SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 31, 1994
LADD FURNITURE, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-11577 56-1311320
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of Incorporation)
One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (910) 889-0333
N/A
(Former name or former address, if changed since last report.)
ITEM 1. Changes in Control of Registrant.
Not Applicable.
ITEM 2. Acquisition or Disposition of Assets.
On December 15, 1993, LADD Furniture, Inc. ("LADD")
entered into a Stock Purchase Agreement (the "Agreement") with
all of the stockholders of Pilliod Holding Company ("Pilliod")
(the stockholders collectively hereinafter referred to as the
"Stockholders") to purchase all of the outstanding stock of
Pilliod in a transaction valued at approximately $54,000,000.
LADD agreed to retire debt of Pilliod's wholly-owned subsidiary,
The Pilliod Cabinet Company ("Pilliod Cabinet"), of approximately
$30,000,000 and to pay approximately $24,000,000 in cash to the
Stockholders. The Agreement provided that the transaction was
subject to the termination or expiration of the waiting period
required pursuant to the Hart-Scott-Rodino Act. On January 7,
1994, the Federal Trade Commission granted early termination of
the waiting period required under the Hart-Scott-Rodino Act.
On January 28, 1994, LADD entered into a Transfer and
Administration Agreement ("TAA") with Enterprise Funding
Corporation ("EFC") to sell an undivided interest in certain of
LADD's trade accounts receivable. The TAA provides for EFC to
pay to LADD up to $30,000,000 for receivables purchased.
Effective January 31, 1994, LADD sold an interest in a defined
pool of trade accounts receivable which generated $20,000,000 in
cash.
On January 28, 1994, LADD entered into an unsecured one
year revolving line of credit with The Chase Manhattan Bank, N.A.
(the "Chase Line of Credit") in the aggregate principal amount of
$20,000,000.
On January 31, 1994, the Pilliod purchase transaction
was consummated and LADD retired $29,893,000 of debt of Pilliod
Cabinet, assumed $247,000 of debt of Pilliod Cabinet and paid
$23,860,000 in cash to the Stockholders. The purchase price was
financed by the $20,000,000 generated by the sale of trade
accounts receivable pursuant to the TAA and funds from available
short-term and long-term bank lines of credit, including the
Chase Line of Credit.
ITEM 3. Bankruptcy or Receivership.
Not Applicable.
ITEM 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
ITEM 5. Other Events.
Not Applicable.
ITEM 6. Resignations of Registrant's Directors.
Not Applicable.
ITEM 7. Financial Statements and Exhibits.
a) Financial Statements of Pilliod
(i) See the Index to Financial
Statements following the
signature page hereto for the
Financial Statements available
at this time.
(ii) Interim Financial Statements
It is impracticable for the
Company to provide the
required interim financial
statements of Pilliod at this
time. The required interim
financial statements will be
filed under separate cover of
Form 8-K/A as soon as
practicable, but not later
than April 15, 1994.
b) Pro Forma Financial Information
It is impracticable for the Company
to provide the required Pro Forma
Financial Information at this time.
The required Pro Forma Financial
Information will be filed under
separate cover of Form 8-K/A as
soon as practicable, but not later
than April 15, 1994.
c) Exhibits
4.1 Stock Purchase Agreement dated
December 15, 1993 among LADD
Furniture, Inc. and the Stock-
holders of Pilliod Holding
Company.
4.2 Amendment to Stock Purchase
Agreement dated January 31,
1994 among LADD Furniture,
Inc. and the stockholders of
Pilliod Holding Company
23.1 Consent of Ernst & Young
99.1 Transfer and Administration
Agreement dated January 28,
1994 between Enterprise
Funding Corporation and LADD
Furniture, Inc., and Clayton-
Marcus Company, Inc., Barclay
Furniture Co. and LADD
Transportation, Inc., as
designated subsidiaries
99.2 Receivables Purchase Agreement
dated January 28, 1994 between
Clayton-Marcus Company, Inc.,
Barclay Furniture Co. and LADD
Transportation, Inc. and LADD
Furniture, Inc.
99.3 Letter Agreement, dated
January 28, 1994, between LADD
Furniture, Inc. and The Chase
Manhattan Bank, N.A.
99.4 Form of Promissory Note of
LADD Furniture, Inc. dated
January 28, 1994 to The Chase
Manhattan Bank, N.A. in the
aggregate principal amount of
$20,000,000
ITEM 8. Change in Fiscal Year.
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
LADD FURNITURE, INC.
Date: February 15, 1994 By: /s/William S. Creekmuir
William S. Creekmuir
Title: Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
<PAGE>
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PAGE
Report of Independent Auditors......................................................................................... F-2
Consolidated Balance Sheets at May 2, 1992 and May 1, 1993............................................................. F-3
For the years ended May 2, 1992 and May 1, 1993:
Consolidated Statements of Operations................................................................................ F-4
Consolidated Statements of Shareholders' Equity (Capital Deficiency)............................................... F-5
Consolidated Statements of Cash Flows................................................................................ F-6
Notes to Consolidated Financial Statements........................................................................... F-7
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Pilliod Holding Company
We have audited the accompanying consolidated balance sheets of Pilliod
Holding Company as of May 2, 1992 and May 1, 1993, and the related consolidated
statements of operations, shareholders' equity (capital deficiency) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pilliod Holding
Company at May 2, 1992 and May 1, 1993 and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG
Toledo, Ohio
July 14, 1993
F-2
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
MAY 2, MAY 1,
1992 1993
ASSETS (Note 5)
Current assets:
Cash.................................................................................................. $ 9 $ 19
Accounts receivable, less allowance of $360 and $49 for doubtful accounts (Note 3).................... 10,988 11,548
Inventories (Note 2):
Finished products.................................................................................. 4,813 5,214
Work in process.................................................................................... 1,113 2,235
Raw materials...................................................................................... 2,604 4,500
8,530 11,949
Prepaid expenses................................................................................... 461 540
Total current assets.................................................................................... 19,988 24,056
Other assets:
Goodwill, net of accumulated amortization of $1,128 and $1,295........................................ 5,310 5,142
Property and equipment held for sale.................................................................. 1,425 --
Deferred financing costs and other.................................................................... 190 16
Total other assets 6,925 5,158
Property, plant and equipment, at cost less accumulated depreciation and amortization (Note 4).......... 7,980 8,343
$34,893 $37,557
LIABILITIES AND SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)...............................................
Current liabilities:
Accounts payable...................................................................................... $ 6,881 $ 8,084
Accrued liabilities:
Compensation.......................................................................................... 1,772 1,952
Commissions and royalties............................................................................. 414 475
Taxes other than income............................................................................... 309 417
Insurance............................................................................................. 104 148
Interest.............................................................................................. 1,851 126
Other 51 --
4,501 3,118
Long-term debt due within one year or which may become due on demand (Note 5)......................... 24,677 4,661
Total current liabilities............................................................................. 36,059 15,863
Long-term debt, less amounts classified as due currently (Note 5)....................................... 2,397 20,256
Commitments
Shareholders' equity (capital deficiency) (Notes 5 and 7):
Class A common stock, $.01 par value; 9,000,000 shares authorized, 6,842,500 shares outstanding....... 68 68
Class B common stock, $.01 par value; 9,000,000 shares authorized, none outstanding................... -- --
Capital in excess of par value 6,622 6,622
Deficit............................................................................................... (10,253) (5,252)
Total shareholders' equity (capital deficiency)......................................................... (3,563) 1,438
$34,893 $37,557
</TABLE>
See accompanying notes.
F-3
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
YEARS ENDED
MAY 2, 1992 MAY 1, 1993
(53 WEEKS) (52 WEEKS)
Net sales.......................................................................................... $67,823 $77,719
Cost of sales...................................................................................... 53,365 59,144
Gross profit....................................................................................... 14,458 18,575
Selling, general and administrative................................................................ 10,702 11,192
Operating profit................................................................................... 3,756 7,383
Other income (expense):
Interest expense................................................................................. (3,358) (2,555)
Other............................................................................................ 352 270
Income before income taxes and extraordinary credit................................................ 750 5,098
Provision for income taxes (Note 8):
Federal:
Current....................................................................................... 40 97
Deferred...................................................................................... -- --
Charge in lieu of tax......................................................................... 287 1,639
State and local:
Charge in lieu of tax......................................................................... 80 265
407 2,001
Income before extraordinary credits................................................................ 343 3,097
Extraordinary credit -- income tax benefits resulting from realization of operating loss
carryforwards.................................................................................... 367 1,904
Net income......................................................................................... $ 710 $ 5,001
</TABLE>
See accompanying notes.
F-4
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY (CAPITAL DEFICIENCY)
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL
CLASS A IN
COMMON EXCESS OF
STOCK PAR VALUE DEFICIT TOTAL
Balance at April 27, 1991........................................................ $ 68 $ 6,622 $(10,963) $(4,273)
Net income..................................................................... 710 710
Balance at May 2, 1992........................................................... 68 6,622 (10,253) (3,563)
Net income..................................................................... -- -- 5,001 5,001
Balance at May 1, 1993........................................................... $ 68 $ 6,622 $ (5,252) $ 1,438
</TABLE>
See accompanying notes.
F-5
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
YEARS ENDED
MAY 2, MAY 1,
1992 1993
(53 (52
WEEKS) WEEKS)
OPERATING ACTIVITIES
Net income............................................................................................... $ 710 $ 5,001
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.......................................................................... 2,313 2,024
Gain on sales of property and equipment................................................................ (8) (15)
Writedown of property held for sale.................................................................... 108 --
Changes in operating assets and liabilities:
Accounts receivable................................................................................. (1,511) (560)
Inventories......................................................................................... 1,136 (3,420)
Prepaid expenses.................................................................................... 310 (79)
Accounts payable.................................................................................... (520) 1,203
Accrued liabilities................................................................................. 1,229 (1,383)
Net cash provided by operating activities................................................................ 3,767 2,771
INVESTING ACTIVITIES
Purchases of property and equipment...................................................................... (494) (1,818)
Proceeds from sale of property and equipment............................................................. 32 1,467
Other.................................................................................................... (63) 64
Net cash used in investing activities.................................................................... (525) (287)
FINANCING ACTIVITIES
Payments on long-term debt............................................................................... (4,076) (6,209)
Proceeds from long-term borrowings....................................................................... 854 3,811
Increase in deferred financing costs..................................................................... (61) (25)
Other.................................................................................................... -- (51)
Net cash used in financing activities.................................................................... (3,283) (2,474)
Net increase (decrease) in cash.......................................................................... (41) 10
Cash at beginning of period.............................................................................. 50 9
Cash at end of period.................................................................................... $ 9 $ 19
Supplemental cash flow information:
Cash paid for interest................................................................................. $ 2,857 $ 4,137
Cash paid for income taxes............................................................................. $ 31 $ 98
Non-cash investing and financing activities:
During fiscal 1993 the Company entered into capital lease obligations of approximately $325,000 for new
equipment.
</TABLE>
See accompanying notes.
F-6
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Pilliod
Holding Company (Company) and the combined accounts of its wholly-owned
subsidiary, The Pilliod Cabinet Company (Cabinet Company). The Company's fiscal
year ends on the Saturday nearest April 30.
INVENTORIES
The Cabinet Company's inventories are valued at the lower of last-in,
first-out (LIFO) cost or market.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of property, plant and equipment are provided
over the estimated useful lives of the assets using both straight-line and
declining balance methods.
Goodwill, which was generated by the March 19, 1985 acquisition of Cabinet
Company, is being amortized on a straight-line basis over 40 years.
PROFIT SHARING PLAN
Substantially all of the Company's employees are participants in a profit
sharing plan. Contributions to the plan are at the discretion of the Board of
Directors. No contributions were made in fiscal 1992 or 1993.
NEW STANDARD FOR ACCOUNTING FOR INCOME TAXES
The Company has not adopted the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, (SFAS No. 109), which
is required to be adopted in the Company's 1994 fiscal year. Under the liability
method required by the Statement, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. The
Company's current accounting policies require that future tax effects related
F-7
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- Continued
to assets and liabilities acquired in a business combination be included in the
recorded amounts of the related assets and liabilities. SFAS No. 109 requires
that such acquired assets be recorded at their full value and that the resulting
differences between book and tax bases be accounted for consistent with the
liability method. It further requires that assets and liabilities acquired in
previous business combinations be restated. Under the Company's current method,
income tax expense is determined using the deferred method. Deferred tax expense
is based on items of income and expense that are reported in different years in
the financial statements and tax returns and are measured at the tax rate in
effect in the year the difference originated.
The Company has not decided whether or not it will restate prior year
financial statements as permitted by SFAS No. 109; therefore the impact of
adoption cannot be quantified. The Company believes, however, that the adoption
of SFAS No. 109 will not have a material adverse effect on financial position or
results of operations.
2. INVENTORIES
Under the LIFO method, inventories have been reduced by approximately $718
and $118 at May 2, 1992 and May 1, 1993, respectively, from amounts which would
have been reported under the first-in, first-out (FIFO) method.
3. CONCENTRATION OF CREDIT RISK
Cabinet Company is principally engaged in the business of furniture
manufacturing. Substantially all accounts receivable are from department stores
and furniture retailers. Credit is extended to customers based on an evaluation
of credit reports, payment practices and, in most cases, financial condition.
Collateral or letters of credit are generally not required. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations.
F-8
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<S> <C> <C>
MAY 2, MAY 1,
1992 1993
Land and improvements................................................................................... $ 782 $ 789
Buildings............................................................................................... 7,184 7,578
Machinery and equipment................................................................................. 16,515 17,783
Office and show space equipment......................................................................... 2,275 1,607
Automotive equipment.................................................................................... 170 151
26,926 27,908
Less accumulated depreciation and amortization.......................................................... 18,946 19,565
$ 7,980 $ 8,343
</TABLE>
5. NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<S> <C> <C>
MAY 2, MAY 1,
1992 1993
Revolving line of credit with banks, interest at prime plus 2% (8% aggregate rate at May 1, 1993)....... $ 9,484 $ 9,388
Term loans from banks, monthly principal installments of $205, interest at prime plus 2% (8% aggregate
rate at May 1, 1993) payable monthly.................................................................. 8,906 6,903
Subordinated notes (see below).......................................................................... 5,000 4,675
Notes payable to banks, effectively guaranteed by the Company's principal shareholders, due July 1,
1995, interest at prime plus 1.5% (7.5% aggregate rate at May 1, 1993) payable monthly................ 3,000 3,000
</TABLE>
F-9
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. NOTES PAYABLE AND LONG-TERM DEBT -- Continued
<TABLE>
<S> <C> <C>
MAY 2, MAY 1,
1992 1993
Note payable to former shareholder, payable in monthly installments of $20, including interest at prime
(6% at May 1, 1993)................................................................................... 556 363
Various equipment lease obligations, payable monthly to August 1995 (see Note 6)........................ 128 348
Commitment fees payable to bank, non-interest bearing, payable $10 monthly.............................. -- 240
27,074 24,917
Amounts due within one year............................................................................. 24,677 4,661
$ 2,397 $20,256
</TABLE>
The agreement for the revolving line of credit and term loans limits total
borrowings outstanding for the term of the agreement to $27,900. Borrowings
under the revolving line of credit are based on 85% of eligible trade accounts
receivable and 50% of eligible FIFO inventory, not to exceed $18,000 ($14,703
was available under the formula at May 1, 1993 of which $9,388 was outstanding).
The agreement runs through May 1995 and is automatically renewed for successive
one-year periods unless the agreement is terminated by the Company or the banks.
The entire amount outstanding under the revolving line of credit has been
excluded from current liabilities in the May 1, 1993 balance sheet because the
Company intends that at least that amount would remain outstanding under the
agreement for an uninterrupted period extending beyond one year from the balance
sheet date.
Borrowings under the agreement are secured by substantially all of the
assets of Cabinet Company. The agreement contains certain financial covenants,
the most restrictive of which 1) require maintenance of certain liquidity
ratios, yearly income levels and net worth levels, 2) limit future borrowings
and 3) limit declaration of dividends. Notes payable to banks are secured under
the agreement and are generally subject to the same conditions and covenants. At
May 1, 1993, the Company was in compliance with the covenant requirements of the
agreement as amended on April 28, 1993. At May 2, 1992, the Company violated
certain of the covenant requirements. The banks did not grant
F-10
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. NOTES PAYABLE AND LONG-TERM DEBT -- Continued
waivers of the covenant violations and could have declared the Company in
default and the debt due; therefore, all borrowings under the agreement were
classified as current in the May 2, 1992 balance sheet.
On April 28, 1993, the Company amended the revolving line of credit and
term loan agreement. The amendment revised financial covenants, extended the
termination date of the agreement and permitted additional term borrowings of
$2,000 (all of which were outstanding at May 1, 1993). The borrowings were used
to pay a portion of the interest due on the subordinated notes. In connection
with the amendment, the Company incurred a commitment fee of $240.
On April 28, 1993 the Company entered into an agreement with the holders of
its subordinated notes to amend the notes. The agreement required the payment of
all accrued and unpaid interest through February 18, 1993 and the forgiveness of
$2,175 of principal. The principal balance of $2,825 of the amended subordinated
notes is payable $565 annually beginning April 1994 through April 1998, with
interest at 12.186% per annum payable semi-annually beginning October 28, 1993.
The Company is required to redeem the subordinated notes at par upon a Change of
Control Event (as defined in the amended notes) and, if certain types of Change
of Control Event occur on or prior to April 28, 1994, the Company will be
required to pay an additional $1,000 upon such redemption; as such, recognition
of gains has been deferred until the expiration of the contingency.
The May 1, 1993 carrying value of the subordinated debt consists of
remaining principal balance, expected interest over the life of the notes and
net contingent amounts payable. In the event a Change of Control Event does not
occur prior to April 28, 1994, the carrying value of the subordinated notes
would be reduced to future principal and interest requirements.
The required minimum annual maturities of long-term debt, including the
principal portion of capital lease obligations, for the fiscal years subsequent
to May 1, 1993 are as follows: 1994 - $4,661; 1995 - $3,708; 1996 - $15,211;
1997 - $703; 1998 - $634.
F-11
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM LEASES
CAPITAL LEASES
The Cabinet Company leases certain equipment under agreements classified as
capital leases. The cost and accumulated amortization of such equipment are as
follows:
<TABLE>
<S> <C> <C>
MAY 2, MAY 1,
1992 1993
Cost.................................................................................................... $ 744 $ 662
Less accumulated amortization........................................................................... 580 168
$ 164 $ 494
</TABLE>
Future minimum payments and their present value at May 1, 1993 are as
follows:
<TABLE>
<S> <C>
1994.................................................................................................................. $161
1995.................................................................................................................. 161
1996.................................................................................................................. 64
Total minimum lease payments.......................................................................................... 386
Less amounts representing interest.................................................................................... 38
Present value of minimum lease payments - included in long-term debt (see Note 5)..................................... $348
</TABLE>
OPERATING LEASES
The Cabinet Company leases equipment and office and show space under
agreements classified as operating leases. Total rent expense charged to
operations for fiscal years 1992 and 1993 was $838 and $702, respectively.
Minimum rental commitments under noncancellable operating leases at May 1,
1993 aggregate $874 and are payable as follows:
<TABLE>
<S> <C>
1994.................................................................................................................. $421
1995.................................................................................................................. 344
1996.................................................................................................................. 106
1997.................................................................................................................. 3
</TABLE>
F-12
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMON STOCK
In addition to the 9,000,000 shares of authorized Class A common stock, the
Company is authorized to issue 9,000,000 shares of Class B common stock, of
which none have been issued. The two classes of common stock entitle the holders
to the same rights and privileges except that Class A common stock entitles the
holder to voting rights while Class B common stock has no voting rights.
Shareholders of Class A common stock are permitted to exchange any or all
shares for the same number of Class B shares and Class B holders are entitled to
convert any or all shares into the same number of Class A shares within certain
limitations.
Information on stock options is as follows:
<TABLE>
<S> <C> <C>
CLASS A SHARES EXERCISE
UNDER OPTION PRICE
Outstanding at April 27, 1991................................................................. 1,020,000 $.50 to $1.17
Granted in 1992............................................................................... 795,000 $ .25
Cancelled in 1992............................................................................. (725,000) $.85 to $1.17
Outstanding at May 2, 1992 and May 1, 1993.................................................... 1,090,000 $ .25 to $.85
</TABLE>
Options outstanding at May 1, 1993 expire at various dates ranging from
October 26, 1994 through May 29, 1996. All options granted are exercisable at
the date of grant.
8. INCOME TAXES
At May 1, 1993, the Company has operating loss carryforwards for both tax
and financial reporting purposes of approximately $2,800. Such carryforwards may
be used to reduce otherwise taxable income until they expire in fiscal 2005 and
2006. The fiscal 1992 and 1993 provisions for current Federal income tax
consists of alternative minimum tax, which can be used to offset future regular
Federal income tax.
F-13
<PAGE>
<PAGE>
PILLIOD HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES -- Continued
The consolidated effective tax rate differs from the statutory U. S.
federal tax rate for the following reasons and by the following percentages:
<TABLE>
<S> <C> <C>
MAY 2, MAY 1,
1992 1993
Statutory U. S. Federal tax (benefit) rate.................................................................. 34.0% 34.0%
Amortization of asset basis differences..................................................................... 5.0 .6
Amortization of goodwill.................................................................................... 7.6 1.1
State and local taxes....................................................................................... 7.1 3.4
Other....................................................................................................... .6 .1
Effective tax rate.......................................................................................... 54.3% 39.2%
</TABLE>
The provision for deferred income taxes consists of the following:
<TABLE>
<S> <C> <C>
MAY 2, MAY 1,
1992 1993
Effect of operating loss carryforwards...................................................................... $ 308 $ 32
Property, plant and equipment............................................................................... (253 ) (223 )
Inventories................................................................................................. (54 ) 31
Accrued liabilities......................................................................................... 67 57
Other....................................................................................................... (68 ) 103
$ -- $ --
</TABLE>
F-14
<PAGE>
STOCK PURCHASE AGREEMENT, dated as of December 15, 1993
(the "Agreement"), among LADD Furniture, Inc., a North Carolina
corporation (the "Purchaser"), and each person listed in Sched-
ule 1.1 hereto (individually a "Seller" and collectively the
"Sellers"), who are all of the stockholders of Pilliod Holding
Company, a Delaware corporation (the "Holding Company"). Certain
capitalized terms used in this Agreement are defined in Arti-
cle VIII.
W I T N E S S E T H :
WHEREAS, the Sellers own all of the issued and
outstanding capital stock of the Holding Company, consisting of
6,842,500 shares of Class A Common Stock, par value $0.01 per share
(the "Shares");
WHEREAS, the Holding Company owns all of the issued and
outstanding capital stock of The Pilliod Cabinet Company, an Ohio
corporation (the "Cabinet Company"), the sole operating subsidiary
of the Holding Company; and
WHEREAS, the Sellers wish to sell the Shares to the
Purchaser, and the Purchaser wishes to purchase the Shares from the
Sellers, on the terms and conditions and for the consideration set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises
made herein and of the mutual benefits to be derived herefrom, the
parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares. Subject to all of the
terms and conditions of this Agreement and in reliance upon the
representations and warranties contained herein, at the Closing
provided for in section 1.2, (a) each of the Sellers will sell to
the Purchaser the number of Shares set forth opposite such Seller's
name in the column entitled "Number of Shares Owned" in Sched-
ule 1.1 hereto, and (b) the Purchaser will purchase from each of
the Sellers the number of Shares set forth opposite such Seller's
name in the column entitled "Number of Shares Owned" in Sched-
ule 1.1 hereto for a cash purchase price equal to the Purchase
Price hereinafter defined. Such Shares shall be delivered by the
Sellers as provided in section 1.3 and such cash purchase price
shall be paid by the Purchaser as provided in section 1.4. The
total Purchase Price to be paid by the Purchaser for the 6,842,500
Shares, representing all of the issued and outstanding capital
stock of the Holding Company, shall be equal to $54,000,000 less
the aggregate principal amount of Scheduled Indebtedness
outstanding on the Closing Date (subject to adjustment as
determined by the purchase price adjustment provisions of section
3.5).
1.2 Closing. The closing of the purchase and sale of
the Shares contemplated hereby (the "Closing") will take place at
the offices of Debevoise & Plimpton, 875 Third Avenue, New York,
New York 10022 at 10:00 A.M. New York City time on January 31, 1994
(effective January 29, 1994) or at such other place, time or date
as the parties hereto may agree in writing (the "Closing Date"),
subject to section 7.1.
1.3 Delivery of Shares. At the Closing, each Seller
will transfer to the Purchaser, against payment of the purchase
price therefor as provided in section 1.4, good and valid title to
the Shares being sold by such Seller, free and clear of any liens,
charges, encumbrances, security interests, options or rights or
other claims of others of any character whatsoever with respect
thereto, by delivering to the Purchaser certificates for such
Shares, duly endorsed in blank or accompanied by a stock power or
other proper instrument of assignment duly executed in blank, and
having all requisite stock transfer stamps attached.
1.4 Payment of Purchase Price. At the Closing, the
Purchaser shall deliver (a) to the account of Clayton, Dubilier &
Rice, Inc. as Custodian (the "Custodian") under the Power of
Attorney and Custody Agreements, each dated as of December 8, 1993
(individually a "Custody Agreement" and collectively the "Custody
Agreements"), between each of the Sellers and Clayton, Dubilier &
Rice, Inc., as Attorney-in-Fact and Custodian, immediately
available funds in an amount equal to the excess of the Purchase
Price over the Stock Escrow Amount and (b) to the account of the
Escrow Agent immediately available funds in an amount equal to the
Stock Escrow Amount, to be held by the Escrow Agent under the terms
of the Escrow Agreement pending the completion of the procedures
set forth in section 3.5. Such delivery shall be made, in the case
of the portion payable to the Custodian, by a wire transfer of such
funds on the Closing Date to such account as shall be designated in
writing by the Custodian to the Purchaser at least two business
days prior to the Closing Date, or, upon the request of the Cus-
todian, by cashier's or certified check, payable to the Custodian
or its order; and, in the case of the Stock Escrow Amount, by a
wire transfer of such amount on the Closing Date to the account
specified in the Escrow Agreement. All stock, documentary, stamp,
excise and other transfer or other taxes payable in respect of the
transfer of the Shares shall be paid by the Sellers. The delivery
by the Purchaser to the Custodian of the aggregate purchase price
for the Shares pursuant to this section 1.4 shall constitute deliv-
ery of such purchase price to the Sellers and entitle the Purchaser
to delivery of the Shares pursuant to section 1.3. The Purchaser
shall have no liability to any Seller as a result of any act or
failure to act by the Custodian.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties as to Holding Company
and Cabinet Company. The Sellers, jointly and severally, represent
and warrant to the Purchaser as of the date hereof as follows:
2.1.1 Corporate Status. (a) Holding Company. The
Holding Company is a corporation duly incorporated, validly exist-
ing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as
presently conducted. The Holding Company is duly qualified and in
good standing as a foreign corporation duly authorized to do
business in all jurisdictions in which the failure to be so
qualified would have a Material Adverse Effect. The Holding
Company does not own directly or indirectly any Subsidiaries other
than the Cabinet Company and Export, a wholly-owned subsidiary of
the Cabinet Company which has had no assets or liabilities or
operations at any time during the past five years.
(b) Cabinet Company. The Cabinet Company is a corpo-
ration duly incorporated, validly existing and in good standing
under the laws of the State of Ohio and has all requisite corporate
power and authority to own, lease and operate its properties and to
carry on its business as presently conducted. The Cabinet Company
is duly qualified and in good standing as a foreign corporation
duly authorized to do business in all jurisdictions in which the
failure to be so qualified would have a Material Adverse Effect.
The Cabinet Company does not own, directly or indirectly, any
Subsidiaries other than Export, a wholly-owned subsidiary which has
had no assets or liabilities or operations at any time during the
past five years.
(c) Corporate Records. The Sellers have caused the
Holding Company to deliver to the Purchaser complete and correct
copies, as in effect on the date hereof, of the Certificate of
Incorporation and By-Laws of the Holding Company and the Cabinet
Company and all amendments to each thereof. The Purchaser has been
given the opportunity to inspect the corporate records of the
Holding Company and the Cabinet Company described in Schedule
2.1.4.
2.1.2 Capitalization. (a) Capital Stock. The
authorized capital stock of the Holding Company consists of
(i) 9,000,000 shares of Class A Common Stock, par value $0.01 per
share (the "Class A Common Stock"), of which 6,842,500 shares are
issued and outstanding, and (ii) 9,000,000 shares of Class B Common
Stock, par value $0.01 per share (the "Class B Common Stock", and,
together with the Class A Common Stock, the "Common Stock"), none
of which are issued and outstanding. The Shares constitute all of
the issued and outstanding capital stock of the Holding Company,
have been duly authorized and validly issued, and are fully paid
and nonassessable. Schedule 1.1 contains a complete and correct
list of all persons owning of record any shares of Common Stock,
specifying for each Seller the number of shares owned and the
number of each certificate representing such shares.
(b) Options. There are 1,310,000 shares of the Holding
Company's Class A Common Stock reserved for issuance upon the exer-
cise of the options (the "Options") issued to certain employees and
officers of the Holding Company (the "Option Holders"). There are
Options relating to 1,310,000 shares of Class A Common Stock
outstanding (the "Option Shares"). Schedule 1.1 contains a com-
plete and correct list of all Option Holders, including the number
of Option Shares issuable upon exercise of each Option and the
exercise price thereof.
(c) Agreements with Respect to Common Stock. There are
no preemptive or similar rights on the part of any holder of any
class of securities of the Holding Company other than such rights
as may be set forth in the Management Stock Subscription Agreements
and the Management Stock Option Agreements between the Holding
Company and certain of the Sellers and Option Holders
(collectively, the "Management Agreements"). Except for the
Options, no options, warrants, conversion or other rights,
agreements, commitments, arrangements or understandings of any kind
obligating the Holding Company or the Cabinet Company, contingently
or otherwise, to issue or sell any shares of its capital stock of
any class or any securities convertible into or exchangeable for
any such shares, are outstanding, and no authorization therefor has
been given.
(d) Capitalization of Cabinet Company, etc. The
authorized capital stock of the Cabinet Company consists of 100
shares of common stock, par value $.01 per share, of which 100
shares are issued and outstanding (the "Cabinet Company Shares").
The Cabinet Company Shares constitute all of the issued and
outstanding capital stock of the Cabinet Company, have been duly
authorized and validly issued, and are fully paid and non-assess-
able. The Holding Company is the sole record and beneficial owner
of all of the Cabinet Company Shares. There are no options,
warrants, conversion or other rights, agreements, commitments,
arrangements or understandings of any kind obligating the Holding
Company or the Cabinet Company, contingently or otherwise, to issue
or sell any Cabinet Company Shares or any securities convertible
into or exchangeable for Cabinet Company Shares, outstanding, and
no authorization therefore has been given.
(e) Capitalization of Export, etc. The authorized
capital stock of Export consists of 250 shares of common stock, no
par value, of which 125 shares are issued and outstanding (the
"Export Shares"). The Export Shares constitute all of the issued
and outstanding capital stock of Export, have been duly authorized
and validly issued, and are fully paid and non-assessable. The
Cabinet Company is the sole record and beneficial owner of all of
the Export Shares. There are no options, warrants, conversion or
other rights, agreements, commitments, arrangements or understand-
ings of any kind obligating the Cabinet Company or Export, con-
tingently or otherwise, to issue or sell any Export Shares or any
securities convertible into or exchangeable for Export Shares,
outstanding, and no authorization therefore has been given.
2.1.3 Conflicts, Consents, Subsequent Actions. (a)
Conflicts. Except (i) as set forth on Schedule 2.1.3 and (ii) for
conflicts, violations and defaults that could not, either in any
case or in the aggregate, have a Material Adverse Effect, the
execution and delivery of this Agreement by the Sellers, and the
consummation by the Sellers of the transactions contemplated hereby
in the manner contemplated hereby, will not conflict with or result
in any violation of or default under (or any event that, with
notice or lapse of time or both, would constitute a default under),
any provision of (x) the Certificate of Incorporation or By-Laws of
the Holding Company or the Cabinet Company, (y) any mortgage,
indenture, loan agreement, note, bond, deed of trust, other
agreement, commitment or obligation for the borrowing of money or
the obtaining of credit, material lease or other material agree-
ment, contract, license, franchise, permit or instrument to which
the Holding Company or the Cabinet Company is a party or by which
the Holding Company or the Cabinet Company may be bound, or (z) any
judgment, order, decree, law, statute, rule or regulation appli-
cable to the Holding Company or the Cabinet Company.
(b) Consents. Except (i) as may be required under the
HSR Act, (ii) as set forth in Schedule 2.1.3, (iii) as may be
required pursuant to the terms of the Management Agreements, and
(iv) for any consents and approvals of third parties in respect of
any contract or agreement of the Holding Company or the Cabinet
Company Subsidiary where the failure to obtain such consent or
approval, either in any case or in the aggregate, could not have a
Material Adverse Effect, no consent, approval, authorization,
permit, order, filing, registration or qualification of or with any
court, governmental authority or third person is required to be
obtained by the Holding Company or the Cabinet Company in
connection with the execution and delivery of this Agreement by the
Sellers or the consummation by the Sellers of the transactions
contemplated hereby in the manner contemplated hereby or the
ownership and operation by the Purchaser of the business and
properties of the Holding Company and the Cabinet Company
subsequent to the Closing in substantially the same manner as
previously owned and operated by the Holding Company and the
Cabinet Company (assuming no circumstance peculiar to the Purchaser
unknown to the Holding Company and the Cabinet Company that is not
applicable to them).
(c) Subsequent Actions. For purposes of this Agreement,
the consummation by the Sellers of the transactions contemplated
hereby in no event shall be construed to include any merger with or
other restructuring of the Holding Company, or any other action by
the Holding Company, the Cabinet Company, the Purchaser or any
parent, subsidiary or Affiliate thereof, subsequent to the consum-
mation of the purchase and sale of the Shares.
2.1.4 Financial Information, Material Adverse Change,
Undisclosed Liabilities. (a) Financial Statements. The Sellers
have delivered to the Purchaser audited consolidated statements of
operations, changes in stockholders' equity and cash flows of the
Holding Company and the Cabinet Company for the fiscal years ended
May 2, 1992 and May 1, 1993 and audited consolidated balance sheets
of the Holding Company and the Cabinet Company as at such dates
(the "Audited Financials"), together with the notes thereto, in
each case audited by Ernst & Young, the Holding Company's certified
public accountants. The Sellers also have delivered to the Pur-
chaser an unaudited consolidating balance sheet of the Holding
Company and the Cabinet Company as at November 27, 1993 and an
unaudited consolidating income statement for the seven months then
ended (the "Interim Financials"), prepared from and in accordance
with the books and records of the Holding Company as at such date.
The Audited Financials and the Interim Financials have been
prepared in accordance with generally accepted accounting prin-
ciples consistently applied throughout the periods indicated and
present fairly the financial condition of the Holding Company and
the Cabinet Company at the respective dates indicated and (in the
case of the Audited Financials) the results of operations and cash
flows of the Holding Company and the Cabinet Company for the
respective periods indicated, except that the Interim Financials
are subject to year-end audit adjustments, do not contain notes and
do not reflect any provision for deferred income taxes.
(b) Material Adverse Effect. Except as disclosed on
Schedule 2.1.4, since May 1, 1993, there has been no change in the
business, properties, financial condition, results of operations or
prospects of the Holding Company and the Cabinet Company that could
have a Material Adverse Effect.
(c) Undisclosed Liabilities. Except (i) as and to the
extent reflected in the audited consolidated balance sheet of the
Holding Company and the Cabinet Company as at May 1, 1993 included
in the Audited Financials or in the notes to the Audited Financials
for the year then ended, (ii) as disclosed in Schedule 2.1.4 or any
other Schedule hereto and (iii) as to Environmental Matters,
neither the Holding Company nor the Cabinet Company had on May 1,
1993 any liabilities or obligations, secured or unsecured (whether
absolute, accrued, contingent or otherwise, and whether due or to
become due) that has had or could have a Material Adverse Effect.
Since May 1, 1993, neither the Holding Company nor the Cabinet
Company has incurred any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise, and whether
due or to become due), except (w) as and to the extent reflected in
the Interim Financials, (x) as disclosed in Schedule 2.1.4 or any
other Schedule hereto, (y) for liabilities or obligations incurred
in the ordinary course of business and consistent with past
practice and which, individually or in the aggregate, have not had
and could not have a Material Adverse Effect and (z) as to
Environmental Matters.
(d) Financial Practices. The accounts, notes and other
receivables, the allowance for possible losses, and the accounts
payable and accrued expenses of the Holding Company and the Cabinet
Company shown on the Audited Financials and the Interim Financials
have been reported in accordance with generally accepted accounting
principles, consistently applied, except that the Interim
Financials are subject to year-end audit adjustments, do not
contain notes and do not reflect any provision for deferred income
taxes. From May 1, 1993, to the date hereof, the Holding Company
and the Cabinet Company have collected a percentage of their
outstanding accounts receivable substantially consistent with past
experience. From May 1, 1993, to the date hereof, the Holding
Company and the Cabinet Company have paid their accounts payable
and accrued expenses on a timely basis in the ordinary course of
business, consistent with past practice.
2.1.5 Insurance. Schedule 2.1.5 accurately lists all of
the policies of general liability, property, auto, workers'
compensation, product liability, life and other forms of insurance
providing insurance coverage for the Holding Company and the
Cabinet Company. (The Cabinet Company maintains in force certain
group life insurance plans, which are listed on Schedule 2.1.13.)
Each of such policies is in full force and effect and no notice of
termination or nonrenewal with respect to any such policy has been
received by the Holding Company or the Cabinet Company. There are
no outstanding unpaid premiums, and there are no amounts due and
payable with respect to outstanding borrowings incurred to fund
insurance premiums which have not been paid when due. There are no
provisions for retroactive or retrospective premium adjustments,
except those for which adequate reserves have been recorded on the
books and records of the Company in accordance with generally
accepted accounting principles. Neither the Holding Company nor
the Cabinet Company has knowledge of any state of facts or the
occurrence of any event which either of them reasonably believes
will form the basis of any claim against the Holding Company or the
Cabinet Company which might materially increase the insurance
premiums payable under any such policy. Schedule 2.1.5 also
contains a true and complete description of all outstanding bonds
and other surety arrangements issued or entered into in connection
with the business and operations of the Holding Company and the
Cabinet Company. No consents by any party to such policies are
required in order for the Sellers to execute, deliver and perform
this Agreement and for the consummation of the transactions
contemplated hereby. To the knowledge of the Sellers, there are no
existing circumstances that entitle such insurers to refuse
liability under their respective policies, and no other person has
the right to receive an interest in the proceeds of such policies.
2.1.6 Litigation. Except (a) as set forth in Sched-
ule 2.1.6 and (b) as to Environmental Matters, there is no action,
claim, suit or proceeding pending or, to the best knowledge of the
Holding Company or the Cabinet Company, threatened by or against or
affecting the Holding Company or the Cabinet Company and there is
no investigation pending or, to the best knowledge of the Holding
Company or the Cabinet Company, threatened against or affecting the
Holding Company or the Cabinet Company (in each case before any
court or governmental or regulatory authority or body and in each
case whether or not the defense thereof or liability in respect
thereof is covered by policies of insurance), that could, either
individually or in the aggregate, have a Material Adverse Effect,
or that challenges the validity of this Agreement or the consumma-
tion of the transactions contemplated hereby. Neither the Holding
Company nor the Cabinet Company is subject to any outstanding
order, writ, injunction or decree that could have a Material
Adverse Effect or could interfere materially with the consummation
of the transactions contemplated hereby.
2.1.7 Compliance with Laws, Permits. (a) Compliance
with Laws. Except (a) as set forth on Schedule 2.1.7 and (b) as to
Environmental Matters, neither the Holding Company nor the Cabinet
Company has received any notice or has any knowledge that the
Holding Company or the Cabinet Company is in violation of, or
default under, any judgment, order or decree of any court or admin-
istrative agency or any law, statute, ordinance, rule or regula-
tion, of any foreign, federal, state or local government or any
other governmental department or agency (including without
limitation, any laws or regulations relating to anti-competitive
practices, discrimination, employment, health, transportation and
safety), which violations and defaults could, either individually
or in the aggregate, have a Material Adverse Effect or interfere
materially with the consummation of the transactions contemplated
hereby.
(b) Permits. The Holding Company and the Cabinet
Company hold all permits, licenses, franchises and other
authorizations from governmental authorities (collectively,
"Governmental Permits") required to own, lease, operate or use the
properties owned, leased, operated or used by them and to conduct
their business as now being conducted, other than (a) those the
failure to hold which could not, individually or in the aggregate,
have a Material Adverse Effect and (b) as to Environmental Matters.
After giving effect to the execution and delivery of this Agreement
and the consummation by the Sellers of the transactions
contemplated hereby in the manner contemplated hereby and the
ownership and operation by the Purchaser of the business and
properties of the Holding Company and the Cabinet Company subse-
quent to the Closing in substantially the same manner as previously
owned and operated by the Holding Company and the Cabinet Company
(assuming no circumstance peculiar to the Purchaser unknown to the
Holding Company and the Cabinet Company that is not applicable to
them), each of the Governmental Permits (except for such incidental
licenses, permits and other authorizations which would be readily
obtainable by any qualified applicant without undue burden in the
event of any lapse, termination, cancellation or forfeiture there-
of) will continue to be valid, subsisting and in full force and
effect without (i) the occurrence of any breach, default or
forfeiture of rights thereunder or (ii) the consent, approval, or
act of or the making of any filing with, any governmental body,
regulatory commission or other party.
2.1.8 Tax Matters. (a) General. Each of the Holding
Company and the Cabinet Company (i) has filed on a timely basis all
United States federal tax returns required by law to be filed by it
and has filed on a timely basis all state, local and foreign tax
returns required by law to be filed by it (including, without
limitation, tax returns for all income, franchise, property, sales,
use, excise, escheat, intangible, employment, withholding and
service taxes) (except to the extent that the failure so to file
could not have a Material Adverse Effect) and (ii) has paid on a
timely basis all such taxes, penalties and additions to tax
relating to such taxes and interest on such taxes, penalties and
additions to tax (all income, franchise, property, sales, use,
excise, escheat, intangible, employment, withholding and service
taxes and any penalties and additions to tax related to such taxes
and interest on all such taxes, penalties and additions to tax
being referred to in this section 2.1.8 collectively as "Taxes" and
all returns relating to such Taxes being referred to in this sec-
tion 2.1.8 as "Tax Returns") levied upon it or its properties as
shown on the returns referred to in clause (i), other than those
that are presently payable without penalty, as to which sufficient
reserves have been established in accordance with generally
accepted accounting principles on the books and records of the
Holding Company and the Cabinet Company. Except as set forth on
Schedule 2.1.8, for all fiscal years ended on or prior to May 1,
1993 and for the period ended November 27, 1993, each of the
Holding Company and the Cabinet Company has established on their
books and records reserves in accordance with generally accepted
accounting principles for the payment of any Taxes not yet due and
payable. Each of the Holding Company and the Cabinet Company has
made all required declarations of estimated United States federal
and all applicable state and local income taxes and have paid all
taxes as shown on such declarations. All monies required to be
held by the Holding Company and the Cabinet Company from employees
of the Holding Company and the Cabinet Company for income taxes,
social security and other payroll taxes have been collected or
withheld, and either paid to the respective governmental agencies,
set aside in accounts for such purpose, or accrued, reserved
against and entered upon the books of the Holding Company. All
proper amounts have been collected or withheld by the Holding
Company and the Cabinet Company for all other Taxes payable or
anticipated to be payable. There are no liens for Taxes upon the
assets of the Holding Company or the Cabinet Company, except liens
for Taxes that are not yet due. Except as set forth on Schedule
2.1.8, and except in connection with an election (whether deemed or
actual) by the Purchaser under section 338 or 336(e) of the Code,
the execution, delivery, and performance of this Agreement will not
cause any Taxes to be payable (other than by the Sellers) or cause
any lien, charge, or encumbrance to secure any Taxes to be created
either immediately or upon the nonpayment of any Tax (other than on
the properties or assets of the Sellers). The Holding Company's
United States Tax Returns have been audited, or the time for audit
has expired, for periods ended through April 29, 1989 and, to the
best of the Holding Company's and the Cabinet Company's knowledge,
there are no pending tax examinations or audits of their respective
Tax Returns. Neither the United States Internal Revenue Service
nor any other taxing authority is now asserting or to the best
knowledge of the Holding Company and the Cabinet Company
threatening to assert against the Holding Company or the Cabinet
Company any deficiency or claim for additional Taxes, and, to the
best knowledge of the Holding Company and the Cabinet Company,
there is no basis for the assertion of any such deficiency or claim
which, if successfully asserted, could have a Material Adverse
Effect. Except as set forth on Schedule 2.1.8, neither the Holding
Company nor the Cabinet Company has granted any waiver of any
statute of limitation with respect to, or any extension of a period
for the assessment of, any United States federal, state, county or
municipal or any Taxes. The Holding Company and the Cabinet
Company have delivered to Purchaser true and complete copies of all
federal income tax returns (including amended returns) and tax
audit reports, if any, for the last six fiscal years.
2.1.9 Brokers, Finders. Neither the Holding Company nor
the Cabinet Company has retained any broker or finder in connection
with the transactions contemplated hereby so as to give rise to any
claim against the Purchaser for any brokerage or finder's
commission, fee or similar compensation.
2.1.10 Absence of Certain Changes. Except as set forth
in Schedule 2.1.10, since May 1, 1993, neither the Holding Company
nor the Cabinet Company has (a) issued, sold or delivered or agreed
to issue, sell or deliver any additional shares of its capital
stock or any options, warrants or rights to acquire any such capi-
tal stock, or securities convertible into or exchangeable for such
capital stock, (b) mortgaged, pledged or subjected to any lien,
lease, security interest or other charge or encumbrance any of its
assets, tangible or intangible, involving more than $25,000,
(c) acquired or disposed of any assets or properties having a value
in excess of $50,000, or entered into any agreement or other ar-
rangements for any such acquisition or disposition, except for the
acquisition or disposition of inventory in the ordinary course of
business consistent with past practice, (d) declared, made, paid or
set apart any sum for any dividend or other distribution to its
shareholders (except from the Cabinet Company to the Holding
Company) or purchased or redeemed or made any commitment to
purchase or redeem any shares of its capital stock or any option,
warrant or right to purchase any of its capital stock, or re-
classified its capital stock, (e) increased or orally promised to
increase the rate or improve the terms of payment of wages,
salaries, compensation, fees, bonus, insurance, pension or other
benefits payable to any Affiliate, officer or employee other than
in accordance with the normal compensation and benefits policies of
the Holding Company or the Cabinet Company, or granted any
severance or termination pay, or entered into any employment,
severance or consulting agreement or arrangement with any Affiliate
officer or employee that is not terminable by the employer on less
than 30 days notice without cause and without penalty, (f) forgiven
or cancelled any debts or claims or waived any rights of value
other than in the ordinary course of business consistent with past
practice, (g) suffered any damage, destruction or loss (whether or
not covered by insurance) affecting its properties or assets that
could have a Material Adverse Effect, (h) suffered any strike, or
suffered any other labor trouble affecting its business or
operations that could have a Material Adverse Effect, (i) suffered
or experienced any change in relations with or loss of any
employees, suppliers or customers that could have a Material
Adverse Effect, (j) created, incurred, guaranteed or assumed or
agreed to create, incur, guarantee or assume any indebtedness for
borrowed money, except under its revolving credit arrangements as
in effect from time to time, or entered into any capitalized
leases, (k) changed any method of accounting or accounting practice
or policy of the Holding Company or the Cabinet Company, except for
accounting for income taxes as required by Statement of Financial
Accounting Standards No. 109, (l) conducted its business other than
in the ordinary course consistent with past practice, except as
required by this Agreement, (m) settled or compromised any claim,
suit or cause of action involving more than $25,000, (n) made any
capital expenditures or commitments therefor involving more than
$25,000, (o) revalued any of their respective assets, including,
without limitation, write-ups or write-downs of inventory or write-
offs of accounts receivable other than in the ordinary course of
business consistent with past practice, (p) delayed payment of any
of their respective accounts payable or other liabilities beyond
the due date thereof or the date when such liability would have
been paid in the ordinary course of business consistent with past
practice, or (q) entered into any agreement or made any commitment
to take any of the types of action described in clauses (a) through
(q) above.
2.1.11 Title to Properties, etc. (a) Each of the
Holding Company and the Cabinet Company has good title to all of
its material tangible personal properties and assets, including the
tangible personal properties and assets reflected in the Interim
Financials referred to in section 2.1.4 (other than inventories and
other properties and assets disposed of in the ordinary course of
business since the date of the Interim Financials), subject to no
mortgage, lien or security interest except those listed in part I
of Schedule 2.1.11; and subject to no other charge, encumbrance,
title imperfection or other restriction of any nature except (i)
those listed on Schedule 2.1.11 and (ii) those that could not,
individually or in the aggregate, have a Material Adverse Effect.
All machinery and equipment in use is in good and serviceable
condition, reasonable wear and tear excepted, and has been well
maintained.
(b) Schedule 2.1.11 sets forth a complete list of (i)
all real property and all interests in real property owned in fee
by the Holding Company or the Cabinet Company (each an "Owned
Property") and (ii) all real property and all interests in real
property leased by the Holding Company or the Cabinet Company (each
a "Leased Property", and, together with the Owned Property, the
"Real Property"). The Holding Company and the Cabinet Company have
(x) good and marketable fee title to all Owned Property and (y)
valid leasehold interests in all Leased Property; and such title
and leasehold interests are insured or insurable and are free and
clear of any mortgage, lien or security interest except those
listed in part III of Schedule 2.1.11; and subject to no other
charge, encumbrance, title imperfection or restriction of any
nature, other than (A) those created or permitted under the
agreements listed pursuant to Section 2.1.12(iv) and (B) those that
could not, individually or in the aggregate, have a Material
Adverse Effect. The Holding Company has made available to the Pur-
chaser complete and correct copies of all deeds and leases relating
to the Real Property. All improvements on the Owned Property are
in good and serviceable condition, reasonable wear and tear
excepted, and have been well maintained.
(c) The Owned Property is in full compliance with all
applicable building, zoning, subdivision and other land use and
similar laws, codes, ordinances, rules, regulations and orders of
governmental authorities ("Real Estate Laws"), other than those the
failure to comply with which could not have a Material Adverse
Effect, and neither the Holding Company nor the Cabinet Company has
received any notice or has any knowledge of violation or claimed
violation of any Real Estate Law. The Holding Company and the
Cabinet Company enjoy peaceful and undisturbed possession under
their respective leases of the Leased Property, and each of such
leases is in full force and effect.
2.1.12 Certain Contracts. (a) Schedule 2.1.12 sets
forth a complete list of all Contracts of the Holding Company and
the Cabinet Company. The term "Contracts" shall mean (i) contracts
and agreements with respect to which the aggregate amount
reasonably expected to be paid or received thereunder in the future
exceeds $25,000, other than (A) open trade accounts with respect to
the purchase or sale by the Holding Company or the Cabinet Company
of its supplies or products, respectively, in the ordinary course
of business and (B) leases of real property listed in Sched-
ule 2.1.11; (ii) contracts and agreements outstanding with of-
ficers, employees (including leased employees), directors, agents,
consultants, advisors, salesmen, sales, manufacturer, advertising
or public relations representatives, distributors, consignees,
sales agents or dealers, other than (x) contracts that by their
terms are cancelable by the Holding Company or the Cabinet Company
with notice of not more than 30 days and without cancellation
penalties or severance payments or other payments required to be
paid after the date of cancellation aggregating in excess of
$25,000, and (y) contracts that provide for payments based solely
on products sold and require no minimum payments and do not provide
for territorial restrictions; (iii) collective bargaining
agreements or other contracts with any labor union; (iv) mortgages,
indentures, security agreements, notes, letters of credit, loan
agreements or guarantees furnished by or binding upon the Holding
Company or the Cabinet Company; (v) agreements prohibiting or
materially limiting the ability of the Holding Company or the
Cabinet Company to engage in any business or compete with any per-
son; (vi) licenses or other agreements providing in whole or part
for the use of any patents, trademarks, trade names, service marks,
registered copyrights, inventions, trade secrets or other propri-
etary know-how; (vii) contracts for the future acquisition by the
Holding Company or the Cabinet Company of any other business or
company; (viii) contracts and agreements between the Holding
Company and its stockholders or between the Holding Company and any
Affiliate of the Holding Company; (ix) any contract for the
purchase or sale of real property; and (x) any contract or
agreement relating to the use, development, purchase or licensing
of computer hardware or software. The Holding Company has made
available to the Purchaser complete and correct copies of all
Contracts.
(b) All of the Contracts are in full force and effect
and constitute a valid and binding obligation of the Holding
Company or the Cabinet Company and neither the Holding Company nor
the Cabinet Company, nor, to the best knowledge of the Holding
Company and the Cabinet Company, any other party to any of the Con-
tracts, is (or, with notice or lapse of time or both, would be) in
default in any respect, which defaults could in the aggregate have
a Material Adverse Effect or give rise to the right of any holder
of indebtedness to accelerate the maturity thereof.
(c) No Contract or any other agreement between the
Holding Company or the Cabinet Company and any of the Sellers or
any of the Sellers' Affiliates will continue in effect after the
Closing. Assuming the obtaining of any necessary consents, the
execution and delivery of this Agreement and the consummation by
the Sellers of the transactions contemplated hereby in the manner
contemplated hereby and the ownership and operation by the
Purchaser of the business and properties of the Holding Company and
the Cabinet Company subsequent to the Closing in substantially the
same manner as previously owned and operated by the Holding Company
and the Cabinet Company (assuming no circumstance peculiar to the
Purchaser unknown to the Holding Company and the Cabinet Company
that would not be applicable to them) will not cause any amounts
payable under the Contracts to be increased, including without
limitation, pursuant to any change of control provisions that may
be contained therein.
2.1.13 Compliance with ERISA. (a) Schedule 2.1.13 sets
forth a complete list of each "employee benefit plan," as that term
is defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and each bonus,
deferred or incentive compensation, stock purchase, stock option,
severance or termination pay plan or program that is maintained or
contributed to by the Holding Company or the Cabinet Company for
the benefit of any of their respective employees or former
employees (the "Plans"). With respect to each of the Plans, the
Holding Company has heretofore made available to the Purchaser (or
will deliver to the Purchaser prior to the Closing) correct and
complete copies of each of the following documents: (i) the Plan
and related trust or other funding document described in
Schedule 2.1.4 (including all amendments thereto), (ii) the Form
5500 annual reports described in Schedule 2.1.4, including all
attachments thereto, filed with the Internal Revenue Service with
respect to each such Plan, (iii) the trust and actuarial reports
described in Schedule 2.1.4, if any, prepared with respect to each
such Plan, (iv) the most recent determination letter received from
the Internal Revenue Service with respect to each such Plan that is
intended to be qualified under section 401 of the Code, (v) the
summary plan description described in Schedule 2.1.4 and (vi) the
financial statements described in Schedule 2.1.4, if any, prepared
with respect to each Plan.
(b) Each Plan has been administered and operated in
material compliance with the applicable requirements of ERISA and
the Code and no such Plan is subject to section 412 of the Code or
Title IV of ERISA. No liability to the Pension Benefit Guaranty
Corporation (the "PBGC") has been or is expected to be incurred by
the Holding Company or the Cabinet Company or any other trade or
business that is treated as a member of the same "controlled group"
of, or under "common control" with, the Holding Company or the
Cabinet Company pursuant to section 4001(b) of ERISA or section 412
of the Code (a "Related Person"). Neither the Holding Company nor
any Plan nor any trust thereunder nor, to the knowledge of the
Holding Company, any fiduciary of any Plan has engaged in any
prohibited transaction that has resulted or is reasonably expected
to result in the imposition of any tax pursuant to section 4975(a)
or (b) of the Code or penalty pursuant to section 409 or section
502(i) of ERISA on the Holding Company or the Cabinet Company, such
Plan or such trust. No Plan is a "multiemployer plan" (within the
meaning of section 3(37) of ERISA) or a "multiple employer" plan
(within the meaning of section 4063 or 4064 of ERISA). Each Plan
that is intended to be qualified under section 401(a) of the Code
has received a favorable determination letter from the Internal
Revenue Service to that effect.
(c) There are no pending or, to the best knowledge of
the Holding Company or the Cabinet Company, threatened claims of
any employee or former employee of the Holding Company or the
Cabinet Company against or otherwise involving any of the Plans
(other than routine claims for benefits).
(d) All contributions (including insurance premiums)
required to have been made by the Holding Company or the Cabinet
Company to any Plan pursuant to the applicable provisions of any
Plan, the Code or ERISA have been made within the time prescribed
by such provisions of the Code and ERISA and all contributions
required to have been made by each Related Person to any other
employee benefit plan (within the meaning of section 3(3) of ERISA)
of any Related Person pursuant to section 412 of the Code have been
made within the time prescribed by section 412 of the Code.
(e) No events have occurred and no condition with
respect to a Plan exists that would subject the Holding Company,
the Cabinet Company or the Purchaser to any material tax under
section 4971, 4977 or 4979 of the Code or to a material fine under
section 502(c) of ERISA. Neither the Holding Company nor the
Cabinet Company retains the services of any leased employees (as
such term is defined in section 414(n) of the Code) that must be
taken into account with respect to any Plan.
(f) On or after the date hereof and prior to the Closing
Date, no Plan maintained by the Holding Company or the Cabinet
Company will be (i) terminated by the Holding Company or the
Cabinet Company, (ii) amended by the Holding Company or the Cabinet
Company in any manner which would materially increase the benefits
accrued by any participant thereunder, or (iii) amended by the
Holding Company or the Cabinet Company in any manner which would
materially increase the cost of maintaining such Plan to the
Holding Company, the Cabinet Company or the Purchaser.
(g) Neither the Holding Company nor the Cabinet Company
sponsors or maintains a VEBA, other than one which has no assets or
liabilities. Each "employee welfare benefit plan" (as such term is
defined in section 3(1) of ERISA) which is a "group health plan"
(as such term is defined in section 4980(g)(2)) of the Code)
complies with the applicable requirements of section 4980B of the
Code.
(h) The Holding Company and the Cabinet Company have
complied in all material respects with the applicable requirements
of the Americans with Disabilities Act and the Family and Medical
Leave Act and have operated each Plan in material compliance with
such laws.
2.1.14 Trademarks, Trade Names, Patents, etc. (a)
Schedule 2.1.14 sets forth a complete list of (i) all United
States, state or foreign trade names, trademarks, service marks,
patents or copyrights or applications therefor, or patent licenses
or patent applications owned by or registered in the name of the
Holding Company or the Cabinet Company or used in the business of
the Holding Company or the Cabinet Company or in which the Holding
Company or the Cabinet Company holds any right, license or interest
(collectively, the "Intellectual Property"); (ii) all agreements,
commitments, contracts, understandings, licenses, assignments and
indemnities relating or pertaining to any asset, property or right
of the character described in the preceding clause to which the
Holding Company or the Cabinet Company is a party, showing in each
case the parties and the material terms; and (iii) all licenses or
agreements pertaining to mailing lists, know-how, trade secrets,
inventions, disclosures or uses of ideas currently used in the
business of the Holding Company or the Cabinet Company to which the
Holding Company or the Cabinet Company is a party, showing in each
case the parties and the material terms.
(b) Except as set forth in Schedule 2.1.14, all patents,
if any, listed in Schedule 2.1.14 as being owned, controlled or
used by the Holding Company or the Cabinet Company are valid and in
force and all patent applications of the Holding Company or the
Cabinet Company, if any, listed therein are in good standing, all
without challenge of any kind, and, except as otherwise disclosed
in such Schedule 2.1.14, the Holding Company or the Cabinet Company
owns the entire right, title and interest in and to such patents
and patent applications without qualification, limitation, burden
or encumbrance of any kind. All the registrations for trade names,
trademarks, service marks and copyrights, if any, listed in
Schedule 2.1.14 as being owned, controlled or used by the Holding
Company or the Cabinet Company are valid and in force and all
applications for such registrations are pending and in good
standing, all without challenge of any kind, and the Holding
Company or the Cabinet Company owns the entire right, title and
interest in and to all such trade names, trademarks and service
marks so listed as well as the registrations and applications for
registration therefor without qualification, limitation, burden or
encumbrance of any kind. Correct and complete copies of all the
patents and patent applications and of all trademarks, trade names,
service marks and copyrights and registrations, applications or
deposits therefor and all licenses listed in Schedule 2.1.14 will
be furnished to Purchaser prior to Closing.
(c) Except as set forth in Schedule 2.1.14 the Holding
Company or the Cabinet Company owns or has the right to use all
patents, trademarks, service marks, copyrights, trade names,
inventions, improvements, processes, formulae, trade secrets,
mailing lists, know-how and proprietary or confidential information
used in conducting the business of the Holding Company and the
Cabinet Company. All such patents, trademarks, service marks,
copyrights, trade names, inventions, improvements, processes,
formulae, trade secrets, mailing lists, know-how and proprietary or
confidential information may be transferred to Purchaser pursuant
to the transactions contemplated by this Agreement without the
consent of any third party. Except as set forth in Schedule 2.1.6,
(i) no infringement of any patent, patent right, trademark, service
mark, trade name or copyright or registration thereof has occurred
or results in any way from the operations or business of the
Holding Company or the Cabinet Company, (ii) no claim or, to the
knowledge of the Holding Company or the Cabinet Company, threat of
any such infringement has been made or implied in respect of any of
the foregoing, (iii) no claim of invalidity of any patent described
in Schedule 2.1.14 has been made, (iv) no proceedings are pending
or, to the knowledge of the Holding Company or the Cabinet Company,
threatened against the Holding Company or the Cabinet Company which
challenge the validity or ownership of any patent, trademark, trade
name, service mark or copyright or the ownership of any other right
or property described in Schedule 2.1.14, (v) there is not, to the
knowledge of the Holding Company or the Cabinet Company, any
infringing use of any of the same by others and (vi) to the
knowledge of the Holding Company and the Cabinet Company, except as
set forth in Schedule 2.1.6, neither the Holding Company nor the
Cabinet Company has received written notice of, and there is no
basis for, a claim against the Holding Company or the Cabinet
Company that the operations, activities, products, equipment,
machinery or processes of the businesses of the Holding Company or
the Cabinet Company infringe the patents, trademarks, service
marks, trade names, copyrights or other property rights of others.
2.1.15 Labor Matters. Since January 1, 1988, there has
been no work stoppage or slowdown or other labor difficulties
relating to the Holding Company or the Cabinet Company that has had
or could have a Material Adverse Effect. Except as set forth in
Schedule 2.1.15, neither the Holding Company nor the Cabinet
Company is aware of any labor union that is currently seeking to
represent or organize the employees at any of the principal
facilities of the Holding Company and the Cabinet Company other
than labor unions currently representing such employees. Except as
set forth in Schedule 2.1.15, (i) the Holding Company and the
Cabinet Company are in substantial compliance with all federal,
state and local laws respecting employment and employment practices
(including immigration laws relevant to employment), terms and
conditions of employment and wages and hours, and are not engaged
in any unfair labor practice; (ii) there is no unfair labor prac-
tice complaint against the Holding Company or the Cabinet Company
pending before the National Labor Relations Board or any state or
local labor relations board or agency; and (iii) no grievance which
could have a Material Adverse Effect on the business or operations
of the Holding Company or the Cabinet Company and no arbitration
proceeding arising out of or under collective bargaining agreements
is pending and, to the best knowledge of the Holding Company and
the Cabinet Company, no claim therefore has been asserted.
2.1.16 Disclosure. To the Holding Company's and the
Cabinet Company's best knowledge, this Agreement, the Schedules
hereto and the certificates and other documents furnished by the
Holding Company, the Cabinet Company or any of the Sellers to the
Purchaser pursuant hereto, taken as a whole, do not as of their
respective dates contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
contained herein and therein not misleading. No officer, director
or employee of the Holding Company or the Cabinet Company or any
other person has been authorized to give any information or to make
any representation in connection with the transactions contemplated
hereby other than those contained herein and in any certificates or
documents furnished pursuant hereto and, if given or made, such
information or representation may not be relied upon as having been
authorized by the Holding Company, the Cabinet Company or any of
the Sellers.
2.1.17 Affiliate Transactions. Except as set forth in
Schedule 2.1.17, neither the Holding Company nor the Cabinet
Company has within the period of three years preceding the date of
this Agreement engaged in any transaction material to the Holding
Company or the Cabinet Company with any Affiliate of the Holding
Company, other than upon fair and reasonable terms that are no less
favorable to the Holding Company or the Cabinet Company than those
which might be obtained in an arm's-length transaction at the time
from persons that are not Affiliates of the Holding Company. No
Contract or other agreement between the Holding Company or the
Cabinet Company and any of the Sellers' Affiliates will continue in
effect after the Closing.
2.2 Representations and Warranties as to the Sellers.
Each of the Sellers, as to itself, severally and not jointly
represents and warrants to the Purchaser as follows:
2.2.1 Authorization, etc. Such Seller has full right,
power and authority to enter into this Agreement and the Custody
Agreement to which such Seller is a party and to perform fully such
Seller's obligations hereunder and thereunder. This Agreement and
such Custody Agreement have been duly executed and delivered by
such Seller and constitute the legal, valid and binding obligations
of such Seller enforceable against such Seller in accordance with
their respective terms.
2.2.2 Conflicts, Consents, Subsequent Actions. (a)
Conflicts. The execution and delivery by each Seller of this
Agreement and the Custody Agreement to which such Seller is a
party, and the consummation by each Seller of the transactions
contemplated hereby and thereby, in the manner contemplated hereby
and thereby, do not and will not conflict with or result in the
breach of any of the terms or provisions of, or constitute a
default under (or an event that, with notice or lapse of time or
both, would constitute a default under), any mortgage, indenture,
loan agreement, note, other agreement for the borrowing of money or
the obtaining of credit, deed of trust, will, lease or other mater-
ial agreement or instrument to which such Seller is a party or by
which such Seller or the Shares owned by such Seller may be bound,
or (to the extent that a default thereunder could materially impair
such Seller's ability to carry out the terms of this Agreement) any
judgment, order, decree, law, statute, rule or regulation
applicable to such Seller or to the Shares to be sold by such
Seller, except (i) as set forth in Schedule 2.2.2, (ii) that such
Seller is party to an agreement restricting disposition of the
Shares to be sold by such Seller hereunder unless such Seller has
delivered to the Holding Company an opinion of counsel, satisfac-
tory to the Holding Company, to the effect that such disposition is
exempt from the provisions of section 5 of the Securities Act of
1933, as amended (the "Securities Act"), or the Holding Company has
waived the delivery of such opinion, and (iii) in the case of each
Seller other than The Clayton & Dubilier Private Equity Fund
Limited Partnership (collectively, the "Management Sellers"), the
Holding Company and The Clayton & Dubilier Private Equity Fund
Limited Partnership or its designee have rights to purchase such
Shares pursuant to the Management Agreements.
(b) Consents. Except (i) as may be required under the
HSR Act, (ii) as set forth in Schedule 2.2.2 and (iii) as may be
required pursuant to the terms of the Management Agreements, no
consent, approval, authorization, order, filing, registration or
qualification of or with any court, governmental authority or third
person is required to be obtained by such Seller in connection with
the execution and delivery by such Seller of this Agreement or
consummation by such Seller of the transactions contemplated herein
in the manner contemplated hereby.
(c) Subsequent Actions. For purposes of this Agreement,
the consummation by such Seller of the transactions contemplated
hereby and by the Custody Agreement to which such Seller is a party
in no event shall be construed to include any merger with or other
restructuring of the Holding Company, or any other action by the
Holding Company, the Cabinet Company, the Purchaser or any parent,
subsidiary or Affiliate thereof, subsequent to the consummation of
the purchase and sale of the Shares.
2.2.3 Title to Stock, etc. Such Seller is the record
and beneficial owner of and has good and valid title to the Shares
to be sold by such Seller pursuant to this Agreement, free and
clear of any lien, pledge, charge, security interest, encumbrance,
preemptive subscription, title retention agreement, adverse claim
or option, except as set forth in section 2.2.2 or Schedule 2.2.2
(including, without limitation, in the case of each Management
Seller, the Management Agreements). Upon the delivery of and
payment for such Shares at the Closing, as provided for in this
Agreement, such Seller will transfer to the Purchaser good and
valid title to such Shares, free and clear of any lien, pledge,
charge, security interest, encumbrance, preemptive subscription,
title retention agreement, adverse claim, option or other
restriction whatsoever.
2.2.4 Litigation. There is no action, claim, suit or
proceeding pending or, to such Seller's best knowledge, threatened
by or against or affecting such Seller and there is no investiga-
tion pending or, to the best knowledge of such Seller, threatened
against or affecting such Seller, in each case before any court or
governmental or regulatory authority or body, that could have a
material adverse effect on the consummation of the transactions
contemplated by this Agreement.
2.2.5 Brokers, Finders. Such Seller has not retained
any broker or finder in connection with the transactions
contemplated hereby so as to give rise to any claim against the
Purchaser or the Holding Company or the Cabinet Company for any
brokerage or finder's commission, fee or similar compensation.
Merrill Lynch & Co. has acted as financial advisor to the Sellers
and its fees and expenses will be paid by the Sellers at the
Closing.
2.3 Representations and Warranties of Purchaser. The
Purchaser represents and warrants to each of the Sellers as of the
date hereof as follows:
2.3.1 Purchaser's Corporate Status. The Purchaser is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of North Carolina.
2.3.2 Authorization, etc. The Purchaser has full
corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby and to
perform its obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Purchaser. This Agreement has
been duly executed and delivered by the Purchaser and constitutes
the legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms.
2.3.3 Conflicts, Consents. (a) Conflicts. The
execution and delivery of this Agreement by the Purchaser, and the
consummation by the Purchaser of the transactions contemplated
hereby in the manner contemplated hereby, do not and will not
conflict with or result in any violation of, or default under (or
any event that, with notice or lapse of time or both, would
constitute a default under), any provision of (i) the Certificate
of Incorporation or By-Laws of the Purchaser, (ii) any mortgage,
indenture, loan agreement, note, bond, deed of trust, other agree-
ment, commitment or obligation for the borrowing of money or the
obtaining of credit, material lease or other material agreement,
contract, license, franchise, permit or instrument to which the
Purchaser is a party or by which it may be bound, or (iii) any
judgment, order, decree, law, statute, rule or regulation
applicable to the Purchaser.
(b) Consents. Except as may be required under the HSR
Act, no consent, approval, authorization, permit, order, filing,
registration or qualification of or with any court, governmental
authority or third person is required to be obtained by the Pur-
chaser in connection with the execution and delivery by the
Purchaser of this Agreement or the consummation by the Purchaser of
the transactions contemplated hereby in the manner contemplated
hereby.
2.3.4 Litigation. There is no action, claim, suit or
proceeding pending or, to the Purchaser's best knowledge,
threatened by or against or affecting the Purchaser and there is no
investigation pending or, to the best knowledge of the Purchaser,
threatened against or affecting the Purchaser, in each case before
any court or governmental or regulatory authority or body, that
could have a material adverse effect on the consummation of the
transactions contemplated by this Agreement.
2.3.5 Brokers, Finders. The Purchaser has not retained
any broker or finder in connection with the transactions
contemplated hereby so as to give rise to any valid claim against
any of the Sellers, the Holding Company or any Subsidiary for any
brokerage or finder's commission, fee or similar compensation.
2.3.6 Purchase for Investment. The Purchaser is
acquiring the Shares for its own account for investment and not
with a view to any distribution thereof. The Purchaser
acknowledges receipt of advice from the Holding Company to the
effect that the Shares have not been registered under the
Securities Act or any state securities laws.
ARTICLE III
CERTAIN COVENANTS PENDING AND POST-CLOSING
3.1 Access and Information; Confidentiality. Prior to
the Closing, the Sellers will cause the Holding Company and the
Cabinet Company (a) to give to the Purchaser and its
representatives full and free access to its properties, books,
records, contracts and commitments, (b) to furnish all such
information and documents relating to its properties and business
as the Purchaser may reasonably request, and (c) to allow the
Purchaser to discuss matters relating to the Holding Company and
the Cabinet Company with the outside auditors and attorneys for the
Holding Company and the Cabinet Company, with any other
representatives of the Holding Company or the Cabinet Company as
reasonably requested by the Purchaser, and, if accompanied by a
representative of the Cabinet Company or subject to such other
reasonable conditions as the Cabinet Company may impose, with
customers and suppliers of the Cabinet Company. All information
about the Holding Company and the Cabinet Company obtained by the
Purchaser, whether furnished before or after the date hereof,
whether oral or written, and regardless of the manner in which it
is obtained, will be considered "Proprietary Information" for
purposes of the letter dated August 5, 1993 from the Cabinet
Company to the Purchaser concerning confidentiality and related
matters, unless such information is excluded as Proprietary Infor-
mation by the terms of such letter, which letter is hereby incor-
porated by reference and made a part hereof; and such letter will
apply to all such Proprietary Information furnished pursuant to
this Agreement to the same extent as if it were furnished pursuant
thereto.
3.2 Conduct of Business of the Holding Company and the
Cabinet Company. Except as set forth in Schedule 3.2, from the
date hereof to the Closing, the Sellers will cause the Holding
Company and the Cabinet Company (a) to conduct their businesses
only in the ordinary course in substantially the same manner as
heretofore, (b) to maintain and keep their properties and equipment
in such repair, working order and condition as is sufficient for
the operation of their business in the ordinary course, (c) to keep
in full force and effect insurance comparable in amount and scope
of coverage to that now maintained by them (to the extent available
on commercially reasonable terms in the case of any renewal or
replacement policies), (d) to perform in all material respects all
of their obligations under all contracts and commitments applicable
to their businesses or properties, (e) to use their reasonable
efforts to maintain and preserve their business organizations
intact, and maintain their relationships with their suppliers and
customers so that they will be preserved after the Closing, (f) to
maintain their books of account and records in the usual and regu-
lar manner, (g) to comply in all material respects with all laws
and regulations applicable to them and to the conduct of their
businesses, (h) not to amend their certificates of incorporation or
by-laws, (i) not to merge or consolidate with, or agree to merge or
consolidate with, or to purchase substantially all of the assets
of, or otherwise acquire, any business or any business organization
or division thereof, (j) promptly to advise the Purchaser in writ-
ing of any Material Adverse Effect, and (k) not to take any action
described in section 2.1.10.
3.3 Efforts to Consummate Transaction. The Purchaser
and each Seller shall use their reasonable efforts to take or cause
to be taken all actions required to consummate the transactions
contemplated hereby. The Purchaser and Sellers shall file or
supply, or cause to be filed or supplied, all material
applications, notifications and information required to be filed or
supplied by them or the Holding Company pursuant to applicable law
in connection with the transactions contemplated hereby, including
filings and reports pursuant to the HSR Act. The Purchaser shall
use its reasonable efforts to obtain all consents and approvals
from governmental authorities and third parties required to be ob-
tained by the Purchaser for the consummation by the Purchaser of
the transactions contemplated hereby, other than any consents and
approvals the failure of which to be obtained, either in any case
or in the aggregate, could not have a material adverse effect on
the transactions contemplated hereby. Each Seller shall use such
Seller's reasonable efforts to obtain all consents and approvals
from governmental authorities and third parties and waivers by the
Holding Company and The Clayton & Dubilier Private Equity Fund
Limited Partnership required to be obtained by such Seller for the
consummation by such Seller of the transactions contemplated
hereby, other than any consents and approvals the failure of which
to be obtained, either in any case or in the aggregate, could not
have a material adverse effect on the transactions contemplated
hereby. The Purchaser shall cooperate in good faith with the
Holding Company, the Cabinet Company and the Sellers in the obtain-
ing by the Holding Company and the Cabinet Company of all consents
and approvals from governmental authorities and third parties
required to be obtained by the Holding Company and the Cabinet
Company for the consummation of the transactions contemplated
hereby.
3.4 Non-Solicitation. Each Seller, severally and not
jointly, covenants that from the date hereof through the Closing
Date, such Seller will not, directly or indirectly, and will not
permit any employee, representative, financial or legal advisor or
agent of such Seller to, make, solicit, assist or encourage the
initiation of any inquiries or proposals or participate in any
negotiations with any party or furnish any confidential information
to any party (other than the Purchaser and its employees,
representatives, advisors and agents) concerning the acquisition of
the Shares or any portion of the assets, properties or business of
the Holding Company or the Cabinet Company, other than dispositions
of inventories and other assets in the ordinary course of business.
3.5 Purchase Price Adjustment. (a) Delivery and
Review of Closing Balance Sheet. As promptly as practicable, but
no later than 45 days after the Closing Date, the Sellers will
cause to be prepared and delivered to the Purchaser (i) the Closing
Financial Statements, accompanied by the auditors' report thereon
from a nationally recognized firm of independent public accountants
selected by the Sellers (which may be Ernst & Young, the Holding
Company's independent public accountants), and (ii) a certificate
of the Company, setting forth the Closing Net Book Value and the
Closing Working Capital, together with supporting calculations in
reasonable detail (the "Adjustment Certificate"). The Purchaser
and its accountants shall be given an opportunity to discuss with
the Sellers' accountants matters relating to the scope of the audit
to be performed (including, without limitation, determination of
sample sizes for accounts receivable and inventory observations)
and, prior to the delivery of the Closing Financial Statements, the
Purchaser and its accountants shall be given an opportunity to
review draft financial statements and to discuss with the Sellers'
accountants significant audit issues that arose in the course of
their audit. The Purchaser shall have 30 days from the date on
which the Closing Balance Sheet and the Adjustment Certificate are
delivered to it to review such documents (the "Review Period").
The Purchaser and its accountants shall be provided with full
access to the work papers of the Sellers' accountants in connection
with such review. If the Purchaser asserts that any item or amount
shown or reflected in the Closing Balance Sheet or the Adjustment
Certificate or that the calculation of the Closing Net Book Value
or the Closing Working Capital, was arrived at other than in accor-
dance with generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the Balance
Sheet (other than with regard to the application of Statement of
Financial Accounting Standards No. 109), the Purchaser may, on or
prior to the last day of the Review Period, deliver a notice to the
Sellers setting forth, in reasonable detail, each disputed item or
amount and the basis for the Purchaser's disagreement therewith,
together with supporting calculations (the "Dispute Notice"). If
no Dispute Notice is received by the Sellers on or prior to the
last day of the Review Period, the Closing Balance Sheet and the
Adjustment Certificate shall be deemed accepted by the Purchaser.
(b) Disputes. Within 30 days after delivery of the
Dispute Notice if the Purchaser and the Sellers shall be unable
despite their reasonable efforts to resolve the dispute set forth
in the Dispute Notice, the Purchaser and the Sellers shall jointly
retain another nationally recognized firm of independent public
accountants mutually acceptable to them. Such independent firm
shall review the Closing Balance Sheet (and, if necessary or
appropriate in their judgment, any related work papers of the
Sellers' accountants), the Adjustment Certificate and the Dispute
Notice, and shall, as promptly as practicable and in no event later
than 45 days following the date of their engagement, deliver to the
Sellers and the Purchaser a report (the "Adjustment Report")
setting forth, in reasonable detail, their determination with
respect to all of the disputed items or amounts specified in the
Dispute Notice, and the revisions, if any, to be made to the
Closing Balance Sheet, the Adjustment Certificate and the
calculation of the Closing Net Book Value or the Closing Working
Capital to reflect such determination, together with supporting
calculations. The Adjustment Report shall be final and binding
upon the Purchaser and the Sellers. The Sellers shall pay one-
half, and the Purchaser shall pay one-half, of the fees and
expenses of such independent firm incurred in preparing and deliv-
ering such Adjustment Report.
(c) Adjustment and Payment. The Purchase Price shall be
reduced by an amount equal to the sum of (i) the excess, if any, of
the Target Net Book Value over the Closing Net Book Value plus (ii)
the excess, if any, of the Target Working Capital over the Closing
Working Capital; in each case based on the Closing Net Book Value
and the Closing Working Capital determined pursuant to sec-
tion 3.5(a) or 3.5(b), as the case may be. Any adjustment to the
Purchase Price pursuant to this section 3.5 shall be paid by the
Sellers in the manner set forth hereafter in this paragraph (c),
two business days after the date on which the Adjustment Report is
delivered to the Sellers and the Purchaser or, if no Dispute Notice
is received by the Sellers on or prior to the last day of the
Review Period, then on the business day following the last day of
the Review Period. Any such payment shall be made in cash, by wire
transfer of immediately available funds to the account of the
Purchaser designated at least two business days prior to the date
on which such payment is scheduled to be made.
The purchase price adjustment payable pursuant to this
section 3.5 shall be paid by application of the Escrow Amount in
the manner provided in the Escrow Agreement. If the Escrow Amount
shall be insufficient to pay in full the amount of the purchase
price adjustment, the Sellers hereby jointly and severally agree to
pay the deficiency to the Purchaser, and the Sellers each agree
that in such event the Purchaser may proceed against any one of
them for the full payment of the purchase price adjustment, without
proceeding against any of the others.
The parties acknowledge that the Purchaser may receive
from one or more of the Sellers the full amount of the purchase
price adjustment, by payment by such Seller or Sellers of amounts
in excess of such Seller or Seller's proportionate share of the
purchase price adjustment. In such event, each Seller agrees to
pay to the Seller or Sellers which shall have paid such amounts to
the Purchaser pursuant to this section 3.5 its proportionate share
of such purchase price adjustment, determined as provided in
paragraph V of the Custody Agreements, to reimburse the paying
Seller or Sellers for amounts paid by them in excess of their
proportionate shares. In addition, the Purchaser will cause the
Holding Company to assign to such Seller or Sellers who shall have
paid such amounts to the Purchaser all of the Holding Company's
rights to receive from the Option Holders all amounts the Holding
Company may then be entitled to receive from the Option Holders in
payment of the purchase price adjustment pursuant to paragraph 5 of
the Option Cancellation Agreements.
3.6 Environmental Survey. (a) Prior to the Closing,
the Purchaser shall cause to be conducted by a reputable firm of
environmental consultants selected by the Purchaser (the
"Environmental Consultants") an environmental survey of the Owned
Property and such other environmental investigation relating to the
Operations of the Holding Company and the Cabinet Company as may be
satisfactory to the Purchaser. Such survey and investigation shall
be at the Purchaser's sole expense. The Sellers will cause the
Holding Company and the Cabinet Company to furnish to the Purchaser
and the Environmental Consultants full and free access to the Owned
Property and to such books, records and documents relating to the
Owned Property and to the business and Operations of the Holding
Company and the Cabinet Company as the Purchaser may reasonably
request in connection with such environmental survey and
investigation. The Purchaser will cause the Environmental
Consultants, upon the request of any Seller, to provide the Sellers
with informal periodic reports (but no less frequently than weekly)
of their findings during the course of their survey and inves-
tigation. The Purchaser will use its reasonable efforts to complete
such environmental survey and investigation by the fifth business
day prior to January 31, 1994 (or such other date as the parties
hereto may have agreed pursuant to section 1.2).
(b) At the conclusion of such environmental survey and
investigation, but not later than the fifth business day prior to
the Closing, the Purchaser will cause the Environmental Consultants
to deliver to the Sellers a certificate setting forth in reasonable
detail each Material Environmental Cost (the "Environmental
Certificate") determined as a result of such survey and
investigation. The Sellers shall have four business days from the
date on which the Environmental Certificate is delivered to them to
review the Environmental Certificate and, if they so elect, to
cause the Environmental Certificate to be reviewed by a reputable
firm of environmental consultants selected by the Sellers (the
"Sellers' Consultants"). If the Sellers' Consultants shall assert
that any item of Material Environmental Cost set forth on the
Environmental Certificate is incorrect in any material respect, the
Sellers may, on or prior to the Closing Date, deliver a notice to
the Purchaser setting forth each disputed item or amount (the
"Environmental Dispute Notice"). The Sellers, within ten business
days after delivery of the Environmental Dispute Notice, shall
deliver a supplemental notice setting forth in reasonable detail
the basis for their disagreement with each of the items of Material
Environmental Cost covered by the Environmental Dispute Notice.
(c) If an Environmental Dispute Notice shall be
delivered, the Closing shall automatically be adjourned to the
thirtieth day following the date of delivery thereof (or, if such
thirtieth day shall not be a business day, to the next following
business day), and the dispute resolution procedures set forth in
paragraph (d) of this section 3.6 shall be complied with.
(d) Within five days after delivery of the Environmental
Dispute Notice, if the Purchaser and the Sellers shall be unable
despite their reasonable efforts to resolve the dispute set forth
in the Environmental Dispute Notice, the Purchaser and the Sellers
shall jointly retain another reputable firm of environmental
consultants mutually acceptable to them. Such firm shall review
the Environmental Certificate, the Environmental Dispute Notice and
the environmental audit reports and other documentation prepared by
or for the Environmental Consultants and the Sellers' Consultants
in the course of their respective surveys and investigations, and
shall, as promptly as practicable and in no event later than 25
days following the date of their engagement, deliver to the Sellers
and the Purchaser a report (the "Environmental Adjustment Report")
setting forth, in reasonable detail, their determination with
respect to all of the disputed items or amounts specified in the
Environmental Dispute Notice, together with appropriate supporting
calculations. The Environmental Adjustment Report shall be final
and binding upon the Purchaser and the Sellers. The Sellers shall
pay one-half, and the Purchaser shall pay one-half, of the fees and
expenses of such independent firm incurred in preparing and
delivering such Environmental Adjustment Report.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Purchaser. The
obligation of the Purchaser under this Agreement to purchase the
Shares is subject to the fulfillment, at or prior to the Closing,
of the following conditions, any one or more of which may be waived
by the Purchaser at its sole discretion:
4.1.1 Representations, Performance, etc. Either (a) the
representations and warranties of the Sellers contained in sections
2.1.2(a) and 2.1.2(b) shall be true and correct, and the other
representations and warranties of the Sellers contained in sec-
tions 2.1 and 2.2 shall be true and correct in all material
respects, at and as of the Closing Date with the same effect as
though made at and as of the Closing Date, except as modified by
transactions permitted by this Agreement or (b) the aggregate
amount of Material Violations of the representations and warranties
of the Sellers contained in sections 2.1 and 2.2 shall be less than
$500,000. The Sellers shall have duly performed and complied with
all agreements, covenants and conditions required by this Agreement
to be performed or complied with by them prior to or at the Closing
Date unless the failure (other than the failure to tender the
Shares for delivery as required by section 1.3) so to perform or to
comply could not have a Material Adverse Effect. The Sellers shall
have delivered to the Purchaser a certificate executed on behalf of
each of the Sellers, dated the Closing Date, to the effect set
forth above in this section 4.1.1.
4.1.2 Opinion of Counsel. The Purchaser shall have
received favorable opinions, addressed to the Purchaser and dated
the Closing Date, of (a) Debevoise & Plimpton, special counsel to
the Sellers and the Holding Company, in substantially the form
attached hereto as Exhibit A-1, (b) Eastman & Smith, special Ohio
counsel to the Cabinet Company, in substantially the form attached
hereto as Exhibit A-2, and (c) Shumaker, Loop & Kendrick, counsel
to certain of the Sellers, substantially in the form attached
hereto as Exhibit A-3.
4.1.3 Resignation of Directors. Each director and
officer of the Holding Company (and, as requested by the Purchaser,
each director and officer of the Cabinet Company and Export) shall
have submitted his resignation effective as of the Closing.
4.1.4 Certain Approvals, etc. All consents and
approvals from governmental authorities and third parties required
to be obtained by the Sellers and the Holding Company to consummate
the transactions contemplated hereby shall have been obtained,
including the expiration or termination of all applicable waiting
periods under the HSR Act and other applicable laws, regulations,
orders and decrees, other than any consents and approvals of third
parties in respect of any contract or agreement of the Holding
Company or the Cabinet Company (not involving the borrowing of
money) in respect of which the failure to obtain such consent or
approval could not have a Material Adverse Effect. The Sellers
shall have obtained a waiver by the Holding Company of the require-
ment for the delivery of an opinion of counsel upon the sale of the
Shares, to the effect that such sale is exempt from the provisions
of section 5 of the Securities Act, and the Management Sellers
shall have obtained waivers by the Holding Company and The Clayton
& Dubilier Private Equity Fund Limited Partnership (on behalf of
itself and any affiliate thereof) of their respective rights to
purchase the Shares of each Management Seller pursuant to the
Management Agreements. Each Management Agreement shall have been
terminated.
4.1.5 No Injunction. No injunction or other order
issued by a court of competent jurisdiction restraining or
prohibiting the consummation of the transactions contemplated by
this Agreement shall be in effect.
4.1.6 Cancellation of Options. The Holding Company
shall have received the Option Cancellation Agreement of each
Option Holder, substantially in the form attached hereto as Exhib-
it B, and shall have delivered complete and correct copies of such
Option Cancellation Agreements to the Purchaser. All of the issued
and outstanding Options of the Holding Company, entitling the
holders thereof to a total of 1,310,000 Option Shares, shall have
been cancelled by the Holding Company prior to the Closing. The
Holding Company or the Cabinet Company prior to the Closing (a)
shall have borrowed funds (under the Loan and Security Agreement or
from another source) in an amount equal to the Total Option
Cancellation Amount and (b) shall have paid (i) to the Escrow Agent
a portion of the proceeds of such borrowing equal to the Option
Escrow Amount and (ii) to the holders of the Options an amount
equal to the balance of the proceeds (the Total Option Cancellation
Amount less the Option Escrow Amount) less fees and expenses
charged to the Option Holders pursuant to the Option Cancellation
Agreements and applicable withholding.
4.1.7 Certificate as to Certain Tax Matters. Each
Seller shall have delivered to Purchaser a certificate that meets
the requirements of section 1.1445-2(b)(2) of the U.S. federal
income tax regulations certifying that such Seller is not a foreign
person, or the Holding Company or the Cabinet Company shall have
delivered to the Purchaser a certificate that meets the
requirements of section 1.897-2(h) certifying that neither the
Holding Company nor the Cabinet Company is a United States real
property holding corporation.
4.1.8 Review of Environmental Survey. The Purchaser
shall have completed and received the results of the environmental
survey described in section 3.6. The aggregate amount of Material
Environmental Costs set forth in the Environmental Certificate or,
if applicable, the Environmental Adjustment Certificate, delivered
pursuant to section 3.6, shall be less than $500,000.
4.1.9 Employment Agreements. The Cabinet Company shall
have entered into Employment Agreements with Thomas Millner, Mark
Little and William Duncan in substantially the form attached hereto
as Exhibit C-1, and the Cabinet Company shall have entered into an
Employment Agreement with John Long in substantially the form
attached hereto as Exhibit C-2.
4.1.10 Escrow Agreement. The Purchaser, the Custodian
and the Escrow Agent shall have executed and delivered the Escrow
Agreement and the Escrow Agreement shall be in full force and
effect.
4.1.11 Confirmation Delivered by Merrill Lynch & Co.
The Purchaser shall have received from Merrill Lynch & Co. evidence
satisfactory to the Purchaser that neither the Purchaser, the
Holding Company nor the Cabinet Company shall be liable for the
fees and expenses payable to Merrill Lynch & Co. pursuant to the
third, fourth and fifth paragraphs of its engagement letter with
the Cabinet Company dated July 30, 1993.
4.2 Conditions to Obligations of Sellers. The
obligation of the Sellers under this Agreement to sell the Shares
is subject to the fulfillment, at or prior to the Closing, of the
following conditions, any one or more of which may be waived by the
Sellers at their sole discretion:
4.2.1 Representations, Performance, etc. The
representations and warranties of the Purchaser contained in sec-
tion 2.3 shall be true and correct in all material respects at and
as of the Closing Date with the same effect as though made at and
as of the Closing Date, except as modified by transactions
permitted by this Agreement. The Purchaser shall have duly
performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing Date. The Purchaser shall
have delivered to the Sellers a certificate of the Purchaser signed
by an officer of the Purchaser familiar with the transactions
contemplated by this Agreement, dated the Closing Date, to the
effect set forth above in this section 4.2.1.
4.2.2 Opinion of Counsel. The Sellers shall have
received a favorable opinion, addressed to each of them and dated
the Closing Date, of Petree Stockton, L.L.P., counsel for the Pur-
chaser, in substantially the form attached hereto as Exhibit A-4.
4.2.3 Repayment of Indebtedness for Borrowed Money of
Company. The Purchaser shall repay or arrange to have the Cabinet
Company repay, in full, or shall assume or secure the necessary
consents with respect to, all Scheduled Indebtedness, together with
all interest accrued and unpaid to the date of payment and any
prepayment premium payable with respect thereto, or the holders of
any Scheduled Indebtedness shall have agreed to waive any defaults
or mandatory prepayments or redemptions arising thereunder or under
the security arrangements relating thereto resulting from the sale
of the Shares and the consummation of the other transactions con-
templated hereby and shall have consented to such transactions.
4.2.4 Certain Approvals, etc. All consents and
approvals from governmental authorities and third parties required
to be obtained by the Purchaser to consummate the transactions
contemplated hereby shall have been obtained, including the
expiration or termination of all applicable waiting periods under
the HSR Act and other applicable laws, regulations, orders and
decrees, other than any consents and approvals of third parties in
respect of any contract or agreement of the Purchaser (not
involving the borrowing of money) in respect of which the failure
to obtain such consent or approval, either in any case or in the
aggregate, could not have a Material Adverse Effect.
4.2.5 No Injunction. No injunction or other order
issued by a court of competent jurisdiction restraining or
prohibiting the consummation of the transactions contemplated by
this Agreement shall be in effect.
4.2.6 Cancellation of Options. Each Option Holder shall
have received a duly executed Option Cancellation Agreement from
the Holding Company which provides for the termination and
cancellation of such Holder's Options as specified therein. The
Holding Company or the Cabinet Company prior to the Closing (a)
shall have borrowed funds (under the Loan and Security Agreement or
from another source) in an amount equal to the Total Option
Cancellation Amount and (b) shall have paid (i) to the Escrow Agent
a portion of the proceeds of such borrowing equal to the Option
Escrow Amount and (ii) to the holders of the Options an amount
equal to the balance of the proceeds (the Total Option Cancellation
Amount less the Option Escrow Amount) less fees and expenses
charged to the Option Holders pursuant to the Option Cancellation
Agreements and applicable withholding.
4.2.7 Escrow Agreement. The Purchaser, the Custodian
and the Escrow Agent shall have executed and delivered the Escrow
Agreement and the Escrow Agreement shall be in full force and
effect.
4.2.8 Officers' Certificates. Each Seller shall have
received a certificate or certificates of the officers of the
Holding Company and the Cabinet Company, setting forth such
information with regard to the representations and warranties
contained in section 2.1 as such Seller may reasonably require in
order to enable such Seller to make the representations and
warranties contained therein.
ARTICLE V
EMPLOYEE BENEFIT MATTERS
The Purchaser agrees that it shall, or shall cause the
Holding Company or the Cabinet Company to, except for the
Management Bonus Program and the Medical Expense Reimbursement Plan
dated September 23, 1976 of the Cabinet Company, maintain for a
period of one year following the Closing, employee benefits and
employee benefit plans in respect of the employees or former
employees of the Holding Company or the Cabinet Company or their
beneficiaries which, in the aggregate, provide benefits that are
substantially equivalent to the benefits that are provided to such
individuals immediately prior to the Closing, at no greater cost to
such individuals, and shall cause the Holding Company and the
Cabinet Company to honor its and their obligations and
responsibilities to such employees, former employees and
beneficiaries under all employee benefit plans, and related
programs, arrangements and policies. With respect to the
Management Bonus Program, the Purchaser agrees that it shall, or
shall cause the Holding Company or the Cabinet Company to, maintain
management incentive programs no less favorable than those provided
by Purchaser to similarly situated management employees. Payments
and benefits accrued under the terms the Management Bonus Program
with respect to periods prior to the Closing Date shall be paid by
the Cabinet Company concurrently with the Closing. The Cabinet
Company shall concurrently with the Closing pay to the executive
officers entitled thereto the payments payable under the Special
Bonus Agreement.
ARTICLE VI
PUBLIC ANNOUNCEMENTS
Except as may otherwise be required by law, the Purchaser
shall not, directly or indirectly, make or cause to be made any
public announcement or issue any notice in any form with respect to
this Agreement or the transactions contemplated hereby without the
prior written consent of the Sellers, and none of the Sellers
shall, directly or indirectly, make or cause to be made any public
announcement or issue any notice in any form with respect to this
Agreement or the transactions contemplated hereby without the prior
written consent of the Purchaser.
ARTICLE VII
TERMINATION
7.1 Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing Date in the
circumstances set forth in this Section 7.1, by delivering written
notice of such termination.
7.1.1 Termination by Sellers. This Agreement may be
terminated by the Sellers (or by the Custodian acting on behalf of
the Sellers) upon the happening of an occurrence or circumstance
which will result in the failure to satisfy any of the conditions
set forth in section 4.2 and the Purchaser shall have failed to
satisfy such condition within twenty days after notice by Sellers
(or by the Custodian acting on behalf of the Sellers).
7.1.2 Termination by Purchaser. This Agreement may be
terminated by the Purchaser upon the happening of an occurrence or
circumstance which will result in the failure to satisfy any of the
conditions set forth in section 4.1 and the Sellers shall have
failed to satisfy such condition within twenty days after notice by
the Purchaser.
7.1.3 Termination by Either Party. This Agreement may
be terminated by either the Purchaser or the Sellers (or the
Custodian acting on behalf of the Sellers) if (i) the
representations and warranties of the other party shall prove not
to have been true in all material respects as of the date when
made, (ii) events shall have occurred subsequent to the date hereof
as a result of which the representations and warranties of the
other party could not be true in all material respects as of the
Closing Date, unless the occurrence of such events shall be due to
the failure of the party seeking to terminate this Agreement to
perform or comply with any of the covenants, agreements or
conditions hereof to be performed or complied with by such party
prior to the Closing, or (iii) the Closing shall not have occurred
prior to April 15, 1994 (or such other date as may be mutually
agreed by the parties).
7.2 Effect of Termination. If this Agreement is
terminated as permitted under Section 7.1, such termination shall
be without liability of or to any party to this Agreement or any
Affiliate, stockholder, partner, director, officer, employee or
agent of such party. The provisions of Sections 3.1 and 9.2 shall
survive any such termination.
ARTICLE VIII
DEFINITIONS
8.1 Definitions. As used herein and in the Schedules
hereto the following terms have the following respective meanings:
Affiliate: any person directly or indirectly
controlling, controlled by or under common control with any other
person.
Agreement: the meaning specified in the first paragraph.
Audited Financials: the meaning specified in sec-
tion 2.1.4(a).
Balance Sheet: the audited consolidated balance sheet of
the Holding Company as of May 1, 1993, included in the Audited
Financials.
Cabinet Company: the meaning specified in the second
WHEREAS clause of this Agreement.
Class A Common Stock: the meaning specified in sec-
tion 2.1.2(a).
Class B Common Stock: the meaning specified in section
2.1.2(a).
Closing: the meaning specified in section 1.2.
Closing Balance Sheet: the audited consolidated balance
sheet of the Holding Company as of the Effective Date, which shall
(a) be prepared in accordance with generally accepted accounting
principles applied on a basis consistent with those used in the
preparation of the Balance Sheet (other than with regard to the
application of Statement of Financial Accounting Standards No. 109)
and (b) have been audited in accordance with generally accepted
auditing standards by a nationally recognized firm of independent
public accountants selected by the Sellers.
Closing Date: the meaning specified in section 1.2.
Closing Financial Statements: the Closing Balance Sheet;
and the related audited consolidated statements of operations, cash
flows and stockholders' equity (deficit) of the Holding Company for
the period from May 2, 1993 to the Effective Date.
Closing Net Book Value: the Holding Company's total
stockholders' equity as shown on the Closing Balance Sheet,
adjusted by subtracting or adding the following accounting items to
the extent they were added or subtracted, as the case may be, in
calculating such total stockholders' equity: (a) cancellation of
stock option compensation expense, (b) compensation expense
incurred under the Special Bonus Agreement, (c) gain on liquidation
of subordinated debt, (d) change of control payment in respect of
long-term indebtedness, (e) legal and accounting fees incurred in
connection with discontinued initial public offering, (f) the tax
effects of items (a) through (e) above and (g) all remaining net
deferred tax liabilities.
Closing Working Capital: the excess of consolidated
current assets over consolidated current liabilities (exclusive of
the current portion of long-term indebtedness) of the Holding
Company as shown on the Closing Balance Sheet.
Code: the Internal Revenue Code of 1986, as amended.
Common Stock: the meaning specified in section 2.1.2(a).
Contracts: the meaning specified in section 2.1.12.
Custodian: the meaning specified in section 1.4.
Custody Agreements: the meaning specified in sec-
tion 1.4.
Effective Date: the fiscal month-end of the Holding
Company most recently preceding the Closing Date (which fiscal
month-end shall be January 29, 1994, if the Closing Date shall be
January 31, 1994 as scheduled).
Environmental Laws: all applicable federal, state,
county or local statutes, laws, regulations, rules, ordinances,
codes, orders, licenses and permits of any governmental authority
relating to protection of the environment (but without giving
effect to any change in applicable law which will become effective
after the Closing Date).
Environmental Matters: liabilities, obligations,
actions, claims, suits or proceedings arising under Environmental
Laws or relating to Hazardous Substances, and violations of or
defaults under Environmental Laws (all of which are to be dealt
with in the manner provided in sections 3.6 and 4.1.8).
ERISA: the meaning specified in section 2.1.13(a).
ERISA Plans: the meaning specified in section 2.1.13(a).
Escrow Agent: Chemical Bank, a New York State chartered
bank, as Escrow Agent under the terms of the Escrow Agreement.
Escrow Agreement: the Escrow Agreement among the
Purchaser, the Custodian and the Escrow Agent, in substantially the
form attached hereto as Exhibit D.
Escrow Amount: $1,750,000.
Export: Pilliod Export Corporation, an Ohio corporation.
Hazardous Substances: any waste, substance or material
defined as a hazardous waste or hazardous substance or otherwise
determined to be toxic or a pollutant or contaminant under any
Environmental Laws or judicial or administrative order or decisions
now in effect or in effect at any time during the ownership by the
Holding Company or the Cabinet Company of the Owned Property or the
Previously Owned Property, including, without limitation, asbestos,
petroleum and petroleum products and any substance deemed hazardous
pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, and the Resource, Conservation and
Recovery Act, as amended.
Holding Company: the meaning specified in the introduc-
tory paragraph of this Agreement.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
Intellectual Property: the meaning specified in sec-
tion 2.1.14.
Interim Financials: the meaning specified in sec-
tion 2.1.4(a).
Leased Property: the meaning specified in sec-
tion 2.1.11(b).
Loan and Security Agreement: the Loan and Security
Agreement, dated as of June 17, 1988, as amended to the date
hereof, between the Cabinet Company and Sanwa Business Credit
Company.
Management Agreements: the meaning specified in sec-
tion 2.1.2(c).
Management Sellers: the meaning specified in sec-
tion 2.2.2(a).
Material Adverse Effect: a material adverse effect on
the business, properties, assets (tangible and intangible) or
financial condition or results of operation of the Holding Company
and the Cabinet Company (taken as a whole), in each case other than
as a result of general economic conditions.
Material Environmental Cost: any material civil penalty
or fine, or any material remedial cost or other material work,
repairs, construction or capital expenditures (or any investigative
or engineering expense related thereto or in furtherance thereof)
required under any Environmental Laws with respect to the Owned
Property or the Previously Owned Property or the continuation of
the Operations (a) which has been incurred or which is more likely
than not, in light of the facts and circumstances known at the time
of determination, to be incurred within twelve months by the
Holding Company or the Cabinet Company or, after giving effect to
the Closing, the Purchaser, (b) which is or will be with respect to
any single occurrence or condition in excess of $25,000 and (c)
which is the result of (i) the Owned Property or the Previously
Owned Property and their existing and prior uses by the Holding
Company and the Cabinet Company, and the Operations, not complying
with Environmental Laws; (ii) the Owned Property or the Previously
Owned Property having been previously used as a landfill or as a
dump for garbage or refuse; (iii) any material use, discharge,
release, storage, disposal or treatment of any Hazardous Substances
on or from the Owned Property or the Previously Owned Property; or
(iv) storage tanks for Hazardous Substances or petroleum-based
products having been located on the Owned Property or the
Previously Owned Property, either above or below ground, or under-
ground pipes or lines being on the Owned Property or the Previously
Owned Property, except for county water or sewer lines or electri-
cal conduits, if any, owned by public utility companies.
Material Violation: with respect to any of the
representations and warranties of the Sellers contained in sections
2.1 and 2.2, the untruth or incorrectness of such representation
and warranty, if the financial impact of such untruth or
incorrectness is equal to or greater than $25,000. For all
purposes of this Agreement, if an event or occurrence has a
financial impact equal to or greater than $25,000, it will be
deemed to have a Material Adverse Effect.
Meridian Property: the real property located in
Lauderdale County, Mississippi and sold by the Cabinet Company to
the Lauderdale County Economic Development District pursuant to the
Contract For Sale and Purchase of Real Property dated July 15,
1992.
Operations: the existing and prior conduct of the
business and operations of the Holding Company and the Cabinet
Company (including, without limitation, the on-site and off-site
use, storage, transportation, treatment or disposal of Hazardous
Substances).
Option Cancellation Agreements: the separate agreements
to be entered into among each Option Holder and the Holding
Company, providing for the cancellation, effective prior to the
Closing, of the Options held by such Option Holder, and payment of
the Option Cancellation Amount to the Option Holder with respect to
each Option covered thereby.
Option Cancellation Amount: with respect to each Option
held by each Option Holder, an amount equal to the excess of (i)
the product of (x) the quotient of the Purchase Price divided by
6,842,500 and (y) the number of shares of capital stock of the
Company which would be issued upon exercise of such Option over
(ii) the exercise price payable pursuant such Option.
Option Escrow Amount: a portion of the Escrow Amount
equal to the Escrow Amount multiplied by a fraction, the numerator
of which is the Total Option Cancellation Amount and the
denominator of which is the sum of the Purchase Price and the Total
Option Cancellation Amount.
Option Holder: the meaning specified in sec-
tion 2.1.2(b).
Option Shares: the meaning specified in sec-
tion 2.1.2(b).
Options: the meaning specified in section 2.1.2(b).
Owned Property: the meaning specified in sec-
tion 2.1.11(b).
PBGC: the meaning specified in section 2.1.13(a).
Plans: the meaning specified in section 2.1.13(a).
Previously Owned Property: the Meridian Property and any
other real property owned or leased by the Holding Company or the
Cabinet Company at any time, other than the Owned Property.
Purchase Price: the meaning specified in section 1.1.
Purchaser: the meaning specified in the introductory
paragraph of this Agreement.
Real Estate Laws: the meaning specified in section
2.1.11(c).
Real Property: the meaning specified in sec-
tion 2.1.11(b).
Related Person: the meaning specified in sec-
tion 2.1.13(b).
Scheduled Indebtedness: (a) indebtedness of the Cabinet
Company under the Loan and Security Agreement, including without
limitation (i) the change of control payment equal to $100,000,
(ii) deferred commitment fees payable upon change of control up to
$240,000 and (iii) the portion of such indebtedness equal to
$3,000,000 and reflected on the Balance Sheet as "notes payable to
banks, effectively guaranteed by the Company's principal
shareholders"; (b) the Amended Subordinated Notes due 1998 of the
Cabinet Company, outstanding in the principal amount of $2,824,500,
plus the change of control payment equal to $1,000,000; (c) the
Non-Negotiable Promissory Note of the Cabinet Company, dated
September 29, 1989, original principal amount $672,750; (d) capital
leases with Hewlett-Packard Company relating to computer equipment
and Eaton Financial Corporation relating to a Thermwood router; and
(e) without duplication of clause (a) above, indebtedness incurred
(x) to fund the payment by the Cabinet Company of the Total Option
Cancellation Amount (including the portion paid to the Escrow Agent
in respect of the Option Escrow Amount) as contemplated by sec-
tions 4.1.6 and 4.2.6, (y) to fund payments in respect of the
Special Bonus Agreement or any other compensation arrangements and
(z) for any other purpose after the date hereof; and including in
each case interest accrued and unpaid to the Closing Date.
Securities Act: the meaning specified in section 2.2.2.
Seller or Sellers: the meaning specified in the
introductory paragraph of this Agreement.
Shares: the meaning specified in the first WHEREAS
clause of this Agreement.
Special Bonus Agreement: the agreement of the Cabinet
Company evidenced by the Memorandum dated September 1, 1993, to pay
to the four senior executive officers of the Cabinet Company a
special bonus aggregating $1,000,000 in connection with the
transactions contemplated by this Agreement.
Stock Escrow Amount: a portion of the Escrow Amount
equal to the Escrow Amount less the Option Escrow Amount.
Subsidiary: each corporation of which the Holding
Company owns, directly or indirectly, capital stock representing
more than 50% of the outstanding voting stock.
Target Net Book Value: $4,875,000.
Target Working Capital: $17,000,000.
Taxes: the meaning specified in section 2.1.8.
Tax Returns: the meaning specified in section 2.1.8.
Total Option Cancellation Amount: the aggregate of the
Option Cancellation Amounts payable in respect of all Options.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties. The
representations, warranties and covenants of the Sellers and the
Purchaser contained in this Agreement (other than those contained
in Article V and in sections 3.5 and 9.2) or in any certificate
delivered pursuant to this Agreement shall not survive the Closing
hereunder. From and after the Closing, the Sellers shall have no
liability to the Purchaser for or with respect to, and the
Purchaser releases the Sellers from, any cost, loss, damage or
liability that the Purchaser may thereafter suffer or incur as a
result of Environmental Matters.
9.2 Expenses. Each of the Sellers and the Purchaser
shall assume and bear its own expenses, costs and fees incurred in
the preparation and execution of this Agreement and compliance
herewith, including attorneys' and accountants' fees.
9.3 Assignment; Successors. This Agreement shall not be
assignable by any party hereto without the prior written consent of
all of the other parties and any attempt to assign this Agreement
without such consent shall be void and of no effect; except that
the rights (but none of the obligations) of the Purchaser hereunder
may be assigned at least five days prior to the Closing, without
the consent of the Sellers, to any corporation all of the
outstanding capital stock of which is owned by the Purchaser. This
Agreement shall inure to the benefit of, and be binding on and
enforceable against, the successors and assigns of the respective
parties hereto. Nothing in this Agreement, expressed or implied,
is intended or shall be construed to confer upon any person other
than the parties and successors and assigns permitted by this sec-
tion 9.3 any right, remedy or claim under or by reason of this
Agreement.
9.4 Amendment and Modification. Neither this Agreement
nor any term hereof may be changed, waived, discharged or
terminated orally, other than by the written consent signed by the
party against which such change, waiver, discharge or termination
is sought to be enforced.
9.5 Notices. All notices, consents, requests,
instructions, approvals and other communications provided for
herein and all legal processes in regard hereto shall be validly
given, made or served, if in writing and delivered personally or
sent by registered or certified mail, postage prepaid, or by
commercial courier or by telecopy (promptly confirmed in writing),
if to the Sellers, to them c/o Clayton, Dubilier & Rice, Inc., 126
East 56th Street, New York, New York 10022, Attention:
Mr. Joseph L. Rice, III, with copies to Franci J. Blassberg, Esq.,
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022,
and if to the Purchaser, to it at LADD Furniture, Inc., One Plaza
Center, Box HP-3, High Point, NC 27261-1500, FAX: (910) 885-6050,
Attention: Richard R. Allen, Chairman of the Board, President and
Chief Executive Officer, with copies to Petree Stockton, L.L.P.1001
West Fourth Street, Winston-Salem, NC 27101, FAX: (910) 607-7505,
Attention: Robert E. Esleeck, Esq., or, in each case, at such other
address as may be specified in writing.
9.6 Best Knowledge. For the purposes of the
representations and warranties of the Sellers contained in
Article II, the knowledge or the best knowledge of the Holding
Company or the Cabinet Company shall be deemed to consist solely of
the knowledge or best knowledge, as the case may be, of those
individuals listed on Schedule 9.6.
9.7 Arbitration. Any dispute, controversy or claim
arising out of or in connection with, or relating to, this
Agreement or any breach or alleged breach hereof (except as
otherwise provided in section 3.5 or 3.6) shall, upon the request
of any party involved, be submitted to, and settled by, arbitration
in the City of New York, State of New York pursuant to the
commercial arbitration rules then in effect of the American
Arbitration Association. Any award rendered shall be final and
conclusive upon the parties and a judgment thereon may be entered
in the highest court of the forum, state or federal, having
jurisdiction. The expenses of the arbitration shall be borne
equally by the parties to the arbitration, provided that each party
shall pay for and bear the costs of experts, evidence and counsel's
fees, except that in the discretion of the arbitrator, any award
may include the costs of a party's counsel if the arbitrator
expressly determines that the party against whom such award is
entered has caused the dispute, controversy or claim to be
submitted to arbitration as a dilatory tactic.
9.8 Release of Claims Against Merrill Lynch & Co.
Reference is made to the letter (the "Engagement Letter"), dated
July 30, 1993, between the Cabinet Company and Merrill Lynch & Co.
("Merrill Lynch"), as amended by the letter, dated December 15,
1993, among the Cabinet Company, Merrill Lynch and the Sellers.
Each of the Sellers agrees, as contemplated by the Engagement
Letter, not to make any claim against Merrill Lynch or its
affiliates or their respective directors, officers, employees,
agents or controlling persons (collectively, "Merrill Lynch
Parties"), for any liability (whether direct or indirect, in
contract or tort or otherwise) to such Seller related to or arising
out of the engagement of Merrill Lynch pursuant to, or the
performance by Merrill Lynch of the services contemplated by, the
Engagement Letter except to the extent that any loss, claim, damage
or liability is found in a final judgment by a court (or a
settlement tantamount to such a final judgment, to which any
Merrill Lynch Party is a party) to have resulted from the bad faith
or gross negligence of any such Merrill Lynch Party. The agreement
contained in this section 9.8 shall survive the Closing hereunder,
notwithstanding anything in section 9.1 to the contrary.
9.9 Miscellaneous. The headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. This
Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, except for the
confidentiality agreement described in section 3.1. This Agreement
may be executed in several counterparts, each of which shall
constitute one and the same instrument. This Agreement shall be
governed in all respects, including validity, interpretation and
effect, by the laws of the State of New York, without giving effect
to the conflict of laws rules thereof. If any term or provision of
this Agreement is held by a court or other authority of competent
jurisdiction to be invalid, void or unenforceable, the remaining
terms and provisions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
PURCHASER:
LADD FURNITURE, INC.
By________________________________
Name:
Title:
SELLERS:
The Clayton & Dubilier Private
Equity Fund Limited Partnership
By Clayton & Dubilier Associates
Limited Partnership, the General
Partner
By_____________________________
Joseph L. Rice, III
General Partner
By_____________________________
Donald J. Gogel
General Partner
_________________________________*
Peter P. Pilliod
_________________________________*
Barbara Ann Whetsel
_________________________________*
Debra Lynn Pilliod
_________________________________*
Henry O. Timnick
_________________________________*
Arthur E. Reinhold
_________________________________*
Sidney A. Lenger
_________________________________*
Martin P. Doolan
_________________________________*
John R. Long
_________________________________*
Thomas Millner
_________________________________*
William M. Duncan
________________________________
William J. Pilliod
_________________________________
Mark A. Little
_________________________________*
Kevin Driscoll
_________________________________*
Gary Olson
_________________________________*
Progressive Furniture Inc.
*By Clayton, Dubilier & Rice,
Inc., as Attorney-in-Fact
By:__________________________
Name:
Title:
__________________________________________________________________________
STOCK PURCHASE AGREEMENT
among
LADD Furniture, Inc.,
as Purchaser
and
THE STOCKHOLDERS OF
PILLIOD HOLDING COMPANY,
as Sellers
Dated as of December 15, 1993
_____________________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I: SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares 2
1.2 Closing 3
1.3 Delivery of Shares 3
1.4 Payment of Purchase Price 3
ARTICLE II: REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties as to
Holding Company and Cabinet Company 5
2.1.1 Corporate Status 5
2.1.2 Capitalization 6
2.1.3 Conflicts, Consents, Subsequent
Actions 9
2.1.4 Financial Information, Material
Adverse Change, Undisclosed
Liabilities 12
2.1.5 Insurance 15
2.1.6 Litigation 16
2.1.7 Compliance with Laws, Permits 17
2.1.8 Tax Matters 19
2.1.9 Brokers, Finders 22
2.1.10 Absence of Certain Changes 22
2.1.11 Title to Properties, etc. 25
2.1.12 Certain Contracts 27
2.1.13 Compliance with ERISA 30
2.1.14 Trademarks, Trade Names,
Patents, etc. 34
2.1.15 Labor Matters 38
2.1.16 Disclosure 39
2.1.17 Affiliate Transactions 40
2.2 Representations and Warranties as to
the Sellers 40
2.2.1 Authorization, etc. 40
2.2.2 Conflicts, Consents, Subsequent
Actions 41
2.2.3 Title to Stock, etc. 43
2.2.4 Litigation 44
2.2.5 Brokers, Finders 44
2.3 Representations and Warranties
of Purchaser 44
2.3.1 Purchaser's Corporate Status 44
2.3.2 Authorization, etc. 45
2.3.3 Conflicts, Consents 45
2.3.4 Litigation 46
2.3.5 Brokers, Finders 46
2.3.6 Purchase for Investment 47
ARTICLE III: CERTAIN COVENANTS PENDING AND POST-CLOSING
3.1 Access and Information; Confidentiality 47
3.2 Conduct of Business of the Holding
Company and the Cabinet Company 48
3.3 Efforts to Consummate Transaction 50
3.4 Non-Solicitation 51
3.5 Purchase Price Adjustment 52
3.6 Environmental Survey 56
ARTICLE IV: CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Purchaser 60
4.1.1 Representations, Performance,
etc. 60
4.1.2 Opinion of Counsel 61
4.1.3 Resignation of Directors 61
4.1.4 Certain Approvals, etc. 62
4.1.5 No Injunction 63
4.1.6 Cancellation of Options 63
4.1.7 Certificate as to Certain
Tax Matters 64
4.1.8. Review of Environmental Survey 64
4.1.9. Employment Agreements 64
4.1.10. Escrow Agreement 65
4.1.11. Confirmation Delivered by Merrill
Lynch & Co. 65
4.2 Conditions to Obligations of Sellers 65
4.2.1 Representations, Performance,
etc. 65
4.2.2 Opinion of Counsel 66
4.2.3 Repayment of Indebtedness for
Borrowed Money of Company 66
4.2.4 Certain Approvals, etc. 67
4.2.5 No Injunction 67
4.2.6 Cancellation of Options 67
4.2.7. Escrow Agreement 68
4.2.8 Officers' Certificates 68
ARTICLE V: EMPLOYEE BENEFIT MATTERS 69
ARTICLE VI: PUBLIC ANNOUNCEMENTS 70
ARTICLE VII: TERMINATION
7.1 Grounds for Termination 70
7.1.1 Termination by Sellers 71
7.1.2 Termination by Purchaser 71
7.1.3 Termination by Either Party 71
7.2 Effect of Termination 72
ARTICLE VIII: DEFINITIONS
8.1 Definitions 72
ARTICLE IX: MISCELLANEOUS
9.1 Survival of Representations and Warranties 84
9.2 Expenses 84
9.3 Assignment; Successors 85
9.4 Amendment and Modification 85
9.5 Notices 86
9.6 Best Knowledge 86
9.7 Arbitration 87
9.8 Release of Claims Against Merrill Lynch 87
9.9 Miscellaneous 88
SCHEDULES
1.1 Shares of Common Stock
2.1.3 Conflicts and Consents
2.1.4 Material Adverse Effect and Undisclosed Liabilities
2.1.5 Insurance and Bond and Surety Arrangements
2.1.6 Litigation
2.1.7 Violation of Laws
2.1.8 Tax Matters
2.1.10 Certain Changes
2.1.11 Title to Properties
2.1.12 Contracts
2.1.13 Employee Benefit Plans
2.1.14 Intellectual Property
2.1.15 Labor Matters
2.1.17 Affiliate Transactions
2.2.2 Seller Conflicts and Consents
9.6 Officers of Pilliod
EXHIBITS
Exhibit A-1 Form of Opinion of Debevoise & Plimpton
Exhibit A-2 Form of Opinion of Eastman & Smith
Exhibit A-3 Form of Opinion of Shumaker, Loop &
Kendrick
Exhibit A-4 Form of Opinion of Petree, Stockton L.L.P.
Exhibit B Option Cancellation Agreement
Exhibit C-1 Form of Employment Agreement
Exhibit C-2 Employment Agreement among Pilliod Holding
Company, the Pilliod Cabinet Company and
John R. Long
Exhibit D Escrow Agreement
AMENDMENT TO STOCK PURCHASE AGREEMENT
AMENDMENT, dated as of January 31, 1994 (the "Amendment")
to the Stock Purchase Agreement, dated as of December 15, 1993 (the
"Agreement"), among LADD Furniture, Inc., a North Carolina
corporation (the "Purchaser"), and each person listed in Sched-
ule 1.1 thereto (individually a "Seller" and collectively the
"Sellers"), who are all of the stockholders of Pilliod Holding
Company, a Delaware corporation (the "Holding Company").
W I T N E S S E T H :
WHEREAS, the Purchaser and the Sellers have agreed to
amend the Agreement, subject to the terms and conditions of this
Amendment;
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Definitions. Capitalized terms used herein without
other definition are used as defined in the Agreement.
2. Amendment to the Table of Contents to the Agreement.
The Table of Contents to the Agreement under the heading
"SCHEDULES" is hereby amended by inserting the phrase "8.1
Scheduled Indebtedness" where appropriate on page iv thereof.
3. Amendment to Article I of the Agreement. The first
sentence of Section 1.2 is hereby amended by deleting the phrase
"(effective January 29, 1994)" where it appears in the fifth line
thereof and inserting the following new sentence at the end
thereof:
"The parties agree that the Closing shall be
deemed to occur prior to the start of business on
the Closing Date and that all operations of the
business of the Cabinet Company on the Closing Date
shall be for the account of the Purchaser."
4. Amendment to Article II of the Agreement.
(a) The first sentence of Section 2.1.7(b) is
hereby amended by inserting the phrase "have a Material
Adverse Effect" after the word "aggregate" where it appears on
the eighth line thereof and deleting the phrase ", have a
Material Adverse Effect" where it appears in the ninth line
thereof.
(b) The last sentence of Section 2.1.17 is hereby
amended by inserting the phrase ", other than the Expense
Letter Agreement and the Pilliod Letter Agreement" after the
word "Closing" in the last line thereof.
5. Amendment to Article III. The second sentence
of Section 3.1 is hereby amended by inserting the phrase
"August 5" in place of the phrase "August 2" where it appears
in the 21st line thereof.
6. Amendment to Article VIII of the Agreement.
(a) The definitions of the following terms set
forth in Article VIII of the Agreement are hereby amended as
follows:
"Effective Date" is hereby amended to read in its
entirety as follows:
"Effective Date: January 31, 1994."
"Scheduled Indebtedness" is hereby amended to read
in its entirety as follows:
"Scheduled Indebtedness: the items of
indebtedness of the Cabinet Company and the Holding
Company as specified on Schedule 8.1 hereof."
(b) Article VIII of the Agreement is hereby amended
by adding the following definitions where appropriate in
alphabetical order:
"Expense Letter Agreement: the letter
agreement, dated as of January 31, 1994, between
the Holding Company and the Custodian relating to
the remittance by the Holding Company to the
Custodian of certain expense-related amounts with-
held by the Holding Company from the Option
Cancellation Amounts."
"Pilliod Letter Agreement: the letter
agreement, dated as of January 31, 1994, between
the Cabinet Company and Peter P. Pilliod relating
to certain items of office furniture."
7. Amendment to Article IX. Section 9.2 is hereby
amended by adding the following phrase at the end thereof:
"; provided that (i) the Sellers shall bear the
fees and expenses of the Escrow Agent under the
Escrow Agreement and (ii) the Cabinet Company will
bear the fees and expenses of Ernst & Young in
connection with the preparation of the Closing
Financial Statements."
8. Amendment to the Schedules. The reference in
part I of Schedule 2.1.12 to the "Amended Subordinated Notes
of the Cabinet Company due 1988, guaranteed by the Holding
Company" is hereby deleted and replaced with the phrase:
"The Amended Subordinated Notes of the Cabinet Company
due 1998, guaranteed by the Holding Company."
9. Acknowledgment by Purchaser. The Purchaser
hereby acknowledges that the conditions set forth in Section
4.1.8 of the Agreement have been satisfied in full.
10. Miscellaneous. Except as expressly amended and
modified hereby, the Agreement is hereby reaffirmed and
remains in full force and effect. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" contained in
the Agreement shall from and after the date hereof refer to
the Agreement as amended hereby. The headings contained in
this Amendment are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement. This Amendment may be executed in several counter-
parts, each of which shall constitute one and the same
instrument. This Amendment shall be governed in all respects,
including validity, interpretation and effect, by the laws of
the State of New York without giving effect to the conflict of
laws rules thereof.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed
this Amendment as of the date first above written.
PURCHASER:
LADD FURNITURE, INC.
By________________________________
Name:
Title:
SELLERS:
The Clayton & Dubilier Private
Equity Fund Limited Partnership
By Clayton & Dubilier Associates
Limited Partnership, the General
Partner
By_____________________________
Joseph L. Rice, III
General Partner
________________________________*
Peter P. Pilliod
_________________________________*
Barbara Ann Whetsel
_________________________________*
Debra Lynn Pilliod
_________________________________*
Henry O. Timnick
_________________________________*
Arthur E. Reinhold
_________________________________*
Sidney A. Lenger
_________________________________*
Martin P. Doolan
_________________________________*
John R. Long
_________________________________*
Thomas Millner
_________________________________*
William M. Duncan
_________________________________*
William J. Pilliod
<PAGE>
_________________________________*
Mark A. Little
_________________________________*
Kevin Driscoll
_________________________________*
Gary Olson
_________________________________*
Progressive Furniture Inc.
*By Clayton, Dubilier & Rice,
Inc., as Attorney-in-Fact
By:__________________________
Name:
Title:
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements
(Forms S-8 Nos. 33-2838 and 33-21816) pertaining to the Amended and
Restated 1983 Incentive Stock Option Plan of LADD Furniture, Inc. of our
report dated July 14, 1993, with respect to the consolidated financial
statements of Pilliod Holding Company included in the Current Report on
Form 8-K dated February 14, 1994.
ERNST & YOUNG
Toledo, Ohio
February 14, 1994
TRANSFER AND ADMINISTRATION AGREEMENT
between
ENTERPRISE FUNDING CORPORATION,
as Company
and
LADD FURNITURE, INC.
as Transferor and Collection Agent
and
CLAYTON-MARCUS COMPANY, INC.,
BARCLAY FURNITURE CO.,
and
LADD TRANSPORTATION, INC.
as Designated Subsidiaries
Date as of January 28, 1994
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms.......................................1
SECTION 1.2. Other Terms................................................20
SECTION 1.3. Computation of Time Periods................................20
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1. Facility...................................................20
SECTION 2.2. Transfers; Company Certificate; Eligible Receivables.......20
SECTION 2.3. Selection of Tranche Periods and Tranche Rates.............23
SECTION 2.4. Fees and Other Costs and Expenses..........................24
SECTION 2.5. Non-Liquidation Settlement and Reinvestment Procedures.....24
SECTION 2.6. Liquidation Settlement Procedures..........................25
SECTION 2.7. Fees.......................................................26
SECTION 2.8. Protection of Ownership Interest of the Company............26
SECTION 2.9. Deemed Collections; Application of Payments................27
SECTION 2.10. Payments and Computations, Etc.............................28
SECTION 2.11. Reports....................................................28
SECTION 2.12. Collection Account.........................................29
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Transferor............29
SECTION 3.2 Reaffirmation of Representations and Warranties by
the Transferor............................................32
i
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 Conditions to Closing......................................33
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants of Transferor........................36
SECTION 5.2. Negative Covenants of Transferor...........................40
SECTION 5.3. Financial Covenants of Transferor..........................41
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1. Appointment of Collection Agent............................41
SECTION 6.2. Duties of Collection Agent.................................42
SECTION 6.3. Rights After Designation of New Collection
Agent................................................43
SECTION 6.4. Responsibilities of the Transferor.........................44
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. Termination Events..........................................44
SECTION 7.2. Termination.................................................46
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1. Indemnities by the Transferor................................46
SECTION 8.2. Indemnity for Taxes, Reserves and Expense....................48
SECTION 8.3. Other Costs, Expenses and Related Matters....................50
SECTION 8.4. Reconveyance Under Certain Circumstances.....................51
ii
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Term of Agreement..........................................51
SECTION 9.2. Waivers; Amendments........................................51
SECTION 9.3. Notices....................................................52
SECTION 9.4. Governing Law; Submission to Jurisdiction; Integration.....53
SECTION 9.5. Severability; Counterparts.................................54
SECTION 9.6. Successors and Assigns.....................................54
SECTION 9.7. Waiver of Confidentiality..................................54
SECTION 9.8. Confidentiality Agreement..................................54
SECTION 9.9. Confidentiality Agreement of the Company...................55
SECTION 9.10. No Bankruptcy Petition Against the Company.................55
SECTION 9.11. No Recourse Against Stockholders, Officers or Directors....55
SECTION 9.12. Characterization of the Transactions
Contemplated by the Agreement............................56
SECTION 9.13. Company Certificate........................................56
EXHIBITS
EXHIBIT A Form of Contract
EXHIBIT B Credit and Collection Policies and Practices
EXHIBIT C List of Lock-Box Banks, Addresses and Account Numbers
EXHIBIT D Form of Lock-Box Agreement
EXHIBIT E Form of Investor Report
EXHIBIT F Form of Transfer Certificate
EXHIBIT G Form of Weekly Report
EXHIBIT H List of Actions and Suits
EXHIBIT I Location of Records
EXHIBIT J List of Subsidiaries, Divisions and Tradenames
EXHIBIT K-1 Form of Opinion of Counsel for the Designated Subsidiaries
iii
EXHIBIT K-2 Form of Opinion of Counsel for the Transferor
EXHIBIT L Form of Responsible Officer's Certificate
EXHIBIT M Form of Company Certificate
EXHIBIT N Transferor's Fiscal Month Ending Dates
EXHIBIT O Definitions for Fiscal Covenants
EXHIBIT P Agreed Upon Procedures Report
iv
TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (this "Agreement"),
dated as of January 28, 1994, between LADD FURNITURE, INC., a North
Carolina corporation, as transferor (in such capacity, the
"Transferor") and as collection agent (in such capacity, the "Col-
lection Agent"), CLAYTON-MARCUS COMPANY, INC., a North Carolina
corporation, BARCLAY FURNITURE CO., a Mississippi corporation, LADD
TRANSPORTATION, INC., a North Carolina corporation (together, the
"Designated Subsidiaries"), and ENTERPRISE FUNDING CORPORATION, a
Delaware corporation (the "Company").
WHEREAS, the Transferor may desire to convey, transfer
and assign, from time to time, undivided percentage interests in
certain accounts receivable, and the Company may desire to accept
such conveyance, transfer and assignment of such undivided
percentage interests, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings:
"Adverse Claim" means a lien, security interest, charge
or encumbrance, or other right or claim in, of or on any Person's
assets or properties in favor of any other Person.
"Administrative Agent" means NationsBank of North
Carolina, N.A., as administrative agent.
"Affiliate" of the Collection Agent, of the Transferor,
or of the Company means any Person directly or indirectly con-
trolling, controlled by, or under direct or indirect common
control with, the Collection Agent, the Transferor or the Compa-
ny. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power
to direct or cause the direction of the management or policies of
the controlled Person, whether through ownership of voting stock,
by contract or otherwise.
"Affiliated Obligor" means any Obligor which is an
Affiliate of another Obligor.
"Aggregate Unpaids" means, at any time,
an amount equal to the sum of (i) the aggregate accrued and unpaid
Discount with respect to all Tranche Periods at such time, (ii) the Net
Investment at such time, and (iii) all amounts owed (whether due
or accrued) hereunder by Transferor to the Company at such time.
"Arrangement Fee" means the fee payable by the
Transferor to the Administrative Agent pursuant to Section 2.7
hereof, the terms of which are set forth in the Fee Letter.
"Average Collection Period" means at any time a period
of days equal to the product of (i) a fraction the numerator of
which shall be the amount set forth in the most recent Investor
Report as the "Beginning Balance" of the Receivables and the
denominator of which shall be the Collections as set forth in the
most recent Investor Report and (ii) thirty (30).
"Base Rate" or "BR" means, a rate per annum equal to
the greater of (i) the prime rate of interest announced by the
Liquidity Provider from time to time, changing when and as said
prime rate changes (such rate not necessarily being the lowest or
best rate charged by the Liquidity Provider) and (ii) the rate
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day,
the average of the quotations for such day for such transactions
received by the Liquidity Provider from three Federal funds
brokers of recognized standing selected by it, plus 2%.
"Business Day" means any day excluding Saturday, Sunday
and any day on which banks in New York, New York or Charlotte,
North Carolina are authorized or required by law to close, and,
when used with respect to the determination of any Eurodollar
Rate or any notice with respect thereto, any such day which is
also a day for trading by and between banks in United States
dollar deposits in the London interbank market.
"BR Tranche" means a Tranche as to which Discount is
calculated at the Base Rate.
"BR Tranche Period" means, with respect to a BR
Tranche, prior to the Termination Date, a period of up to 30 days
requested by the Transferor and agreed to by the Company or the
Liquidity Provider, as the case may be, commencing on a Business
Day requested by the Transferor and agreed to by the Company or
the Liquidity Provider , as the case may be, and after the
Termination Date, a period of one day. If such BR Tranche Period
would end on a day which is not a Business Day, such BR Tranche
Period shall end on the next succeeding Business Day.
"Capitalized Lease" of a Person
means any lease of property by such Person as lessee which would be
capitalized on a balance sheet of such Person prepared in accordance with
generally accepted accounting principles.
"CD Rate" shall mean, with respect to any CD Tranche
Period, a rate which is .75% in excess of a rate per annum equal
to the sum (rounded upward to the nearest 1/100 of 1%) of (A) the
rate obtained by dividing (x) the Certificate of Deposit Rate for
such CD Tranche Period by (y) a percentage equal to 100% minus
the stated maximum rate for all reserve requirements as specified
in Regulation D (including without limitation any marginal, emer-
gency, supplemental, special or other reserves) that would be
applicable during such Tranche Period to a negotiable certificate
of deposit in excess of $100,000, with a maturity approximately
equal to such Tranche Period, of any member bank of the Federal
Reserve System plus (B) the then daily net annual assessment rate
(rounded upward, if necessary, to the nearest 1/100 of 1%) as
estimated in good faith using commercially reasonable means by
the Liquidity Provider for determining the current annual
assessment payable by the Liquidity Provider to the Federal
Deposit Insurance Corporation for insuring such certificates of
deposit.
"CD Tranche" means a Tranche as to which Discount is
calculated at the CD Rate.
"CD Tranche Period" means, with respect to a CD
Tranche, prior to the Termination Date, a period of up to 30
days requested by the Transferor and agreed to by the Company or
the Liquidity Provider, as the case may be, commencing on a
Business Day requested by the Transferor and agreed to by the
Company or the Liquidity Provider, as the case may be, and after
the Termination Date, a period of one day. If such CD Tranche
Period would end on a day which is not a Business Day, such CD
Tranche Period shall end on the next succeeding Business Day.
"Certificate of Deposit Rate" means, with respect to
any CD Tranche Period, the average of the bid rates determined in
good faith using commercially reasonable means by the Liquidity
Provider to be bid rates per annum, at approximately 10:00 a.m.
(New York City time) on the Business Day before the first day of
the CD Tranche Period for which such CD Rate is to be applicable,
of two or more New York certificate of deposit dealers of recog-
nized standing selected by the Liquidity Provider for the
purchase in New York from the Liquidity Provider at face value
of certificates of deposit of the Liquidity Provider in an
aggregate amount approximately comparable to the amount of the CD
Tranche to which such CD Rate is to be applicable and with a
maturity approximately equal to the applicable CD Tranche Period.
"Closing Date" means January 28, 1994.
"Collateral Agent" means NationsBank of
North Carolina, N.A., as collateral agent for any Liquidity Provider,
any Credit Support Provider, the holders of Commercial Paper and certain
other parties.
"Collections" means, with respect to any Receivable,
all cash collections and other cash proceeds of such Receivable,
including, without limitation, all Finance Charges, if any, and
cash proceeds of Related Security with respect to such Receivable
and any Deemed Collections of such Receivable.
"Collection Account" means the account, established by
the Collateral Agent, for the benefit of the Company, pursuant to
Section 2.12.
"Collection Agent" means at any time the Person then
authorized pursuant to Section 6.1 to service, administer and
collect Receivables.
"Collection Delay" means 30 days, or upon written
notice to the Collection Agent, such higher number of days as the
Administrative Agent may estimate to be necessary for the collec-
tion of a Receivable.
"Commercial Paper" means the promissory notes of the
Company issued by the Company in the commercial paper market.
"Company Certificate" means the certificate issued to
the Company pursuant to Section 2.2 hereof.
"Concentration Factor" means for any Designated Obligor
3% of the Outstanding Balance of all Eligible Receivables;
provided however, that with respect to any Designated Obligor and
its affiliates whose long term unsecured debt obligations are
rated at least "A1" by Moody's and at least "A+" by Standard &
Poor's and with respect to which rating neither Moody's nor
Standard & Poor's shall have made a public announcement antici-
pating a downgrading of such Designated Obligor's long term unse-
cured debt obligations to a rating less than the aforementioned
ratings ("A1/A+ Rated Obligors") 5% of the Outstanding Balance of
all Eligible Receivables at such time.
"Contract" means an agreement or invoice in substan-
tially the form of one of the forms set forth in Exhibit A or
otherwise approved by the Company, pursuant to or under which an
Obligor shall be obligated to pay for merchandise purchased or
services rendered.
"CP Rate" means, with respect to any CP Tranche Period,
the rate equivalent to the rate (or if more than one rate, the
weighted average of the rates) at which Commercial Paper having a
term equal to such CP Tranche Period may be sold by any placement
agent or commercial paper dealer selected by the Company,
provided, however, that if the rate (or rates) as agreed between
any such agent or dealer and the Company is a discount rate, then
the rate (or if more than one rate, the weighted average of the
rates) resulting from the Company's converting such discount rate
(or rates) to an interest-bearing equivalent rate per annum.
"CP Tranche" means a Tranche as to which Discount is
calculated at a CP Rate.
"CP Tranche Period" means, with respect to a CP
Tranche, a period of days not to exceed 180 days commencing on a
Business Day requested by the Transferor and agreed to by the
Company pursuant to Section 2.3. If such CP Tranche Period would
end on a day which is not a Business Day, such CP Tranche Period
shall end on the next succeeding Business Day.
"Credit and Collection Policy" shall mean the
Designated Subsidiaries' and the Transferor's credit and collec-
tion policy or policies and practices, relating to Contracts and
Receivables existing on the date hereof and referred to in
Exhibit B attached hereto, as modified by the Transferor from
time to time in compliance with Section 5.2(c).
"Credit Support Agreement" means the agreement between
the Company and the Credit Support Provider evidencing the
obligation of the Credit Support Provider to provide credit
support to the Company in connection with the issuance by the
Company of Commercial Paper.
"Credit Support Provider" means the Person or Persons
who will provide credit support to the Company in connection with
the issuance by the Company of Commercial Paper.
"Dealer Fee" means the fee payable by the Transferor to
the Collateral Agent, pursuant to Section 2.4 hereof, the terms
of which are set forth in the Fee Letter.
"Deemed Collections" means any Collections on any
Receivable deemed to have been received pursuant to Section
2.9(a) or (b).
"Defaulted Receivable" means a Receivable: (i) as to
which any payment, or part thereof, remains unpaid for 91 days or
more from the original due date for such Receivable; (ii) as to
which an Event of Bankruptcy has occurred with respect to the
Obligor thereof; (iii) if the Transferor or an Affiliate is the
Collection Agent, which has been identified by the Collection
Agent as uncollectible; or (iv) which, consistent with the Credit
and Collection Policy, should be written off as uncollectible.
"Delinquency Ratio" means, the
ratio (expressed as a percentage) computed as of the last day of each
Fiscal Month by dividing (i) the sum of the aggregate Outstanding Balance
of all outstanding Delinquent Receivables plus the aggregate amount of
Receivables designated as "disputed" or a "deduction" on the
Collection Agent's books and records, by (ii) the aggregate Out-
standing Balance of all Receivables as of such date less
Defaulted Receivables as of such date.
"Delinquent Receivable" means a Receivable: (i) as to
which any payment, or part thereof, remains unpaid for more than
30 days from the original due date for such Receivable and (ii)
which is not a Defaulted Receivable.
"Designated Obligor" means, at any time, each Obligor;
provided, however, that any Obligor shall cease to be a
Designated Obligor upon notice from the Company, delivered at any
time in good faith and based upon reasonable criteria relating to
such Obligor's financial performance or financial condition.
"Designated Subsidiary" means each of Clayton-Marcus
Company, Inc., Barclay Furniture Co., and LADD Transportation,
Inc. and such other wholly-owned subsidiaries of the Transferor
as (i) become parties to the Purchase Agreement and to this
Agreement and (ii) are consented to in writing by the Company to
be "Designated Subsidiaries" hereunder.
"Dilution Ratio" means, the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month by
dividing (i) the aggregate amount of credits, rebates, discounts,
disputes, warranty claims, repossessed or returned goods, charge
back allowances, other dilution factors, and any other billing or
other adjustment by the Transferor or the Collection Agent,
provided to Obligors in respect of Receivables during the pre-
ceding three Fiscal Months (including such Fiscal Month) by (ii)
the aggregate Outstanding Balance of all Receivables which arose
during such three Fiscal Months.
"Dilution Reserve" means, at any time, an amount equal
to the product of (i) 1.5, (ii) the highest Dilution Ratio as of
the last day on any of the preceding twelve (12) months and (iii)
the sum of the Net Investment, the Loss Reserve, the Discount
Reserve and the Servicing Fee Reserve, all at such time.
"Discount" means, with respect to any Tranche Period:
(TR x TNI x AD) 360
Where:
TR = the Tranche Rate applicable to such Tranche Period.
TNI = the portion of the Net Investment allocated to such
Tranche Period.
AD = the actual number of days during such Tranche Period.
provided, however, that no provision of this Agreement shall
require the payment or permit the collection of Discount in
excess of the maximum permitted by applicable law; and provided,
further, that Discount shall not be considered paid by any
distribution if at any time such distribution is rescinded or
must be returned for any reason.
"Discount Reserve" means, at any time, an amount equal
to:
TD + LY
Where:
TD = the sum of the unpaid Discount for all Tranche Periods.
LY = the Liquidation Yield
"Early Collection Fee" means, for any Tranche Period
(such Tranche Period to be determined without regard to the last
sentence in Section 2.3(a)) during which the portion of the Net
Investment that was allocated to such Tranche Period is reduced,
the excess, if any, of (i) the additional Discount that would
have accrued during such Tranche Period if such reductions had
not occurred, minus (ii) the income, if any, received by the
Company from investing the proceeds of such reductions.
"Effective Date" shall mean the Business Day on which
all the conditions precedent set forth in Section 4.1 hereof
shall be satisfied.
"Eligible Investments" shall mean (a) negotiable in-
struments or securities represented by instruments in bearer or
registered or in book-entry form which evidence (i) obligations
fully guaranteed by the United States of America; (ii) time
deposits in, or bankers acceptances issued by, any depositary
institution or trust company incorporated under the laws of the
United States of America or any state thereof and subject to
supervision and examination by Federal or state banking or
depositary institution authorities; provided, however, that at
the time of investment or contractual commitment to invest
therein, the certificates of deposit or short-term deposits, if
any, or long-term unsecured debt obligations (other than such
obligation whose rating is based on collateral or on the credit
of a Person other than such institution or trust company) of such
depositary institution or trust company shall have a credit
rating from Moody's and S&P of at least "P-1" and "A-1", respec-
tively, in the case of the certificates of deposit or short-term
deposits, or a rating not lower than one of the two highest
investment categories granted by Moody's and by S&P; (iii)
certificates of deposit having, at the time of investment or
contractual commitment to invest therein, a rating from Moody's
and S&P of at least "P-1" and "A-1", respectively; (iv)
investments in money market funds rated in the highest investment
category or otherwise approved in writing by the applicable
rating agencies, (b) demand deposits in any depositary
institution or trust company referred to in (a)(ii) above, (c)
commercial paper (having original or remaining maturities of no
more than 30 days) having, at the time of investment or
contractual commitment to invest therein, a credit rating from
Moody's and S&P of at least "P-1" and "A-1", respectively, (d)
Eurodollar time deposits having a credit rating from Moody's and
S&P of at least "P-1" and "A-1", respectively, and (e) repurchase
agreements involving any of the Eligible Investments described in
clauses (a)(i), (a)(iii) and (d) hereof so long as the other
party to the repurchase agreement has at the time of investment
therein, a rating from Moody's and S&P of at least "P-1" and "A-
1", respectively.
"Eligible Receivable" means, at any time, any Re-
ceivable:
(i) which either
(x) has been originated by a Designated Obligor and transferred by
such Designated Subsidiary to the Transferor or (y)
originated by the Transferor and, in either case to
which the Transferor has good title thereto, free and
clear of all Adverse Claims;
(ii) the Obligor of
which is a United States resident, is a Designated Obligor at the
time of the initial creation of an interest therein hereunder,
is not an Affiliate of any of the parties hereto, and
is not a government or a governmental subdivision or
agency; provided, however, that Receivables with an
aggregate Outstanding Balance not greater than 2% of
the aggregate Outstanding Balance of all Receivables
may be originated by Obligors which are Canadian
residents;
(iii) which is not a
Defaulted Receivable at the time of the initial creation of an interest
of the Company therein;
(iv) which is not
a Delinquent Receivable at the time of the initial creation of an
interest of the Company therein (other than regarding
Receivables transferred on the date of the initial Incremental
Transfer hereunder);
(v) which, according to the Contract
related thereto, is required to be paid in full within
30 days of the original billing date therefor;
provided, however, that Receivables with an aggregate
Outstanding Balance not greater than 15% of the
aggregate Outstanding Balance of all Receivables may be
required to be repaid in full between 31 and 180 days
from the original billing date therefor;
(vi) which is an
"eligible asset" as defined in Rule 3a-7 under the Investment
Company Act of 1940, as amended;
(vii) a purchase of
which with the proceeds of Commercial Paper would constitute a
"current transaction" within the meaning of Section 3(a)(3) of
the Securities Act of 1933, as amended;
(viii) which is an
"account" within 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
Contract that together with the Receivable related thereto, is in
full force and effect and constitutes the legal, valid
and binding obligation of the related Obligor en-
forceable against such Obligor in accordance with its
terms and is not subject to any offset, counterclaim 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
billing, fair credit reporting, equal credit opportuni-
ty, 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 material 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 Transferor's or a Designated Subsidiary's
business; and
(xiv) the Obligor of which has been
directed to make all payments to a specified account of
the Collection Agent with respect to which there shall
be a Lock-Box Agreement in effect.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated thereunder.
"Estimated Maturity Period" means, at any time, the
period, rounded to the nearest whole number of days, equal to the
weighted average days until due of the Receivables as calculated
by the Collection Agent in good faith and set forth in the most
recent Investor Report, such calculation to be based on the
assumptions that (a) each Receivable within a particular aging
category, (as set forth in the Investor Report) will be paid on
the last day of such aging category and (b) the last day of the
last such aging category coincides with the last date on which
any Outstanding Balance of any Receivables would be written off
as uncollectible or charged against any applicable reserve or
similar account in accordance with the requirements of the Credit
and Collection Policy as applied by the Transferor and the
Transferor's normal accounting practices applied on a basis
consistent with those reflected in the Transferor's financial
statements, provided, however, that if the Company shall disagree
with any such calculation on the basis that an error in the
calculation exists, the Company may recalculate the Estimated
Maturity Period in accordance with the foregoing and based on
reasonable assumptions based on fact, and such recalculation, in
the absence of manifest error, shall be conclusive.
"Eurodollar Rate" means, with respect to any Eurodollar
Tranche Period, a rate which is .625% in excess of a rate per
annum equal to the sum (rounded upwards, if necessary, to the
next higher 1/100 of 1%) of (A) the rate obtained by dividing (i)
the applicable LIBOR Rate by (ii) a percentage equal to 100%
minus the reserve percentage used for determining the maximum re-
serve requirement as specified in Regulation D (including, with-
out limitation, any marginal, emergency, supplemental, special or
other reserves) that is applicable to the Liquidity Provider
during such Eurodollar Tranche Period in respect of eurocurrency
or eurodollar funding, lending or liabilities (or, if more than
one percentage shall be so applicable, the daily average of such
percentage for those days in such Eurodollar Tranche Period
during which any such percentage shall be applicable) plus (B)
the then daily net annual assessment rate (rounded upwards, if
necessary, to the nearest 1/100 of 1%) as estimated by the
Liquidity Provider for determining the current annual assess-
ment payable by the Liquidity Provider to the Federal Deposit
Insurance Corporation in respect of eurocurrency or eurodollar
funding, lending or liabilities.
"Eurodollar Tranche" means a Tranche as to which
Discount is calculated at the Eurodollar Rate.
"Eurodollar Tranche Period" means, with respect to a
Eurodollar Tranche, prior to the Termination Date, a period of up
to 30 days requested by the Transferor and agreed to by the
Company or the Liquidity Provider , as the case may be, commenc-
ing on a Business Day requested by the Transferor and agreed to
by the Company; provided, however, that if such Eurodollar
Tranche Period would expire on a day which is not a Business Day,
such Eurodollar Tranche Period shall expire on the next suc-
ceeding Business Day; provided, further, that if such Eurodollar
Tranche Period would expire on (a) a day which is not a Business
Day but is a day of the month after which no further Business Day
occurs in such month, such Eurodollar Tranche Period shall expire
on the next preceding Business Day or (b) a Business Day for
which there is no numerically corresponding day in the applicable
subsequent calendar month, such Eurodollar Tranche Period shall
expire on the last Business Day of such month.
"Event of Bankruptcy", with respect to any Person,
shall mean (i) that such Person shall generally not pay its debts
as such debts become due or shall admit in writing its inability
to pay its debts generally or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted
by or against such Person seeking to adjudicate it as bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee or
other similar official for it or any substantial part of its
property, that results in the entry of an order which remains
undismissed, unbonded or unstayed pending appeal and in effect
for a period of 60 days from the date of entry thereof or (ii) if
such Person is a corporation, such Person or any Subsidiary shall
take any corporate action to authorize any of the actions set
forth in the preceding clause (i).
"Fee Letter" means the letter agreement dated the date
hereof between the Transferor and the Company, as amended,
modified or supplemented from time to time.
"Finance Charges" means, with respect to a Contract,
any finance, interest, late or similar charges owing by an
Obligor pursuant to such Contract.
"Fiscal Month" shall mean each fiscal month of the
Transferor as set forth on Exhibit N hereto.
"Guaranty" of a Person means any agreement by which
such Person assumes, guarantees, endorses, contingently agrees to
purchase or provide funds for the payment of, or otherwise
becomes liable upon, the obligation of any other Person, or
agrees to maintain the net worth or working capital or other
financial condition of any other Person or otherwise assures any
other creditor of such other Person against loss, including,
without limitation, any comfort letter, operating agreement or
take-or-pay contract and shall include, without limitation, the
contingent liability of such Person in connection with any
application for a letter of credit.
"Incremental Transfer" means a Transfer which is made
pursuant to Section 2.2(a).
"Indebtedness" of a Person means such Person's (i)
obligations for borrowed money, (ii) obligations representing the
deferred purchase price of property other than accounts payable
arising in the ordinary course of such Person's business on terms
customary in the trade, (iii) obligations, whether or not
assumed, secured by liens or payable out of the proceeds or pro-
duction from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) Capitalized Lease
obligations and (vi) obligations for which such Person is
obligated pursuant to a Guaranty.
"Indemnified Amounts" has the meaning specified in
Section 8.1.
"Indemnified Parties" has the meaning specified in
Section 8.1.
"Interest Coverage Ratio" has the meaning specified in
Exhibit O.
"Investor Report" means a report, in substantially the
form of Exhibit E or in such other form as is mutually agreed to
by the Transferor and the Company, furnished by the Collection
Agent to the Company and the Administrative Agent pursuant to
Section 2.11(b).
"Law" shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance,
order, injunction, writ, decree or award of any Official Body.
"Leverage Ratio" has the meaning specified in Exhibit O.
"LIBOR Rate" shall mean, with respect to any Eurodollar
Tranche Period, the rate at which deposits in dollars are offered
to the Liquidity Provider in the London interbank market at
approximately 11:00 a.m. (London time) two Business Days before
the first day of such Eurodollar Tranche Period in an amount
approximately equal to the Eurodollar Tranche to which the
Eurodollar Rate is to apply and for a period of time
approximately equal to the applicable Eurodollar Tranche Period.
"Liquidation Yield" means, at any time, an amount
equal to:
(RVF x LBR x NI) x (EM + CD)
360
Where:
RVF = the Rate Variance Factor.
LBR = the Base Rate which is applicable to the liquidation
period of the Net Investment at such time.
NI = the Net Investment.
EM = the Estimated Maturity Period of the Receivables.
CD = the Collection Delay.
"Liquidity Provider Agreement" means the agreement
between the Company and the Liquidity Provider evidencing the
obligation of the Liquidity Provider to provide liquidity support
to the Company in connection with the issuance by the Company of
Commercial Paper.
"Liquidity Provider" means the Person or Persons who
will provide liquidity support to the Company in connection with
the issuance by the Company of Commercial Paper.
"Lock-Box Account" means an account maintained by the
Collection Agent or any Designated Subsidiary at a Lock-Box Bank
for the purpose of receiving Collections from Receivables.
"Lock-Box Agreement" means an agreement among the
Collateral Agent, the Collection Agent and a Lock-Box Bank in
substantially the form of Exhibit D hereto.
"Lock-Box Bank" means each of the banks set forth in
Exhibit C hereto and such banks as may be added thereto or
deleted therefrom pursuant to Section 2.8.
"Loss Percentage" means on any day the greater of (i)
five (5) times the highest Loss-to-Liquidation Ratio as of the
last day of the twelve (12) months preceding the then current
month, (ii) three (3) times the highest Concentration Factor of
all Designated Obligors (exclusive of A1/A+ Rated Obligors) and
(iii) ten (10) percent.
"Loss Reserve" means, on any day, an amount equal to:
LP x (NI + DLR + DR + SFR)
Where:
LP = the Loss Percentage at the close of business of the
Collection Agent on such day.
NI = the Net Investment at the close of business of the
Collection Agent on such day.
DLR = the Dilution Reserve at the close of business of the
Collection Agent on such day.
DR = the Discount Reserve at the close of business of the
Collection Agent on such day.
SFR = the Servicing Fee Reserve at the close of business of
the Collection Agent on such day.
Notwithstanding the foregoing, the Loss Reserve shall at all
times be at least equal to 10.0% of the highest Net Investment at
any time since the Closing Date.
"Loss-to-Liquidation 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 Out-
standing Balance of all Receivables which became Defaulted
Receivables during such period, by (ii) the aggregate amount of
Collections received by the Collection Agent during such period
less Deemed Collections for the period.
"Material Subsidiary" means, as at any date of
determination, any Subsidiary whose net sales for the rolling
four quarter period ending on the Quarterly Date falling on or
immediately preceeding such date of determination exceed
$20,000,000 or whose assets exceed $15,000,000 as at such date.
"Maximum Net Investment" means $30,000,000.
"Maximum Percentage Factor" means 95%.
"Moody's" means Moody's Investors Service, Inc.
"Net Investment" means the sum of the Transfer Prices
for each Incremental Transfer less the aggregate amount of
Collections received and applied by the Company to reduce such
Net Investment pursuant to Section 2.6 or Section 2.9; provided
that the Net Investment shall be restored in the amount of any
Collections so received and applied if at any time the
distribution of such Collections is rescinded or must otherwise
be returned for any reason.
"Net Receivables Balance" means at any time the
Outstanding Balance of the Eligible Receivables at such time
reduced by the sum of (i) the aggregate amount by which the
Outstanding Balance of all Eligible Receivables of each
Designated Obligor exceeds the Concentration Factor for such
Designated Obligor, plus (ii) the aggregate Outstanding Balance
of all Eligible Receivables which are Defaulted Receivables, plus
(iii) the aggregate Outstanding Balance of all Eligible
Receivables of each Obligor with respect to which either 10% or
more of such Obligor's Receivables are Defaulted Receivables or
50% or more of such Obligor's Receivables are Delinquent Receiv-
ables.
"Obligor" means a Person obligated to make payments for
the provision of goods and services pursuant to a Contract.
"Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of either, or any
court, tribunal, grand jury or arbitrator, in each case whether
foreign or domestic.
"Other Transferor" means any Person other than the
Transferor that has entered into a receivables purchase agreement
or transfer and administration agreement with the Company.
"Outstanding Balance" of any Receivable at any time
means the then outstanding principal amount thereof including any
accrued and outstanding Finance Charges related thereto.
"Percentage Factor" means the percentage computed at
any time of determination as follows:
NI + LR + DLR + DR + SFR
NRB
Where:
NI = the Net Investment at the time of such computation.
LR = the Loss Reserve at the time of such computation.
DLR = the Dilution Reserve at the time of such computation.
DR = the Discount Reserve at the time of such computation.
SFR = the Servicing Fee Reserve at the time of such
computation.
NRB = the Net Receivables Balance at the time of such
computation.
Notwithstanding the foregoing computation, the
Percentage Factor shall not exceed one hundred percent (100%).
The Percentage Factor shall be calculated by the Collection Agent
on the day of the initial Incremental Transfer hereunder.
Thereafter, until the Termination Date, the Collection Agent
shall daily recompute the Percentage Factor and report such
recomputations to the Company monthly in the Investor Report or
as requested by the Company. The Percentage Factor shall remain
constant from the time as of which any such computation or
recomputation is made until the time as of which the next such
recomputation shall be made, notwithstanding any additional
Receivables arising, any Incremental Transfer made pursuant to
Section 2.2(a) or any reinvestment Transfer made pursuant to
Section 2.2(b) and 2.5 during any period between computations of
the Percentage Factor. The Percentage Factor, as calculated at
the close of business on the Termination Date, shall remain
constant at all times thereafter until such time as the Company
shall have received the Aggregate Unpaids, at which time the
Percentage Factor shall be recomputed in accordance with Section
2.6.
"Person" means any corporation, natural person, firm,
joint venture, partnership, trust, unincorporated organization,
enterprise, government or any department or agency of any
government.
"Potential Termination Event" means an event which but
for the lapse of time or the giving of notice, or both, would
constitute a Termination Event.
"Proceeds" means "proceeds" as defined in Section 9-
306(1) of the UCC.
"Program Fee" means the fee payable by the Transferor
to the Company pursuant to Section 2.7 hereof, the terms of which
are set forth in the Fee Letter.
"Purchase Agreement" means the Receivables Purchase
Agreement dated as of January 28, 1994, among the Transferor and
the Designated Subsidiaries, as the same may be amended, supple-
mented or otherwise modified.
"Purchased Interest" means the interest in the
Receivables acquired by the Liquidity Provider through purchase
pursuant to the terms of the Liquidity Provider Agreement.
"Quarterly Date" has the meaning specified in Exhibit
O.
"Quarterly Period" has the meaning specified in Exhibit
O.
"Rate Variance Factor" means the number, computed from
time to time in good faith by the Company, that reflects the
largest potential variance (from minimum to maximum) in selected
interest rates over a period of time selected by the Company from
time to time, set forth in a written notice by the Company to the
Transferor and the Collection Agent.
"Receivable" means the indebtedness owed to the
Transferor by any Obligor (without giving effect to any purchase
hereunder by the Company 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 the Transferor or a Designated Subsidiary and
thereafter transferred to the Transferor by such Designated
Subsidiary, and includes the right to payment of any Finance
Charges and other obligations of such Obligor with respect there-
to. Notwithstanding the foregoing, once a Receivable has been
deemed collected pursuant to Section 2.9 hereof, it shall no
longer constitute a Receivable hereunder.
"Records" means all Contracts and other documents,
books, records and other information (including, without limita-
tion, computer programs, tapes, discs, punch cards, data
processing software and related property and rights) maintained
with respect to Receivables and the related Obligors.
"Related Security" means with respect to any Receiv-
able:
(i) all of the Transferor's interest,
if any, in the merchandise (including returned
merchandise), if any, the sale of which by the
Transferor gave rise to such Receivable;
(ii) all other security interests or
liens and property subject thereto from time to time,
if any, purporting to secure payment of such Re-
ceivable, whether pursuant to the Contract related to
such Receivable or otherwise, together with all fi-
nancing statements signed by an Obligor describing any
collateral securing such Receivable;
(iii) all guarantees, insurance or other
agreements or arrangements of any kind from time to
time supporting or securing payment of such Receivable
whether pursuant to the Contract related to such Re-
ceivable or otherwise; and
(iv) all Records.
"Section 8.2 Costs" has the meaning specified in
Section 8.2(d).
"Servicing Fee" shall mean the fee payable by the
Company to the Collection Agent, with respect to a Tranche, in an
amount equal to 0.50% per annum on the amount of the Net
Investment allocated to such Tranche pursuant to Section 2.3.
Such fee shall accrue from the date of the initial purchase of an
ownership interest in the Receivables to the later of the
Termination Date or the date on which the Net Investment is
reduced to zero. On or prior to the Termination Date such fee
shall be payable only from Collections pursuant to, and subject
to the priority of payments set forth in, Section 2.5. After the
Termination Date such fee shall be payable only from Collections
pursuant to, and subject to the priority of payments set forth
in, Section 2.6.
"Servicing Fee Reserve" means at any time the sum of
(i) the Servicing Fee for all Tranches and (ii) an amount equal
to the product of (A) the Net Investment at such time, and (B)
the Servicing Fee percentage and (C) a fraction having as the
numerator, the sum of the Estimated Maturity Period and the
Collection Delay and as the denominator, 360.
"Standard & Poor's" or "S&P" means Standard & Poor's
Ratings Group.
"Subsidiary" of a Person means any corporation more
than 50% of the outstanding voting securities of which shall at
any time be owned or controlled, directly or indirectly, by such
Person or by one or more Subsidiaries of such Person or any simi-
lar business organization which is so owned or controlled.
"Termination Date" means the earliest of (i) that
Business Day designated by the Transferor to the Company as the
Termination Date at any time following 60 days' written notice to
the Company, (ii) the date of termination of the commitment of
the Liquidity Provider under the Liquidity Provider Agreement,
(iii) the date of termination of the commitment of the Credit
Support Provider under the Credit Support Agreement, (iv) the day
on which the Company delivers a notice of termination pursuant to
Section 7.2, or (v) January 27, 1995 unless extended not later
than 60 days prior to such date for any additional period by con-
sent of the Company, the Designated Subsidiaries, the Transferor
and the Collateral Agent.
"Termination Event" means an event described in Section
7.1.
"Tranche" means a portion of the Aggregate Net
Investment allocated to a Tranche Period pursuant to Section 2.3.
"Tranche Period" means a CP Tranche Period, a BR
Tranche Period, a CD Tranche Period or a Eurodollar Tranche
Period.
"Tranche Rate" means the CP Rate, the Base Rate, the CD
Rate or the Eurodollar Rate.
"Transaction Costs" has the meaning specified in
Section 8.3(a).
"Transfer" means a conveyance, transfer and assignment
by the Transferor to the Company of an undivided percentage
ownership interest in Receivables hereunder.
"Transfer Certificate" has the meaning given to it in
Section 2.2(a).
"Transfer Date" means, with respect to each Transfer,
the Business Day on which such Transfer is made.
"Transfer Price" means with respect to any Incremental
Transfer, the amount paid to the Transferor by the Company as
described in the Transfer Certificate.
"Transferred Interest" means, at any time of determina-
tion, an undivided percentage ownership interest in (i) each and
every then outstanding Receivable, (ii) all Related Security with
respect to each such Receivable, (iii) all Collections with
respect thereto, and (iv) other Proceeds of the foregoing, equal
to the Percentage Factor at such time, and only at such time
(without regard to prior calculations). The Transferred Interest
in each Receivable, together with Related Security and Collec-
tions with respect thereto, shall at all times be equal to the
Transferred Interest in each other Receivable, together with
Related Security and Collections. To the extent that the
Transferred Interest shall decrease as a result of a
recalculation of the Percentage Factor, the Company shall be
considered to have reconveyed to the Transferor an undivided
percentage ownership interest in each Receivable, together with
Related Security and Collections, in an amount equal to such
decrease such that in each case the Transferred Interest in each
Receivable shall be equal to the Transferred Interest in each
other Receivable.
"UCC" means, with respect to any state, the Uniform
Commercial Code as from time to time in effect in such state.
"Unused Facility Fee" means the fee payable by the
Transferor to the Company pursuant to Section 2.7 hereof, the
terms of which are set forth in the Fee Letter.
"Weekly Report" means a report, in substantially the
form of Exhibit G or in such other form as is mutually agreed to
by the Transferor and the Company, furnished by the Collection
Agent to the Company and the Administrative Agent pursuant to
Section 2.11(a).
SECTION 1.2. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting 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 computation 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."
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1. Facility. Upon the terms and subject to
the conditions herein set forth the Transferor may, at its
option, convey, transfer and assign to the Company, and the
Company shall accept such conveyance, transfer and assignment
from the Transferor, without recourse except as provided herein,
undivided percentage ownership interests in the Receivables, to-
gether with Related Security and Collections with respect there-
to, from time to time.
SECTION 2.2. Transfers; Company Certificate; Eligible
Receivables. (a) Incremental Transfers. On and after the
Effective Date, upon the terms and subject to the conditions
herein set forth the Transferor may, at its option, convey,
transfer and assign to the Company, and the Company shall accept
such conveyance, transfer and assignment from the Transferor,
without recourse except as provided herein, undivided percentage
ownership interests in the Receivables, together with Related
Security and Collections with respect thereto (each, an
"Incremental Transfer") from time to time for an aggregate Trans-
fer Price not to exceed the Maximum Net Investment; provided that
the Company shall not accept any such transfer if it is unable to
obtain funds therefor in the commercial paper market or under the
Liquidity Provider Agreement. The Transferor shall by notice
given by telefax offer to convey, transfer and assign to the
Company undivided percentage ownership interests in the Receiv-
ables at least three (3) Business Days prior to the proposed date
of transfer. Each such notice shall specify the desired Transfer
Price (which shall be at least $1,000,000 and integral multiples
of $1,000,000 in excess thereof) and the desired date of such
Incremental Transfer, together with the desired Tranche Period
(or range) related thereto as required by Section 2.3. The
Company shall, by notice given by telephone or telefax, accept
such offer to convey, transfer and assign undivided percentage
ownership interests. Each notice of proposed Transfer shall be
irrevocable and binding on the Transferor and the Transferor
shall indemnify the Company against any loss or expense incurred
by the Company, either directly or through the Liquidity Provider
Agreement as a result of any failure by the Transferor to
complete such Incremental Transfer including, without limitation,
any loss (including loss of anticipated profits) or expense in-
curred by the Company, either directly or pursuant to the
Liquidity Provider Agreement, by reason of the liquidation or
reemployment of funds acquired by the Company or the Liquidity
Provider (including, without limitation, funds obtained by
issuing commercial paper or promissory notes or obtaining depos-
its as loans from third parties) for the Company to fund such
Incremental Transfer.
On the date of the initial Incremental Transfer, the Company
shall deliver written confirmation to the Transferor of the
Transfer Price, the Tranche Period and the Tranche Rate relating
to such Transfer and the Transferor shall deliver to the Company
the Transfer Certificate in the form of Exhibit F hereto (the
"Transfer Certificate"). The Company shall indicate the amount
of the initial Incremental Transfer together with the date
thereof on the grid attached to the Transfer Certificate. On the
date of each subsequent Incremental Transfer, the Company shall
send written confirmation to the Transferor of the Transfer
Price, the Tranche Period, the Transfer Date and the Tranche Rate
applicable to such Incremental Transfer. The Company shall
indicate the amount of the Incremental Transfer together with the
date thereof as well as any decrease in the Net Investment on the
grid attached to the Transfer Certificate. The Transfer Certifi-
cate shall evidence the Incremental Transfers. Following each
Incremental Transfer, the Company shall deposit to the
Transferor's account at the location indicated on the signature
page hereof, or as provided by the Transferor from time to time
by written notice, in immediately available funds, an amount
equal to the Transfer Price for such Incremental Transfer.
(b) Reinvestment Transfers. On each Business Day
occurring after the initial Incremental Transfer hereunder and
prior to the Termination Date, the Transferor hereby agrees to
convey, transfer and assign to the Company, and in consideration
of Transferor's agreement to maintain at all times prior to the
Termination Date a Net Receivables Balance in an amount at least
sufficient to maintain the Percentage Factor at an amount not
greater than the Maximum Percentage Factor, the Company hereby
agrees to purchase from the Transferor undivided percentage
ownership interests in each and every Receivable, together with
Related Security and Collections with respect thereto, to the
extent that Collections are available for such Transfer in
accordance with Section 2.5, such that after giving effect to
such Transfer, (i) the amount of the Company's Net Investment at
the close of business on such Business Day shall be equal to the
amount of the Company's Net Investment at the close of business
on the Business Day immediately preceding such Business Day plus
the Transfer Price of any Incremental Transfer made on such day,
if any, and (ii) the Company's Transferred Interest in each
Receivable, together with Related Security and Collections with
respect thereto, shall be equal to its Transferred Interest in
each other Receivable, together with Related Security and Collec-
tions with respect thereto.
(c) All Transfers. Each Transfer shall consti-
tute a purchase of undivided percentage ownership interests in
each and every Receivable, together with Related Security and
Collections with respect thereto, then existing, as well as in
each and every Receivable, together with Related Security and
Collections with respect thereto, which arises at any time after
the date of such Transfer. The Company's aggregate undivided
percentage ownership interest in the Receivables, together with
Related Security and Collections with respect thereto, shall
equal the Percentage Factor in effect from time to time.
(d) Company Certificate. The Transferor shall
issue to the Company the Company Certificate, in the form of
Exhibit M, on or prior to the date hereof.
(e) Percentage Factor. The Percentage Factor
shall be initially computed as of the opening of business of the
Collection Agent on the date of the initial Incremental Transfer
hereunder. Thereafter until the Termination Date, the Percentage
Factor shall be automatically recomputed as of the close of
business of the Collection Agent on each day (other than a day
after the Termination Date). The Percentage Factor shall remain
constant from the time as of which any such computation or
recomputation is made until the time as of which the next such
recomputation, if any, shall be made. The Percentage Factor, as
computed as of the day immediately preceding the Termination
Date, shall remain constant at all times on and after such
Termination Date until the date on which the Net Investment shall
become zero and the Aggregate Unpaids shall have been paid in
full.
(f) Assignment. The Transferor hereby irrevoca-
bly assigns to the Company all of its right, title and interest
in and to the Purchase Agreement. The Designated Subsidiaries,
by their signature hereto, acknowledge such assignment in favor
of the Company.
SECTION 2.3. Selection of Tranche Periods and Tranche
Rates.
(a) At all times hereafter, but prior to the
occurrence of a Termination Event, the Transferor shall, subject
to the limitations described below, request Tranche Periods and
allocate a portion of the Net Investment to each selected Tranche
Period, so that the aggregate amounts allocated to outstanding
Tranche Periods at all times shall equal the Net Investment. The
Transferor shall give the Company irrevocable notice by telephone
of the new requested Tranche Period and whether the requested
Tranche Rate applicable thereto shall be the CP Rate, the BR
Rate, the CD Rate or the Eurodollar Rate (a "Tranche Selection
Notice") at least (i) three (3) Business Days prior to the
expiration of any then existing Tranche Period if the Tranche
Rate to be applicable to the new requested Tranche Period shall
be the Eurodollar Rate, (ii) two (2) Business Days prior to the
expiration of any then existing Tranche Period if the Tranche
Rate to be applicable to the new requested Tranche Period shall
be the BR Rate or the CD Rate, and (iii) one (1) Business Day
prior to the expiration of any then existing Tranche Period if
the Tranche Rate to be applicable to the new requested Tranche
Period shall be the CP Rate; provided, however, that the Company
may select, in its sole discretion, any such new Tranche Period
and Tranche Rate if (i) the Transferor fails to provide such
notice on a timely basis or (ii) the Company determines, in its
sole discretion, that the Tranche Rate requested by the
Transferor is unavailable or for any reason commercially
undesirable or the Company determines, in its sole discretion,
that the Tranche Period requested by the Transferor is not
available. If the Company determines that the Tranche Period
requested by the Transferor is not available, the Company shall,
to the extent practicable, consult with the Transferor as to the
desired Tranche Period. If, as a result of a lack of liquidity
in respect of the Commercial Paper or otherwise, the Liquidity
Provider acquires a Purchased Interest with respect to the
Receivables pursuant to the terms of the Liquidity Provider
Agreement, the Liquidity Provider may exercise the right of
selection granted to the Company hereby, and the portion of the
Net Investment allocated to each selected Tranche Period shall
equal, to the extent practicable, the portion of the Net
Investment allocated to the Tranche Period that immediately
preceded such new Tranche Period. The Company confirms that it
is its intention to allocate all or substantially all of the Net
Investment to one or more CP Tranche Periods; provided that the
Company may determine from time to time, in its sole discretion,
that funding such Net Investment by means of one or more CP
Tranche Periods is not commercially desirable. In the case of
any Tranche Period outstanding upon the occurrence of a
Termination Event, such Tranche Period shall end on the date of
such occurrence.
(b) At all times on and after the occurrence of a
Termination Event, the Company or the Liquidity Provider , as
applicable, shall select all Tranche Periods and Tranche Rates
applicable thereto.
SECTION 2.4. Fees and Other Costs and Expenses.
Notwithstanding the limitation on recourse under Section 2.1, the
Transferor shall pay, as and when due in accordance with this
Agreement, all fees hereunder, all amounts payable pursuant to
Article VIII hereof, if any, and the Servicing Fee. The
Transferor shall pay to the Collateral Agent on each maturity of
Commercial Paper an amount equal to the discount accrued on the
Company's Commercial Paper notes to the extent such notes were
issued in order to fund the Transferred Interest in an amount in
excess of the Transfer Price of an Incremental Transfer. The
Transferor shall pay to the Collateral Agent, on each day on
which Commercial Paper is issued by the Company, the Dealer Fee
as set forth in the Fee Letter. Discount shall accrue with re-
spect to each Tranche on each day occurring during the Tranche
Period related thereto. Nothing in this Agreement shall limit in
any way the obligations of the Transferor to pay the amounts set
forth in this Section 2.4.
SECTION 2.5. Non-Liquidation Settlement and Reinvest-
ment Procedures. On each day after the date of any Incremental
Transfer but prior to the Termination Date and provided that no
Potential Termination Event shall have occurred and be continu-
ing, the Collection Agent shall out of the Percentage Factor of
Collections received on or prior to such day and not previously
applied or accounted for: (i) set aside and hold in trust for
the Company (or deposit into the Collection Account if so
required pursuant to Section 2.12) an amount equal to all Dis-
count, the Program Fee, the Unused Fee and the Servicing Fee ac-
crued through such day and not so previously set aside or paid
and (ii) apply the balance of such Percentage Factor of Collec-
tions remaining after application of Collections as provided in
clause (i) of this Section 2.5 to the Transferor, for the benefit
of the Company for the purchase of additional undivided percent-
age interests in each Receivable pursuant to Section 2.2(b). On
the last day of each Tranche Period, from the amounts set aside
as described in clause (i) of the first sentence of this Section
2.5, the Collection Agent shall deposit to the Company's account,
an amount equal to the accrued and unpaid Discount for such
Tranche Period and shall deposit to its account an amount equal
to the accrued and unpaid Servicing Fee for such Tranche Period.
As provided in Section 6.2(b), the Collection Agent shall remit
to the Transferor, as soon as practicable after receipt, such
portion of Collections not allocated to the Company.
SECTION 2.6. Liquidation Settlement Procedures. If on
the Termination Date, the Percentage Factor is greater than the
Maximum Percentage Factor, then the Transferor shall immediately
pay to the Company from previously received Collections, an
amount equal to the amount such that, when applied in reduction
of the Net Investment, will result in a Percentage Factor less
than or equal to the Maximum Percentage Factor. Such amount
shall be applied by the Company to the reduction of the Net In-
vestment of Tranche Periods selected by the Company. On the
Termination Date and on each day thereafter, and on each day on
which a Potential Termination Event has occurred and is continu-
ing, the Collection Agent shall set aside and hold in trust for
the Company (or deposit into the Collection Account if so
required pursuant to Section 2.12) the Percentage Factor of all
Collections received on such day. On the Termination Date or the
day on which a Potential Termination Event occurs, the Collection
Agent shall deposit to the Company's account any remaining
amounts set aside pursuant to Section 2.5(i) above. On the last
day of each Tranche Period to occur on or after the Termination
Date or during the continuance of a Potential Termination Event,
the Collection Agent shall deposit to the Company's account, the
amounts set aside pursuant to the preceding sentence, together
with any remaining amounts set aside pursuant to Section 2.5(i)
prior to the Termination Date or the day on which a Potential
Termination Event occurs but not to exceed the sum of (i) the ac-
crued Discount for such Tranche Period, (ii) the portion of the
Net Investment allocated to such Tranche Period, and (iii) the
aggregate of all other amounts then owed (whether due or accrued)
hereunder by Transferor to the Company. On such day, the
Collection Agent shall deposit to its account, from the amounts
set aside pursuant to the preceding sentence which remain after
payment in full of the aforementioned amounts, the accrued Ser-
vicing Fee for such Tranche Period. If there shall be
insufficient funds on deposit for the Collection Agent to
distribute funds in payment in full of the aforementioned
amounts, the Collection Agent shall distribute funds first, in
payment of the accrued Discount, second, in payment of all fees
and expenses payable to the Company hereunder, third, if the
Transferor is not the Collection Agent, to the Collection Agent's
account, in payment of the Servicing Fee payable to the
Collection Agent, fourth, in reduction of the Net Investment
allocated to such Tranche Period, fifth, in payment of all other
amounts payable to the Company and sixth, if the Transferor is
the Collection Agent, to its account as Collection Agent, in pay-
ment of the Servicing Fee payable to the Transferor as Collection
Agent. Following the date on which the Net Investment has been
reduced to zero, all accrued Discount and Servicing Fees have
been paid in full and all other Aggregate Unpaids have been paid
in full, (i) the Collection Agent shall recompute the Percentage
Factor, (ii) the Company shall be considered to have reconveyed
to the Transferor any interest in the Receivables (including the
Transferred Interest), (iii) the Collection Agent shall pay to
Transferor any remaining Collections set aside and held by the
Collection Agent pursuant to the second sentence of this Section
2.6 and (iv) the Company shall execute and deliver to the Trans-
feror, at the Transferor's expense, such documents or instruments
as are necessary to terminate the Company's interest in the
Receivables. Any such documents shall be prepared by or on
behalf of the Transferor.
SECTION 2.7. Fees. Notwithstanding any limitation on
recourse contained in this Agreement, the Transferor shall pay
the following non-refundable fees:
(a) On the last day of each month, to the
Company, the Program Fee and the Unused Facility Fee. The
Administrative Agent shall provide prior written notice to the
Transferor as to the amount of such fees.
(b) On the date of execution hereof, to the
Administrative Agent, the Arrangement Fee.
SECTION 2.8. Protection of Ownership Interest of the
Company. (a) The Transferor agrees that from time to time, at its
expense, it will promptly execute and deliver all instruments and
documents and take all actions as may be necessary or as the
Company may reasonably request in order to perfect or protect the
Transferred Interest or to enable the Company to exercise or
enforce any of its rights hereunder. Without limiting the fore-
going, the Transferor will, upon the request of the Company, in
order to accurately reflect this purchase and sale transaction,
execute and file such financing or continuation statements or
amendments thereto or assignments thereof (as permitted pursuant
to Section 9.6 hereof) as may be requested by the Company and
mark its master data processing records and other documents with
a legend describing the purchase by the Company of the
Transferred Interest and stating "An interest in these accounts
receivable has been conveyed to Enterprise Funding Corporation
pursuant to a Transfer and Administration Agreement dated January
28, 1994." The Transferor shall, upon request of the Company,
obtain such additional search reports as the Company shall
request. To the fullest extent permitted by applicable law, the
Company shall be permitted to sign and file continuation state-
ments and amendments thereto and assignments thereof without the
Transferor's signature. Carbon, photographic or other
reproduction of this Agreement or any financing statement shall
be sufficient as a financing statement. The Transferor shall
neither change its name, identity or corporate structure (within
the meaning of Section 9-402(7) of the UCC as in effect in the
States of New York and North Carolina) nor relocate its chief
executive office or any office where Records are kept unless it
shall have: (i) given the Company at least thirty (30) days
prior notice thereof and (ii) prepared at Transferor's expense
and delivered to the Company all financing statements, in-
struments and other documents necessary to preserve and protect
the Transferred Interest or requested by the Company in
connection with such change or relocation. Any filings under the
UCC or otherwise that are occasioned by such change in name or
location shall be made at the expense of Transferor.
(b) The Collection Agent shall instruct all
Obligors to cause all Collections to be deposited directly with a
Lock-Box Bank. Any Lock-Box Account maintained by a Lock-Box
Bank pursuant to the related Lock-Box Agreement shall be under
the ownership and control of the Collateral Agent. The
Collection Agent shall be permitted to give instructions to the
Lock-Box Banks for so long as either a Collection Agent default
or any other Termination Event has not occurred hereunder. The
Collection Agent shall not add any bank as a Lock-Box Bank to
those listed on Exhibit C unless such bank has entered into a
Lock-Box Agreement. The Collection Agent shall not terminate any
bank as a Lock-Box Bank unless the Administrative Agent shall
have received fifteen (15) days' prior notice of such termi-
nation. If the Transferor or the Collection Agent receives any
Collections or the Transferor is deemed to receive any
Collections pursuant to Section 2.9, the Transferor or the
Collection Agent, as applicable, shall immediately, but in any
event within two Business Days of receipt, remit such Collections
to a Lock-Box Account. If any Designated Subsidiary receives any
Collections, such Designated Subsidiary shall immediately, but in
any event within two Business Days of receipt, remit such Collec-
tions to a Lock-Box Account.
SECTION 2.9. Deemed Collections; Application of Pay-
ments. (a) If on any day the Outstanding Balance of a Receivable
is either (x) reduced as a result of any defective, rejected or
returned goods or services, any cash discount, credit, rebate,
allowance or other 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), the Transferor shall be deemed to have
received on such day a collection of such Receivable in the
amount of such reduction or cancellation and the Transferor shall
pay to the Collection Agent an amount equal to such reduction or
cancellation which shall be applied by the Collection Agent as a
Collection in accordance with Section 2.5 or 2.6, as applicable.
Each Designated Subsidiary agrees that it shall be liable,
jointly and severally with the Transferor, for any obligation of
the Transferor under this Section 2.9(a) which relates to or
arises out of a Receivable transferred by such Designated
Subsidiary to the Transferor pursuant to the Purchase Agreement.
The Net Investment shall be reduced by the amount of such payment
actually received by the Company.
(b)If on any day any of the representations or
warranties in Article III is no longer true with respect to a Re-
ceivable, the Transferor shall be deemed to have received on such
day a Collection of such Receivable in full and the Transferor
shall on such day pay to the Collection Agent an amount equal to
the aggregate Percentage Factor of the Outstanding Balance of
such Receivable and such amount shall be allocated to the Company
by the Collection Agent and applied by the Collection Agent as a
Collection allocable to the Transferred Interest in accordance
with Section 2.5 or 2.6, as applicable. Each Designated
Subsidiary agrees that it shall be liable, jointly and severally
with the Transferor, for any obligation of the Transferor under
this Section 2.9(b) which relates to or arises out of a Re-
ceivable transferred by such Designated Subsidiary to the Trans-
feror pursuant to the Purchase Agreement. The Net Investment
shall be reduced by the amount of such payment actually received
by the Company.
(c)Any payment by an Obligor in respect of any
indebtedness owed by it to the Transferor shall, except as other-
wise specified by such Obligor or otherwise required by contract
or law and unless otherwise instructed by the Company, be applied
as a Collection of any Receivable of such Obligor included in the
Transferred Interest (starting with the oldest such Receivable)
to the extent of any amounts then due and payable thereunder
before being applied to any other receivable or other
indebtedness of such Obligor.
SECTION 2.10. Payments and Computations, Etc. All
amounts to be paid or deposited by the Transferor or the
Collection Agent hereunder shall be paid or deposited in
accordance with the terms hereof no later than 11:00 a.m. (New
York City time) on the day when due in immediately available
funds; if such amounts are payable to the Company they shall be
paid or deposited in the account indicated on the signature page
hereof, until otherwise notified by the Company. The Transferor
shall, to the extent permitted by law, pay to the Company upon
demand, interest on all amounts not paid or deposited when due to
the Company hereunder at a rate equal to 2% per annum plus the
Base Rate. All computations of discount, interest and all per
annum fees hereunder shall be made on the basis of a year of 360
days for the actual number of days (including the first but
excluding the last day) elapsed. Any computations of amounts
payable by the Transferor hereunder to the Company, the Liquidity
Provider or the Credit Support Provider shall be binding absent
manifest error.
SECTION 2.11. Reports. (a) On each Wednesday of each
week (or if such day is not a Business Day, the next succeeding
Business Day), the Collection Agent shall prepare and forward to
the Company and the Administrative Agent a Weekly Report certify-
ing as to the calculation of the Net Receivables Balance as of
the close of business on the immediately preceding Business Day.
(b) Prior to the tenth day of each month, the Col-
lection Agent shall prepare and forward to the Company and the
Administrative Agent (i) an Investor Report as of the end of the
last day of the immediately preceding Fiscal Month, (ii) if
requested by the Company or the Administrative Agent, a listing
by Obligor of all Receivables together with an aging of such
Receivables and (iii) such other information as the Company or
the Administrative Agent may reasonably request.
SECTION 2.12. Collection Account. There shall be
established on the day of the initial Incremental Transfer
hereunder and maintained, for the benefit of the Company, with
the Collateral Agent, a segregated account (the "Collection
Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Company.
The Collection Agent shall remit daily within two Business Days
of receipt to the Collection Account all Collections received
with respect to any Receivables which are allocable to the
Company pursuant to Section 2.5(i) and Section 2.6; provided,
however, the Collection Agent shall be permitted to make payments
to the Company on the last day of each Tranche Period instead of
depositing funds into the Collection Account on a daily basis for
so long as, and only for so long as no Collection Agent default
and no other Termination Event has occurred hereunder. Funds on
deposit in the Collection Account (other than investment earn-
ings) shall be invested by the Collateral Agent in Eligible
Investments that will mature so that such funds will be available
prior to the last day of each successive Tranche Period following
such investment. On the last day of each calendar month, all
interest and earnings (net of losses and investment expenses) on
funds on deposit in the Collection Account shall be retained in
the Collection Account and be available to make any payments re-
quired to be made hereunder (including Discount) to the Company.
On the date on which the Net Investment is zero and all amounts
payable hereunder have been paid to the Company, any funds re-
maining on deposit in the Collection Account shall be paid to the
Transferor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the
Transferor. The Transferor represents and warrants to the Compa-
ny that:
(a) Corporate Existence and Power. The Transfer-
or is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and
has all corporate power and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is now con-
ducted.
(b) Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the
Transferor of this Agreement, the Purchase Agreement, the Fee
Letter, the Company Certificate and the Transfer Certificate are
within the Transferor's corporate powers, have been duly autho-
rized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or
official (except as contemplated by Section 2.8), and do not
contravene, or constitute a default under, any provision of
applicable law or regulation or of the Certificate of Incorpora-
tion or Bylaws of the Transferor or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the
Transferor or result in the creation or imposition of any lien on
assets of the Transferor or any of its Subsidiaries (except as
contemplated by Section 2.8).
(c) Binding Effect. Each of this Agreement, the
Purchase Agreement, the Fee Letter and the Company Certificate
constitutes and the Transfer Certificate upon payment by the
Company of the Transfer Price set forth therein will constitute
the legal, valid and binding obligation of the Transferor,
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of creditors.
(d) Perfection. Immediately preceding each
Transfer hereunder, the Transferor shall be the owner of all of
the Receivables, free and clear of all liens, encumbrances,
security interests, preferences or other security arrangement of
any kind or nature whatsoever. On or prior to each Transfer and
each recomputation of the Transferred Interest, all financing
statements and other documents required to be recorded or filed
in order to perfect and protect the Transferred Interest against
all creditors of and purchasers from the Transferor will have
been duly filed in each filing office necessary for such purpose
and all filing fees and taxes, if any, payable in connection with
such filings shall have been paid in full.
(e) Accuracy of Information. All information
heretofore furnished by the Transferor (including without
limitation, the Investor Reports, the Weekly Reports and the
Transferor's financial statements) to the Company or the
Administrative Agent for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Transferor to the Company
or the Administrative Agent will be, true and accurate in every
material respect, on the date such information is stated or
certified.
(f) Taxes. The Transferor and its 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 Transferor or any of its
Subsidiaries except to the extent that failure to file or pay
would not have a material adverse effect on the consolidated
financial condition of the Transferor or the Company's interest
in the Receivables and except for any tax which is being
contested in good faith and by proper proceedings and against
which adequate reserves are being maintained. The charges,
accruals and reserves on the books of the Transferor and its
Subsidiaries in respect of taxes and other governmental charges
are, in the opinion of the Transferor, adequate.
(g) Action, Suits. Except as set forth in Exhib-
it H, there are no actions, suits or proceedings pending, or to
the knowledge of the Transferor threatened, against or affecting
the Transferor or any Affiliate of the Transferor or their
respective properties, in or before any court, arbitrator or
other body, which may materially adversely affect the financial
condition of the Transferor and its Subsidiaries taken as a whole
or materially adversely affect the ability of Transferor to
perform its obligations under this Agreement.
(h) Use of Proceeds. No proceeds of any Transfer
will be used by the Transferor to acquire any security in any
transaction which is subject to Section 13 or 14 of the
Securities Exchange Act of 1934, as amended.
(i) Place of Business. The chief place of busi-
ness and chief executive office of the Transferor are located at
the address of the Transferor indicated in Section 9.3 hereof and
the offices where the Transferor keeps all its Records, are
located at the address(es) described on Exhibit I or such other
locations notified to the Company in accordance with Section 2.8
in jurisdictions where all action required by Section 2.8 has
been taken and completed.
(j) Good Title. Upon each Transfer and each
recomputation of the Transferred Interest, the Company shall
acquire a valid and perfected first priority undivided percentage
ownership interest to the extent of the Transferred Interest or a
first priority perfected security interest in each Receivable
that exists on the date of such Transfer and recomputation and in
the Related Security and Collections with respect thereto free
and clear of any Adverse Claim.
(k) Tradenames, Etc. As of the date hereof: (i)
the Transferor's chief executive office is located at the address
for notices set forth in Section 9.3 hereof; (ii) the Transferor
has only the subsidiaries and divisions listed on Exhibit J here-
to; and (iii) the Transferor has, within the last five (5) years,
operated only under the tradenames identified in Exhibit J
hereto, and, within the last five (5) years, has not changed its
name, merged with or into or consolidated with any other corpo-
ration or been the subject of any proceeding under Title 11,
United States Code (Bankruptcy), except as disclosed in Exhibit J
hereto.
(l) Nature of Receivables. Each Receivable
included in the Net Receivable Balance is an Eligible Receivable
and as "eligible asset" as defined in Rule 3a-7 under the In-
vestment Company Act, of 1940, as amended.
(m) Coverage Requirement; Amount of Receivables.
The Percentage Factor does not exceed the Maximum Percentage
Factor. As of January 26, 1994, the aggregate Outstanding
Balance of the Receivables in existence was $33,523,286.27 and,
as of the close of business on January 26, 1994, the Net
Receivables Balance was $27,635,422.69.
(n) Credit and Collection Policy. Since
January 13, 1994, there have been no material changes in the
Credit and Collection Policy; since such date, no material
adverse change has occurred in the overall rate of collection of
the Receivables.
(o) Collections and Servicing. Since October 2,
1993, there has been no material adverse change in the ability of
the Transferor to service and collect the Receivables.
(p) No Termination Event. No event has occurred
and is continuing and no condition exists which constitutes a
Termination Event or a Potential Termination Event.
(q) Not an Investment Company. The Transferor 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.
(r) ERISA. The Transferor is in compliance in
all material respects with ERISA and no ERISA lien on any of the
Receivables shall exist.
(s) Lock-Box Accounts. The names and addresses
of all the Lock-Box Banks, together with the account numbers of
the Lock-Box Accounts at such Lock-Box Banks, are specified in
Exhibit C hereto (or at such other Lock-Box Banks and/or with
such other Lock-Box Accounts as have been notified to the
Collateral Agent and for which Lock-Box Agreements have been
executed in accordance with Section 2.8(b) and delivered to the
Collection Agent).
Any document, instrument, certificate or notice
delivered to the Company hereunder shall be deemed a
representation and warranty by the Transferor.
SECTION 3.2. Reaffirmation of Representations and War-
ranties by the Transferor. On each day that a Transfer is made
hereunder, the Transferor, by accepting the proceeds of such
Transfer, whether delivered to the Transferor pursuant to Section
2.2(a) or Section 2.5, shall be deemed to have certified that all
representations and warranties described in Section 3.1 are
correct on and as of such day as though made on and as of such
day. Each Transfer shall be subject to the further condition
precedent that prior to the date of such Transfer, the Collection
Agent shall have delivered to the Collateral Agent, in form and
substance satisfactory to the Administrative Agent, a completed
Investor Report dated within nine (9) days prior to the date of
such Transfer, together with a listing by Obligor, if requested,
and such additional information as may be reasonably requested by
the Administrative Agent; and the Transferor shall be deemed to
have represented and warranted that such conditions precedent
have been satisfied.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing. The Transferor
shall deliver to the Company, prior to this Agreement becoming
effective, the following documents, instruments and fees all of
which shall be in a form and substance acceptable to the Company:
(a) A copy of the Resolutions of the Board of
Directors of the Transferor certified by its Secretary approving
the Agreement and the other documents to be delivered by the
Transferor hereunder.
(b) A copy of the Resolutions of the Boards of
Directors of each Designated Subsidiary certified by its
Secretary approving the Purchase Agreement and the other
documents to be delivered by each such Designated Subsidiary
hereunder.
(c) The Articles of Incorporation of the Trans-
feror certified by the Secretary of State or other similar
official of the Transferor's jurisdiction of incorporation.
(d) The Articles of Incorporation of each
Designated Subsidiary certified by the Secretary of State or
other similar official of each such Designated Subsidiary's
jurisdiction of incorporation.
(e) A Good Standing Certificate for the Transfer-
or issued by the Secretary of State or a similar official of the
Transferor's jurisdiction of incorporation and certificates of
qualification as a foreign corporation issued by the Secretaries
of State or other similar officials of each jurisdiction when
such qualification is material to the transactions contemplated
by this Agreement.
(f) A Good Standing Certificate for each
Designated Subsidiary issued by the Secretary of State or a simi-
lar official of each such Designated Subsidiary's jurisdiction of
incorporation and certificates of qualification as a foreign
corporation issued by the Secretaries of State or other similar
officials of each jurisdiction when such qualification is
material to the transactions contemplated by this Agreement or
the Purchase Agreement.
(g) A Certificate of the Secretary of the
Transferor certifying (i) the names and signatures of the
officers authorized on its behalf to execute this Agreement, the
Purchase Agreement, the Company Certificate, the Transfer
Certificate, the Fee Letter and any other documents to be deliv-
ered by it hereunder (on which certificates the Company may con-
clusively rely until such time as the Company shall receive from
the Transferor a revised certificate meeting the requirements of
this clause (g)(i)) and (ii) that attached thereto is a true,
correct and complete copy of the Transferor's By-Laws.
(h) A Certificate of the Secretary of each
Designated Subsidiary certifying (i) the names and signatures of
the officers authorized on its behalf to execute the Purchase
Agreement and any other documents to be delivered by it hereunder
or thereunder and (ii) that attached thereto is a true, correct
and complete copy of each such Designated Subsidiary's By-Laws.
(i) Copies of proper financing statements (Form
UCC-1), dated a date reasonably near to the date of the execution
of the initial Incremental Transfer naming each Designated
Subsidiary as the debtor in favor of the Transferor and showing
the Company as assignee of the secured party or other similar
instruments as may be necessary or in the opinion of the Company
desirable under the UCC of all appropriate jurisdictions or any
comparable law to perfect the Transferor's ownership interest in
all Receivables.
(j) Copies of proper financing statements (Form
UCC-3), if any, necessary to terminate all security interests and
other rights of any person in Receivables previously granted by
any Designated Subsidiary.
(k) Certified copies of request for information
or copies (Form UCC-11) (or a similar search report certified by
parties acceptable to the Company) dated a date reasonably near
the date of the date of the initial Incremental Transfer listing
all effective financing statements which name any Designated
Subsidiary (under its present name and any previous name) as
debtor and which are filed in jurisdictions in which the filings
were made pursuant to item (i) above together with copies of such
financing statements (none of which shall cover any Receivables
or Contracts).
(l) Copies of proper financing statements (Form
UCC-1), dated a date reasonably near to the date of the initial
Incremental Transfer naming the Transferor as the debtor in favor
of the Company and showing the Collateral Agent as assignee of
the secured party or other similar instruments or documents as
may be necessary or in the reasonable opinion of the Company
desirable under the UCC of all appropriate jurisdictions or any
comparable law to perfect the Company's ownership interest in all
Receivables.
(m) Copies of proper financing statements (Form
UCC-3), if any, necessary to terminate all security interests and
other rights of any person in Receivables previously granted by
Transferor.
(n) Certified copies of request for information
or copies (Form UCC-11) (or a similar search report certified by
parties acceptable to the Company) dated a date reasonably near
the date of the initial Incremental Transfer listing all
effective financing statements which name the Transferor (under
its present name and any previous name) as debtor and which are
filed in jurisdictions in which the filings were made pursuant to
item (l) above together with copies of such financing statements
(none of which shall cover any Receivables or Contracts).
(o) Executed copies of the Lock-Box Agreements.
(p) An opinion of Petree Stockton, L.L.P., spe-
cial counsel to the Designated Subsidiaries, covering the matters
set forth in Exhibit K-1 hereto.
(q) An opinion of Petree Stockton, L.L.P., spe-
cial counsel to the Transferor, covering the matters set forth in
Exhibit K-2 hereto.
(r) A certificate of the Transferor in
substantially the form of Exhibit L hereto executed by the
Secretary or Assistant Secretary of the Transferor.
(s) A certificate of each Designated Subsidiary
in substantially the form of Exhibit L hereto executed by the
Secretary or Assistant Secretary of each such Designated
Subsidiary.
(t) A computer tape setting forth all Receivables
and the Outstanding Balances as of January 26, 1994 thereon and
such other information as the Company may reasonably request.
(u) An executed copy of the Fee Letter.
(v) The Transferor Certificate, duly executed by
the Transferor.
(w) The Company Certificate, duly executed by the
Transferor and appropriately completed.
(x) The Arrangement Fee in accordance with Sec-
tion 2.7(b).
(y) An Investor Report for the Fiscal Month ended
January 1, 1994 and a Weekly Report as at January 26, 1994.
(z) Such other documents as the Company shall
reasonably request.
SECTION 4.2. Post Closing Condition. Within 30 days
of the Closing Date, the Transferor shall deliver to the Company,
(i) with respect to each of the Transferor and the Designated
Subsidiaries, either (A) a certificate of qualification as a for-
eign corporation issued by the Secretary of State or other
similar official of Alabama or (B) a legal opinion, reasonably
acceptable to the Company, of counsel admitted to practice in
such state substantially to the effect that such qualification is
not required, (ii) with respect to Clayton-Marcus Company, Inc.,
either (A) a certificate of qualification as a foreign corpora-
tion issued by the Secretary of State or other similar official
of Georgia or (B) a legal opinion, reasonably acceptable to the
Company, of counsel admitted to practice in such state substan-
tially to the effect that such qualification is not required,
(iii) with respect to LADD Transportation, Inc., either (A) a
certificate of qualification as a foreign corporation issued by
the Secretary of State or other similar official of Pennsylvania
or (B) a legal opinion, reasonably acceptable to the Company, of
counsel admitted to practice in such state substantially to the
effect that such qualification is not required, and (iv) with
respect to the Transferor, either (A) a certificate of qualifica-
tion as a foreign corporation issued by the Secretary of State or
other similar official of Texas or (B) a legal opinion,
reasonably acceptable to the Company, of counsel admitted to
practice in such state substantially to the effect that such
qualification is not required.
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants of Transferor.
At all times from the date hereof to the later to occur of (i) the
Termination Date or (ii) the date on which the Net Investment
shall be equal to zero and the Aggregate Unpaids have been paid
in full, unless the Company shall otherwise consent in writing:
(a) Financial Reporting. The Transferor will
maintain, for itself and each Subsidiary, a system of accounting
established and administered in accordance with generally
accepted accounting principles, and furnish to the Administrative
Agent:
(i) Annual Reporting. Within ninety
(90) days after the close of each of its fiscal years,
audited financial statements, prepared in accordance
with generally accepted accounting principles on a con-
solidated and consolidating basis (consolidating state-
ments need not be audited by such accountants) for it-
self and its Subsidiaries, including balance sheets as
of the end of such period, related statements of
operations, shareholder's equity and cash flows
(consolidating statements of shareholder's equity and
cash flows need not be delivered), accompanied by an
unqualified audit report signed by independent certi-
fied public accountants, acceptable to the Administra-
tive Agent, prepared in accordance with generally ac-
cepted auditing standards and any management letter
prepared by said accountants and a letter of said ac-
countants that, in the course of the foregoing, they
have obtained no knowledge of any Termination Event or
Potential Termination Event, or if, in the opinion of
such accountants, any Termination Event or Potential
Termination Event shall exist, stating the nature and
status thereof.
(ii) Quarterly Reporting. Within forty-
five (45) days after the close of the first three quar-
terly periods of each of its fiscal years, for itself
and its Subsidiaries, consolidated and consolidating
unaudited balance sheets as at the close of each such
period and consolidated and consolidating related
statements of operations, shareholder's equity and cash
flows for the period from the beginning of such fiscal
year to the end of such quarter, all certified by its
chief financial officer (consolidating statements of
shareholder's equity and cash flows need not be
delivered).
(iii) Compliance Certificate. Together
with the financial statements required hereunder, a
compliance certificate signed by its chief financial
officer stating that no Termination Event or Potential
Termination Event exists, or if any Termination Event
or Potential Termination Event exists, stating the
nature and status thereof and showing the computation
of, and showing compliance with, each of the financial
ratios and restrictions set forth in Section 5.3.
(iv) Shareholders Statements and
Reports. Promptly upon the furnishing thereof to the
shareholders of the Transferor, copies of all financial
statements, reports and proxy statements so furnished.
(v) S.E.C. Filings. Promptly upon the
filing thereof, copies of all registration statements
and annual, quarterly, monthly or other regular reports
which the Transferor or any subsidiary files with the
Securities and Exchange Commission.
(vi) Notice of Termination Events or
Potential Termination Events. As soon as possible and
in any event within two (2) days after the occurrence
of each Termination Event or each Potential Termination
Event, a statement of the chief financial officer or
chief accounting officer of the Transferor setting
forth details of such Termination Event or Potential
Termination Event and the action which the Transferor
proposes to take with respect thereto.
(vii) Change in Credit and Collection
Policy and Debt Ratings. Within ten (10) days after
the date any material change in or amendment to the
Credit and Collection Policy is made, a copy of the
Credit and Collection Policy then in effect indicating
such change or amendment.
(viii) Credit and Collection Policy. Upon
request of the Company, a complete copy of the Credit
and Collection Policy then in effect.
(ix) Other Information. Such other
information (including non-financial information) as
the Administrative Agent may from time to time
reasonably request.
(b) Conduct of Business. The Transferor will,
and will cause each of its Subsidiaries to, carry on and conduct
its business in substantially the same manner and in substantial-
ly the same fields of enterprise as it is presently conducted and
do all things necessary to remain duly incorporated, validly
existing and in good standing as a domestic corporation in its
jurisdiction of incorporation and maintain all requisite authori-
ty to conduct its business in each jurisdiction in which its
business is conducted.
(c) Compliance with Laws. The Transferor will,
and will cause each of its Subsidiaries to, comply in all
material respects with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may
be subject.
(d) Furnishing of Information and Inspection of -
Records. The Transferor will furnish to the Company from time to
time such information with respect to the Receivables as the
Company may reasonably request, including, without limitation,
listings identifying the Obligor and the Outstanding Balance for
each Receivable. The Transferor will at any time and from time
to time during regular business hours permit the Company, or its
agents or representatives upon three Business Days notice, (i) to
examine and make copies of and abstracts from all Records and
(ii) to visit the offices and properties of the Transferor for
the purpose of examining such Records, and to discuss matters
relating to Receivables or the Transferor's performance hereunder
with any of the officers, directors, employees or independent
public accountants of the Transferor having knowledge of such
matters.
(e) Keeping of Records and Books of Account. The
Transferor will maintain and implement administrative and operat-
ing procedures (including, without limitation, an ability to
recreate records evidencing Receivables in the event of the de-
struction of the originals thereof), and keep and maintain, 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 Transferor
will give the Company notice of any material change in the
administrative and operating procedures referred to in the
previous sentence.
(f) Performance and Compliance with Receivables
and Contracts. The Transferor will at its expense timely and
fully perform and comply with all material provisions, covenants
and other promises required to be observed by it under the
Contracts related to the Receivables. The Transferor will cause
each Designated Subsidiary, at its expense, to 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 Receivables.
(g) Credit and Collection Policies. The
Transferor will, and will cause each Designated Subsidiary to,
comply in all material respects with the Credit and Collection
Policy in regard to each Receivable and the related Contract.
(h) Collections. The Transferor shall, and shall
cause each Designated Subsidiary to, instruct all Obligors to
cause all Collections to be deposited directly to a Lock-Box Ac-
count. The Transferors may, however, in connection with Obligors
which would otherwise be over their credit limit if goods were
shipped prior to payment, direct Obligors to make payments di-
rectly to the Transferor which shall deposit such Collections in
a Lock-Box Account pursuant to Section 5.1(i) below.
(i) Collections Received. The Transferor shall,
and shall cause each Designated Subsidiary 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 Transferor or the
Designated Subsidiary (including without limitation, in the case
of the Transferor, all Collections deemed to have been received
by the Transferor under Section 2.9(a)).
(j) Sale Treatment. The Transferor shall report
the transactions contemplated by the Agreement on its financial
statements as a sale of the Transferred Interest to the Company.
SECTION 5.2. Negative Covenants of Transferor. During
the term of this Agreement, unless the Company shall otherwise
consent in writing:
(a) No Sales, Liens, Etc. Except as otherwise
provided herein, the Transferor will not sell, assign (by opera-
tion 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 Contract, or upon or with respect to any account which
concentrates in a Lock-Box Bank to which any Collections of any
Receivable are sent, or assign any right to receive income in
respect thereof.
(b) No Extension or Amendment of Receivables.
Except as otherwise permitted in Section 6.2 the Transferor 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.
(c) No Change in Business or Credit and
Collection Policy. The Transferor will not make, and shall cause
each Designated Subsidiary not to make, any change in the charac-
ter of its business or in the Credit and Collection Policy, which
change would, in either case, impair the collectibility of any
Receivable.
(d) No Mergers, Etc. The Transferor 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 Transferor may
consolidate or merge with a Person if the Transferor shall be the
surviving entity and such merger or consolidation does not cause
a Termination Event or Potential Termination Event.
(e) Change in Payment Instructions to Obligors.
The Transferor will not, and shall cause each Designated
Subsidiary not 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 hereto or make any change in its instructions to
Obligors regarding payments to be made to any Lock-Box Account,
unless (i) such instructions are to deposit such payments to
another existing Lock-Box Account or (ii) the Administrative
Agent shall have received written notice of such addition,
termination or change at least 30 days prior thereto and the
Administrative Agent 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.
(f) Deposits to Lock-Box Accounts. The
Transferor will not, and shall cause each Designated Subsidiary
not to, deposit or otherwise credit, or cause or permit to be so
deposited or credited, to any Lock-Box Account cash or cash pro-
ceeds other than Collections of Receivables.
(g) Change of Name, Etc. The Transferor will 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 Transferor delivers to the Collateral Agent
(i) UCC financing statements, executed by the Transferor,
necessary to reflect such change and to continue the perfection
of the Company's ownership interests or security interests in the
Receivables and (ii) the Lock-Box Agreements and, in the case of
the Lock-Box Agreements, the Lock-Box Banks necessary to reflect
such change and to continue to enable the Collateral Agent to
exercise its rights contained in Section 2.8.
(h) Amendment to Purchase Agreement. The
Transferor will not amend, modify, or supplement the Purchase
Agreement, except with the prior written consent of the Company;
nor shall the Transferor take any other action under the Purchase
Agreement that shall have a material adverse affect on the Compa-
ny.
SECTION 5.3. Financial Covenants of Transferor.
(a) Interest Coverage Ratio. The Transferor will
not permit the Interest Coverage Ratio for each rolling four
Quarterly Periods ending on any Quarterly Date after January 1,
1994 to be less than 2.0 to 1.0.
(b) Leverage Ratio. The Transferor will not
permit the Leverage Ratio to exceed 55% on any Quarterly Date.
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1. Appointment of Collection Agent. The
servicing, administering and collection of the Receivables shall
be conducted by such Person (the "Collection Agent") so
designated from time to time in accordance with this Section 6.1.
Until the Company gives notice to LADD Furniture, Inc. of the
designation of a new Collection Agent, LADD Furniture, Inc. is
hereby designated as, and hereby agrees to perform the duties and
obligations of, the Collection Agent pursuant to the terms
hereof. The Company may, upon the occurrence of any Termination
Event designate as Collection Agent any Person (including itself)
to succeed LADD Furniture, Inc. or any successor Collection
Agent, on the condition in each case that any such Person so
designated shall agree to perform the duties and obligations of
the Collection Agent pursuant to the terms hereof. Upon the
occurrence of a Potential Termination Event or a Termination
Event, the Company may notify any Obligor of the Transferred
Interest.
SECTION 6.2. Duties of Collection Agent.
(a) The Collection Agent shall take or cause to
be taken all such action as may be necessary or advisable to
collect each Receivable from time to time, all in accordance with
applicable laws, rules and regulations, and with the care and
diligence which the Collection Agent employs in servicing similar
receivables for its own account, in accordance with the Credit
and Collection Policy. Each of the Transferor and the Company
hereby appoints as its agent the Collection Agent, from time to
time designated pursuant to Section 6.1, to enforce its
respective rights and interests in and under the Receivables, the
Related Security and the Contracts. The Collection Agent shall
set aside for the account of the Transferor and the Company their
respective allocable shares of the Collections of Receivables in
accordance with Sections 2.5 and 2.6. The Collection Agent shall
segregate and deposit to the Company's account the Company's
allocable share of Collections of Receivables when required
pursuant to Article II hereof. So long as no Termination Event
shall have occurred and be continuing, the Transferor may, in
accordance with the Credit and Collection Policy, extend the
maturity of Receivables, but not beyond sixty (60) days, and
extend the maturity or adjust the Outstanding Balance as the
Transferor may determine to be appropriate to maximize Collec-
tions thereof; provided, however, that such extension or ad-
justment shall not alter the status of such Receivable as a
Delinquent Receivable or a Defaulted Receivable. The Transferor
shall deliver to the Collection Agent and the Collection Agent
shall hold in trust for the Transferor and the Company in accor-
dance with their respective interests, all Records which evidence
or relate to Receivables or Related Security. Notwithstanding
anything to the contrary contained herein, from and after the
occurrence of a Termination Event or a Potential Termination
Event the Company shall have the absolute and unlimited right to
direct the Collection Agent (whether the Collection Agent is the
Transferor or any other Person) to commence or settle any legal
action to enforce collection of any Receivable or to foreclose
upon or repossess any Related Security.
(b) The Collection Agent shall hold for the
benefit of the Transferor Collections received minus the
Percentage Factor of such Collections. On the last day of each
Tranche Period, the Collection Agent shall deduct from such
Collections and pay to the Company in reduction of the Net
Investment any amounts due under Section 2.9 hereof and unpaid
from the Transferor or any Designated Subsidiary and turn the
remainder of such Collections over to the Transferor. In
addition, the Collection Agent shall, as soon as practicable fol-
lowing receipt thereof, turn over to the Transferor any collec-
tions of any indebtedness of any Obligor which is not a Receiv-
able. If the Transferor is not the Collection Agent, the Collec-
tion Agent, by giving three Business Days' prior written notice
to the Company, may revise the percentage used to calculate the
Servicing Fee so long as the revised percentage will not result
in a Servicing Fee that exceeds 110% of the reasonable and
appropriate out-of-pocket costs and expenses of such Collection
Agent incurred in connection with the performance of its obli-
gations hereunder as documented to the reasonable satisfaction of
the Company. The Collection Agent, if other than the Transferor,
shall as soon as practicable upon demand, deliver to the Trans-
feror all Records in its possession which evidence or relate to
indebtedness of an Obligor which is not a Receivable.
(c) On or before 90 days after the end of each
fiscal year of the Collection Agent, beginning with the fiscal
year ending December 31, 1994, the Collection Agent shall cause a
firm of independent public accountants (who may also render other
services to the Collection Agent or the Transferor) to furnish a
report to the Company to the effect that they have (i) compared
the information contained in the Investor Reports delivered
during such fiscal year with the information contained in the
Contracts and the Collection Agent's records and computer systems
for such period, and that, on the basis of the agreed upon
procedures set forth in Exhibit P and such comparison, such firm
will issue an agreed upon procedures report to the Collection
Agent stating that such accountants have performed the procedures
outlined on Exhibit P hereto and stating the results thereof.
(d) Notwithstanding anything to the contrary
contained in this Article VI, the Collection Agent, if not the
Transferor, shall have no obligation to collect, enforce or take
any other action described in this Article VI with respect to any
Receivable that is not included in the Transferred Interest other
than to deliver to the Transferor the Collections and documents
with respect to any such Receivable as described in Section
6.2(b).
SECTION 6.3. Rights After Designation of New
Collection Agent. At any time following the designation of a
Collection Agent (other than the Transferor) pursuant to Section
6.1:
(i) The Company may direct that payment
of all amounts payable under any Receivable be made
directly to the Company or its designee.
(ii) The Transferor shall, at the
Company's request and at the Transferor's expense, give
notice of the Company's ownership of Receivables to
each Obligor and direct that payments be made directly
to the Company or its designee.
(iii) The Transferor shall, at the
Company's request, (A) assemble all of the Records, and
shall make the same available to the Company at a place
selected by the Company or its designee, and (B) segre-
gate all cash, checks and other instruments received by
it from time to time constituting Collections of
Receivables in a manner acceptable to the Company and
shall, promptly upon receipt, remit all such cash,
checks and instruments, duly endorsed or with duly
executed instruments of transfer, to the Company or its
designee.
(iv) The Transferor hereby authorizes
the Company to take any and all steps in the
Transferor's name and on behalf of the Transferor nec-
essary or desirable, in the determination of the Com-
pany, to collect all amounts due under any and all Re-
ceivables, including, without limitation, endorsing the
Transferor's or any Designated Subsidiary's name on
checks and other instruments representing Collections
and enforcing such Receivables and the related Con-
tracts.
SECTION 6.4. Responsibilities of the Transferor. Any-
thing herein to the contrary notwithstanding, the Transferor
shall (i) perform all of its obligations under the Contracts
related to the Receivables to the same extent as if interests in
such Receivables had not been sold hereunder and the exercise by
the Company of its rights hereunder shall not relieve the
Transferor from such obligations, (ii) cause each Designated
Subsidiary to perform all of its obligations under the Contracts
related to the Receivables to the same extent as if interests in
such Receivables had not been sold hereunder or under the
Purchase Agreement and the exercise by the Company of its rights
hereunder shall not relieve the Designated Subsidiaries from such
obligations and (iii) pay when due any taxes, including without
limitation, any sales taxes payable in connection with the
Receivables and their creation and satisfaction. The Company
shall not have any obligation or liability with respect to any
Receivable or related Contracts, nor shall it be obligated to
perform any of the obligations of the Transferor or any
Designated Subsidiary thereunder.
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. Termination Events. The occurrence of
any one or more of the following events shall constitute a
Termination Event:
(a) (i) the Collection Agent shall fail to
perform or observe any term, covenant or agreement hereunder
(other than as referred to in clause (ii) of this Section 7.1(a))
and such failure shall remain unremedied for ten (10) days, or
(ii) either the Collection Agent or the Transferor shall fail to
make any payment or deposit to be made by it hereunder when due
or the Collection Agent shall fail to observe or perform any
term, covenant or agreement on the Collection Agent's part to be
performed under Section 2.8(b) hereof; or
(b) any representation, warranty, certification
or statement made by the Transferor in this Agreement or in any
other document delivered pursuant hereto shall prove to have been
incorrect in any material respect when made or deemed made; or
(c) the Transferor shall default in the
observance or performance of the terms, covenants, conditions or
agreements on the Transferor's part (i) to be performed or
observed under Sections 5.1(a)(vi), 5.1(b), 5.1(g), 5.1(h),
5.1(i), 5.2(a), 5.2(c), 5.2(d), 5.2(e), 5.2(f), 5.2(g), 5.2(h) or
Section 5.3 or (ii) to be performed or observed under any other
provision hereof and such default in the case of this clause
(ii) shall remain unremedied for a period of ten (10) days after
the earlier of (A) notice thereof shall have been given to the
Transferor by the Company or the Administrative Agent and (B) the
date on which the Transferor knew or should have known in the
exercise of reasonable care of the default; or
(d) failure of the Transferor or any of its Sub-
sidiaries to pay when due any amounts due under any agreement
under which any Indebtedness greater than $1,000,000 is governed;
or the default by the Transferor or any of its Subsidiaries in
the performance of any term, provision or condition contained in
any agreement under which any Indebtedness greater than
$1,000,000 was created or is governed, regardless of whether such
event is an "event of default" or "default" under any such agree-
ment; or any Indebtedness greater than $1,000,000 shall be de-
clared to be due and payable or required to be prepaid (other
than by a regularly scheduled payment) prior to the date of
maturity thereof; or
(e) any Event of Bankruptcy shall occur with
respect to the Transferor, the Collection Agent or any Designated
Subsidiary or any Material Subsidiary of either the Transferor or
the Collection Agent; or
(f) the Company shall, for any reason, fail to
have a valid and perfected first priority security interest in
the Receivables; or
(g) the Transferor shall enter into any trans-
action or merger whereby it is not the surviving entity; or
(h) there shall have occurred any event which
materially affects the Transferor's ability to either collect the
Receivables or to perform under this Agreement or under the
Purchase Agreement; or
(i) the Liquidity Provider or the Credit Support
Provider shall have given notice that an event of default has
occurred and is continuing under its agreements with the Company;
or
(j) the Commercial Paper issued by the Company
shall not be rated at least "A-2" by Standard & Poor's and at
least "P-2" by Moody's, unless such downgrading is the result of
the Credit Support Provider being downgraded; or
(k) the Percentage Factor exceeds the Maximum
Percentage Factor unless the Transferor reduces the Net
Investment on the next day, bringing the Percentage Factor to
less than or equal to 95% or the Percentage Factor equals or ex-
ceeds 100% at any time; or
(l) the Dilution Ratio for any Fiscal Month ex-
ceeds 10.0%; or
(m) the Loss to Liquidation Ratio averaged for
any three (3) consecutive Fiscal Months exceeds 1.5%; or
(n) the Delinquency Ratio for averaged for any
two (2) consecutive Fiscal Months exceeds 11.0%; or
(o) the Purchase Agreement shall be terminated or
the Transferor or any Designated Subsidiary shall default in any
material respect in the performance its obligation thereunder.
SECTION 7.2. Termination. (a) If a Termination Event
occurs, the Company may, by notice to the Transferor, declare all
outstanding Tranche Periods to be ended and designate the Base
Rate plus 2% to be applicable to the Net Investment.
(b) In addition, if any Termination Event occurs
the Company and the Collateral Agent shall have all of the rights
and remedies provided to a secured creditor or a purchaser of ac-
counts under the UCC by applicable law in respect thereto.
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1. Indemnities by the Transferor. Without
limiting any other rights which the Company may have hereunder or
under applicable law, the Transferor and the Designated
Subsidiaries, jointly and severally, hereby agree to indemnify
the Company, the Liquidity Provider and the Credit Support
Provider and any permitted assigns and their respective officers,
directors and employees (collectively, "Indemnified Parties")
from and against any and all damages, losses, claims, liabili-
ties, costs and expenses, including reasonable attorneys' fees
(which such attorneys may be employees of the Liquidity Provider,
the Credit Support Provider or the Company) and disbursements
(all of the foregoing being collectively referred to as "Indemni-
fied Amounts") awarded against or incurred by any of them arising
out of or as a result of a breach of any representation or
warranty or covenant made by Transferor of this Agreement or the
ownership, either directly or indirectly, by the Company of the
Transferred Interest excluding, however, (i) Indemnified Amounts
to the extent resulting from gross negligence or willful miscon-
duct on the part of an Indemnified Party or (ii) recourse (except
as otherwise specifically provided in this Agreement) for
uncollectible Receivables. Without limiting the generality of
the foregoing, the Transferor and the Designated Subsidiaries,
jointly and severally, shall indemnify each Indemnified Party for
Indemnified Amounts relating to or resulting from:
(i) reliance on any representation or
warranty made by the Transferor or any Designated
Subsidiary (or any officers of any of them) under or in
connection with this Agreement, the Purchase Agreement,
any Investor Report or any other information or report
delivered by the Transferor or a Designated Subsidiary
pursuant hereto or pursuant to the Purchase Agreement,
which shall have been false or incorrect in any mate-
rial respect when made or deemed made;
(ii) the failure by the Transferor or
any Designated Subsidiary to comply with any applicable
law, rule or regulation with respect to any Receivable
or the related Contract, or the nonconformity of any
Receivable or the related Contract with any such
applicable law, rule or regulation;
(iii) the failure to vest and maintain
vested in the Company an undivided percentage ownership
interest, to the extent of the Transferred Interest, in
the Receivables free and clear of any Adverse Claim;
(iv) the failure to file, or any delay
in filing, financing statements, continuation state-
ments, or other similar instruments or documents under
the UCC of any applicable jurisdiction or other appli-
cable laws with respect to any Receivable;
(v) any dispute, claim, offset or de-
fense (other than discharge in bankruptcy) of the
Obligor to the payment of any Receivable (including,
without limitation, a defense based on such Receivable
or the related Contract not being legal, valid and
binding obligation of such Obligor enforceable against
it in accordance with its terms), or any other claim
resulting from the sale of merchandise or services
related to such Receivable or the furnishing or failure
to furnish such merchandise or services;
(vi) any failure of the Transferor, as
Collection Agent or otherwise, to perform its duties or
obligations in accordance with the provisions of
Article VI; or
(vii) any products liability claim or
personal injury or property damage suit or other
similar or related claim or action of whatever sort
arising out of or in connection with merchandise or
services which are the subject of any Receivable;
provided, however, that if the Company enters into agreements for
the purchase of interests in receivables from one or more Other
Transferors, the Company shall allocate such Indemnified Amounts
which are in connection with the Liquidity Provider Agreement,
the Credit Support Agreement or the credit support furnished by
the Credit Support Provider ratably to the Transferor and each
Other Transferor; and provided, further, that if such Indemnified
Amounts are attributable to the Transferor and not attributable
to any Other Transferor, the Transferor and the Designated
Subsidiaries shall be solely liable for such Indemnified Amounts
or if such Indemnified Amounts are attributable to Other
Transferors and not attributable to the Transferor or a
Designated Subsidiary, such Other Transferors shall be solely
liable for such Indemnified Amounts.
SECTION 8.2. Indemnity for Taxes, Reserves and Expens-
es. (a) If after the date hereof, the adoption of any Law or
bank regulatory guideline or any amendment or change in the
interpretation of any existing or future Law or bank regulatory
guideline by any Official Body charged with the administration,
interpretation or application thereof, or the compliance with any
directive of any Official Body (in the case of any bank
regulatory guideline, whether or not having the force of Law):
(i) shall subject any Indemnified Party
to any tax, duty or other charge with respect to this
Agreement, the Transferred Interest, the Receivables or
payments of amounts due hereunder, or shall change the
basis of taxation of payments to any Indemnified Party
of amounts payable in respect of this Agreement, the
Transferred Interest, the Receivables or payments of
amounts due hereunder or its obligation to advance
funds under the Liquidity Provider Agreement or the
credit support furnished by the Credit Support Provider
or otherwise in respect of this Agreement, the Trans-
ferred Interest or the Receivables (except for changes
in the rate of general corporate, franchise, net income
or other income tax imposed on such Indemnified Party
by the jurisdiction in which such Indemnified Party's
principal executive office is located);
(ii) shall impose, modify or deem appli-
cable any reserve, special deposit or similar re-
quirement (including, without limitation, any such re-
quirement imposed by the Board of Governors of the
Federal Reserve System) against assets of, deposits
with or for the account of, or credit extended by, any
Indemnified Party or shall impose on any Indemnified
Party or on the United States market for certificates
of deposit or the London interbank market any other
condition affecting this Agreement, the Transferred
Interest, the Receivables or payments of amounts due
hereunder or its obligation to advance funds under the
Liquidity Provider Agreement or the credit support
provided by the Credit Support Provider or otherwise in
respect of this Agreement, the Transferred Interest or
the Receivables; or
(iii) imposes upon any Indemnified Party
any other expense (including, without limitation,
reasonable attorneys' fees and expenses, and expenses
of litigation or preparation therefor in contesting any
of the foregoing) with respect to this Agreement, the
Transferred Interest, the Receivables or payments of
amounts due hereunder or its obligation to advance
funds under the Liquidity Provider Agreement or the
credit support furnished by the Credit Support Provider
or otherwise in respect of this Agreement, the Trans-
ferred Interests or the Receivables,
and the result of any of the foregoing is to increase the cost to
such Indemnified Party with respect to this Agreement, the
Transferred Interest, the Receivables, the obligations hereunder,
the funding of any purchases hereunder, the Liquidity Provider
Agreement or the Credit Support Agreement, by an amount deemed by
such Indemnified Party to be material, then, within ten (10) days
after demand by the Company, the Transferor and the Designated
Subsidiaries, jointly and severally, shall be obligated to pay to
the Company such additional amount or amounts as will compensate
such Indemnified Party for such increased cost or reduction.
(b) If any Indemnified Party shall have
determined that after the date hereof, the adoption of any
applicable Law or bank regulatory guideline regarding capital
adequacy, or any change therein, or any change in the interpreta-
tion thereof by any Official Body, or any directive regarding
capital adequacy (in the case of any bank regulatory guideline,
whether or not having the force of law) of any such Official
Body, has or would have the effect of reducing the rate of return
on capital of such Indemnified Party (or its parent) as a conse-
quence of such Indemnified Party's obligations hereunder or with
respect hereto to a level below that which such Indemnified Party
(or its parent) could have achieved but for such adoption,
change, request or directive (taking into consideration its poli-
cies with respect to capital adequacy) by an amount deemed by
such Indemnified Party to be material, then from time to time,
within ten (10) days after demand by the Company, the Transferor
and the Designated Subsidiaries, jointly and severally, shall be
obligated to pay to the Company such additional amount or amounts
as will compensate such Indemnified Party (or its parent) for
such reduction.
(c) The Company will promptly notify the
Transferor of any event of which it has knowledge, occurring
after the date hereof, which will entitle an Indemnified Party to
compensation pursuant to this Section. A notice by the Company
claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such
amount, the Company may use any reasonable averaging and
attributing methods.
(d) Anything in this Section 8.2 to the contrary
notwithstanding, if the Company enters into agreements for the
acquisition of interests in receivables from one or more Other
Transferors, the Company shall allocate the liability for any
amounts under this Section 8.2 ("Section 8.2 Costs") to the
Transferor and each Other Transferor; and provided, further, that
if such Section 8.2 Costs are attributable to the Transferor or a
Designated Subsidiary and not attributable to any Other Transfer-
or, the Transferor and the Designated Subsidiaries shall be
solely liable for such Section 8.2 Costs or if such Section 8.2
Costs are attributable to Other Transferors and not attributable
to the Transferor or a Designated Subsidiary, such Other
Transferors shall be solely liable for such Section 8.2 Costs.
SECTION 8.3. Other Costs, Expenses and Related
Matters. (a) The Transferor and the Designated Sub-
sidiaries, jointly and severally, shall be obligated to
pay, upon receipt of a written invoice, and to save the
Company and the Administrative Agent harmless against
liability for the payment of, all reasonable out-of-
pocket expenses (including, without limitation,
attorneys', accountant's and other third parties' fees
and expenses, any filing fees and expenses incurred by
officers or employees of the Company) incurred by or on
behalf of the Company and the Administrative Agent (i) in
connection with the negotiation, execution, delivery and
preparation of this Agreement and any documents or in-
struments delivered pursuant hereto and the transactions
contemplated hereby (including, without limitation, the
perfection or protection of the Transferred Interest) and
(ii) from time to time (a) relating to any amendments,
waivers or consents under this Agreement or the Purchase
Agreement, (b) arising in connection with the Company's
or its agent's enforcement or preservation of rights (in-
cluding, without limitation, the perfection and protec-
tion of the Transferred Interest under this Agreement),
or (c) arising in connection with any audit, dispute,
disagreement, litigation or preparation for litigation
involving this Agreement or the Purchase Agreement (all
of such amounts, collectively, "Transaction Costs").
(b) The Transferor and the Designated
Subsidiaries, jointly and severally, shall be obligated
to pay to the Company on demand any Early Collection Fee
due on account of the reduction of a Tranche on a day
prior to the last day of its Tranche Period.
SECTION 8.4. Reconveyance Under Certain Cir-
cumstances.
(a) Transferor agrees to accept the
reconveyance from the Company of the Transferred Interest
if the Company notifies Transferor of a material breach
of any representation or warranty made or deemed made
pursuant to Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f),
3.1(i), 3.1(k) or 3.1(q) of this Agreement and Transferor
shall fail to cure such breach within 30 days of such no-
tice. The reconveyance price shall be paid by the Trans-
feror to the Company in immediately available funds on
such 30th day in an amount equal to the Aggregate
Unpaids.
(b) In the event of a material breach of
any representation or warranty made or deemed made pursu-
ant to Sections 3.1(d), 3.1(e), 3.1(g), 3.1(h), 3.1(j),
3.1(l), 3.1(m), 3.1(p) or 3.1(r), the Transferor agrees
to accept the reconveyance from the Company of the Trans-
ferred Interest in any Receivable created on and after
the date of such breach if the Company notifies Transfer-
or of such breach and the Transferor shall fail to cure
such breach within 30 days (or, in the case of the repre-
sentations and warranties in Sections 3.1(d) and 3.1(j),
3 days) of such notice. The reconveyance price shall be
paid by the Transferor to the Company in immediately
available funds on such 30th day (or 3rd day, if appli-
cable) in an amount equal to the Outstanding Balance of
any such Receivable.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Term of Agreement. This Agree-
ment shall terminate following the Termination Date when
the Net Investment has been reduced to zero, all accrued
Discount has been paid in full and all other Aggregate
Unpaids have been paid in full; provided, however, that
(i) the rights and remedies of the Company with respect
to any representation and warranty made or deemed to be
made by Transferor pursuant to this Agreement, (ii) the
indemnification and payment provisions of Article VIII,
and (iii) the agreement set forth in Section 9.9, shall
be continuing and shall survive any termination of this
Agreement.
SECTION 9.2. Waivers; Amendments. No failure
or delay on the part of any party to this Agreement in
exercising any power, right or remedy under this Agree-
ment shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or
remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights
and remedies herein provided shall be cumulative and
nonexclusive of any rights or remedies provided by law.
Any provision of this Agreement may be amended if, but
only if, such amendment is in writing and is signed by
the Transferor, the Company and the Designated Subsidiar-
ies.
SECTION 9.3. Notices. Except as provided
below, all communications and notices provided for here-
under shall be in writing (including bank wire, telex,
telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other party at its
address or telecopy number set forth below or at such
other address or telecopy number as such party may here-
after specify for the purposes of notice to such party.
Each such notice or other communication shall be effec-
tive (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this
Section and confirmation is received, (ii) if given by
mail 3 Business Days following such posting, or (iii) if
given by any other means, when received at the address
specified in this Section. However, anything in this
Section to the contrary notwithstanding, the Transferor
hereby authorizes the Company to effect Transfers,
Tranche Period and Tranche Rate selections based on
telephonic notices made by any Person which the Company
in good faith believes to be acting on behalf of the
Transferor. The Transferor agrees to deliver promptly to
the Company a written confirmation of each telephonic
notice signed by an authorized officer of Transferor.
However, the absence of such confirmation shall not
affect the validity of such notice. If the written
confirmation differs in any material respect from the
action taken by the Company, the records of the Company
shall govern absent manifest error.
If to the Company:
Enterprise Funding Corporation
c/o Merrill Lynch Money Markets Inc.
World Financial Center--South Tower
225 Liberty Street
New York, New York 10218
Telephone: (212) 236-7200
Telecopy: (212) 236-7584
(with a copy to the Administrative Agent)
If to the Transferor or the Designated Subsid-
iaries:
LADD Furniture, Inc.
William S. Creekmuir
Senior V.P. and CFO
One Plaza Center
Box HP3
High Point, NC 27261-1500
Telephone: (910) 889-0333
Telecopy: (910) 888-6344
with copy to:
Petree Stockton, L.L.P.
3500 One First Union Center
Charlotte, NC 28202-6001
Attention: Eileen M. Taylor
Telephone: (704) 338-5000
Telecopy: (704) 338-5125
If to the Collateral Agent:
NationsBank of North Carolina, N.A.
NationsBank Corporate Center--7th Floor
Charlotte, NC 28255
Attention: Michelle M. Heath--
Investment Banking
Telephone: (704) 386-7922
Telecopy: (704) 386-2471
If to the Administrative Agent:
NationsBank of North Carolina, N.A.
NationsBank Corporate Center--7th Floor
Charlotte, NC 28255
Attention: Michelle M. Heath--
Investment Banking
Telephone: (704) 386-7922
Telecopy: (704) 386-2471
SECTION 9.4. Governing Law; Submission to
Jurisdiction; Integration.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NORTH CAROLINA. THE PARTIES HERETO HEREBY SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW 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. The parties hereto hereby irrevo-
cably waive, to the fullest extent it may effectively do
so, any objection which they may now or hereafter have to
the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding
brought in such a court has been brought in an inconve-
nient forum. Nothing in this Section 9.4 shall affect
the right of the Company to bring any action or proceed-
ing against the Transferor, any Designated Subsidiary or
its property in the courts of other jurisdictions.
(b) This Agreement contains the final and
complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof
and shall constitute the entire Agreement among the
parties hereto with respect to the subject matter hereof
superseding all prior oral or written understandings,
including but not limited to the mandate letter dated
January 18, 1994.
SECTION 9.5. Severability; Counterparts. This
Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an
original and all of which when taken together shall
constitute one and the same Agreement. Any provisions of
this Agreement which are prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other
jurisdiction.
SECTION 9.6. Successors and Assigns. (a)
This Agreement shall be binding on the parties hereto and
their respective successors and assigns; provided, howev-
er, that the Transferor may not assign any of its rights
or delegate any of its duties hereunder without the prior
written consent of the Company. No provision of this
Agreement shall in any manner restrict the ability of the
Company to assign, participate, grant security interests
in, or otherwise transfer any portion of the Transferred
Interest.
(b) The Transferor hereby agrees and
consents to the complete assignment by the Company of all
of its rights under, interest in, title to and obliga-
tions under this Agreement to the Collateral Agent.
SECTION 9.7. Waiver of Confidentiality. The
Transferor hereby consents to the disclosure of any non-
public information with respect to it received by the
Company or the Administrative Agent to any of the Compa-
ny, any nationally recognized rating agency rating the
Company's commercial paper, the Administrative Agent, the
Collateral Agent, the Liquidity Provider or the Credit
Support Provider in relation to this Agreement.
SECTION 9.8. Confidentiality Agreement. The
Transferor hereby agrees that it will not disclose the
contents of this Agreement or any other proprietary or
confidential information of the Company, the Collateral
Agent, the Administrative Agent, the Liquidity Provider
or the Credit Support Provider to any other Person except
(i) its auditors and attorneys, employees, financial
advisors (other than any commercial bank, except as
provided below) and any nationally recognized rating
agency, provided such auditors, attorneys, employees,
financial advisors or rating agencies are informed of the
highly confidential nature of such information or (ii) as
otherwise required by applicable law or order of a court
of competent jurisdiction or generally acceptable ac-
counting principles. Notwithstanding the foregoing, with
respect to lenders to the Transferor, the Transferor may
provide a copy of this Agreement to such lenders only if
required to do so pursuant to the terms at any agreement
between the Transferor and such lenders existing on the
date hereof. The Transferor shall be permitted to dis-
close the terms of this Agreement, to the extent such
terms relate to the amount of the Net Investment and the
Facility Limit and the tenor hereof; provided, however,
that the Transferor shall not disclose the fees set forth
in the Fee Letter or the calculation of the Percentage
Interest.
SECTION 9.9. Confidentiality Agreement of the
Company. Subject to Section 9.7, the Company hereby
agrees, and covenants to use its best efforts to cause
the Administrative Agent to agree, that it will not dis-
close the contents of this Agreement or any other propri-
etary or confidential information of the Transferor and
the Designated Subsidiaries to any other Person except
(i) the Company's auditors and attorneys, employees, and
financial advisors provided, such auditors, attorneys,
employees, or financial advisors are informed of the
highly confidential nature of such information or (ii) as
otherwise required by applicable law or order of a court
of competent jurisdiction or generally accepted account-
ing principles.
SECTION 9.10. No Bankruptcy Petition Against
the Company. The Transferor and each Designated Subsid-
iary hereby covenants and agrees that, prior to the date
which is one year and one day after the payment in full
of all outstanding Commercial Paper or other indebtedness
of the Company, it will not institute against, or join
any other Person in instituting against, the Company any
bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under
the laws of the United States or any state of the United
States.
SECTION 9.11. No Recourse Against Stockhold-
ers, Officers or Directors. No recourse under any obli-
gation, covenant or agreement of the Company contained in
this Agreement shall be had against Merrill Lynch Money
Markets Inc. (or any affiliate thereof), or any stock-
holder, officer or director of the Company, as such, by
the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or other-
wise; it being expressly agreed and understood that this
Agreement is solely a corporate obligation of the Compa-
ny, and that no personal liability whatever shall attach
to or be incurred by Merrill Lynch Money Markets Inc. (or
any affiliate thereof), or the stockholders, officers or
directors of the buyer, as such, or any of them, under or
by reason of any of the obligations, covenants or agree-
ments of the Company contained in this Agreement, or
implied therefrom, and that any and all personal liabili-
ty for breaches by the Company of any of such obliga-
tions, covenants or agreements, either at common law or
at equity, or by statute or constitution, of Merrill
Lynch Money Markets Inc. (or any affiliate thereof) and
every such stockholder, officer or director is hereby
expressly waived as a condition of and consideration for
the execution of this Agreement.
SECTION 9.12. Characterization of the Transac-
tions Contemplated by the Agreement. It is the intention
of the parties that the transactions contemplated hereby
constitute the sale of the Transferred Interest, convey-
ing good title thereto free and clear of any Adverse
Claims to the Company and that the Transferred Interest
not be part of the Transferor's estate in the event of an
insolvency. If, notwithstanding the foregoing, the
transactions contemplated hereby should be deemed a
financing, the parties intend that the Transferor shall
be deemed to have granted to the Company, and the Trans-
feror hereby grants to the Company, a first priority
perfected security interest in all of the Transferor's
right, title and interest in, to and under the Receiv-
ables, together with Related Security and Collections
with respect thereto, and that this Agreement shall con-
stitute a security agreement under applicable law.
SECTION 9.13. Company Certificate. The Trans-
feror shall maintain a register in which it shall record
the name and address of each holder of the Company Cer-
tificate. The initial holder thereof shall be the Compa-
ny. Each holder of the Company Certificate agrees to
give the Transferor prompt notice of any transfer of the
Company Certificate as well as the name and address of
any subsequent holder thereof. Prior to the presentation
of the Company Certificate for registration of transfer,
the Company may treat the Person in whose name the Compa-
ny Certificate is registered as owner hereunder for all
purposes whatsoever.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Transfer and Administration
Agreement as of the date first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By:
Name:
Title:
LADD FURNITURE, INC.,
as Transferor
By:
Name:
Title:
CLAYTON-MARCUS COMPANY, INC.
By:
Name:
Title:
BARCLAY FURNITURE CO.
By:
Name:
Title:
LADD TRANSPORTATION, INC.
By:
Name:
Title:
LADD FURNITURE, INC.
Buyer
and
CLAYTON-MARCUS COMPANY, INC.,
BARCLAY FURNITURE CO., and
LADD TRANSPORTATION, INC.
Sellers
RECEIVABLES PURCHASE AGREEMENT
Dated as of January 28, 1994
RECEIVABLES PURCHASE AGREEMENT
RECEIVABLES PURCHASE AGREEMENT, dated as of January 28,
1994, by and among CLAYTON-MARCUS COMPANY, INC., a North Carolina
corporation, BARCLAY FURNITURE CO., a Mississippi corporation,
and LADD TRANSPORTATION, 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 Closing Date (as hereinafter defined) and
generated thereafter in the normal course of their respective
businesses pursuant to written agreements 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.
"Collections" means, with respect to any Receivable,
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 substan-
tially 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 LADD Transportation,
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 "Designated 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 decimal equivalent of the sum of
(i) the product of (A) the "prime rate" then applied by the Buyer
to intercompany borrowings from it by its Subsidiaries and (B) a
fraction the numerator of which is 50 and the denominator at
which is 360 and (ii) the decimal equivalent of a charge-off
ratio, determined on the basis at historical losses on the
Receivables as a function of Receivables generated (as opposed to
Receivables outstanding).
"Eligible Receivable" means, at any time, any Re-
ceivable:
(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 interest therein hereunder,
is not an Affiliate of any of the parties hereto, and
is not a government or a governmental subdivision or
agency; provided, however, that Receivables with an
aggregate Outstanding Balance not greater than 2% 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
30 days of the original billing date therefor;
provided, that Receivables with an aggregate
Outstanding Balance not greater than 15% of the
aggregate Outstanding Balance of all Receivables may be
required to be repaid in full between 31 and 180 days
from the original billing date therefor;
(vi) which is an "eligible asset" as
defined in Rule 3a-7 under the Investment Company Act
of 1940, as amended;
(vii) a purchase of which with the pro-
ceeds of Commercial Paper would constitute a "current
transaction" within the meaning of Section 3(a)(3) of
the Securities Act of 1933, as amended;
(viii) which is an "account" within the
meaning of Article 9 of the UCC of all applicable ju-
risdictions;
(ix) which is denominated and payable
only in United States dollars in the United States;
(x) which arises under a Contract that
together with the Receivable related thereto, is in
full force and effect and constitutes the legal, valid
and binding obligation of the related Obligor en-
forceable against such Obligor in accordance with its
terms and is not subject to any offset, counterclaim 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
billing, fair credit reporting, equal credit opportuni-
ty, 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 material 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 specified account of
the Collection Agent with respect to which there shall
be a Lock-Box Agreement in effect.
"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; provided however, that no indebtedness owed by Curtis Field,
Inc. to Barclay Furniture Co. shall be a Receivable hereunder.
"Related Security" means with respect to any Receiv-
able:
(i) all of the Seller's interest, if
any, in the merchandise (including returned merchan-
dise), if any, the sale of which by the Seller gave
rise to such Receivable;
(ii) all other security interests or
liens and property subject thereto from time to time,
if any, purporting to secure payment of such Re-
ceivable, whether pursuant to the Contract related to
such Receivable or otherwise, together with all fi-
nancing statements signed by an Obligor describing any
collateral securing such Receivable;
(iii) all guarantees, insurance or other
agreements or arrangements of any kind from time to
time supporting or securing payment of such Receivable
whether pursuant to the Contract related to such Re-
ceivable or otherwise; and
(iv) all Records.
"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 January 28, 1994 among the
Buyer, as transferor, the Designated Subsidiaries 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 computation 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."
ARTICLE II
PURCHASE AND CONVEYANCE 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
Closing 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 obligations of any of the Sellers,
or any other Person to Obligors or to any other Person in con-
nection with the Receivables or under any Related Security or
other agreement 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 Closing Date.
(c) [Reserved]
(d) 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
financing 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 processing re-
cords and other documents with a legend describing 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 con-
veyed to Enterprise Funding Corporation pursuant to a Transfer
and Administration Agreement dated January 28, 1994." Each
Seller shall, upon request of the Buyer, obtain such additional
search reports as the Buyer shall request. To the fullest extent
permitted by applicable law, the Buyer shall be permitted to sign
and file continuation statements and amendments thereto and as-
signments thereof without the Seller's signature. Carbon,
photographic or other reproduction of this Agreement or any
financing statement shall be sufficient as a financing statement.
(e) It is the express intent of each of the Sellers
and the Buyer that the conveyance of the Receivables 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. However, 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 securi-
ty interest in and to all of such Seller's right, title and
interest in all Receivables outstanding on the Closing 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 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, 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.
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 Closing 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 the
aggregate Outstanding Balance of the Receivables 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
Closing 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 the aggregate Purchase Price of Receivables generated by
such Seller in the preceding month.
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 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 con-
ducted.
(b) Corporate and Governmental Authorization;
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 governmental body,
agency or official (except as contemplated by Section 2.1(d)),
and do not contravene, or constitute a default under, any provi-
sion of applicable law or regulation or of the Certificate of
Incorporation or Bylaws of the Seller or of any agreement, judg-
ment, 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 Subsidiaries (except as
contemplated by Section 2.1(d)).
(c) Binding Effect. This Agreement constitutes
the legal, valid and binding obligation of the Seller, enforce-
able in accordance with its terms, subject to applicable bank-
ruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors.
(d) Perfection. Immediately preceding each 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 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 information
heretofore furnished by the Seller to the Buyer for purposes of
or in connection with this Agreement or any transaction contem-
plated hereby is, and all such information hereafter furnished by
the Seller to the Buyer will be, true and accurate in every mate-
rial respect, 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 Subsidiar-
ies 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 contested 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 Exhib-
it H to the Transfer Agreement, there are no actions, suits or
proceedings pending, or to the knowledge of the Seller threat-
ened, against or affecting the Seller or any Affiliate of the
Seller or their respective properties, 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.
(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 busi-
ness and chief executive office of the each Seller is as follows:
Clayton-Marcus Company, Inc., Hickory, North Carolina; for
Barclay Furniture Co., Sherman, Mississippi; for LADD
Transportation, Inc., High Point, North Carolina, and the offices
where the 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 accor-
dance with Section 2.1(d) in jurisdictions where all action re-
quired by Section 2.1(d) has been taken and completed.
(j) Good Title. Upon each sale hereunder, the
Buyer shall acquire all right, title and interest 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 Section 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 Receivable is an
"eligible asset" as defined in Rule 3a-7 under the Investment
Company Act, of 1940, as amended.
(m) Amount of Receivables. As of January 26,
1994, the aggregate Outstanding Balance of the Receivables owned
by Clayton-Marcus Company, Inc. and in existence was
$4,969,579.99. As of January 26, 1994, the aggregate Outstanding
Balance of the Receivables owned by Barclay Furniture Co. and in
existence was $4,168,656.49. As of January 26, 1994, the aggre-
gate Outstanding Balance of the Receivables owned by LADD Trans-
portation, Inc. and in existence was $187,511.32.
(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. 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 addresses
of all the Lock-Box Banks, together with the account numbers of
the Lock-Box Accounts at such Lock-Box Banks, are specified in
Exhibit C to the Transfer Agreement (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
executed in accordance with Section 2.8(b) of the Transfer Agree-
ment and delivered to the Collection Agent).
Any document, instrument, certificate or notice
delivered to the Buyer hereunder shall be deemed a representation
and warranty by the Seller delivering such document.
Section 4.2 Reaffirmation of Representations and War-
ranties 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 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 Carolina 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 re-
spects, to own its property and conduct its other businesses as
such properties are presently owned and such businesses are pres-
ently 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 necessary corporate action, re-
quire no action by or in respect of, or filing with, any govern-
mental body, agency or official, and do not contravene, or con-
stitute 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, authoriza-
tions, licenses, consents, orders, or other actions of any Person
or of any governmental body required 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
Conveyance 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 representations 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 Agree-
ment. Upon discovery by the Buyer or any 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 discovery.
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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 conduct its busi-
ness 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 jurisdic-
tion of incorporation 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, orders, writs, judg-
ments, 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 Receivables 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
representatives upon three Business Days notice, (i) to examine
and make copies of and abstracts from all Records and (ii) to
visit the offices and properties of the Seller for the purpose of
examining such Records, and to discuss matters relating to
Receivables or the Seller's performance hereunder with any of the
officers, directors, 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 and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Receivables in the event of the destruction of
the originals thereof), and keep and maintain, all documents,
books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including,
without limitation, records adequate to permit the daily identi-
fication 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 sentence.
(e) Performance and Compliance with Receivables 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 Receivables.
(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 payment, direct Obligors to make pay-
ments 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.
(i) Sale Treatment. The Seller shall report the
transactions contemplated by this Agreement on its financial
statements 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 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 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 Collection
Policy. The Seller will not make any change in the character of
its business or in the Credit and Collection Policy, which change
would, in either case, impair the collectibility of any Receiv-
able.
(m) No Mergers, Etc. The Seller will not (i) consoli-
date 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 Agree-
ment.
(n) Change in Payment Instructions to Obligors. 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 regarding 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 Agree-
ment 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 pro-
ceeds other than Collections of Receivables.
(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) the Lock-Box Agree-
ments and, in the case of the Lock-Box Agreements, the Lock-Box
Banks necessary to reflect such change and to continue to 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, liability, 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, defi-
ciency, or expense arises out of or is based upon a breach by
such Seller of its representations, warranties and covenants
contained herein, or any information certified in any Schedule
delivered by such Seller hereunder, 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
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 promptly give the Buyer
written notice upon becoming aware that the Seller is not in com-
pliance in all material respects with ERISA or that any ERISA
lien on any of the Receivables exists.
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1 Mandatory Repurchase.
(a) Breach of Warranty. In the event that any
Receivable sold by a Seller hereunder shall fail to meet the
conditions set forth in the definition of Eligible Receivable or
any representation or warranty made herein in respect of a
Receivable shall be false, the applicable Seller shall pay to the
Buyer the Outstanding Balance of any such Receivable.
(b) Reconveyance Under Certain Circumstances. Each
Seller agrees to accept the reconveyance from the Buyer of the
Receivables sold by it hereunder with respect to which the Seller
is required to re-acquire the Transferred Interest therein
pursuant to the Transfer Agreement.
Section 6.2 Dilutions. Each Seller agrees to pay to
the Buyer the amount required to be paid by the Buyer pursuant to
Section 2.9(a) of the Transfer Agreement in respect of any
Receivable sold by such Seller hereunder.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to the Buyer's Obligations
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 Closing Date, in the case of Receivables sold
to the Buyer on the Closing Date, or the date such Receivables
are created, in the case of Receivables created after the Closing
Date;
(c) At the Closing Date, each Seller shall have sub-
stantially performed all other obligations required to be
performed by the provisions of this Agreement;
(d) With respect to Receivables sold to the Buyer by
the Closing 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(d); 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 (including, without limitation, records of
corporate proceedings) relevant to the transactions herein
contemplated 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:
(a) All representations and warranties of the Buyer
contained in this Agreement shall be true and correct with the
same effect as though such representations 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
contemplated as such Seller may reasonably have requested.
ARTICLE VIII
TERM AND TERMINATION
Section 8.1 Term. This Agreement shall commence 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 Transfer Agreement; or (b) upon the occurrence of
an Event of Bankruptcy with respect to either the Buyer or any
Seller, 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 obli-
gations hereunder, which default continues unremedied for more
than 30 days after written notice (any such date being a "Ter-
mination Date"); provided, 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 termi-
nation, including, without limitation, any obligations 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 termination 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 executed obligations, including, without
limitation, pre-termination breaches of representations and
warranties by such Seller or the Buyer. Without limiting the
foregoing, 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.
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 each Seller. This Agreement and
any other Conveyance Papers may be amended from time to time by
the Buyer and the Sellers to correct or supplement any provisions
herein which may be inconsistent with any other provisions herein
or in any other Conveyance Papers or to add any other provisions
with respect to matters or questions arising under this Agreement
or any other Conveyance Papers which shall not be inconsistent
with the provisions of this Agreement or any other Conveyance
Papers. Any reconveyance executed in accordance with the provi-
sions 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 irrevocably 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
inconvenient 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
(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, agreements, 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 pursuant to
the Transfer Agreement to Enterprise and its successors and
assigns thereunder, or to another person approved in writing by
each Seller (each, a "Permitted Assignee"). The Buyer hereby
notifies (and each Seller hereby acknowledges that) the Buyer,
pursuant to the Transfer Agreement, has assigned its rights here-
under to Enterprise. All rights of the Buyer hereunder may be
exercised by 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 or any Seller, any right, remedy, power or privilege
hereunder, 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 exercise
thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exhaustive of any rights,
remedies, powers and privilege provided by law.
Section 9.8 Counterparts. This Agreement and all
other Conveyance Papers may be executed in two or more counter-
parts 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.
Section 9.9 Binding Effect; Third-Party Beneficiaries.
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 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
Conveyance 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 otherwise affect the
meaning or interpretation of any provision 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.
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:
Name:
Title:
BARCLAY FURNITURE CO.
as Seller
By:________________________
Name:
Title:
LADD TRANSPORTATION, INC.
as Seller
By:
Name:
Title:
LADD FURNITURE, INC.,
as Buyer
By:________________________
Name:
Title:
January 28, 1994
LADD Furniture, Inc.
1 Plaza Center
Box HP3
High Point, North Carolina 27261-1500
Attn: Mr. William S. Creekmuir
Senior Vice President and Chief Financial Officer
Ladies and Gentlemen:
The Chase Manhattan Bank, N.A. ("Lender") is pleased to
confirm that it is prepared to make funds available to LADD
Furniture Inc. ("Borrower") for general corporate purposes,
including acquisitions, subject to the terms and conditions
outlined below.
Commitment Lender agrees to make loans ("Loans") in an
aggregate principal amount not to exceed at any
one time $20,000,000, as such amount may be
reduced in part or in whole by three business
days' written notice to Lender (the "Commit-
ment"). Borrower may borrow, repay and prepay
Loans and reborrow at any time from January 28,
1994 to but excluding January 27, 1995 (the
"Availability Period"), subject to the limita-
tions set forth herein and in a promissory note
(the "Note"), which shall evidence the Loans
and be substantially in the form of Exhibit A
attached hereto.
Termination/ Borrower, may upon at least three business
Reduction of days' notice to Lender, terminate at any time,
Commitment or reduce from time to time, the unused amount
of the Commitment. All accrued commitment fees
shall be payable on the effective date of such
reduction or termination.
Commitment A commitment fee shall accrue on the daily
Fee average unused Commitment during the Avail-
ability Period at a rate per annum equal to 3/8
of 1%, calculated on the basis of a 365/366 day
year, for the actual number of days elapsed,
and payable quarterly in arrears on the last
business day of each calendar quarter.
Interest Each Loan shall bear interest as selected by
Rate Borrower and provided in the Note.
Interest Eurodollar Loans (defined in the Note) shall be
Periods and available for interest periods ("Interest
Maturity Periods"), of, at Borrower's selection, one,
two, three or six months. Offered Rate Loans
(defined in the Note) shall be available for
Interest Periods offered by Lender in its sole
discretion and accepted by Borrower. No Inter-
est Period may extend beyond January 27, 1995,
the date on which all Loans shall finally
mature.
Payments and All payments and prepayments of principal and
Prepayments interest made on the terms and conditions
specified in the Note.
Drawdowns Borrower may borrow under the Commitment by
giving Lender notice by 12:00 noon New York
City time, on the same business day of a Vari-
able Rate Loan or an Offered Rate Loan, as the
case may be, and at least three business days
prior to a Eurodollar Loan.
Conditions The obligation of Lender to make Loans to
of Lending Borrower is subject to the conditions precedent
that: (a) in the case of the initial Loan,
Lender shall have received (i) the Note duly
executed and delivered by Borrower, (ii) corpo-
rate borrowing resolution certified by Borrow-
er's Secretary or Assistant Secretary, (iii) an
incumbency certificate of Borrower's Secretary
or Assistant Secretary setting forth the names,
titles and true signatures of Borrower's offi-
cers authorized to sign this Agreement and the
Note, (iv) an opinion of counsel to the Borrow-
er substantially in the form of Exhibit B
hereto, (v) in the case of the initial Loan, a
certificate signed by a duly authorized officer
of Borrower, dated the date of such Loan,
certifying that since October 2, 1993, there
has been no material adverse change in the
condition (financial or otherwise), business,
operations or prospects of Borrower or any of
its subsidiaries and (b) in the case of any
Loans, (i) the fact that the statement referred
to in clause (a)(v) above is true on the date
of such Loan, and (ii) no default or Event of
Default under this Agreement or the Note has
occurred and is continuing, or would result
from the making of such Loan.
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Representa- Borrower hereby represents and warrants that:
tions and (a) this Agreement and the Note when delivered
Warranties will be the legal, valid and binding obliga-
tions of Borrower enforceable against Borrower
in accordance with their terms, except to the
extent that such enforcement may be limited by
applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights gener-
ally, and (b) the execution, delivery and per-
formance by Borrower of this Agreement and the
Note have been authorized by all necessary
corporate action and do not and will not con-
travene the Borrower's charter or by-laws or
any applicable law or any contractual provision
binding on or affecting the Borrower.
Default Events which may cause the acceleration of the
maturity of any Loan ("Events of Default") are
as specified in the Note. Lender may terminate
the Commitment upon the occurrence of any Event
of Default, but it shall terminate immediately
upon the occurrence of any "bankruptcy" or
"insolvency" Event of Default.
Participations Lender may sell to one or more entities a par-
ticipation in all or any part of a Loan, but
such participant shall not have any rights or
benefits under this Agreement or the Note and
Lender shall in no event be obligated to such
participant under their participation agreement
to take or refrain from taking any action here-
under or under the Note, except that Lender may
agree in the participation agreement that it
will not, without the consent of such partici-
pant, agree to (i) extend any stated payment
date for any principal or interest or (ii)
reduce the principal of or the interest rate on
any participated Loan below the rate at which
such participant is entitled to receive inter-
est thereon. Lender may furnish information
concerning Borrower or any of its subsidiaries
to prospective participants provided that such
persons agree to maintain the confidentiality
of such information which is not public.
Governing Law THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
Please evidence your acceptance of the foregoing by signing
and returning to us the enclosed copy of this Agreement on or
before January 27, 1994, the date on which our commitment to
enter into this Agreement (if not accepted prior thereto) will
expire.
Very truly yours,
THE CHASE MANHATTAN BANK, N.A.
By
Name: Thomas P. Durney
Title: Vice President
Agreed and Accepted:
LADD FURNITURE INC.
By s/William S. Creekmuir
Name: William S. Creekmuir
Title: Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
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EXHIBIT A
PROMISSORY NOTE
New York, New York January 28, 1994
FOR VALUE RECEIVED, the undersigned unconditionally
promises to pay to the order of THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION) (the "Bank"), at its principal office, One
Chase Manhattan Plaza, New York, New York 10081 (the "Principal
Office"), for the account of the Lending Office (as hereinafter
defined), the principal amount of each loan endorsed on the
schedule attached hereto and made a part hereof (including any
continuations, the "Schedule") on the maturity date of such loan
as shown on the Schedule, and to pay interest on the unpaid
balance of the principal amount of such loan from and including
the date of such loan (as shown on the Schedule) to such maturity
date at a rate per annum equal to: (a) a variable rate equal to:
the higher of (i) the Federal Funds Rate plus 1/2 of 1% and (ii)
the Prime Rate (such higher rate being the "Variable Rate" and
such loan a "Variable Rate Loan"); or (b) a fixed rate 1 and 1/8%
above the Eurodollar Rate applicable to such loan (such loan a
"Eurodollar Loan"); or (c) a fixed rate as the Bank may in its
discretion offer to the undersigned and the undersigned amy
accept (such loan an "Offered Rate Loan"). Any principal not
paid when due shall bear interest from maturity until paid in
full at a rate per annum equal to the Default Rate (as defined
below). Interest shall be payable on the relevant Interest
Payment Date (as defined below). Interest shall be calculated on
the basis of a year of 365 or 366 days (in the case of Variable
Rate Loans) and 360 days (in the case of the Eurodollar Rate and
Offered Rate Loans) and, in each case, for the actual days
elapsed. All payments hereunder shall be made in lawful money of
the United States and in immediately available funds. Any
extension of time for the payment of the principal of this note
resulting from the due date falling on a non-Banking Day shall be
included in the computation of interest. The date, and Interest
Periods (as defined in the Letter Agreement) of, and the interest
rates with respect to, the loans and any payments of principal
shall be recorded by the Bank on its books and prior to any
transfer of this note (or, at the discretion of the Bank, at any
other time) endorsed by the Bank on the Schedule, which shall be
conclusive in the absence of manifest error; provided, however,
that the Bank's failure to endorse the Schedule shall not affect
the undersigned's obligations hereunder.
1. Certain Definitions. As used herein, the
following terms shall have the corresponding meanings:
(a) "Banking Day" means any day on which
commercial banks are not authorized or required to close in New
York City and, where such term is used in the definition of
"Eurodollar Rate" or refers to the Eurodollar Rate, which is also
a day on which dealings in U.S. dollar deposits are carried out
in the London interbank market.
(b) "Default Rate" means, in respect of any
amount not paid when due, a rate per annum during the period
commencing on the due date until such amount is paid in full
equal to: (a) if a Variable Rate Loan, a floating rate 2% above
the rate of interest thereon (including any margin); (b) if an
Offered Rate Loan or Eurodollar Loan, a fixed rate 2% above the
rate of interest in effect thereon (including the margin) at the
time of default until the end of the then current Interest Period
(as defined in the Letter Agreement) therefor and, thereafter, a
floating rate 2% above the Variable Rate (including any margin).
(c) "Eurodollar Rate" means (i) the rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
quoted by the Bank at approximately 11:00 a.m. London time (or as
soon thereafter as practicable) two Banking Days prior to the
first day of an Interest Period (as defined in the Letter
Agreement) during which the Eurodollar Rate will accrue for the
offering by the Bank to leading banks in the London interbank
market of U.S. dollar deposits having a term comparable to such
loan and in an amount comparable to the principal amount of such
loan divided by (ii) 1 minus the Reserve Requirement.
(d) "Federal Funds Rate" means, for any day, the
rate per annum (expressed on a 365/366 basis of calculation, if
the rate hereunder is so calculated) equal to the weighted
average of the rates on overnight Federal funds transactions as
published by the Federal Reserve Bank of New York for such day
(or for any day that is not a Banking Day, for the immediately
preceding Banking Day).
(e) "Interest Payment Date" means for any loan
hereunder, the first day commencing after such loan as follows:
(i) for any Variable Rate Loan, the last Banking Day of each
March, June, September and December; (ii) for any Offered Rate
Loan, at 90-day intervals; (iii) for any Eurodollar Loan, at
three month intervals; (iv) for any amount accruing interest at
the Default Rate, on demand; and (v) for any amount, upon
maturity and any repayment.
(f) "Lending Office" means the Principal Office
or such other office (or affiliate) as the Bank may from time to
time specify.
(g) "Prime Rate" means that rate of interest from
time to time announced by the Bank at the Principal Office as its
prime commercial lending rate.
(h) "Regulatory Change" means any change after
the date hereof in United States federal, state or foreign laws
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<PAGE>
or regulations (including Regulation D) or the adoption or making
after such date of any interpretations, directives or requests
applying to a class of banks including the Bank of or under any
United States federal or state, or any foreign, laws or
regulations (whether or not having the force of law) by any court
or governmental or monetary authority charged with the
interpretation or administration thereof.
(i) "Reserve Requirement" means, for any
Eurodollar Loan, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are
required to be maintained during the term of such Loan under
Regulation D of the Board of Governors of the Federal Reserve
System as amended or supplemented from time to time ("Regulation
D") by member banks of the Federal Reserve System in New York
City with deposits exceeding one billion U.S. dollars against
"Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be
maintained by such member banks by reason of any Regulatory
Change against (i) any category of liabilities which includes
deposits by reference to which the Eurodollar Rate is to be
determined or (ii) any category of extensions of credit or other
assets which include Eurodollar Loans.
2. Related Letter Agreement. Loans evidenced hereby
are made pursuant to that certain letter agreement dated January
28, 1994, between the Bank and the undersigned (the "Letter
Agreement").
3. Additional Costs, Etc. (a) If as a result of any
Regulatory Change, the Bank determines that the cost to the Bank
of making or maintaining any Eurodollar Loan evidenced hereby is
increased, or any amount received or receivable by the Bank
hereunder is reduced, or the Bank is required to make any payment
in connection with an transaction contemplated hereby, then the
undersigned shall pay to the Bank on demand such additional
amount or amounts as the Bank determines will compensate the Bank
for such increased cost, reduction or payment.
(b) If it becomes unlawful for the Bank or its
Lending Office to maintain a Eurodollar Loan, the Bank shall
promptly notify, the Borrower, and such Loan shall be thereby
converted into a Variable Rate Loan on the date specified by the
Bank.
(c) If there is any payment of a Eurodollar Loan
prior to its stated maturity (by reason of acceleration or
otherwise), the undersigned will promptly pay the Bank on demand
an amount determined by the Bank in good faith sufficient to
compensate it for such payment.
-3-
4. Events of Default. If any of the following events
shall occur and be continuing: (a) the undersigned shall fail to
pay the principal of, or interest on, this note, or any other
amount payable under this note, as and when due and payable; (b)
any representation or warranty made or deemed made by the
undersigned in this note or the Letter Agreement (or otherwise
executed in connection with this note) (this note and the Letter
Agreement of the undersigned being the, "Facility Documents") or
which is contained in any certificate, document, opinion,
financial or other statement furnished at any time under or in
connection with any Facility Documents, shall prove to have been
incorrect in any material respect on or as of the date made or
deemed made; (c) the undersigned shall fail to perform or observe
any term, covenant or agreement contained in any Facility
Document on its part to be performed or observed; (d) the
undersigned shall fail to pay when due any indebtedness
(including but not limited to indebtedness for borrowed money) or
if any such indebtedness shall become due and payable, or shall
be capable of becoming due and payable at the option of any
holder thereof, by acceleration of its maturity; or if there
shall be any default by the undersigned under any agreement
relating to such indebtedness; provided that this subsection (d)
shall not apply to that certain Credit Agreement (the "Credit
Agreement") dated as of January 15, 1993 among the undersigned,
the Bank, as agent, and the banks signatory, thereto, (e) the
undersigned shall fail to pay when due any indebtedness under the
Credit Agreement or if any such indebtedness shall become due and
payable by acceleration of its maturity; or (f) the undersigned:
(i) shall generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as its debts become due;
(ii) shall make an assignment for the benefit of creditors; (iii)
shall file a petition in bankruptcy or for any relief under any
law of any jurisdiction relating to reorganization, arrangement,
readjustment of debt, dissolution or liquidation; (iv) shall have
any such petition filed against it in which an adjudication is
made or order for relief is entered or which shall remain
undismissed for a period of 30 days or shall consent or acquiesce
thereto; (v) shall have had a receiver, custodian or trustee
appointed for all or a substantial part of its property; in any
such case, if the Bank shall elect by notice to the undersigned,
the unpaid principal amount of this note, together with accrued
interest, shall become forthwith due and payable; provided that
in the case of an event of default under clause (f) above, the
unpaid principal amount of this note, together with accrued
interest, shall immediately become due and payable without any
notice or other action by the Bank.
5. Miscellaneous. (a) The undersigned waives
presentment, notice of dishonor, protest and any other formality
with respect to this note.
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(b) The undersigned agrees to reimburse the Bank
on demand for all costs, expenses and charges (including without
limitation, fees and charges of external legal counsel for the
Bank and costs allocated by its internal legal department) in
connection with the preparation, interpretation, performance or
enforcement of this note and the Letter Agreement.
(c) This note shall be binding on the undersigned
and its successors and assigns and shall inure to the benefit of
the Bank and its successors and assigns, except that the
undersigned may not delegate any obligations hereunder without
the prior written consent of the Bank.
(d) The undersigned consents to the nonexclusive
jurisdiction and venue of the state and federal courts located in
the City of New York. Service of process by the Bank in
connection with any dispute shall be binding on the undersigned
if sent to the undersigned by registered mail at the address
specified below. The undersigned waives any right the
undersigned may have to jury trial.
(e) This note shall be governed by and
interpreted and construed in accordance with the law of the State
of New York, provided that the foregoing is not intended to limit
the maximum rate of interest which may be charged or collected by
the Bank hereon if, under the law applicable to it, the Bank may
charge or collect such interest at a higher rate than is
permissible under the law of said State. In no case shall the
interest hereon exceed the maximum amount which the Bank may
charge or collect under such law applicable to it.
LADD FURNITURE INC.
By
Name: William S. Creekmuir
Title: Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
-5-
<PAGE>
Loan Number, Maturity Amount of Balance
Amount and Date of Payment and Remaining Notation
Date Interest Rate Loan Loan Number Unpaid Made By
<PAGE>
EXHIBIT B
(Letterhead of counsel to the Borrower)
[Closing Date]
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
New York, New York 10081
Ladies and Gentlemen:
We have acted as counsel to Ladd Furniture Inc. (the
"Borrower") in connection with the execution and delivery of that
certain Letter Agreement (the "Letter Agreement") dated as of
[January 28, 1994] between the Borrower and The Chase Manhattan
Bank, N.A. (the "Lender") and the Note (as defined in the Letter
Agreement) executed by the Borrower in connection with the Letter
Agreement. Except as otherwise defined herein, all terms used
herein and defined in the Letter Agreement, the Note or any
agreement delivered thereunder shall have the meanings assigned
to them therein.
In connection with this opinion, we have examined
executed copies of the Facility Documents and such other
documents, records, agreements and certificates as we have deemed
appropriate. We have also reviewed such matters of law as we
have considered relevant for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its assets and to transact the business in which
it is now engaged or proposed to be engaged, and is duly
qualified as a foreign corporation and in good standing under the
laws of each other jurisdiction in which such qualification is
required.
2. The execution, delivery and performance by the
Borrower of the Facility Documents have been duly authorized by
all necessary corporate action and do not and will not: (a)
contravene the Borrower's charter or bylaws or any applicable law
or any contractual provision binding on or affecting the
Borrower.
3. Each Facility Document is, or when delivered under
the Letter Agreement will be, a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency
and other similar laws affecting creditors' rights generally.
-2-
4. To the best of our knowledge (after due inquiry),
there are no pending or threatened actions, suits or proceedings
against or affecting the Borrower before any court, governmental
agency or arbitrator, which may, in any one case or in the
aggregate, materially adversely affect the financial condition,
operations, properties or business of the Borrower or the ability
of the Borrower to perform its obligations under the Facility
Documents.
Very truly yours,
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