LADD FURNITURE, INC.
Buyer
and
CLAYTON-MARCUS COMPANY, INC.,
BARCLAY FURNITURE CO., and
PILLIOD FURNITURE, INC.
Sellers
RECEIVABLES PURCHASE AGREEMENT
Dated as of March 30, 1995
RECEIVABLES PURCHASE AGREEMENT
RECEIVABLES PURCHASE AGREEMENT, dated as of
March 30, 1995, by and among CLAYTON-MARCUS COMPANY,
INC., a North Carolina corporation, BARCLAY FURNITURE
CO., a Mississippi corporation, and PILLIOD FURNITURE,
INC., a North Carolina Corporation (each a "Designated
Subsidiary" or "Seller") and LADD FURNITURE, INC., a
North Carolina 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 generated thereafter in the normal course of
their respective businesses pursuant to written agree-
ments or with invoices on open accounts;
WHEREAS, each 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 each 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 Furniture, Inc., and
its successors and assigns.
"Charge-Off Ratio" means, for any period of
determination and with respect to Receivables originated
by a Designated Subsidiary, 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 originated by such Designated Subsidiary
which became Defaulted Receivables during such period, by
(ii) the aggregate amount of Collections related to such
Receivables during such period less Deemed Collections
related thereto for such 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
Seller's 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 Agreement, as modified by such 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 to be "Des-
ignated Subsidiaries" hereunder.
"Designated Subsidiary's Discount" shall mean
for any day for a Designated Subsidiary, an amount,
calculated in good faith by the Buyer, equal to the deci-
mal 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 for such Receivables and the
denominator at which is 360 and (ii) the decimal equiva-
2
lent of the applicable average Charge-Off Ratio with re-
spect to the prior three Fiscal Months.
"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
by a Designated Subsidiary and to which such
Designated Subsidiary 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 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
3
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;
(xiii) which was generated in the
ordinary course of the Seller'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.
4
"Enterprise" shall mean Enterprise Funding
Corporation, a Delaware corporation, and its successors
and assigns.
"Permitted Assignee" shall have the meaning set
forth in Section 9.5 hereof.
"Purchase Price" shall have the meaning set
forth in Section 3.1 hereof.
"Receivable" means the indebtedness owed to any
Seller by any Obligor (without giving effect to any
purchase hereunder by the Buyer at any time) under a
Contract whether constituting an account, chattel paper,
instrument or general intangible, arising in connection
with the sale of merchandise or services by such Seller,
and includes the right to payment of any Finance Charges
and other obligations of such Obligor with respect there-
to.
"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 gave rise to such Receiv-
able;
(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.
5
"Seller" shall mean each of the Designated
Subsidiaries and their respective successors and assigns.
"Secured Obligations" shall have the meaning
set forth in Section 2.1(e) hereof.
"Transfer Agreement" shall mean the Transfer
and Administration Agreement dated as of March 30, 1995
among the LADD Funding Corp. as transferor, LADD Furni-
ture, 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 BLACK]
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, each Seller
hereby sells, assigns, transfers and conveys to the
Buyer, and the Buyer hereby purchases from each Seller,
on the terms and subject to the conditions specifically
set forth herein, all of such Seller's right, title and
interest, whether now owned or hereafter acquired, in, to
and under all Receivables outstanding on the Effective
Date and thereafter created by such Seller, in each case,
together 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 any of the Sellers, or any other Person to
Obligors or to any other Person in connection with the
Receivables or under any Related Security or other agree-
ment and instrument relating to the Receivables.
(b) In connection with the foregoing sale,
each 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 and the
other property described in Section 2.1(a) sold by such
Seller hereunder meeting the requirements of applicable
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 such Seller, and to
deliver either the originals of such financing statements
or a file-stamped copy of such financing statements or
other evidence of such filings to the Buyer on the Clos-
ing Date.
(c) Each 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
limiting the foregoing, the each Seller will, upon the
request of the Buyer, in order to accurately reflect this
purchase and sale transaction, execute and file such
7
financing or continuation statements or amendments there-
to or assignments thereof (as permitted pursuant hereto)
as may be requested by the Buyer and mark its master data
processing 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." Each 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 each of the
Sellers and the Buyer that the conveyance of the Receiv-
ables by each such Seller to the Buyer pursuant to this
Agreement be construed as a sale of such Receivables by
each such Seller to the Buyer. It is, further, not the
intention of any of the Sellers and the Buyer that such
conveyance be deemed a grant of a security interest in
the Receivables by any of the Sellers to the Buyer to
secure a debt or other obligation of such Seller. Howev-
er, in the event that, notwithstanding the intent of the
parties, the Receivables are held to continue to be
property of any 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
such Seller provided for in this Agreement shall be
deemed to be and such Seller hereby grants to the Buyer a
security interest in and to all of such Seller's right,
title and interest in all Receivables outstanding on the
Effective Date and thereafter created by such Seller, 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 such Seller in the amount of the Purchase Price
as set forth in this Agreement (the "Secured Obligations-
"). Each Seller and the Buyer shall, to the extent
consistent with this Agreement, take such actions as may
be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Receivables,
8
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 ser-
vicing, administering and collection of the Receivables
shall be conducted by the Buyer, 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 diligence
which the Seller employs in servicing similar receivables
for its own account, in accordance with the Credit and
Collection Policy.
[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 each Seller under this Agreement shall be
a dollar amount equal to (a) for Receivables transferred
by such 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 Designated
Subsidiary's Discount, and (b) for Receivables trans-
ferred by such Seller on any date thereafter, the product
of (i) the aggregate Outstanding Balance of the Receiv-
ables transferred on such date and (ii) one minus the
Designated Subsidiary's Discount 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 and on the last Business Day of
each Fiscal Month thereafter during which Receivables are
sold hereunder.
Section 3.3 Monthly Report. At the end of
each Fiscal Month, each Seller shall deliver to the Buyer
a monthly report showing (i) the aggregate Purchase Price
of Receivables generated by such Seller in the preceding
month and (ii) the aggregate Outstanding Balance of such
Receivables that are Eligible Receivables.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Sellers' Representations and
Warranties. Each Seller (as to itself) represents and
warrants to the Buyer as of the Closing Date and the
Effective Date, and shall be deemed to represent and war-
rant 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 such
Seller hereunder (collectively, "Conveyance Papers") is
within the Seller's corporate powers, have been duly
authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any govern-
mental body, agency or official (except as contemplated
by Section 2.1(d)), 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(d)).
(c) Binding Effect. This Agreement
constitutes the legal, valid and binding obligation of
the Seller, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium
or other similar laws affecting the rights of creditors.
(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,
11
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 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 or
any transaction contemplated hereby is, and all such
information hereafter furnished by the Seller to the
Buyer will be, true and accurate in every material re-
spect, on the date such information is stated or certi-
fied.
(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,
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.
12
(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 each Seller is
as follows: Clayton-Marcus Company, Inc., Hickory, North
Carolina; for Barclay Furniture Co., Sherman, Missis-
sippi; for Pilliod Furniture, Inc., High Point, North
Carolina and the offices where each respective Seller
keeps all its Records, are located at the address(es)
described on Exhibit I to the Transfer Agreement or such
other locations notified to the Buyer in accordance with
Section 2.1(d) in jurisdictions where all action required
by Section 2.1(d) 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 originated by it
that exists on the date of such sale and in the Related
Security and Collections with respect thereto free and
clear of any Adverse Claim.
(k) Tradenames, Etc. As of the date
hereof: (i) each Seller's chief executive office is
located at the address for notices set forth in this Sec-
tion 4.1; (ii) each 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 to the Transfer Agreement hereto.
(l) Nature of Receivables. Each Receiv-
able sold hereunder to the Buyer shall be an Eligible Re-
ceivable.
(m) [Reserved]
(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
13
material adverse change has occurred in the overall rate
of collection of the Receivables.
(o) Not an Investment Company. The
Seller is not an "investment 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 Sellers. On each day that a sale
of a Receivable is made hereunder, the applicable Seller,
by accepting the proceeds of such sale, shall be deemed
to have certified that all representations and warranties
described in Section 4.1 are correct with respect to such
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 each Seller, as of the Closing Date and
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 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 North Caro-
lina and has full power, authority, and legal right to
14
execute, deliver, and perform its obligations under the
Conveyance Papers, to conduct its business as such busi-
ness is presently conducted, and in all material re-
spects, to own its property and conduct its other busi-
nesses 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.
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 each Seller under this Agreement. Upon discov-
ery by the Buyer or any Seller of a breach of any of the
foregoing representations and warranties, the party
15
discovering such breach shall give prompt written notice
to the other within three Business Days of such discov-
ery.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
16
ARTICLE V
COVENANTS OF EACH SELLER
Section 5.1 Sellers' Covenants. Each Seller
with respect to itself 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 such Seller pursuant to this Agreement have been
paid, unless the Buyer otherwise consents in writing,
such 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 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 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
for the purpose of examining such Records, and to discuss
matters relating to Receivables or the Seller's perfor-
mance hereunder with any of the officers, directors,
17
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 accounting
practices currently used by LADD Subsidiaries, consis-
tently applied, and will maintain and implement adminis-
trative and operating procedures (including, without
limitation, an ability to recreate records evidencing
Receivables in the event of the destruction of the origi-
nals thereof), and keep and maintain, all documents,
books, records and other information reasonably necessary
or advisable for the collection of all Receivables (in-
cluding, without limitation, records adequate to permit
the daily identification of each new Receivable and all
Collections of and adjustments to each existing Receiv-
able). The Seller will give the Buyer notice of any
material change in the administrative and operating
procedures referred to in the previous sentence.
(e) Performance and Compliance with Receiv-
ables and Contracts. The Seller will at its expense
timely and fully perform and comply with all material
provisions, covenants and other promises required to be
observed by it under the Contracts related to the Receiv-
ables.
(f) Credit and Collection Policies. The
Seller will 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 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
Seller which shall deposit such Collections in a Lock-Box
Account pursuant to Section 5.1(h) below.
(h) Collections Received. The Seller shall
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.
18
(i) Sale Treatment. The Seller agrees to
treat this conveyance for all purposes (including without
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 its all relevant books, records, tax returns,
financial 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 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 inventory or goods, the sale of which may give
rise to a Receivable or any Receivable or related Con-
tract, 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 re-
ceive income in respect thereof.
(k) No Extension or Amendment of Receivables.
The Seller will not 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 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
(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 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
19
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 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 Receiv-
ables.
(p) Change of Name, Etc. The Seller shall not
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 delivers to
the Buyer and the Collateral Agent (i) UCC financing
statements, executed by the Seller, necessary to reflect
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. Each Seller agrees to
indemnify, defend and hold the Buyer and any Permitted
Assignee harmless from and against any and all loss, lia-
bility, damage, judgment, claim, deficiency, or expense
(including 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, deficien-
cy, or expense arises out of or is based upon a breach by
such Seller of its representations, warranties and cove-
nants contained herein, or any information certified in
any Schedule delivered by such Seller hereunder or in
connection with the Conveyance Papers, being untrue in
any respect at any time. The obligations of such Seller
under this Section 5.1(q) shall be considered to have
been relied upon by the Buyer, LADD Funding Corp. and
Enterprise and shall survive the execution, delivery,
performance and termination of this Agreement regardless
20
of any investigation made by the Buyer, any Permitted As-
signee or on the behalf of any of them.
(r) ERISA. The Seller shall promptly give the
Buyer written notice upon becoming aware that the Seller
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]
21
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1 Mandatory Repurchase.
(a) Breach of Warranty. (i) if on any day any
Receivable sold by a Seller hereunder shall fail to meet
the conditions set forth in the definition of Eligible
Receivables or any representation or warranty made herein
in respect of a Receivable shall no longer be true, such
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 aggregate
Outstanding Balance of such Receivable.
(b) Reconveyance Under Certain Circumstances.
Each 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) and 4.1(-
p), it will accept the reconveyance of any Receivable
created on or after the date of such breach upon receipt
by such Seller of notice given in writing by the Buyer
and such Seller's failure to cure such breach within 30
days (or in the case of representations 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), such 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 Receivables.
Section 6.2 Dilutions. Each Seller agrees
that if on any day the Outstanding Balance of a Receiv-
able 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
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
transaction or an unrelated transaction) then such Seller
shall be deemed to have received on such day a collection
of such Receivable in the amount of such reduction or
cancellation and shall pay to the Buyer an amount equal
to such reduction or cancellation.
22
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 each
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, each 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, each Seller shall have
either delivered to the Buyer or filed the financing
statement(s) required to be filed pursuant to Section
2.1(b); and
(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 each Seller copies of all documents (in-
cluding, without limitation, records of corporate pro-
ceedings) relevant to the transactions herein contem-
plated as the Buyer may reasonably have requested.
Section 7.2 Conditions Precedent to Each
Seller's Obligations. The obligations of each Seller to
sell Receivables on any Business Day shall be subject to
the satisfaction of the following conditions:
23
(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 such Seller, and such 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 such Seller may reasonably have requested.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
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 a 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 who has been 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 any
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
such Seller or the Buyer. Without limiting the forego-
ing, prior to termination, the failure of such Seller to
deliver computer records of Receivables or any reports
regarding 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]
25
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, Enter-
prise and each Seller. Any reconveyance executed in
accordance with the provisions hereof shall not be con-
sidered amendments to this Agreement.
Section 9.2 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 any 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
26
(a) in the case of the Buyer:
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
(b) in the case of the Sellers:
c/o 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.
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 to LADD Funding Corp. pursuant to that
certain Receivables Purchase Agreement, dated as of even
date herewith, between the Buyer, as seller thereunder,
and LADD Funding Corp., as buyer, and further, that LADD
Funding Corp. may, pursuant to the Transfer Agreement,
assign all of its rights to Enterprise and its successors
27
and assigns thereunder, or to another person approved in
writing by each Seller (each, a "Permitted Assignee").
The Buyer hereby notifies each Seller (and each Seller
hereby acknowledges that) the Buyer, pursuant to the
aforementioned Receivables Purchase Agreement and the
subsequent assignment by LADD Funding Corp. to Enterprise
in the Transfer Agreement, has assigned its rights here-
under 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 LADD Funding Corp. or by
its assignee Enterprise.
Section 9.6 Further Assurances. The Buyer and
each 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, any 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.
28
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]
29
IN WITNESS WHEREOF, the Buyer and the Sellers
each have caused this Agreement to be duly executed by
their respective officers as of the day and year first
above written.
CLAYTON-MARCUS COMPANY, INC.
as Seller
By: (Signature of William S. Creekmuir)
Name: William S. Creekmuir
Title: V.P., Secr. & Treas.
BARCLAY FURNITURE CO.
as Seller
By: (Signature of William S. Creekmuir)
Name: William S. Creekmuir
Title: V.P., Secr. & Treas.
PILLIOD FURNITURE, INC.
as Seller
By: (Signature of William S. Creekmuir)
Name: William S. Creekmuir
Title: V.P., Secr. & Treas.
LADD FURNITURE, INC.,
as Buyer
By: (Signature of William S. Creekmuir)
Name: William S. Creekmuir
Title: Sr. V.P., Secr., Treas. & CFO