financing statements or a file-stamped copy
of such financing statements or other evidence of such
filings to the Buyer on the Closing Date.
(c) The Seller agrees that from time to time,
at its expense, it will promptly execute and deliver all
instruments and documents and take all actions as may be
necessary or as the Buyer may reasonably request in order
to perfect or protect the interest of the Buyer in the
Receivables purchased hereunder or to enable the Buyer to
exercise or enforce any of its rights hereunder. Without
7
limiting the foregoing, the Seller will, upon the request
of the Buyer, in order to accurately reflect this pur-
chase and sale transaction, execute and file such financ-
ing or continuation statements or amendments thereto or
assignments thereof (as permitted pursuant hereto) as may
be requested by the Buyer and mark its master data pro-
cessing records and other documents with a legend de-
scribing the purchase by the Buyer of the Receivables and
the subsequent transfer thereof to Enterprise pursuant to
the Transfer Agreement 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 Seller
shall, upon request of the Buyer, obtain such additional
search reports as the Buyer shall request. To the full-
est extent permitted by applicable law, the Buyer shall
be permitted to sign and file continuation statements and
amendments thereto and assignments thereof without the
Seller's signature. Carbon, photographic or other repro-
duction of this Agreement or any financing statement
shall be sufficient as a financing statement.
(d) It is the express intent of the Seller and
the Buyer that the conveyance of the Receivables by the
Seller to the Buyer pursuant to this Agreement be con-
strued as a sale of such Receivables by the Seller to the
Buyer. It is, further, not the intention of the Seller
and the Buyer that such conveyance be deemed a grant of a
security interest in the Receivables by the Seller to the
Buyer to secure a debt or other obligation of the Seller.
However, in the event that, notwithstanding the intent of
the parties, the Receivables are held to continue to be
property of the Seller, then (i) this Agreement also
shall be deemed to be and hereby is a security agreement
within the meaning of the UCC; and (ii) the conveyance by
the Seller provided for in this Agreement shall be deemed
to be, and the Seller hereby grants to the Buyer, a secu-
rity interest in and to all of the Seller's right, title
and interest in all Receivables outstanding on the Effe-
ctive Date and thereafter owned by the Seller, whether
created by the Seller or by a Designated Subsidiary, in
each case, together with all Related Security and Col-
lections with respect thereto and all proceeds of the
foregoing to secure (1) the rights of the Buyer and (2) a
loan to the Seller in the amount of the Purchase Price as
set forth in this Agreement (the "Secured Obligations").
The Seller and the Buyer shall, to the extent consistent
8
with this Agreement, take such actions as may be neces-
sary to ensure that, if this Agreement were deemed to
create a security interest in the Receivables, such
security interest would be deemed to be a perfected
security interest of first priority in favor of the Buyer
under applicable law and will be maintained as such
throughout the term of this Agreement.
Section 2.2 Servicing of Receivables. The
servicing, administering and collection of the Receiv-
ables shall be conducted by the Seller, who hereby agrees
to perform, 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 dili-
gence which the Seller employs in servicing similar
receivables for its own account, in accordance with the
Credit and Collection Policy. The Buyer hereby appoints
the Seller as its agent to enforce the Buyer's rights and
interests in and under the Receivables, the Related
Security and the Contracts. The Seller shall hold in
trust for the Buyer, in accordance with its interests,
all Records which evidence or relate to Receivables or
Related Security. Notwithstanding anything to the con-
trary contained herein, from and after the occurrence of
a Termination Event or a Potential Termination Event
(each as defined in the Transfer Agreement) the Buyer or
Enterprise shall have the absolute and unlimited right to
terminate the Seller's servicing activities described in
this Section 2.2. In consideration of the foregoing, the
Buyer agrees to pay the Seller a servicing fee of one-
half of one percent per annum on the Outstanding Balance
of the Receivables, payable monthly, for its performance
of the duties and obligations described in this Section
2.2.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
ARTICLE III
CONSIDERATION AND PAYMENT
Section 3.1 Purchase Price. The Purchase
Price for the Receivables and related property conveyed
to the Buyer by the Seller under this Agreement shall be
a dollar amount equal to (a) for Receivables transferred
by Seller on the date of the initial Incremental Transfer
under the Transfer Agreement, the product of (i) the
aggregate Outstanding Balance of all Receivables as of
the Effective Date and (ii) one minus the then applicable
Purchase Discount, and (b) for Receivables transferred by
the Seller on any date thereafter, the product of (i) the
aggregate Outstanding Balance of the Receivables trans-
ferred on such date and (ii) one minus the Purchase Dis-
count applicable on such date.
Section 3.2 Payment of Purchase Price. The
Purchase Price for Receivables shall be paid or provided
for on the Effective Date with respect to the Receivables
existing on the Effective Date and on the last Business
Day of each Fiscal Month thereafter during which Receiv-
ables are sold hereunder, as the case may be, (i) by
payment in immediately available funds to the extent such
funds are available in excess of necessary working capi-
tal and (ii) to the extent such funds are not available,
by increasing the amount due the Seller under the Revolv-
ing Subordinated Note by notation thereon; provided,
however, that the amount of the Revolving Subordinated
Note on any Business Day shall not exceed 80% of (x) the
aggregate Purchase Price of the Receivables purchased
hereunder existing on such Business Day minus (y) an
amount equal to the Net Investment (as defined in the
Transfer Agreement). To the extent that the total Pur-
chase Price for Receivables is not paid in full by the
Buyer on the Effective Date or on each Business Day on
which Receivables are purchased hereunder either in cash
or by an increase in the principal amount of the Revolv-
ing Subordinated Note, as the case may be, the Seller
shall be deemed to have contributed to the Buyer Receiv-
ables in an aggregate principal amount equal to such
shortfall.
Section 3.3 Monthly Report. At the end of
each Fiscal Month, the Seller shall deliver to the Buyer
a monthly report showing (i) the aggregate Purchase Price
10
of Receivables acquired or generated by the Seller in the
preceding month and (ii) the aggregate Outstanding Bal-
ance of such Receivables that are Eligible Receivables.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Seller's Representations and War-
ranties. The Seller represents and warrants to the Buyer
as of the Closing Date and on the Effective Date, and
shall be deemed to represent and warrant as of the date
of the creation of any Receivable sold to the Buyer
pursuant to this Agreement that:
(a) Corporate Existence and Power. The
Seller 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 conducted.
(b) Corporate and Governmental Autho-
rization; Contravention. The execution, delivery and
performance by the Seller of this Agreement, and each
other document or instrument to be delivered by the
Seller hereunder (collectively, "Conveyance Papers") and
the Designated Subsidiaries Receivables Purchase Agree-
ment is within the Seller's corporate powers, have been
duly authorized by all necessary corporate action, re-
quire no action by or in respect of, or filing with, any
governmental body, agency or official (except as contem-
plated by Section 2.1(c)), 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 Seller or of any agreement, judgment,
injunction, order, decree or other instrument binding
upon the Seller or result in the creation or imposition
of any lien on assets of the Seller or any of its Sub-
sidiaries (except as contemplated by Section 2.1(c)).
(c) Binding Effect. Each of the Convey-
ance Papers and the Designated Subsidiaries Receivables
Purchase Agreement constitutes the legal, valid and bind-
ing obligation of the Seller, enforceable in accordance
with its terms, subject to applicable bankruptcy, insol-
vency, moratorium or other similar laws affecting the
rights of creditors.
12
(d) Perfection. Immediately preceding
each sale hereunder, the Seller shall be the owner of all
of the Receivables sold by it hereunder, free and clear
of all Adverse Claims. On or prior to the Closing Date,
all financing statements and other documents required to
be recorded or filed in order to perfect and protect the
Buyer's interest in the Receivables against all creditors
of and purchasers from the Seller or any Designated
Subsidiary will have been either delivered to the Buyer
or 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 either
delivered to the Buyer or paid in full, as applicable.
(e) Accuracy of Information. All infor-
mation heretofore furnished by the Seller to the Buyer
for purposes of or in connection with this Agreement, the
Conveyance Papers, the Designated Subsidiaries Receiv-
ables Purchase Agreement or any transaction contemplated
in connection therewith is, and all such information
hereafter furnished by the Seller to the Buyer will be,
true and accurate in every material respect, on the date
such information is stated or certified.
(f) Tax Status. The Seller and its
Subsidiaries 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 Seller 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 Seller or the Buyer's interest in the
Receivables and except for any tax which is being con-
tested in good faith and by proper proceedings and
against which adequate reserves are being maintained.
The charges, accruals and reserves on the books of the
Seller and its Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of the Seller,
adequate.
(g) Action, Suits. Except as set forth
in Exhibit H to the Transfer Agreement, there are no ac-
tions, suits or proceedings pending, or to the knowledge
of the Seller threatened, against or affecting the Seller
or any Affiliate of the Seller or their respective prop-
erties, in or before any court, arbitrator or other body,
13
which may materially adversely affect the financial
condition of the Seller and its subsidiaries taken as a
whole or materially adversely affect the ability of
Seller to perform its obligations under this Agreement.
(h) Use of Proceeds. No proceeds of any
sale hereunder will be used by the Seller 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 Seller is
in High Point, North Carolina and the offices where the
Seller keeps all its Records, are located at the ad-
dress(es) described on Exhibit I to the Transfer Agree-
ment or such other locations notified to the Buyer in
accordance with Sections 2.1(b) in jurisdictions where
all action required by Section 2.1(b) has been taken and
completed.
(j) Good Title. Upon each sale hereun-
der, the Buyer shall acquire all right, title and inter-
est of the Seller in each Receivable that exists on the
date of such sale and in the Related Security and Collec-
tions with respect thereto free and clear of any Adverse
Claim.
(k) Tradenames, Etc. As of the date
hereof: (i) the Seller's chief executive office is
located at the address for notices set forth in this Sec-
tion 4.1; (ii) the Seller has, within the last five (5)
years, operated only under the tradenames identified in
Exhibit J to the Transfer Agreement, 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 attached to the Transfer Agreement.
(l) Nature of Receivables. Each Receiv-
able sold hereunder to the Buyer shall be an Eligible Re-
ceivable.
(m) Amount of Receivables. As of the
close of business on the second Business Day prior to the
Effective Date, the aggregate Outstanding Balance of the
14
Receivables in existence shall be as set forth in the
certification of the Seller required to be delivered
pursuant to Section 7.1(f).
(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) Not an Investment Company. Each of
the Seller and any Designated Subsidiary is not an "in-
vestment company" within the meaning of the Investment
Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
(p) ERISA. The Seller is in compliance
in all material respects with ERISA and no ERISA lien on
any of the Receivables shall exist.
(q) 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 to the Transfer Agree-
ment (or at such other Lock-Box Banks and/or with such
other Lock-Box Accounts as have been notified to the
Buyer and for which Lock-Box Agreements have been execut-
ed in accordance with Section 2.8(b) of the Transfer
Agreement and delivered to the Collection Agent).
Any document, instrument, certificate or notice
delivered to the Buyer hereunder shall be deemed a repre-
sentation and warranty by the Seller delivering such
document.
Section 4.2 Reaffirmation of Representations
and Warranties by the Seller. On each day that a sale of
a Receivable is made hereunder, the Seller, by accepting
the proceeds of such sale, shall be deemed to have certi-
fied that all representations and warranties described in
Section 4.1 are correct with respect to the Seller on and
as of such day as though made on and as of such day.
Section 4.3 Representations and Warranties of
the Buyer. The Buyer hereby represents and warrants to,
and agrees with the Seller, as of the Closing Date and
the Effective Date, and shall be deemed to represent and
15
warrant as of the date of the creation of any Receivable
sold to the Buyer hereunder that:
(a) Organization and Good Standing. The Buyer
is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and
has full power, authority, and legal right to execute,
deliver, and perform its obligations under the Conveyance
Papers, to conduct its business as such business is
presently conducted, and in all material respects, to own
its property and conduct its other businesses as such
properties are presently owned and such businesses are
presently conducted.
(b) Due Qualification. The Buyer is duly
qualified to do business and is in good standing as a
foreign corporation (or is exempt from such requirements)
and has obtained all necessary licenses and approvals
with respect to the Buyer in each jurisdiction in which
failure to so qualify or to obtain such licenses and
approvals would render any Contract or any Receivable
unenforceable by the Buyer.
(c) Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance
by the Buyer of this Agreement is within the Buyer's
corporate powers, have been duly authorized by all neces-
sary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or
official, 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
Buyer or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Buyer or
result in the creation or imposition of any lien on
assets of the Buyer.
(d) All Consents Required. All approvals,
authorizations, licenses, consents, orders, or other
actions of any Person or of any governmental body re-
quired in connection with the execution and delivery by
the Buyer of the Conveyance Papers, the performance by
the Buyer of the transactions contemplated by the Convey-
ance Papers, and the fulfillment of the terms of the
Conveyance Papers have been obtained and are in full
force and effect.
16
Section 4.3 Notice of Breach. The represen-
tations and warranties set forth in Section 4.1 shall
survive the conveyance of the Receivables to the Buyer,
and termination of the rights and obligations of the
Buyer and the Seller under this Agreement. Upon discov-
ery by the Buyer or the Seller of a breach of any of the
foregoing representations and warranties, the party
discovering such breach shall give prompt written notice
to the other within three Business Days of such discov-
ery.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
ARTICLE V
COVENANTS OF THE SELLER
Section 5.1 Seller's Covenants. The Seller
hereby covenants and agrees with the Buyer as follows:
During the term of this Agreement, and until
all Receivables sold to the Buyer shall have been paid in
full or written-off as uncollectible, and all amounts
owed by the Seller pursuant to this Agreement have been
paid, unless the Buyer otherwise consents in writing, the
Seller covenants and agrees as follows:
(a) Conduct of Business. The Seller will, and
will cause each of its Subsidiaries to, carry on and con-
duct 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 incorpo-
ration and maintain all requisite authority to conduct
its business in each jurisdiction in which its business
is conducted.
(b) Compliance with Laws. The Seller will,
and will cause each of its Subsidiaries to, comply in all
material respects with all laws, rules, regulations, or-
ders, writs, judgments, injunctions, decrees or awards to
which it may be subject.
(c) Furnishing of Information and Inspection
of Records. The Seller will, and will cause each of the
Designated Subsidiaries to, furnish to the Buyer from
time to time such information with respect to the Receiv-
ables as the Buyer may reasonably request, including,
without limitation, listings identifying the Obligor and
the Outstanding Balance for each Receivable. The Seller
will, and will cause each of the Designated Subsidiaries
to, at any time and from time to time during regular
business hours permit the Buyer, or its agents or repre-
sentatives upon three Business Days notice, (i) to exam-
ine and make copies of and abstracts from all Records and
(ii) to visit the offices and properties of the Seller or
the Designated Subsidiary for the purpose of examining
such Records, and to discuss matters relating to Receiv-
ables or the Seller's or the Designated Subsidiary's
18
performance hereunder with any of the officers, direc-
tors, employees or independent public accountants of the
Seller having knowledge of such matters.
(d) Keeping of Records and Books of Account.
The Seller will maintain a system of accounting estab-
lished and administered in accordance with generally ac-
cepted accounting principles, consistently applied, and
will maintain for each of its Subsidiaries, a system of
accounting established and administered in accordance
with accounting practices currently used by LADD Subsid-
iaries, consistently applied, and will maintain and
implement administrative and operating procedures (in-
cluding, without limitation, an ability to recreate -
records evidencing Receivables in the event of the de-
struction of the originals thereof), and keep and main-
tain, all documents, books, records and other information
reasonably necessary or advisable for the collection of
all Receivables (including, without limitation, records
adequate to permit the daily identification of each new
Receivable and all Collections of and adjustments to each
existing Receivable). The Seller will give the Buyer
notice of any material change in the administrative and
operating procedures referred to in the previous sen-
tence.
(e) Performance and Compliance with Receiv-
ables and Contracts. The Seller at its expense will, and
will cause each of its Subsidiaries to, timely and fully
perform and comply with all material provisions, cove-
nants and other promises required to be observed by it
under the Contracts related to the Receivables.
(f) Credit and Collection Policies. The
Seller will, and will cause each of the Designated Sub-
sidiaries to, comply in all material respects with the
Credit and Collection Policy in regard to each Receivable
and the related Contract.
(g) Collections. The Seller shall, and shall
cause each of the Designated Subsidiaries to, instruct
all Obligors to cause all Collections to be deposited
directly to a Lock-Box Account. The Seller may, however,
in connection with Obligors which would otherwise be over
their credit limit if goods were shipped prior to pay-
ment, direct Obligors to make payments directly to the
19
Seller which shall deposit such Collections in a Lock-Box
Account pursuant to Section 5.1(h) below.
(h) Collections Received. The Seller shall,
and shall cause each of the Designated Subsidiaries to
hold in trust, and deposit, 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 Seller or by a Designated Subsidiary.
(i) Sale Treatment. The Seller agrees to
treat this conveyance for all purposes (including, with-
out limitation, tax and financial accounting purposes) as
a sale and, to the extent any such reporting is required,
shall report the transactions contemplated by this Agree-
ment on all relevant books, records, tax returns, finan-
cial statements and other applicable documents as a sale
of the Receivables to the Buyer.
(j) No Sales, Liens, Etc. Except as otherwise
provided herein, the Seller will not, and will not permit
any of its Subsidiaries to 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.
(k) No Extension or Amendment of Receivables.
The Seller will not and will not permit any of the Desig-
nated Subsidiaries to extend, amend or otherwise modify
the terms of any Receivable, or amend, modify or waive
any term or condition of any Contract related thereto.
(l) No Change in Business or Credit and Col-
lection Policy. The Seller will not and will not permit
any of the Designated Subsidiaries to make any change in
the character of its business or in the Credit and Col-
lection Policy, which change would, in either case,
impair the collectibility of any Receivable.
(m) No Mergers, Etc. The Seller will not (i)
consolidate or merge with or into any other Person, or
20
(ii) sell, lease or transfer all or substantially all of
its assets to any other person; provided, however, that
the Seller may consolidate or merge with a Person if the
Seller shall be the surviving entity and such merger or
consolidation does not cause a Termination Event or
Potential Termination Event under the Transfer Agreement.
(n) Change in Payment Instructions to Obligo-
rs. The Seller will not, and will not permit any of the
Designated Subsidiaries to 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 to the Transfer Agreement
or make any change in its instructions to Obligors re-
garding payments to be made to any Lock-Box Account,
unless (i) such instructions are to deposit such payments
to another existing Lock-Box Account or (ii) the Buyer
and the Administrative Agent shall have received written
notice of such addition, termination or change at least
30 days prior thereto and the Buyer shall have received a
Lock-Box Agreement executed by each new Lock-Box Bank or
an existing Lock-Box Bank with respect to each new Lock-
Box Account, as applicable.
(o) Deposits to Lock-Box Accounts. The Seller
will not, and will not permit any of the Designated Sub-
sidiaries to deposit or otherwise credit, or cause or
permit to be so deposited or credited, to any Lock-Box
Account cash or cash proceeds other than Collections of
Receivables.
(p) Change of Name, Etc. The Seller shall
not, and will not permit any of the Designated Subsidiar-
ies to 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 Seller or the
Designated Subsidiary delivers to the Buyer and the Col-
lateral Agent (i) UCC financing statements, executed by
the Seller or the Designated Subsidiary, necessary to re-
flect such change and to continue the perfection of the
Buyer's interest in the Receivables and (ii) new or
revised Lock-Box Agreements executed by the Lock-Box
Banks which reflect such change and enable the Collateral
Agent to exercise its rights contained in Section 2.8 of
the Transfer Agreement.
(q) Indemnification. The Seller agrees indem-
nify, defend and hold the Buyer and any Permitted Assign-
21
ee harmless from and against any and all loss, liability,
damage, judgment, claim, deficiency, or expense (includ-
ing interest, penalties, reasonable attorneys' fees and
amounts paid in settlement) to which the Buyer or such
Permitted Assignee may become subject insofar as such
loss, liability, damage, judgment, claim, deficiency, or
expense arises out of or is based upon a breach by the
Seller of its representations, warranties and covenants
contained herein, or any information certified in any
Schedule delivered by the Seller hereunder or in connec-
tion with the Conveyance Papers, being untrue in any re-
spect at any time. The obligations of the Seller under
this Section 5.1(q) shall be considered to have been
relied upon by the Buyer and Enterprise and shall survive
the execution, delivery, performance and termination of
this Agreement regardless of any investigation made by
the Buyer, any Permitted Assignee or on the behalf of any
of them.
(r) ERISA. The Seller shall, and shall cause
each of the Designated Subsidiaries to promptly give the
Buyer written notice upon becoming aware that the Seller
or such Designated Subsidiary is not in compliance in all
material respects with ERISA or that any ERISA lien on
any of the Receivables exists.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
22
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1 Mandatory Repurchase.
(a) Breach of Warranty. If on any day any
Receivable sold by the Seller hereunder shall fail to
meet the conditions set forth in the definition of Eligi-
ble Receivable or any representation or warranty made
herein in respect of a Receivable shall no longer be
true, the Seller shall be deemed to have received on such
day a Collection of such Receivable in full and shall on
such day pay to the Buyer an amount equal to the aggre-
gate Outstanding Balance of such Receivable.
(b) Reconveyance Under Certain Circumstances.
The Seller agrees that, with respect to any Receivable
sold hereunder, in the event of a breach of any of the
representations and warranties set forth in Sections
4.1(d), 4.1(e), 4.1(g), 4.1(h), 4.1(j), 4.1(l), 4.1(m)
and 4.1(p), the Seller agrees to accept the reconveyance
of any Receivable created on and after the date of such
breach upon receipt by the Seller of notice given in
writing by the Buyer and the Seller's failure to cure
such breach within 30 days (or, in the case of repre-
sentations and warranties found in Sections 4.1(d) and
4.1(j), within 3 days) of such notice. In the event of a
reconveyance under this Section 6.1(b), the Seller shall
pay to the Buyer in immediately available funds on such
30th day (or third day, if applicable) an amount equal to
the Outstanding Balance of any such Receivable.
Section 6.2 Dilutions. The Seller agrees that
if on any day the Outstanding Balance of a Receivable
sold by the Seller hereunder is either (x) reduced as a
result of defective, rejected or returned goods or other
dilution factor, any billing adjustment or other adjust-
ment, 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) then the Seller shall
be deemed to have received on such day a collection of
such Receivable in the amount of such reduction or can-
cellation and shall pay to the Buyer an amount equal to
such reduction or cancellation.
23
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to the Buyer's Obliga-
tions Regarding Receivables. The obligations of the
Buyer to purchase the Receivables on any Business Day
shall be subject to the satisfaction of the following
conditions:
(a) All representations and warranties of the
Seller contained in this Agreement shall be true and
correct on the Effective Date and on the day of creation
of any Receivable thereafter with the same effect as
though such representations and warranties had been made
on such date;
(b) All information concerning the Receivables
provided to the Buyer shall be true and correct in all
material respects as of the Effective Date, in the case
of Receivables sold to the Buyer on the Effective Date,
or the date such Receivables are created, in the case of
Receivables created after the Effective Date;
(c) At the Effective Date, the Seller shall
have substantially performed all other obligations re-
quired to be performed by the provisions of this Agree-
ment;
(d) With respect to Receivables sold to the
Buyer by the Effective Date, the Seller shall have either
delivered or caused to be delivered to the Buyer or filed
or caused to be filed the financing statement(s) required
to be filed pursuant to Section 2.1(b);
(e) All corporate and legal proceedings and
all instruments in connection with the transactions
contemplated by this Agreement shall be satisfactory in
form and substance to the Buyer, and the Buyer shall have
received from the Seller copies of all documents (includ-
ing, without limitation, records of corporate proceed-
ings) relevant to the transactions herein contemplated as
the Buyer may reasonably have requested; and
(f) On the Effective Date, the Seller shall
deliver to the Buyer and Enterprise a certification of
the aggregate Outstanding Balance of the Receivables in
24
existence as of the close of business on the second Busi-
ness Day prior to the Effective Date.
Section 7.2 Conditions Precedent to Seller's
Obligations. The obligations of the Seller to sell
Receivables on any Business Day shall be subject to the
satisfaction of the following conditions:
(a) All representations and warranties of the
Buyer contained in this Agreement shall be true and
correct with the same effect as though such representa-
tions and warranties had been made on such date;
(b) Payment or provision for payment of the
Purchase Price in accordance with the provisions of
Section 3.3 hereof shall have been made; and
(c) All corporate and legal proceedings and
all instruments in connection with the transactions
contemplated by this Agreement shall be satisfactory in
form and substance to the Seller, and the Seller shall
have received from the Buyer copies of all documents
(including, without limitation, records of corporate
proceedings) relevant to the transactions herein contem-
plated as the Seller may reasonably have requested.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
ARTICLE VIII
TERM AND TERMINATION
Section 8.1 Term. This Agreement shall com-
mence as of the date of execution and delivery hereof and
shall continue in full force and effect until the earlier
of: (a) the date on which the Net Investment shall have
been reduced to zero and all other Aggregate Unpaids
shall have been paid to Enterprise pursuant to the Trans-
fer Agreement; or (b) upon the occurrence of an Event of
Bankruptcy with respect to either the Buyer or any Sell-
er, or (c) either the Buyer or the Seller becomes unable
for any reason to purchase or re-purchase Receivables in
accordance with the provisions of this Agreement or
default in its obligations hereunder, which default
continues unremedied for more than 30 days after written
notice (any such date being a "Termination Date"); pro-
vided, however, that the termination of this Agreement
pursuant to this Section 8.1 hereof shall not discharge
any Person from any obligations incurred prior to such
termination, including, without limitation, any obliga-
tions to make any payments with respect to Receivables
sold prior to such termination; provided, further, that
the events of termination referred to in clause (b) or
(c) above shall only terminate the Agreement with respect
to the Seller when affected thereby.
Section 8.2 Effect of Termination. No termi-
nation or rejection or failure to assume the executory
obligations of this Agreement in the bankruptcy of the
Seller or the Buyer shall be deemed to impair or affect
the obligations pertaining to any executed sale or exe-
cuted obligations, including, without limitation, pre-
termination breaches of representations and warranties by
the Seller or the Buyer. Without limiting the foregoing,
prior to termination, the failure of the Seller to deliv-
er computer records of Receivables or any reports regard-
ing the Receivables shall not render such transfer or
obligation executory, nor shall the continued duties of
the parties pursuant to Article 5 or Section 9.1 of this
Agreement render an executed sale executory.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Amendment. This Agreement and any
other Conveyance Papers and the rights and obligations of
the parties hereunder may not be changed orally, but only
by an instrument in writing signed by the Buyer and the
Seller and consented to in writing by Enterprise. Any
reconveyance executed in accordance with the provisions
hereof shall not be considered amendments to this Agree-
ment.
Section 9.2 Governing Law. 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 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 PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. Each party hereto hereby irrevo-
cably waives, to the fullest extent it may effectively do
so, any objection which it 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 inconve-
nient forum. Nothing in this Section 9.2 shall affect
the right of the Buyer to bring any action or proceeding
against the Seller or its property in the courts of other
jurisdictions.
Section 9.3 Notices. All demands, notices and
communications hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered at
or mailed by registered mail, return receipt requested,
to
27
(a) in the case of the Buyer:
LADD Funding Corp.
William S. Creekmuir
Vice President, Secretary and Treasurer
One Plaza Center
Box HP3
High Point, N.C. 27261-1500
Telephone: (910) 410-6601
Telecopy: (910) 888-6344
with a copy 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
(b) in the case of the Seller:
LADD Furniture, Inc.
William S. Creekmuir
Senior V.P. and CFO
One Plaza Center
Box HP3
High Point, N.C. 27261-1500
Telephone: (910) 889-0333
Telecopy: (910) 888-6344
or, as to each party, at such other address as shall be
designated by such party in a written notice to each
other party.
Section 9.4 Severability of Provisions. If
any one or more of the covenants, agreements, provisions
or terms of this Agreement or any other Conveyance Paper
shall for any reason whatsoever be held invalid, then
such covenants, agreements, provisions, or terms shall be
deemed severable from the remaining covenants, agree-
ments, provisions, or terms of this Agreement or any
other Conveyance Paper and shall in no way affect the
validity or enforceability of the other provisions of
this Agreement or of any other Conveyance Paper.
28
Section 9.5 Assignment. This Agreement and
all other Conveyance Papers may not be assigned by the
parties hereto except that the Buyer may assign its
rights hereunder pursuant to the Transfer Agreement to
Enterprise and its successors and assigns thereunder, or
to another person approved in writing by the Seller
(each, a "Permitted Assignee"). The Buyer hereby noti-
fies (and the Seller hereby acknowledges that) the Buyer,
pursuant to the Transfer Agreement, has assigned its
rights hereunder to Enterprise, and that Enterprise has
collaterally assigned its rights under the Transfer
Agreement to the Collateral Agent and may, from time to
time, assign interests in its rights under the Transfer
Agreement to one or more Liquidity Providers. All rights
of the Buyer hereunder may be exercised by Enterprise or
its assignee.
Section 9.6 Further Assurances. The Buyer and
the Seller agree to do and perform, from time to time,
any and all acts and to execute any and all further
instruments required or reasonably requested by the other
party more fully to effect the purposes of this Agreement
and the other Conveyance Papers, including, without
limitation, the execution of any financing statements or
continuation statements or equivalent documents relating
to the Receivables for filing under the provisions of the
UCC or other laws of any applicable jurisdiction.
Section 9.7 No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the
part of the Buyer, the Seller, Enterprise or any Permit-
ted Assignee, any right, remedy, power or privilege here-
under, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exer-
cise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaus-
tive of any rights, remedies, powers and privilege pro-
vided by law.
Section 9.8 Counterparts. This Agreement and
all other Conveyance Papers may be executed in two or
more counterparts including telefax transmission thereof
(and by different parties on separate counterparts), each
of which shall be an original, but all of which together
shall constitute one and the same instrument.
29
Section 9.9 Binding Effect; Third-Party Bene-
ficiaries. This Agreement and the other Conveyance
Papers will inure to the benefit of and be binding upon
the parties hereto and their respective successors and
permitted assigns. Any Permitted Assignee, including
Enterprise, shall be considered a third-party beneficiary
of this Agreement.
Section 9.10 Merger and Integration. Except
as specifically stated otherwise herein, this Agreement
and the other Conveyance Papers set forth the entire
understanding of the parties relating to the subject
matter hereof, and all prior understandings, written or
oral, are superseded by this Agreement and the other
Conveyance Papers. This Agreement and the other Convey-
ance Papers may not be modified, amended, waived or
supplemented except as provided herein.
Section 9.11 Headings. The headings herein
are for purposes of reference only and shall not other-
wise affect the meaning or interpretation of any provi-
sion hereof.
Section 9.12 Exhibits. The schedules and
exhibits referred to herein shall constitute a part of
this Agreement and are incorporated into this Agreement
for all purposes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
30
IN WITNESS WHEREOF, the Buyer and the Seller
each have caused this Agreement to be duly executed by
their respective officers as of the day and year first
above written.
LADD FURNITURE, INC.
as Seller
By: (Signature of William S. Creekmuir
Name: William S. Creekmuir
Title: Sr. V.P., Secr., Treas. & CFO
LADD FUNDING CORP.
as Buyer
By: (Signature of William S. Creekmuir
Name: William S. Creekmuir
Title: V.P., Secr. & Treas.