<PAGE>

                                                                    Exhibit 4(b)
                                                                  EXECUTION COPY



                      PURCHASE AND CONTRIBUTION AGREEMENT



                         Dated as of November 15, 1994

                As Amended and Restated as of December 29, 1995

                                     Among


                        THE LANE COMPANY, INCORPORATED,

                            ACTION INDUSTRIES, INC.,

                      BROYHILL FURNITURE INDUSTRIES, INC.,

                                      and

                     THOMASVILLE FURNITURE INDUSTRIES, INC.


                                   as Sellers
                                   ----------

                                      and

                           INTERCO RECEIVABLES CORP.

                                  as Purchaser
                                  ------------

                                        
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                               Page
                                                               ----
<S>                                                            <C>
PRELIMINARY STATEMENTS.......................................   1

                                   ARTICLE I
                                  DEFINITIONS

SECTION 1.01.  Certain Defined Terms.........................   1
               Adverse Claim.................................   1
               Affiliate.....................................   1
               Aged Trial Balance............................   2
               Agreement Documents...........................   2
               Apollo Entity.................................   2
               Bank Credit Agreement.........................   2
               Business Day..................................   2
               Capitalized Lease Obligations.................   2
               CL Sale Agreement.............................   2
               Collections...................................   3
               Consolidated EBIT.............................   3
               Consolidated EBITDA...........................   3
               Consolidated Net Income.......................   3
               Consolidated Net Interest Coverage Ratio......   3
               Consolidated Net Interest Expense.............   3
               Contract......................................   4
               Contributed Receivable........................   4
               CP Rate.......................................   4
               Credit and Collection Policy..................   5
               Daily Settlement Trigger......................   5
               Default Ratio.................................   5
               Defaulted Receivable..........................   6
               Designated Obligor............................   6
               Dilution......................................   7
               Discount......................................   7
               Effective Date................................   7
               Eligible Foreign Receivable...................   7
               Eligible Receivable...........................   8
               ERISA.........................................  10
               Event of Termination..........................  10
               Facility......................................  10
               Facility Termination Date.....................  10
               Indebtedness..................................  11
               Indemnified Amounts...........................  11
               Initial Purchase Date.........................  11
               Interco.......................................  11
               Interco Agreement.............................  11
               Intercreditor Agreement.......................  12
               Interest Rate Protection Agreement............  12
               Invested Amount...............................  12
               Lock-Box Account..............................  12
</TABLE>
                                       i
<PAGE>
 
<TABLE>
<CAPTION>
Section                                                        Page
-------                                                        ----
<S>                                                            <C>
               Lock-Box Agreement............................  12
               Lock-Box Bank.................................  13
               Maximum Purchase Limit........................  13
               Monthly Report................................  13
               Net Dilution Ratio............................  13
               Original Sellers..............................  13
               Original PCA..................................  13
               Obligor.......................................  13
               Originator Receivables........................  13
               Outstanding Balance...........................  14
               Person........................................  14
               Pro Forma Basis...............................  14
               Purchase......................................  15
               Purchase Date.................................  15
               Purchased Receivable..........................  15
               Receivable....................................  16
               Receivables Purchase Request..................  16
               Related Security..............................  16
               Servicer......................................  16
               Servicer Default..............................  16
               Servicer Fee..................................  17
               Subsidiary....................................  18
               Transferred Receivable........................  18
               UCC...........................................  18
SECTION 1.02   Other Terms...................................  18
SECTION 1.03   Computation of Time Periods...................  18

                                   ARTICLE II
                AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS

SECTION 2.01   Facility......................................  19
SECTION 2.02   Making Purchases..............................  19
SECTION 2.03   Collections...................................  20
SECTION 2.04   General Settlement Procedures.................  21
SECTION 2.05   Payments and Computations, Etc................  21
SECTION 2.06   Contributions.................................  22

                                  ARTICLE III
                            CONDITIONS OF PURCHASES

SECTION 3.01   Conditions Precedent to Initial Purchase from
               the Original Sellers Under the Original PCA...  22
SECTION 3.01A  Conditions Precedent to Effectiveness of
               Amended and Restated Agreement................  24
SECTION 3.02   Conditions Precedent to All Purchases.........  26
</TABLE>
                                      ii
<PAGE>
 
<TABLE>
<CAPTION>      
Section                                                        Page
-------                                                        ----
<S>                                                            <C>
                                 ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

SECTION 4.01   Representations and Warranties of the Sellers.  28

                                   ARTICLE V
                                   COVENANTS

SECTION 5.01   Affirmative Covenants of the Sellers..........  32
SECTION 5.02   Reporting Requirements of the Sellers.........  35
SECTION 5.03   Negative Covenants of the Sellers.............  37
SECTION 5.04   Affirmative Covenant of the Sellers and the
               Purchaser.....................................  39
SECTION 5.05   Grant of Security Interest....................  39

                                   ARTICLE VI
                         ADMINISTRATION AND COLLECTION

SECTION 6.01   Designation of Servicer.......................  39
SECTION 6.02   Duties of The Servicer........................  40
SECTION 6.03   Servicer Fee..................................  42
SECTION 6.04   Rights of the Purchaser.......................  42
SECTION 6.05   Responsibilities of the Sellers...............  43
SECTION 6.06   Further Assurances............................  44
SECTION 6.07.  Transfer of Records to Purchaser..............  45

                                  ARTICLE VII
                             EVENTS OF TERMINATION

SECTION 7.01   Events of Termination                            45

                                  ARTICLE VIII
                                INDEMNIFICATION

SECTION 8.01   Indemnities by the Sellers                       48

                                   ARTICLE IX
                                 MISCELLANEOUS

SECTION 9.01   Amendments, Etc................................  50
SECTION 9.02   Notices, Etc...................................  50
SECTION 9.03   No Waiver; Remedies............................  50
SECTION 9.04   Binding Effect; Assignability..................  51
SECTION 9.05   GOVERNING LAW..................................  51
SECTION 9.06   Costs, Expenses and Taxes......................  51
SECTION 9.07   No Proceedings.................................  52
</TABLE>
                                      iii
<PAGE>
 
<TABLE>
<CAPTION>      
Section                                                        Page
-------                                                        ----
<S>                                                            <C>
SECTION 9.08   Confidentiality................................  52
SECTION 9.09   Independent Decision...........................  53
SECTION 9.10   Third Party Beneficiary........................  53
SECTION 9.11   Execution in Counterparts, Etc.................  53
</TABLE>
                                      iv
<PAGE>
 
                             SCHEDULES AND EXHIBITS

SCHEDULE I     List of Offices of the Sellers Where Records
                 Are Kept

SCHEDULE II    List of Lock-Box Banks Holding One or More
                 Lock-Box Accounts


EXHIBIT A      Form of Opinion of Counsel for the Sellers
                 and Interco

EXHIBIT B      Credit and Collection Policy

EXHIBIT C      Form of Amendment No. 1 to the Interco Agreement

EXHIBIT D      Form of Intercreditor Agreement

                                       v
<PAGE>
 
                      PURCHASE AND CONTRIBUTION AGREEMENT

                         Dated as of November 15, 1994
                            as Amended and Restated
                            as of December 29, 1995

          THE LANE COMPANY, INCORPORATED, a Virginia corporation ("Lane"),
ACTION INDUSTRIES, INC., a Virginia corporation ("Action"), BROYHILL FURNITURE
INDUSTRIES, INC., a North Carolina corporation ("Broyhill") and THOMASVILLE
FURNITURE INDUSTRIES, INC., a Pennsylvania corporation ("Thomasville") (Lane,
Action, Broyhill, and Thomasville, individually, a "Seller", and collectively,
the "Sellers"), and INTERCO RECEIVABLES CORP., a Delaware corporation (the
"Purchaser"), agree as follows:

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

          (2) Lane, Action and Broyhill (collectively, the "Original Sellers")
and the Purchaser entered into a Purchase and Contribution Agreement dated as of
November 15, 1994 (the "Original PCA") pursuant to which each of the Sellers has
sold and contributed Receivables to the Purchaser.  The parties hereto desire to
add Thomasville as an additional Seller under the Original PCA and to amend
certain provisions of the Original PCA in connection therewith.

          NOW, THEREFORE, the Original PCA is hereby amended and restated in its
entirety, effective as of the Effective Date, and the parties agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

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

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

          "Affiliate" means, as to any Person, any other Person that, directly
     or indirectly, is in control of, is

                                       1
<PAGE>
 
     controlled by or is under common control with such Person; provided,
     however, that with respect to Broyhill, Lane, Action, Thomasville and the
     Purchaser, the term "Affiliate" shall be deemed not to include any Apollo
     Entity.

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

          "Agreement Documents" has the meaning assigned to that term in Section
     4.01(c).

          "Apollo Entity" means any of (i) Apollo Advisors, L.P., (ii) Lion
     Advisors, L.P., (iii) any accounts managed by Apollo Advisors, L.P. or Lion
     Advisors, L.P. and (iv) any Person directly or indirectly in control of,
     controlled by, or under common control with, Apollo Advisors, L.P. or Lion
     Advisors, L.P., other than Broyhill, Lane, Action, Thomasville, the
     Purchaser or Interco and any of their respective Subsidiaries.

          "Bank Credit Agreement" means the Credit Agreement dated as of
     November 17, 1994, as amended and restated as of December 29, 1995, among
     Interco, Broyhill, Lane, Thomasville, the banks named therein and Bankers
     Trust Company, as agent.

          "Business Day" means a day of the year on which banks are not required
     or authorized to close in New York City.

          "Capitalized Lease Obligations" of any Person shall mean all rental
     obligations which, under generally accepted accounting principles, are or
     will be required to be capitalized on the books of such Person, in each
     case taken at the amount thereof accounted for as indebtedness in
     accordance with such principles.

          "CL Sale Agreement" means, collectively, (i) the Alternate Receivables
     Purchase Agreement, dated as of November 15, 1995, as amended and restated
     as of the Effective Date, among the Purchaser, as seller, Credit Lyonnais
     New York Branch, as purchaser and Credit Lyonnais New York Branch, as agent
     for itself and certain banks identified therein and (ii) the Receivables
     Purchase Agreement, dated as of November 15, 1995, as amended and restated
     as of the Effective Date, among the Purchaser, as

                                       2
<PAGE>
 
     seller, Atlantic Asset Securitization Corp., as purchaser, and Credit
     Lyonnais New York Branch, as agent, in each case as further amended or
     restated from time to time in accordance with the terms thereof.

          "Collections" means, with respect to any Receivable, (a) all funds
     which are received by a Seller or Servicer in payment of any amounts owed
     in respect of such Receivable (including, without limitation, purchase
     price, finance charges, interest and all other charges), or applied to
     amounts owed in respect of such Receivable (including, without limitation,
     insurance payments, payments under letters of credit with respect to such
     Receivable and net proceeds of the sale or other disposition of repossessed
     goods or other collateral or property of the Obligor or any other party
     directly or indirectly liable for payment of such Receivable and available
     to be applied thereon), (b) all funds deemed to have been received by a
     Seller or any other Person as a Collection pursuant to Section 2.04 and (c)
     all other proceeds of such Receivable.

          "Consolidated EBIT" shall mean, for any period, the Consolidated Net
     Income of Interco and its Restricted Subsidiaries, determined on a
     consolidated basis, before Consolidated Net Interest Expense (to the extent
     deducted in arriving at Consolidated Net Income) and provision for taxes or
     gains or losses from sales of assets other than inventory sold in the
     ordinary course of business, in each case that were included in arriving at
     Consolidated Net Income.

          "Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
     adjusted by adding thereto the amount of all amortization of intangibles
     and depreciation, in each case that were deducted in arriving at
     Consolidated EBIT for such period.

          "Consolidated Net Income" shall mean, for any period, the net after
     tax income of Interco and its Restricted Subsidiaries determined on a
     consolidated basis, minus cash Dividends paid in respect of Disqualified
     Preferred Stock, without giving effect to any extraordinary gains or
     losses.

          "Consolidated Net Interest Coverage Ratio" for any period shall mean
     the ratio of Consolidated EBITDA to Consolidated Net Interest Expense for
     such period.

          "Consolidated Net Interest Expense" shall mean, for any period, the
     total consolidated interest expense of Interco and its Restricted
     Subsidiaries for such period (calculated without regard to any limitations
     on the payment thereof)

                                       3
<PAGE>
 
     plus, without duplication, that portion of Capitalized Lease Obligations of
     Interco and its Restricted Subsidiaries representing the interest factor
     for such period, and capitalized interest expense, plus, (i) all cash fees,
     service charges and other costs, as well as all collections or other
     amounts retained by the Agent, the Banks and Atlantic (each as defined in
     the CL Sale Agreement) which are in excess of amounts paid to the Purchaser
     under the CL Sale Agreement for the purchase of receivables thereunder and
     (ii) the product of (x) the amount of all cash Dividend requirements
     (whether or not declared or paid) on Disqualified Preferred Stock paid,
     accrued or scheduled to be paid or accrued during such period times (y) a
     fraction, the numerator of which is one and the denominator of which is one
     minus the then current effective consolidated, Federal, state, local and
     foreign tax rate (expressed as a decimal number between one and zero) of
     Interco as reflected in the audited consolidated financial statements of
     Interco for its most recently completed Fiscal Year, which amounts
     described in the preceding clauses (i) and (ii) shall be treated as
     interest expense of Interco and its Restricted Subsidiaries for purposes of
     this definition regardless of the treatment of such amounts under generally
     accepted accounting principles, in each case net of the total consolidated
     cash interest income of Interco and its Restricted Subsidiaries for such
     period, but excluding the amortization of any deferred financing costs and
     all amounts in respect of the Interest Rate Protection Agreements, all
     determined on a consolidated basis.

          "Contract" means an agreement between an Obligor and any Seller,
     pursuant to or under which such Obligor shall be obligated to make payments
     to such Seller for merchandise, insurance or services from time to time.

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

          "Courtesy Receivable" means a Receivable which arises out of the
     provision of transportation services but does not arise out of the
     transportation of goods shipped by a Seller to an Obligor.

          "CP Rate" means an interest rate per annum equal to the per annum
     yield equivalent to the published discount for one-month commercial paper
     issued by firms whose bonds are rated AA by Standard & Poors Corporation
     (or the equivalent), which is reported in "Selected Interest Rates"
     (Publication H. 15 (519)), Federal Reserve Statistical Release, published
     by the Board of Governors of the Federal

                                       4
<PAGE>
 
     Reserve System (or successor publication) (or, if such yield is not
     published, such other rate as the Sellers and the Purchaser shall agree to
     in writing).

          "Credit and Collection Policy" means collection policies and practices
     relating to Contracts and Receivables described in Exhibit B, as modified
     without violating this Agreement.

          "Cumulative Consolidated EBITDA" means, at any date, an amount
     determined on a cumulative basis of Consolidated EBITDA for each Fiscal
     Year ending on or prior to such date, beginning with Fiscal Year 1996.

          "Daily Settlement Trigger" means the occurrence of any of the
     following:

          (a) The Consolidated Net Interest Coverage Ratio for any period of
     four consecutive fiscal quarters (or, if shorter, the period beginning on
     January 1, 1996 and ended on the last day of a fiscal quarter ended after
     the Effective Date), in each case taken as one accounting period, ended on
     the last day of a fiscal quarter set forth below, shall be less than the
     amount set forth opposite such period below:


<TABLE>
<CAPTION>
 
             Fiscal Quarter               Ratio
             --------------             ---------
             <C>                       <C>
             March 1996                 1.83:1.00
             June 1996                  2.07:1.00
             September 1996             2.51:1.00
             December 1996              2.51:1.00
                                     
             March 1997                 2.62:1.00
             June 1997                  2.62:1.00
             September 1997             2.62:1.00
             December 1997              2.92:1.00
                                     
             March 1998                 3.00:1.00
             June 1998                  3.09:1.00
             September 1998             3.19:1.00
             December 1998              3.29:1.00
                                     
             March 1999                 3.37:1.00
             June 1999                  3.42:1.00
             September 1999             3.47:1.00
             December 1999              3.57:1.00
                                     
             March 2000                 3.66:1.00
             June 2000                  3.71:1.00
</TABLE>

                                       5
<PAGE>
 
<TABLE>
<CAPTION>
 
             <C>                       <C>
             September 2000             3.76:1.00
             December 2000 and
              thereafter                3.86:1.00
</TABLE>

          (b) The Consolidated EBITDA for any period of four consecutive fiscal
     quarters (or, if shorter, the period beginning on January 1, 1996 and ended
     on the last day of a fiscal quarter ended after the Effective Date), in
     each case taken as one accounting period, ended on the last day of a fiscal
     quarter set forth below, shall be less than the amount set forth opposite
     such period below:

<TABLE>
<CAPTION>
 
          Fiscal Quarter                     Amount
          --------------                  ------------
          <S>                             <C>
 
          March 1996                      $ 30,000,000
          June 1996                       $ 65,000,000
          September 1996                  $105,000,000
          December 1996                   $145,000,000
 
          March 1997                      $147,500,000
          June 1997                       $150,000,000
          September 1997                  $152,500,000
          December 1997                   $155,000,000
 
          March 1998                      $158,000,000
          June 1998                       $162,000,000
          September 1998                  $166,000,000
          December 1998                   $170,000,000
 
          March 1999                      $172,500,000
          June 1999                       $175,000,000
          September 1999                  $177,500,000
          December 1999                   $180,000,000
 
          March 2000                      $182,500,000
          June 2000                       $185,000,000
          September 2000                  $187,500,000
          December 2000 and thereafter    $190,000,000
</TABLE>

          (c) The Leverage Ratio at any time shall be greater than the ratio set
     forth opposite the fiscal quarter most recently ended as set forth below:


<TABLE>
<CAPTION>
 
             Fiscal Quarter               Ratio
             --------------             ---------
             <C>                       <C>
             December 1996              4.52:1.00
                            
             March 1997                 4.52:1.00
             June 1997                  4.29:1.00
             September 1997             4.29:1.00
             December 1997              4.08:1.00
 
</TABLE>

                                       6
<PAGE>
 
<TABLE>
<CAPTION>
 
             Fiscal Quarter               Ratio
             --------------             ---------
             <C>                       <C>

             March 1998                 4.06:1.00
             June 1998                  3.86:1.00
             September 1998             3.86:1.00
             December 1998              3.65:1.00
                            
             March 1999                 3.62:1.00
             June 1999                  3.62:1.00
             September 1999             3.62:1.00
             December 1999              3.41:1.00
                            
             March 2000                 3.37:1.00
             June 2000                  3.17:1.00
             September 2000             2.96:1.00
             December 2000 and 
               thereafter               2.96:1.00
</TABLE>

          (d) The Cumulative Consolidated EBITDA ending during any Fiscal Year
     (beginning with Fiscal Year 1997) set forth below, shall be less than the
     amount set forth opposite such period below:
<TABLE>
<CAPTION>
 
          Period                    Amount
          ------                 ------------
          <S>                    <C>
 
          1997                   $315,000,000
          1998                   $490,000,000
          1999                   $665,000,000
          2000 and thereafter    $890,000,000
</TABLE>

     provided that, from and after the first date upon which Interco or any of
     the Sellers shall have used more than $50,000,000 of Net Cash Proceeds from
     sales or issuances of equity of Interco (including pursuant to any exercise
     of the Interco Warrants, any exercise of any stock options and the issuance
     of any Preferred Stock) to repay Term Loans under the Bank Credit Agreement
     pursuant to Sections 4.01, 4.02(e) and/or 4.02(f) of the Bank Credit
     Agreement, and shall have furnished a certificate to the Administrative
     Agent under the Bank Credit Agreement (with a copy to the Purchaser)
     showing in reasonable detail the amount of such applications pursuant to
     the respective such Sections, then each of the amounts required by this
     clause (d) shall be reduced (i) by $15,000,000 if the principal amount of
     Term Loans so repaid with such Net Cash Proceeds from equity issuances is
     greater than $50,000,000 but less than or equal to $75,000,000 or (ii) by
     $20,000,000 if the principal amount of Term Loans so repaid with such Net
     Cash Proceeds from equity issuances is greater than $75,000,000;

          (e) The Net Dilution Ratio shall be greater than 7%;

          (f) The Default Ratio shall be greater than 7%;

                                       7
<PAGE>
 
          (g) Any Event of Termination shall occur under Section 7.01(e) or (g)
     of this Agreement; or

          (h) The Sellers shall have repurchased Receivables (pursuant to
     indemnity provisions or otherwise) from the Purchaser and/or the
     Purchaser's assignees in an aggregate amount exceeding $17,500,000 in any
     Fiscal Year.

          "Default Ratio" means the ratio (expressed as a percentage) computed
     as of the last day of each fiscal month of the Sellers by dividing (i) the
     aggregate Outstanding Balance of all Receivables that met the requirements
     of clause (i) of the definition of Defaulted Receivable on such day by (ii)
     the aggregate Outstanding Balance of all Receivables on such day.  For
     purposes of this definition, the term "Receivables" shall mean only those
     Receivables which constituted Eligible Receivables when they were
     transferred to the Purchaser, or which would have constituted Eligible
     Receivables if they had been transferred to the Purchaser.

          "Defaulted Receivable" means a Receivable:

               (i)  as to which any payment, or part thereof,     remains unpaid
          for over 90 days from the original due date for such payment;

              (ii)  which is not a Priority DIP Receivable and as to which the
          Obligor thereof or any other Person obligated thereon or owning any
          Related Security in respect thereof has taken any action, or suffered
          any event to occur, of the type described in Section 7.01(g); or

             (iii)  which, consistent with the Credit and Collection Policy, is
          deemed uncollectible.

          "Designated Obligor" means, at any time, each Obligor except any such
     Obligor as to which the Purchaser has, at least three Business Days prior
     to the date of determination, given notice to the relevant Seller that such
     Obligor shall not be considered a Designated Obligor by reason of the fact
     that in the reasonable opinion of the Purchaser any one of the following
     shall exist as to such Obligor:  (i) the timely collectibility of the
     Receivables of such Obligor has been impaired by reason of a material
     adverse change in the financial condition, business, operations or
     prospects of such Obligor, or (ii) such Obligor has demonstrated an
     inconsistent payment history and in the reasonable opinion of the Purchaser
     such inconsistent
                                       8
<PAGE>
 
     payment history materially impairs the Purchaser's ability to rely on
     timely payment by such Obligor in the future, or (iii) such Obligor is in a
     class of Obligors which do not meet criteria of purchasers generally
     applicable to obligors for companies which are similarly situated as the
     relevant Seller and which are selling receivables or undivided interests
     therein in similar transactions.  Unless the Purchaser shall hereafter
     notify the relevant Seller to the contrary, Trimble-Western Furniture Inc.
     shall not be a Designated Obligor.

          "Dilution" means, with respect to any Receivable, the aggregate amount
     of (i) any reductions or adjustments in the Outstanding Balance of such
     Receivable as a result of any defective, rejected, returned, repossessed or
     foreclosed merchandise or services or any cash discount, credit memo,
     rebate, cooperative advertising, chargeback or other adjustment, dispute or
     setoff and (ii) any unresolved disputes relating to such Receivable, which
     have not yet resulted in the reduction or adjustment of the Outstanding
     Balance of such Receivable.

          "Discount" means, in respect of each Purchase, 2% of the Outstanding
     Balance of the Receivables that are the subject of such Purchase; provided,
     however, the foregoing Discount may be revised by request of any of the
     parties hereto provided that such revision is consented to by all of the
     parties (it being understood that each party agrees to duly consider such
     request but shall have no obligation to give such consent).

          "Effective Date" means December 29, 1995.

          "Eligible Foreign Receivable" means a Receivable meeting all of the
     criteria set forth in either of the following clauses:

               (i)  the payment of such Receivable is fully supported by a
          letter of credit issued by an office or branch located in the United
          States of an Eligible LOC Bank, the Purchaser or its assignee holds a
          first priority, perfected security interest in such letter of credit
          and the issuer of such letter of credit has been notified of such
          security interest; or

               (ii)  the Obligor of such Receivable is a Canadian resident, the
          Purchaser or its assignee holds a first priority, perfected security
          interest in such Receivable which is enforceable under applicable
          Canadian law, the Purchaser or its assignee has

                                       9
<PAGE>
 
          received an opinion of Canadian counsel for the Seller, in form and
          substance satisfactory to the Purchaser or its assignee, as to
          perfection, enforcement, taxes and such other matters as the Purchaser
          or its assignee may reasonably request, and such Receivable satisfies
          any other requirements as to which the Purchaser or its assignee has
          notified the Sellers in writing;

provided, however, that the aggregate Outstanding Balance of Eligible Foreign
Receivables which shall be considered Eligible Receivables shall not at any time
exceed an amount equal to 10% of the Total Commitment (as defined in the CL Sale
Agreement).

          "Eligible LOC Bank" means a commercial bank which (i) has an office or
branch in the United States and (ii) has combined capital and surplus of at
least $250,000,000.

          "Eligible Receivable" means a Receivable:

               (i) which was generated in the ordinary course of the relevant
          Seller's business and does not constitute a Courtesy Receivable;

              (ii) which constitutes an account or general intangible as defined
          in the applicable UCC;

             (iii)  the Obligor of which is a United States resident (unless
          such Receivable is an Eligible Foreign Receivable), is not an
          Affiliate of any of the parties hereto, and is not a government or a
          governmental subdivision or agency;

              (iv) the Obligor of which, at the time of the transfer of such
          Receivable under this Agreement, is a Designated Obligor;

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

              (vi) the sale of which does not contravene or conflict with any
          law;

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

            (viii)  which arises under a Contract that is substantially in the
          form of the form of contract or the form of invoice (in the case of an
          open account agreement) previously approved by the Purchaser and

                                      10
<PAGE>
 
          which Contract, together with such Receivable, is in full force and
          effect and constitutes the legal, valid and binding obligation of the
          Obligor of such Receivable enforceable against such Obligor in
          accordance with its terms and is not subject to any dispute, offset,
          counterclaim or defense whatsoever (except payments for cooperative
          advertising and the discharge in bankruptcy of such Obligor);

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

               (x) which satisfies all applicable requirements of the Credit and
          Collection Policy, as the same may be modified in accordance with the
          terms of the CL Sale Agreement;

              (xi) which, according to the Contract related thereto, is required
          to be paid in full (A) within 120 days of the original billing date
          therefor, (B) later than 120 days but within 150 days of the original
          billing date therefor, but only (x) if such Receivable was originated
          by Lane or Action and (y) to the extent that the Outstanding Balance
          of such Receivable at the time of transfer thereof under this
          Agreement, when aggregated with the Outstanding Balance of all other
          Transferred Receivables originated by Lane or Action and having
          similar payment terms, does not exceed $23,000,000, or (C) later than
          150 days but within 180 days of the original billing date therefor,
          but only (x) if such Receivable was originated by Lane or Action and
          (y) to the extent that the Outstanding Balance of such Receivable at
          the time of transfer thereof under this Agreement, when aggregated
          with the Outstanding Balance of all other Transferred Receivables
          originated by Lane or Action and having similar payment terms, does
          not exceed $7,000,000; and

             (xii)  which is in a class of Receivables which complies with such
          other criteria and requirements as

                                      11
<PAGE>
 
          Purchaser may from time to time specify to the Sellers following 30
          days' notice; provided that such criteria and requirements are
          specified in good faith, take into account current market conditions,
          and are for the purpose of not permitting the condition of the
          Receivables, taken as a whole, to drop below the condition thereof as
          at the date of the execution of this Agreement.

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

          "Event of Termination" has the meaning assigned to that term in
     Section 7.01.

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

          "Facility Termination Date" means the earliest of (i) December 29,
     2000, (ii) the date of termination of the Facility pursuant to Section 7.01
     and (iii) the date which the Seller designates by at least five Business
     Days' notice to the Purchaser.

          "Fiscal Year" means each fiscal year of Interco ending on December 31
     of each calendar year.

          "Indebtedness" shall mean, as to any Person, without duplication, (i)
     all indebtedness (including principal, interest, fees and charges) of such
     Person for borrowed money or for the deferred purchase price of property or
     services, (ii) the maximum amount available to be drawn under all letters
     of credit issued for the account of such Person and all unpaid drawings in
     respect of such letters of credit, (iii) all Indebtedness of the types
     described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition
     secured by any Adverse Claim on any property owned by such Person, whether
     or not such Indebtedness has been assumed by such Person (to the extent of
     the value of the respective property), (iv) the aggregate amount required
     to be capitalized under leases under which such Person is the lessee, (v)
     all obligations of such Person to pay a specified purchase price for goods
     or services, whether or not delivered or accepted, i.e., take-or-pay and
     similar obligations, (vi) all obligations of such Person under direct or
     indirect guaranties in respect of, and obligations (contingent or
     otherwise) to purchase or otherwise acquire,

                                      12
<PAGE>
 
     or otherwise to assure a creditor against loss in respect of, indebtedness
     or obligations of others of kinds referred to in clauses (i) through (v)
     above or in clause (vii), and (vii) all obligations under any Interest Rate
     Protection Agreement or under any similar type of agreement.  In addition
     to the foregoing, for the purposes of calculating Consolidated Debt, and
     making adjustments on a Pro Forma Basis, the "Invested Amount" under the CL
     Sale Agreement shall constitute Indebtedness.

          "Indemnified Amounts" has the meaning assigned to that term in Section
     8.01.

          "Initial Purchase Date" means November 17, 1994; provided, however,
     that when used in connection with Receivables originated by Thomasville,
                                                                             
          "Initial Purchase Date" shall mean the Effective Date.

          "Interco" means Interco Incorporated, a Delaware corporation.

          "Interco Agreement" means an agreement in the form of Exhibit C to the
     Original PCA, made by Interco in favor of the Purchaser, as amended by
     Amendment No. 1 thereto dated as of the Effective Date, as the same may be
     further amended, modified or restated from time to time.

          "Intercreditor Agreement" means an agreement substantially in the form
     of Exhibit D hereto among Bankers Trust Company, as agent, the Purchaser
     and Credit Lyonnais New York Branch, as agent, as the same may be amended,
     modified or restated from time to time.

          "Interest Rate Protection Agreement" shall mean any interest rate swap
     agreement, interest rate cap agreement, interest collar agreement, interest
     rate hedging agreement, interest rate floor agreement or other similar
     agreement or arrangement.

          "Invested Amount" with respect to a Seller means the sum of amounts
     paid by the Purchaser to such Seller for each Purchase of Receivables from
     such Seller pursuant to Section 2.02, reduced from time to time by
     Collections of such Receivables actually received by the Purchaser net of
     the applicable portion of the Discount representing yield (assumed to be
     0.75% unless otherwise mutually agreed); provided, however, that such
     Invested Amount shall not be reduced by any Collections to the extent that
     at any time such Collections are rescinded or must otherwise be returned
     for any reason.

                                      13
<PAGE>
 
          "Leverage Ratio" means on any date the ratio of (i) Consolidated Debt
     on such date to (ii) Consolidated EBITDA for the period of four consecutive
     fiscal quarters most recently ended on or prior to such date, in each case
     taken as one accounting period.

          "Lock-Box Account" means one or more accounts, under the exclusive
     ownership and control of the Purchaser (or its assigns or designees),
     maintained for the purpose of receiving Collections.

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

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

          "Maximum Purchase Limit" means $225,000,000.

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

          "Net Dilution Ratio" means on any date the ratio (expressed as a
     percentage) computed as of the last day of the preceding fiscal month of
     the Sellers, by dividing (i) the balance of all Originator Receivables
     representing resolved or unresolved Dilutions (other than Dilutions arising
     out of cooperative advertising payments or discounts for early payment)
     during such month by (ii) the aggregate Outstanding Balance of all
     Originator Receivables on such day; provided, however, that the balance of
     all Originator Receivables originated by Thomasville representing resolved
     or unresolved Dilutions (other than Dilutions arising out of cooperative
     advertising payments or discounts for early payment) during any fiscal
     month shall be deemed to be an amount equal to the sum, for the prior seven
     months, of the amount deducted for Dilution (other than Dilution arising
     out of cooperative advertising payments or discounts for early payment)
     from the Outstanding Balance of all Originator Receivables originated by
     Thomasville.  For purposes of this definition, the term "Outstanding
     Balance" shall be interpreted as if all references in the definition
     thereof to "Receivables" were references to "Originator Receivables."

                                      14
<PAGE>
 
          "Original Bank Credit Agreement" means the Bank Credit Agreement as
     defined in the Original PCA, without giving effect to the amendment and
     restatement thereof as of the Effective Date.

          "Original Sellers" has the meaning assigned to that term in the
     Preliminary Statements.

          "Original PCA" has the meaning assigned to that term in the
     Preliminary Statements.

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

          "Originator Receivables" means, collectively, all receivables created
     by each of the Sellers (regardless of whether such receivables have been
     transferred to the Purchaser or any assignee or transferee of the
     Purchaser).

          "Outstanding Balance" of any Receivable at any time means the then
     outstanding principal balance thereof; provided, however, that in the case
     of any Receivable originated by Broyhill which is subject to a third-party
     guarantee and entitled to a cash discount for quick payment, the
     Outstanding Balance of such Receivable shall be reduced by the amount of
     such cash discount.

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

          "Priority DIP Receivable" means a Receivable:

               (i) the Obligor of which is the subject of a federal bankruptcy
          case; and

               (ii) the indebtedness of which constitutes a priority under 11
          U.S.C. (S) 507(a)(1).

          "Pro Forma Basis" shall mean, as to any Person, for any of the
     following events which occur subsequent to the commencement of a period for
     which the financial effect of such event is being calculated, and giving
     effect to the event for which such calculation is being made, such
     calculation as will give pro forma effect to such event as if same had
     occurred at the beginning of such period of calculation, and

                                      15
<PAGE>
 
               (i) for purposes of the foregoing calculation, the transaction
          giving rise to the need to calculate the pro forma effect to any of
          the following events shall be assumed to have occurred on the first
          day of the four fiscal quarter period last ended before the occurrence
          of the respective event for which such pro forma effect is being
          determined (the "Reference Period"), and

              (ii) in making any determination with respect to the incurrence or
          assumption of any Indebtedness or issuance of any Disqualified
          Preferred Stock during the Reference Period or subsequent to the
          Reference Period and on or prior to the date of the transaction
          referenced in clause (i) above (the "Transaction Date"), (w) all
          Indebtedness or Disqualified Preferred Stock (including the
          Indebtedness or Disqualified Preferred Stock incurred or assumed and
          for which the financial effect is being calculated) incurred or
          permanently repaid during the Reference Period shall be deemed to have
          been incurred or repaid at the beginning of such period, (x)
          Consolidated Net Interest Expense of such Person attributable to
          interest or dividends on any Indebtedness or Disqualified Preferred
          Stock, as the case may be, bearing floating interest rates should be
          computed on a pro forma basis as if the rate in effect on the
          Transaction Date had been the applicable rate for the entire period,
          (y) Consolidated Net Interest Expense of such Person attributable to
          interest on any Indebtedness under any revolving credit facility which
          was in effect during the respective Reference Period shall be computed
          on a pro forma basis based upon the average daily balance of such
          Indebtedness outstanding during the applicable period (or, if shorter,
          the portion of the period during which the revolving credit facility
          was in effect) and (z) Consolidated Net Interest Expense will be
          increased or reduced by the net cost (including amortization of
          discount) or benefit (after giving effect to amortization of discount)
          associated with the Interest Rate Protection Agreements, which will
          remain in effect for the twelve-month period after the Transaction
          Date and which shall have the effect of fixing the interest rate on
          the date of computation, and

             (iii)  in making any determination of Consolidated EBITDA, pro
          forma effect shall be given to any acquisition of part or all of a
          business or division of another Person or any Significant Divestiture
          which occurred during the Reference Period or subsequent to

                                      16
<PAGE>
 
          the Reference Period and prior to the Transaction Date, Consolidated
          EBITDA shall be determined as if such acquisition or Significant
          Divestiture occurred on the first day of the Reference Period, taking
          into account cost savings and expenses which would otherwise be
          accounted for as an adjustment pursuant to Article 11 of Regulation S-
          X under the Securities Act of 1933, as amended, as if such cost
          savings or expenses were realized on the first day of the Reference
          Period.

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

          "Purchase Date" has the meaning assigned to that term in Section
     2.02(a).

          "Purchased Receivable" means any Receivable which, pursuant to the
     procedure described in Section 2.02(c), has been identified as a Purchased
     Receivable.

          "Receivable" means the indebtedness of any Obligor under a Contract
     (including the right to payment of any interest or finance charges and
     other obligations of such Obligor with respect thereto).

          "Receivables Purchase Request" has the meaning assigned to that term
     in Section 2.02(a).

          "Related Security" means with respect to any Receivable:

               (i) all of the relevant Seller's right, title and interest in and
          to all Contracts or other agreements that relate to such Receivable;

              (ii) all of the relevant Seller's interest in the merchandise
          (including returned merchandise), if any, relating to the sale which
          gave rise to such Receivable;

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

              (iv) all guarantees, insurance and other agreements or
          arrangements of whatever character from

                                      17
<PAGE>
 
          time to time supporting or securing payment of such Receivable whether
          pursuant to the Contract related to such Receivable or otherwise; and

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

          "Servicer" means at any time the Person(s) then authorized pursuant to
     Article VI to service, administer and collect Transferred Receivables.

          "Servicer Default" means the occurrence or existence of one or more of
     the following events or conditions:

               (a)  The Servicer (i) shall fail to make any payment or deposit
          to be made by it hereunder when due and such failure shall remain
          unremedied for two Business Days, (ii) shall fail to deliver any
          Monthly Report when required hereunder and such failure shall remain
          unremedied for three Business Days, or (iii) shall fail to perform or
          observe any other term, covenant or agreement hereunder and such
          failure shall remain unremedied for ten days after the earlier of the
          Servicer's actual knowledge thereof or written notice to the Servicer
          thereof; or

               (b)  Any information or report delivered by the Servicer under or
          in connection with this Agreement, including any Monthly Report shall
          prove to have been incorrect or untrue in any material respect when
          made or delivered and (if correctable) shall remain incorrect or
          untrue for ten days after the earlier of actual knowledge by the
          Servicer of such incorrectness or untruth or written notice thereof
          shall have been given by the Purchaser to the Servicer; or

               (c) The Servicer shall make a general assignment for the benefit
          of creditors; or any proceeding shall be instituted by or against the
          Servicer seeking to adjudicate it a bankrupt or insolvent, or seeking
          liquidation, winding up, reorganization, arrangement, adjustment,
          protection, relief, or composition of it or its debts under any law
          relating to bankruptcy, insolvency or reorganization or relief of
          debtors, or seeking the entry of an order for relief or the
          appointment of a receiver, trustee, custodian or other similar
          official for it or for any substantial part of

                                      18
<PAGE>
 
          its property and, in the case of any such proceeding instituted
          against the Servicer (but not instituted by the Servicer), either such
          proceeding shall remain undismissed or unstayed for a period of 60
          days, or any of the actions sought in such proceeding (including,
          without limitation, the entry of an order for relief against, or the
          appointment of a receiver, trustee, custodian or other similar
          official for, it or for any substantial part of its property) shall
          occur; or the Servicer shall take any corporate action to authorize
          any of the actions set forth above in this subsection (c).

          "Servicer Fee" has the meaning assigned to that term in Section 6.03.

          "Settlement Date" means the tenth day of each month (or if such day is
     not a Business Day, the immediately succeeding Business Day); provided,
     however, that following the occurrence of an Event of Termination,
     Settlement Dates shall occur on such days as are selected from time to time
     by the Purchaser or its designee in a written notice to the Servicer.

          "Subsidiary" means, with respect to any Person, any corporation,
     partnership, association, joint venture, or other business entity of which
     more than 50% of the total voting power of shares of stock or other
     ownership interests entitled (without regard to the occurrence of any
     contingency) to vote in the election of the Person or Persons (whether
     directors, managers, trustees or other persons performing similar
     functions) having the power to direct or cause the direction of the
     management and policies thereof is at all times owned or controlled,
     directly or indirectly, by that Person or one or more of the other
     Subsidiaries of that Person or a combination thereof.

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

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

          SECTION 1.02.  Other Terms.  The terms "Cash Equivalents",
"Consolidated Debt", "Disqualified Preferred Stock", "Dividends", "Interco
Warrants", "Net Cash Proceeds", "Preferred Stock", "Restricted Subsidiaries",
"Significant Divestiture", "Term Loans" and "Transaction" shall have the
meanings attributed thereto in the Bank Credit Agreement as in effect on the
date hereof, without giving effect to any further

                                      19
<PAGE>
 
amendments to the Bank Credit Agreement (unless the Purchaser and any assignee
of the Purchaser shall have consented to such amendments in writing), and
regardless of any subsequent expiration or termination of the Bank Credit
Agreement.  All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles.  All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.

          SECTION 1.03.  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

               AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS

          SECTION 2.01.  Facility.  On the terms and conditions hereinafter set
forth and without recourse (except to the extent as is specifically provided
herein), the Purchaser may purchase from any Seller Eligible Receivables of such
Seller from time to time during the period from the Initial Purchase Date to the
Facility Termination Date.  Under no circumstances shall the Purchaser make any
Purchase if, after giving effect to such Purchase, the aggregate outstanding
Invested Amount would exceed the Maximum Purchase Limit.

          SECTION 2.02.  Making Purchases.

          (a) Purchases.  Each Purchase from a Seller shall be made (x) in the
case of a Purchase for a proposed purchase price in excess of $20,000,000, on at
least three Business Days' notice from such Seller to the Purchaser (except on
the Initial Purchase Date), and (y) in the case of a Purchase for a proposed
purchase price of $20,000,000 or less, on notice from such Seller to the
Purchaser given no later than 10:00 A.M. (New York City time) on the date of
such Purchase.  Each such request for a Purchase (each a "Receivables Purchase
Request") shall specify the date of such Purchase (which shall be a Business
Day) and the proposed purchase price (as determined in Section 2.02(b)) for such
Purchase.  The Purchaser shall promptly notify the relevant Seller whether it
has determined to make such Purchase.  On the date of each Purchase (each a
"Purchase Date"), the Purchaser shall, upon satisfaction of the applicable
conditions set forth in Article III, pay the purchase price for such Purchase by

                                      20
<PAGE>
 
deposit of such amount in same day funds to the relevant Seller's account
designated by such Seller.

          (b) Determination of Purchase Price.  The purchase price for the
Receivables that are the subject of any Purchase hereunder shall be determined
on or prior to the date of such Purchase, and shall be equal to the Outstanding
Balance of such Receivables as set forth in the relevant Seller's Aged Trial
Balance, minus the Discount for such Purchase.

          (c)  Identification of Purchased Receivables; Related Security.  On
each Purchase Date, a sufficient number of Eligible Receivables (that do not
already constitute Transferred Receivables hereunder) of the pertinent Seller
shall be identified as Purchased Receivables so that the Outstanding Balance of
such Purchased Receivables so identified shall result in the purchase price
determined in accordance with Section 2.02(b).  The Purchased Receivables will
be identified by reference to the Aged Trial Balance of such Seller.  Starting
with the first Obligor listed on the Aged Trial Balance, each Eligible
Receivable owed by such Obligor (that does not already constitute a Transferred
Receivable hereunder) shall constitute a Purchased Receivable.  Additional
Purchased Receivables shall be identified in a similar manner by proceeding down
the Aged Trial Balance of such Seller, in numerical sequence for subsequent
Obligors.

          (d)  Absolute Sale.  On each Purchase Date, after giving effect to
each Purchase, the Purchaser shall own the Purchased Receivables which have been
identified according to the procedure described in subsection (c) above.  The
Purchase of any Receivable shall include all Related Security with respect to
such Receivable.  It is the intention of the parties hereto that each Purchase
of Receivables to be made hereunder shall constitute a sale of such Receivables
by the relevant Seller to the Purchaser for all purposes, such sale vesting in
the Purchaser all right, title to and interest in the Receivables so purchased
and the Related Security with respect thereto.  Each Seller agrees to note in
its financial statements and master data processing records that the Purchased
Receivables have been sold to the Purchaser.

          (e)  Reconstruction of Trial Balance.  If at any time any Seller fails
to generate its Aged Trial Balance, the Purchaser shall have the right to
reconstruct such Aged Trial Balance so that a determination of the Purchased
Receivables can be made pursuant to Section 2.02(c).  Each Seller agrees to
cooperate with such reconstruction of the Aged Trial Balance, including, without
limitation, the delivery to the Purchaser,

                                      21
<PAGE>
 
upon the Purchaser's request, of copies of all Contracts and all records
relating to the Contracts and the Receivables.

          SECTION 2.03.  Collections.  (a)  The Purchaser agrees to provide to
the Sellers, upon request, access to all information received by the Purchaser
from any Lock-Box Bank.  In the event that any Seller believes that Collections
which are not Collections of Transferred Receivables have been deposited into a
Lock-Box Account, such Seller shall so advise the Purchaser and, on the Business
Day following such identification, the Purchaser shall remit all Collections so
deposited which are identified, to the Purchaser's satisfaction, to be
Collections of Receivables which are not Transferred Receivables to the Seller
that originated such Transferred Receivable.

          (b)  Any Collections of Transferred Receivables received by any Seller
shall be remitted directly to one of the Lock-Box Accounts within one Business
Day of such Seller's receipt.

          SECTION 2.04.  General Settlement Procedures.  (a)  If on any day the
Outstanding Balance of any Purchased Receivable is (i) reduced as a result of
any defective, rejected, returned repossessed or foreclosed merchandise or
services or any cash discount, credit memo, rebate, cooperative advertising,
chargeback or other adjustment by the Sellers, or (ii) reduced or canceled as a
result of a set-off or dispute in respect of any claim by the Obligor thereof
against the Seller which originated such Purchased Receivable (whether such
claim arises out of the same or a related transaction or an unrelated
transaction but excluding adjustments, reductions or cancellations in respect of
such Obligor's bankruptcy), the relevant Seller shall be deemed to have received
on such day a Collection of such Purchased Receivable in the amount of such
reduction or cancellation.  If such Seller is not the Servicer, such Seller
shall pay to the Servicer on or prior to the next Settlement Date all amounts
deemed to have been received pursuant to this subsection.

          (b) Upon discovery by any Seller or the Purchaser of a breach of any
of the representations and warranties made by any Seller in Section 4.01(l) with
respect to any Receivable, such party shall give prompt written notice thereof
to the Purchaser or such Seller, as the case may be, as soon as practicable and
in any event within three Business Days following such discovery.  The Seller
which made such representation or warranty shall, upon not less than two
Business Days' notice from the Purchaser or its assignee or designee, repurchase
such Receivable on the next succeeding Settlement Date for a repurchase price
equal to the Outstanding Balance of such Receivable.  Each repurchase of a
Receivable shall include the Related Security with respect to

                                      22
<PAGE>
 
such Receivable.  The proceeds of any such repurchase shall be deemed to be a
Collection in respect of such Receivable.  If the repurchasing Seller is not the
Servicer, such Seller shall pay to the Servicer on or prior to the next
Settlement Date the repurchase price required to be paid pursuant to this
subsection.

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

          SECTION 2.05.  Payments and Computations, Etc.  (a)  All amounts to be
paid or deposited by a Seller 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 lawful money of the United States of America in same day funds to
the relevant Lock-Box Account.

          (b)  Each Seller shall, to the extent permitted by law, pay to the
Purchaser interest on all amounts not paid or deposited by such Seller when due
hereunder at 1.5% per annum above the CP Rate, payable on demand, provided,
however, that such interest rate shall not at any time exceed the maximum rate
permitted by applicable law.

          (c)  All computations of interest and all computations of fees
hereunder and under the separate fee agreement 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.

          SECTION 2.06.  Contributions.  Each Seller may from time to time
during the period from the Initial Purchase Date to the Facility Termination
Date, at its option, by notice to the Purchaser, identify Receivables which it
proposes to contribute to the Purchaser as a capital contribution.  Such
Receivables shall be identified by reference to the relevant Seller's Aged Trial
Balance.  On the date of each such contribution and after giving effect thereto,
the Purchaser shall own the Receivables so identified and contributed
(collectively, the "Contributed Receivables") and all Related Security with
respect thereto.  Unless the relevant Seller shall notify the Purchaser to the
contrary as to any specified Receivables, the Seller represents to the Purchaser
that each Contributed Receivable is an Eligible Receivable as of the date of its
contribution.

                                      23
<PAGE>
 
                                 ARTICLE III

                            CONDITIONS OF PURCHASES

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

          (a)  A copy of the resolutions adopted by the Board of Directors of
     each Original Seller authorizing specified officers of such Seller to enter
     into, and to perform all necessary actions in connection with, the Original
     PCA and the transactions contemplated by the Original PCA, certified by
     such Seller's Secretary or Assistant Secretary;

          (b)  A certificate of the Secretary or Assistant Secretary of each
     Original Seller certifying the names and true signatures of the officers
     authorized on its behalf to sign the Original PCA and the other documents
     to be delivered by it thereunder;

          (c)  Acknowledgment copies of proper Financing Statements (Form UCC-
     1), duly filed on or before the date of the initial Purchase from each
     Original Seller, naming each Original Seller as the debtor and the
     Purchaser as the secured party, or other similar instruments or documents,
     as may be necessary or, in the opinion of the Purchaser, advisable under
     the UCC of all appropriate jurisdictions or other applicable law to perfect
     the Purchaser's ownership of and security interest in the Receivables and
     Related Security and Collections with respect thereto;

          (d) Certified copies of Requests for Information or Copies (Form UCC-
     11) (or a similar search report certified by a party acceptable to the
     Purchaser), dated a date reasonably near to the date of such initial
     Purchase, listing all effective financing statements (including those
     referred to in Section 3.01(c)) which name any Original Seller (under its
     present name and any previous name) as debtor and which are filed in the
     jurisdictions in which filings were made pursuant to Section 3.01(c),
     together with copies of such financing statements (none of which (except
     those filed pursuant to Section 3.01(c)) shall cover any property which may
     be Receivables, or Related Security or Collections with respect thereto;

                                      24
<PAGE>
 
          (e)  Acknowledgment copies of proper Financing Statements (Form UCC-
     3), if any, necessary to release all security interests and other rights of
     any Person in the Receivables previously granted by any Original Seller;

          (f)  Lock-Box Agreements in respect of each Lock-Box Account relating
     to Collections of Receivables originated by the Original Sellers, duly
     executed by the Lock-Box Bank holding such Lock-Box Account;

          (g)  A favorable opinion of Morgan Lewis & Bockius, counsel for the
     Original Sellers and Interco, reasonably acceptable to the Purchaser, in
     each case in substantially the form of Exhibit A to the Original PCA, and,
     in each case, as to such other matters as the Purchaser may reasonably
     request;

          (h)  A good standing certificate for each Original Seller issued by
     the Secretary of State of such Seller's state of incorporation;

          (i) The Articles of Incorporation of each Original Seller, duly
     certified by the Secretary of State of such Seller's respective state of
     incorporation, as of a recent date acceptable to Purchaser, together with a
     copy of the By-laws of each Original Seller, duly certified by the
     Secretary or an Assistant Secretary of such Seller;

          (j) A copy of the resolutions adopted by the Board of Directors of
     Interco authorizing specified officers of Interco to enter into, and to
     perform all necessary actions in connection with, the Interco Agreement,
     certified by Interco's Secretary or Assistant Secretary;

          (k) A certificate of the Secretary or Assistant Secretary of Interco
     certifying the names and true signatures of the officers authorized on its
     behalf to sign the Interco Agreement and the other documents to be
     delivered by it thereunder;

          (l) The Articles of Incorporation of Interco, duly certified by the
     Secretary of State of Delaware, as of a recent date acceptable to
     Purchaser, together with a copy of the By-laws of Interco, duly certified
     by the Secretary or an Assistant Secretary of Interco;

          (m)  The Interco Agreement;

          (n) A certificate of the Secretary or Assistant Secretary of Lane and
     Broyhill certifying that attached

                                      25
<PAGE>
 
     thereto is a true and complete copy of the Original Bank Credit Agreement
     and the Security Agreement referred to therein; and

          (o) The Intercreditor Agreement, duly executed by the parties thereto.

          SECTION 3.01A.  Conditions Precedent to Effectiveness of Amended and
Restated Agreement.  The effectiveness of this Agreement and the initial
Purchase of Receivables from Thomasville hereunder are each subject to the
conditions precedent that the Purchaser shall have received on or before the
Effective Date the following, each (unless otherwise indicated) dated such date,
in form and substance satisfactory to the Purchaser:

          (a)  A copy of the resolutions adopted by the Board of Directors of
     each Seller authorizing specified officers of such Seller to enter into,
     and to perform all necessary actions in connection with, this Agreement and
     the transactions contemplated by this Agreement, certified by such Seller's
     Secretary or Assistant Secretary;

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

          (c)  Acknowledgment copies of proper Financing Statements (Form UCC-
     1), duly filed on or before the date of the initial Purchase from
     Thomasville, naming Thomasville as the debtor and the Purchaser as the
     secured party, or other similar instruments or documents, as may be
     necessary or, in the opinion of the Purchaser, advisable under the UCC of
     all appropriate jurisdictions or other applicable law to perfect the
     Purchaser's ownership of and security interest in the Receivables and
     Related Security and Collections with respect thereto;

          (d) Certified copies of Requests for Information or Copies (Form UCC-
     11) (or a similar search report certified by a party acceptable to the
     Purchaser), dated a date reasonably near to the date of such initial
     Purchase from Thomasville, listing all effective financing statements
     (including those referred to in Section 3.01A(c)) which name Thomasville
     (under its present name and any previous name) as debtor and which are
     filed in the jurisdictions in which filings were made pursuant to Section
     3.01A(c), together with copies of such financing statements (none of which

                                      26
<PAGE>
 
     (except those filed pursuant to Section 3.01A(c)) shall cover any property
     which may be Receivables, or Related Security or Collections with respect
     thereto;

          (e)  Acknowledgment copies of proper Financing Statements (Form UCC-
     3), if any, necessary to release all security interests and other rights of
     any Person in the Receivables previously granted by Thomasville;

          (f)  Lock-Box Agreements with Corestates Bank, N.A. and Wachovia Bank
     of North Carolina relating to Collections of Receivables originated by
     Thomasville, duly executed by such Lock-Box Banks;

          (g)  A favorable opinion of Morgan Lewis & Bockius, counsel for the
     Sellers and Interco, reasonably acceptable to the Purchaser, in each case
     in substantially the form of Exhibit A, and, in each case, as to such other
     matters as the Purchaser may reasonably request;

          (h)  A good standing certificate for Thomasville issued by the
     Secretary of State of such Seller's state of incorporation;

          (i) The Articles of Incorporation of Thomasville, duly certified by
     the Secretary of State of such Seller's state of incorporation, as of a
     recent date acceptable to Purchaser, together with a copy of the By-laws of
     Thomasville, duly certified by the Secretary or an Assistant Secretary of
     such Seller;

          (j) A copy of the resolutions adopted by the Board of Directors of
     Interco authorizing specified officers of Interco to enter into, and to
     perform all necessary actions in connection with, Amendment No. 1 to the
     Interco Agreement, certified by Interco's Secretary or Assistant Secretary;

          (k) A certificate of the Secretary or Assistant Secretary of Interco
     certifying (i) the names and true signatures of the officers authorized on
     its behalf to sign the Interco Agreement and the other documents to be
     delivered by it thereunder and (ii) that there have been no changes to
     Interco's Articles of Incorporation or By-laws since November 15, 1994;

          (l) Amendment No. 1 to the Interco Agreement, in the form of Exhibit C
     hereto;

                                      27
<PAGE>
 
          (m) A certificate of the Secretary or Assistant Secretary of Lane,
     Broyhill and Thomasville certifying that attached thereto is a true and
     complete copy of the Bank Credit Agreement and the Security Agreement
     referred to therein;

          (n) The Intercreditor Agreement, duly executed by the parties thereto;
     and

          (o) An intercompany agreement between Thomasville and Thomasville
     Upholstery, Inc. regarding the sale to Thomasville of all inventory of
     Thomasville Upholstery, Inc.

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

          (a) with respect to any such Purchase, on or prior to the date of such
     Purchase, each Seller shall have delivered to the Purchaser, if requested
     by the Purchaser, (i) such Seller's Aged Trial Balance (which if in
     magnetic tape or diskette format shall be compatible with the Purchaser's
     computer equipment) as of a date not more than 31 days prior to the date of
     such Purchase, and (ii) a written report identifying, among other things,
     the Receivables to be included in such Purchase and the then outstanding
     Purchased Receivables originated by such Seller and the aged balance
     thereof, in each case correlated to Purchases;

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

          (c)  Each Seller shall have marked its master data processing records
     and, at the request of the Purchaser, each Contract (other than any invoice
     sent to the Obligor under such Contract) giving rise to Purchased
     Receivables and all other relevant records evidencing the Receivables which
     are the subject of such Purchase with a legend, acceptable to the
     Purchaser, stating that such Receivables, the Related Security with respect
     thereto, and Collections with respect thereto and other proceeds thereof,
     have been sold in accordance with this Agreement; and

                                      28
<PAGE>
 
          (d)  on the date of such Purchase the following statements shall be
     true (and each Seller, by accepting the amount of such Purchase, shall be
     deemed to have certified that):

               (i)  On the Effective Date such Seller's representations and
          warranties contained in Section 4.01 are correct on and as of such day
          as though made on and as of such date, and on the date of each
          subsequent Purchase such Seller's representations and warranties
          contained in Section 4.01(l) and (n)-(s) are correct on and as of such
          day as though made on and as of such date,

              (ii)  No event has occurred and is continuing, or would result
          from such Purchase, which constitutes an Event of Termination or would
          constitute an Event of Termination but for the requirement that notice
          be given or time elapse or both, and

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

              (iv)  No event described in paragraph (g) of Section 7.01 has
          occurred and is continuing (without giving effect to the 30-day period
          provided therein for dismissal or stay); and

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


                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

          SECTION 4.01.  Representations and Warranties of the Sellers.  Each
Seller represents and warrants, as of the Effective Date, as to itself, as
follows:

          (a) Such Seller has been duly organized and is validly existing as a
     corporation in good standing under the laws of its respective jurisdiction
     of incorporation, with power and authority to own its properties and to
     conduct its business as such properties are presently owned and such
     business is presently conducted, and had at all relevant times, and now
     has, all necessary power, authority, and legal right to acquire and own the
     Receivables.

                                      29
<PAGE>
 
          (b) Such Seller is duly qualified to do business and is in good
     standing, and has obtained all necessary licenses and approvals, in all
     jurisdictions in which the ownership or lease of property or the conduct of
     its business requires such qualification, licenses or approvals.

          (c) Such Seller has (i) all necessary power, authority and legal right
     to (1) execute and deliver this Agreement and the documents to be executed
     and delivered in connection herewith (together, the "Agreement Documents"),
     (2) carry out the terms of the Agreement Documents, (3) sell, assign and
     contribute Receivables on the terms and conditions herein provided and (ii)
     duly authorized such sale, assignment and contribution to Purchaser by all
     necessary corporate action; and such Seller has duly authorized by all
     necessary corporate action the execution, delivery, and performance of this
     Agreement and the other Agreement Documents.

          (d) This Agreement constitutes a valid sale, transfer, and assignment
     of the Transferred Receivables to Purchaser, enforceable against creditors
     of, and purchasers from, such Seller; and this Agreement constitutes, and
     each other Agreement Document to be signed by such Seller when duly
     executed and delivered will constitute, a legal, valid and binding
     obligation of such Seller enforceable in accordance with its terms.  Such
     Seller shall have no remaining property interest in any Transferred
     Receivable.

          (e) The consummation of the transactions contemplated by this
     Agreement and the other Agreement Documents and the fulfillment of the
     terms hereof will not conflict with, result in any breach of any of the
     terms and provisions of, or constitute (with or without notice or lapse of
     time) a default under, the articles of incorporation or by-laws of such
     Seller, or any indenture, loan agreement, mortgage, deed of trust, or other
     agreement or instrument to which such Seller is a party or binding on or
     affecting such Seller or its property, or result in the creation or
     imposition of any Adverse Claim upon any of its properties pursuant to the
     terms of any such indenture, loan agreement, mortgage, deed of trust, or
     other agreement or instrument, other than this Agreement, or violate any
     law or any order, rule, or regulation applicable to such Seller of any
     court or of any federal or state regulatory body, administrative agency, or
     other governmental instrumentality having jurisdiction over such Seller or
     any of its properties.

          (f) There are no proceedings or investigations pending, or threatened,
     before any court, regulatory body,

                                      30
<PAGE>
 
     administrative agency, or other tribunal or governmental instrumentality
     (A) asserting the invalidity of this Agreement or any other Agreement
     Document, (B) seeking to prevent the consummation of any of the
     transactions contemplated by this or any other Agreement Document, or (C)
     seeking any determination or ruling that could reasonably be expected to
     materially and adversely affect (i) the performance by such Seller or
     Servicer of its obligations under this Agreement, or (ii) the validity or
     enforceability of this Agreement, any other Agreement Document, the
     Receivables or the Contracts.

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

          (h) No authorization or approval or other action by, and no notice to
     or filing with, any governmental authority or regulatory body is required
     for the due execution, delivery and performance by such Seller of this
     Agreement or any other Agreement Document except for the filing of the UCC
     Financing Statements referred to in Article III, all of which, at the time
     required in Article III, shall have been duly made and shall be in full
     force and effect.

          (i) (i)  The audited consolidated and consolidating financial
     statements of Interco and its Subsidiaries (including the consolidated
     balance sheet, and the related statements of income and cash flow and
     changes in shareholders' equity) as at December 31, 1994 and (ii) the
     unaudited consolidated and consolidating financial statements of Interco
     and its Subsidiaries as at September 30, 1995, copies of which have been
     furnished to the Purchaser, have been prepared in conformity with generally
     accepted accounting principles consistently applied and fairly present the
     financial condition of Interco and its Subsidiaries as at such dates and
     the results of the operations of Interco and its Subsidiaries for the
     periods then ended.

          (j) Since September 30, 1995, there has been no material adverse
     change in the financial condition, operations or prospects of Interco and
     its Subsidiaries.

          (k) No injunction, decree or other decision has been issued or made by
     any court, government or agency or instrumentality thereof that prevents,
     and no threat by any person has been made, to the best of such Seller's
     knowledge, to attempt to obtain any such decision that can reasonably be
     expected to prevent, such Seller from conducting a significant part of its
     business operations.

                                      31
<PAGE>
 
          (l) Each Receivable purported to be sold by such Seller hereunder is
     an Eligible Receivable, and each such Receivable and each Transferred
     Receivable, together with the related Contract and all purchase orders and
     other agreements related to such Receivable, is owned by such Seller free
     and clear of any Adverse Claim (other than any Adverse Claim arising solely
     as the result of any action taken by the Purchaser) except as provided
     herein; when Purchaser makes a Purchase it shall acquire valid and
     perfected first priority ownership of each Purchased Receivable and the
     Related Security and Collections with respect thereto free and clear of any
     Adverse Claim (other than any Adverse Claim arising solely as the result of
     any action taken by the Purchaser) except as provided hereunder; and no
     effective financing statement or other instrument similar in effect
     covering any Transferred Receivable, any interest therein, the Related
     Security or Collections with respect thereto is on file in any recording
     office except such as may be filed in favor of Purchaser in accordance with
     this Agreement or in connection with any Adverse Claim arising solely as
     the result of any action taken by the Purchaser.

          (m) No Monthly Report (if prepared by such Seller, or to the extent
     that information contained therein was supplied by such Seller),
     information, exhibit, financial statement, document, book, record or report
     furnished or to be furnished by such Seller to the Purchaser in connection
     with this Agreement was or will be inaccurate in any material respect as of
     the date it was or will be dated or (except as otherwise disclosed to the
     Purchaser) as of the date so furnished, or contained or will contain any
     material misstatement of fact or omitted or will omit to state a material
     fact or any fact necessary to make the statements contained therein not
     materially misleading.

          (n) The chief place of business and chief executive office of such
     Seller and the offices where such Seller keeps all its books, records and
     documents evidencing Receivables, the related Contracts and all purchase
     orders and other agreements related to such Receivables are located at the
     addresses specified in Schedule I (or at such other locations, notified to
     the Purchaser in accordance with Section 5.01(f), in jurisdictions where
     all action required by Section 6.06 has been taken and completed).

          (o) The names and addresses of all the Lock-Box Banks, together with
     the account number of the Lock-Box Accounts of such Seller at such Lock-Box
     Banks, are specified in

                                      32
<PAGE>
 
     Schedule II (or at such other Lock-Box Banks and/or with such other Lock-
     Box Accounts as have been notified to the Purchaser in accordance with
     Section 5.03(d)).

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

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

          (r) Such Seller will use the proceeds of sales of its Receivables
     hereunder to repay Indebtedness on which it is primarily obligated and for
     its own working capital and general corporate purposes, including without
     limitation the payment of dividends on its capital stock, provided that
     such dividends are properly authorized by all requisite corporate action
     and are in compliance with applicable law.

          (s) If less than all of the Receivables of such Seller have been
     transferred to the Purchaser pursuant to this Agreement, no selection
     procedure was utilized by such Seller in selecting the Receivables to be
     transferred to the Purchaser hereunder which is adverse to the interests of
     the Purchaser or would reasonably be expected to result in a Default Ratio
     or Net Dilution Ratio, calculated for such Transferred Receivables, which
     is greater than the Default Ratio or Net Dilution Ratio, calculated for all
     Receivables.


                                   ARTICLE V

                                   COVENANTS

          SECTION 5.01.  Affirmative Covenants of the Sellers.  From the Initial
Purchase Date until the first day following the Facility Termination Date on
which all of the Transferred Receivables are either collected in full or become
Defaulted Receivables, each Seller will, unless the Purchaser shall otherwise
consent in writing:

                                      33
<PAGE>
 
          (a) Compliance with Laws, Etc. Comply in all material respects with
     all applicable laws, rules, regulations and orders with respect to the
     Receivables and related Contracts.

          (b) Preservation of Corporate Existence.  Preserve and maintain its
     corporate existence, rights, franchises and privileges in the jurisdiction
     of its incorporation, and qualify and remain qualified in good standing as
     a foreign corporation in each jurisdiction where the failure to preserve
     and maintain such existence, rights, franchises, privileges and
     qualification would materially adversely affect (i) the interests of the
     Purchaser hereunder or (ii) the ability of such Seller or the Servicer to
     perform their respective obligations hereunder.

          (c) Audits.  At any time and from time to time during regular business
     hours (but subject to reasonable notice at any time when no Event of
     Termination exists), permit the Purchaser, or its agents, representatives
     or assigns,   (i) to examine and make copies of and abstracts from all
     books, records and documents (including, without limitation, computer tapes
     and disks) in the possession or under the control of such Seller relating
     to Receivables and Related Security, and (ii) to visit the offices and
     properties of such Seller for the purpose of examining such materials
     described in clause (i) above, and to discuss matters relating to
     Receivables originated by such Seller and the Related Security or such
     Seller's performance hereunder or under the Contracts with any of the
     officers or employees of such Seller having knowledge of such matters.

          (d) Keeping of Records and Books of Account.  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 identification of each new Receivable and all
     Collections of and adjustments to each existing Receivable).  Each Seller
     shall make a notation in its books and records, including its computer
     files, to indicate which Receivables have been sold or contributed to the
     Purchaser hereunder.

          (e) Performance and Compliance with Transferred Receivables and
     Contracts.  At its expense timely and fully perform and comply with all
     material provisions, covenants

                                      34
<PAGE>
 
     and other promises required to be observed by it under the Contracts
     related to the Transferred Receivables originated by such Seller and all
     purchase orders and other agreements relating to such Transferred
     Receivables.

          (f) Location of Records.  Keep its chief place of business and chief
     executive office, and the offices where it keeps its records concerning the
     Receivables and all related Contracts and all purchase orders and other
     agreements related to Receivables (and all original documents relating
     thereto), at the address(es) of such Seller referred to in Section 4.01(n)
     or, upon 30 days prior written notice to the Purchaser, at such other
     locations in jurisdictions where all action required by Section 6.06 shall
     have been taken and completed.

          (g)  Credit and Collection Policy.  Comply in all material respects
     with the Credit and Collection Policy in regard to each Transferred
     Receivable and the Related Contract.

          (h) Collections.  Instruct all Obligors to cause all Collections of
     Receivables to be deposited directly to a Lock-Box Account.  Each Seller
     will not deposit or otherwise credit, or cause or permit to be so deposited
     or credited, to any Lock-Box Account cash or cash proceeds other than
     Collections of Receivables.

          (i) Audit.  At such Seller's expense as at or about February 1, 1996
     and each February 1 thereafter, permit the Purchaser to conduct through
     Deloitte & Touche LLP an audit, satisfactory to the Purchaser, of the
     Purchased Receivables and matters related thereto.

          (j) Daily Settlement Trigger.  From and after the fifth day after the
     occurrence of a Daily Settlement Trigger, and so long as any Daily
     Settlement Trigger is continuing, (a) cause the Servicer to submit daily
     reports in form and substance satisfactory to the Purchaser listing the
     aggregate Outstanding Balance of all Eligible Receivables generated by such
     Seller on the preceding Business Day, (b) use its best efforts to cause
     each Lock-Box Bank to submit daily reports to the Purchaser listing the
     aggregate amount of all Collections received in the Lock-Box Account(s) at
     such Lock-Box Bank on the preceding Business Day and (c) cause all
     Collections (and only Collections) to be deposited daily into an account
     (the "Concentration Account") maintained in a bank acceptable to the
     Purchaser in the name of the Purchaser and/or the Purchaser's assignee.  No
     funds in the Concentration Account

                                      35
<PAGE>
 
     shall be distributed to or for the benefit of any Seller until the
     Purchaser and the Purchaser's assignee (if any) each notifies the bank in
     which the Concentration Account is located to release funds therein to such
     persons.  The funds in the Concentration Account shall be invested in a
     manner acceptable to the Purchaser and/or the Purchaser's assignee.  If all
     events constituting a Daily Settlement Trigger shall have been cured or
     shall no longer be continuing, and no Event of Termination shall then
     exist, the Sellers and Servicer may resume processing Collections and
     delivering reports as they did immediately prior to the occurrence of a
     Daily Settlement Trigger.

          (k)  Separate Records.  Maintain separate corporate records and books
     of account from those of the Purchaser.

          (l)  Separate Conduct of Business.  (i) Conduct its business from an
     office separate from that of the Purchaser (but which office may be located
     in the same facility as the Purchaser); (ii) ensure that all oral and
     written communications, including without limitation, letters, invoices,
     purchase orders, contracts, statements and applications, will be made
     solely in its own name; (iii) have stationery and other business forms and
     mailing address and a telephone number separate from those of the
     Purchaser; (iv) not hold itself out as having agreed to pay, or as being
     liable for, the obligations of the Purchaser; (v) not engage in any
     transaction with the Purchaser except as contemplated by this Agreement or
     as permitted by the CL Sale Agreement (vi) continuously maintain as
     official records the resolutions, agreements and other instruments
     underlying the transactions contemplated by this Agreement; (vii) disclose
     on its annual financial statements (A) the effects of the transactions
     contemplated by this Agreement in accordance with generally accepted
     accounting principles; and (B) that the assets of the Purchaser are not
     available to pay its creditors; and (viii) comply with (and cause to be
     true and correct) each of the facts and assumptions contained in paragraphs
     (a) - (r) on pages [3 - 6] of the opinion of Morgan Lewis & Bockius
     delivered pursuant to Section 3.01(g) of the Original PCA and Section
     3.01A(g) of this Agreement.

          SECTION 5.02.  Reporting Requirements of the Sellers.  From the date
hereof until the first day following the Facility Termination Date on which all
of the Transferred Receivables are either collected in full or become Defaulted
Receivables, each Seller will, unless the Purchaser shall otherwise consent in
writing, furnish to the Purchaser:

                                      36
<PAGE>
 
          (a) Audit Report.  Within 90 days after each fiscal year of Interco a
     copy of an annual audit report of Interco and its Subsidiaries prepared in
     conformity with generally accepted accounting principles consistently
     (except as specifically noted therein) applied, duly certified without
     qualifications (as to going concern or other matters which in the
     Purchaser's reasonable opinion might adversely affect the ability of any
     Seller to perform its obligations under this Agreement) by Peat Marwick or
     other independent certified public accountants of recognized standing
     selected by the Sellers and reasonably acceptable to the Purchaser;
     provided, however, that the requirements of this clause (a) may be
     satisfied by delivery of Interco's form 10-K filed with the Securities and
     Exchange Commission.

          (b) Interim Reports.  As soon as available, but no later than 45 days
     after each fiscal quarter, a copy of unaudited consolidated and
     consolidating financial statements of Interco and its Subsidiaries prepared
     otherwise in the same manner as the audited financial statements referred
     to in clause (a) of this Section 5.02; provided, however, that the
     requirements of this clause (b) may be satisfied by delivery of Interco's
     form 10-Q filed with the Securities and Exchange Commission.

          (c) Auditor's Materials.  Promptly upon receipt thereof, copies of all
     detailed financial and management reports regarding such Seller to the
     extent relating to the Receivables submitted to such Seller by independent
     public accountants in connection with each annual or interim report made by
     such accountants.

          (d) Termination Events.  As soon as possible and in any event within
     five days after the occurrence of each Event of Termination or each event
     which, with the giving of notice or lapse of time or both, would constitute
     an Event of Termination, a written statement of the chief financial officer
     or chief accounting officer of such Seller setting forth details of such
     event and the action that such Seller proposes to take with respect
     thereto.

          (e) Litigation.  As soon as possible and in any event within 10
     Business Days of such Seller's knowledge thereof, notice of (i) any
     litigation, investigation or proceeding which may exist at any time which
     could reasonably be expected to have a material adverse effect on the
     business, operations, property or financial condition of such Seller or
     impair the ability of such Seller or the Servicer to perform its
     obligations under this Agreement and (ii) any

                                      37
<PAGE>
 
     material adverse development in previously disclosed litigation.

          (f) Other Information.  Promptly, from time to time, such other
     information, documents, records or reports respecting the Receivables or
     the conditions or operations, financial or otherwise, of such Seller or any
     Subsidiary as the Purchaser may from time to time reasonably request in
     order to protect the Purchaser's interests under or as contemplated by this
     Agreement.

          (g) Haverty Furniture Companies, Inc.  Promptly (and in any event
     within ten Business Days) after such Seller's receipt thereof, a copy of
     the quarterly and annual financial statements of Haverty Furniture
     Companies, Inc.

          (h) Daily Settlement Trigger.  Promptly (and in any event within five
     Business Days) after an executive officer of such Seller obtains knowledge
     thereof, notice of the occurrence of any event which constitutes a Daily
     Settlement Trigger.

          (i) Officer's Certificate.  At the time of the delivery of the
     financial statements provided for in clauses (a) and (b) of this paragraph,
     a certificate of the chief financial officer of such Seller to the effect
     that, to the best of such officer's knowledge, no Event of Termination or
     Daily Settlement Trigger has occurred and is continuing or, if any Event of
     Termination or Daily Settlement Trigger has occurred and is continuing,
     specifying the nature and extent thereof, which certificate shall set forth
     the calculations required to establish compliance with the ratios and tests
     set forth in clauses (a), (b), (c), (d) and (h) of the definition of Daily
     Settlement Trigger.

          SECTION 5.03.  Negative Covenants of the Sellers.  From the Initial
Purchase Date until the date following the Facility Termination Date on which
all of the Transferred Receivables are either collected in full or become
Defaulted Receivables, each Seller will not, without the written consent of the
Purchaser:

          (a) Sales, Liens, Etc.  Except as otherwise provided herein or in the
     Intercreditor Agreement, create or suffer to exist (by operation of law or
     otherwise) or otherwise dispose of, or create or suffer to exist any
     Adverse Claim upon or with respect to any Receivable or related Contract or
     Related Security, or upon or with respect to any Lock-Box Account or other
     collection account to which any Collections of Receivables are sent, or
     assign any right to receive income in respect thereof.

                                      38
<PAGE>
 
          (b) Extension or Amendment of Transferred Receivables.  Except for
     extensions, amendments or other modifications which (i) do not decrease the
     Outstanding Balance of or adversely affect the collectibility of a
     Transferred Receivable or (ii) are otherwise permitted pursuant to Section
     6.02(c), extend, amend or otherwise modify the terms of any Transferred
     Receivable, or amend, modify or waive any term or condition of any Contract
     related thereto.

          (c) Change in Business or Credit and Collection Policy.  (i) Make any
     change in the character of its business or in the Credit and Collection
     Policy that would, in either case, materially adversely affect the
     collectibility of the Transferred Receivables or the ability of such Seller
     to perform its obligations under this Agreement, or (ii) in the case of
     Thomasville, make any change prior to December 31, 1996 relating to its
     treatment of reserves for Receivables which, consistent with the Credit and
     Collection Policy, are deemed uncollectible, without the prior written
     consent of the Purchaser (or its assigns).  Such Seller shall not make any
     other change without 30 Business Days prior written notice to the Purchaser
     (or its assigns).

          (d)  Change in Payment Instructions to Obligors.  Add or terminate any
     bank as Lock-Box Bank from those listed in Schedule II, or make any change
     in its instructions to Obligors regarding payments to be made to any Lock-
     Box Bank, unless the Purchaser shall have received notice of such addition,
     termination or change and copies of Lock-Box Agreements with each new Lock-
     Box Bank; provided, however, that within sixty (60) days following the date
     hereof, the Purchaser shall have received copies of executed Lock-Box
     Agreements, in form and substance satisfactory to the Purchaser, relating
     to the Lock-Box Accounts of Thomasville which are maintained at Mellon
     Bank, N.A. and Bank of America as of the date hereof.

          (e)  Change in Corporate Name, Etc.  Make any change to its name or
     structure, or use any tradenames, fictitious names, assumed names or "doing
     business as" names, unless, in the case of each such name change or use and
     prior to the effective date thereof, such Seller delivers to the Purchaser
     such financing statements or amendments to financing statements (Forms UCC-
     1 and UCC-3) executed by such Seller which the Purchaser may request to
     reflect such name change or use, together with such other documents and
     instruments that the Purchaser may reasonably request in connection
     therewith.

                                      39
<PAGE>
 
          (f) Certain Changes in Bank Credit Agreement.  Amend or modify the
     financial covenants (or the related definitions) contained in the Bank
     Credit Agreement so as to make the same more restrictive than the
     previously existing provisions with respect thereto, unless concurrently
     therewith the Sellers enter into an amendment of this Agreement, in form
     and substance reasonably satisfactory to the Purchaser and any assignee of
     the Purchaser, modifying the ratios (and, if appropriate, the related
     definitions) referred to in clauses (a), (b), (c) and (d) of the definition
     of "Daily Settlement Trigger" hereunder so as to be proportionately more
     restrictive.

          (g) Thomasville Subsidiaries.  In the case of Thomasville, permit any
     Subsidiary of Thomasville to sell any of its goods or services to any
     person other than Thomasville.

          SECTION 5.04.  Affirmative Covenant of the Sellers and the Purchaser.
Each Seller and the Purchaser shall record each Purchase as a sale or purchase,
as the case may be, on its books and records, and reflect each Purchase in its
financial statements and tax returns as a sale or purchase, as the case may be.

          SECTION 5.05.  Grant of Security Interest.  To secure all obligations
of the Sellers arising in connection with this Agreement, and each other
agreement entered into in connection with this Agreement, whether now or
hereafter existing, due or to become due, direct or indirect, or absolute or
contingent, including, without limitation, Indemnified Amounts, payments on
account of Collections received or deemed to be received, and any other amounts
due the Purchaser hereunder, each Seller hereby assigns and grants to Purchaser,
effective on the Initial Purchase Date, a security interest in all of such
Seller's right, title and interest now or hereafter existing in, to and under
all Receivables which do not constitute Transferred Receivables, the Related
Security and all Collections with regard thereto.


                                   ARTICLE VI

                         ADMINISTRATION AND COLLECTION

          SECTION 6.01.  Designation of Servicer.  (a)  The servicing,
administering and collection of the Transferred Receivables originated by each
Seller shall be conducted by such Person (the "Servicer") so designated from
time to time in accordance with this Section 6.01; provided, however, that the

                                      40
<PAGE>
 
Servicer shall not have any rights to withdraw any amounts in any Lock-Box
Account or any bank account of the Purchaser.

          (b)  Until the Purchaser gives notice (the "Successor Notice") to any
Seller of a designation of a new Servicer for such Seller's Transferred
Receivables, Lane is hereby designated as Servicer for Transferred Receivables
originated by Lane or Action, Broyhill is hereby designated as Servicer for
Transferred Receivables originated by Broyhill and Thomasville is hereby
designated as Servicer for Transferred Receivables originated by Thomasville.
Lane, Broyhill and Thomasville each hereby agrees to perform the duties and
obligations of the Servicer for such Transferred Receivables pursuant to the
terms hereof.  The Successor Notice may only be given following the occurrence
and during the continuation of a Servicer Default. Any Servicer other than such
Seller shall execute any confidentiality agreement reasonably requested by such
Seller in connection with the designation of a new Servicer.

          (c) Upon receipt by Lane, Broyhill or Thomasville of a Successor
Notice, such Seller agrees that it will terminate its activities as Servicer
hereunder in a manner which the Purchaser (or its designee) believes will
facilitate the transition of the performance of such activities to the new
Servicer, and such Seller shall use its best efforts to assist the Purchaser (or
its designee) to take over the servicing, administering and collection of the
Transferred Receivables.

          (d)  The Servicer may, with the prior consent of the Purchaser,
subcontract with any other Person for servicing, administering or collecting
Transferred Receivables, provided that the Servicer shall remain liable for the
performance of the duties and obligations of the Servicer for the Transferred
Receivables pursuant to the terms hereof.

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


                                      41
<PAGE>
 
exercise and apply if it owned the Transferred Receivables and shall act in the
best interests of the Purchaser.

          (b)  No later than the tenth day (or next Business Day if such day is
not a Business Day) of each month, the Servicer shall prepare and forward to the
Purchaser (i) a Monthly Report, relating to all then outstanding Transferred
Receivables originated by the relevant Seller, and the Related Security and
Collections with respect thereto, in each case, as of the close of business of
the Servicer on the last day of the immediately preceding fiscal month, and (ii)
a listing by Obligor of all Transferred Receivables originated by the relevant
Seller correlating Purchased Receivables and Purchases, together with (x) an
aging report of such Transferred Receivables, (y) a listing of each Obligor the
total Receivables of which are in excess of 2% of the aggregate of all
Transferred Receivables (other than those Obligors referred to in the succeeding
clause (z)) and (z) the total Receivables of each of J.C. Penney Company, Inc.,
Sears Roebuck & Co., Haverty Furniture Companies, Inc. and Wal-Mart Stores, Inc.

          (c)  If no Event of Termination or event that but for notice or lapse
of time or both would constitute an Event of Termination shall have occurred and
be continuing, each Seller, while it or its parent company is the Servicer, may
extend the maturity or adjust the Outstanding Balance of any Transferred
Receivable originated by such Seller as such Seller deems appropriate to
maximize Collections thereof; provided, however, that such extension or
adjustment shall either (x) be in accordance with the relevant Credit and
Collection Policy or (y) adjust the Outstanding Balance of any Transferred
Receivable to reflect the reductions or cancellations described in Section
2.04(a).

          (d)  Each Seller shall deliver to the applicable Servicer, and the
Servicer shall hold in trust for such Seller and the Purchaser in accordance
with their respective interests, all documents, instruments and records
(including, without limitation, computer tapes or diskettes) that evidence or
relate to Transferred Receivables originated by such Seller.

          (e)  The Servicer shall hold in trust and legend appropriately for the
relevant Seller and the Purchaser, in accordance with their respective
interests, all computer tapes or diskettes that evidence or relate to
Transferred Receivables.

          (f)  The Servicer shall as soon as practicable following receipt turn
over to the relevant Seller any cash collections or other cash proceeds
deposited to a Lock-Box Account which are not Collections of Transferred
Receivables,

                                      42
<PAGE>
 
less, in the event the Seller is not the Servicer, all reasonable and
appropriate out-of-pocket costs and expenses of the Servicer of servicing,
collecting and administering the Receivables to the extent not covered by the
Servicer Fee received by it; provided, however, if the relevant Seller has
failed to pay or perform any of its obligations hereunder, the Servicer shall
retain any such collections which relate to Receivables which are not
Transferred Receivables and, at the direction of the Purchaser or its assignee,
apply the same to the payment or performance of such obligations.

          (g)  The Servicer also shall perform the other obligations of the
"Servicer" set forth in this Agreement with respect to the Transferred
Receivables originated by the relevant Seller.

          SECTION 6.03.  Servicer Fee.  The Purchaser shall pay to the Servicer,
so long as it is acting as the Servicer hereunder, a periodic collection fee
(the "Servicer Fee") of 0.75 of 1% per annum on the average daily amount of
outstanding Invested Amount with respect to the Purchased Receivables originated
by the relevant Seller, payable on the tenth day of each month  (or, if such day
is not a Business Day, the immediately succeeding Business Day) or such other
day during each calendar month as the Purchaser and the relevant Servicer shall
agree.

          SECTION 6.04.  Rights of the Purchaser.  (a)  The Purchaser may, at
any time, give notice of ownership and/or direct the Obligors of Transferred
Receivables and any Person obligated on any Related Security, or any of them,
that payment of all amounts payable under any Transferred Receivable be made
directly to the Purchaser or its designee.  Each Seller hereby transfers to the
Purchaser (and its assigns or designees) the exclusive ownership and control of
the Lock-Box Accounts maintained by such Seller for the purpose of receiving
Collections.

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

          (c)  Each Seller shall, at the Purchaser's request, assemble all of
the documents, instruments and other records (including, without limitation,
computer tapes and diskettes) which evidence the Transferred Receivables
originated by such Seller, and the related Contracts and Related Security, or
which

                                      43
<PAGE>
 
are otherwise necessary or desirable to collect the Transferred Receivables, and
the Related Security and Collections with respect thereto, and shall make the
same available to the Purchaser at a place selected by the Purchaser or its
designee.  The Purchaser shall also have the right to make copies of all such
documents, instruments and other records at any time.

          (d)  Each Seller hereby authorizes the Purchaser to take any and all
steps in such Seller's name and on behalf of each such Seller necessary or
desirable, in the determination of the Purchaser, to collect all amounts due
under any and all Transferred Receivables originated by such Seller, including,
without limitation, endorsing such Seller's name on checks and other instruments
representing Collections of Transferred Receivables originated by such Seller
and enforcing such Transferred Receivables and the Related Contracts.

          SECTION 6.05.  Responsibilities of the Sellers.  Anything herein to
the contrary notwithstanding:

          (a) Each Seller shall, prior to the initial Purchase from such Seller,
     transfer to the Purchaser (or its designee) legal and beneficial ownership
     of the collection accounts such Seller then maintains to receive
     Collections on the Receivables originated by such Seller which will be the
     subject of such Purchase (all of which accounts are identified on Schedule
     II), and furnish to the Purchaser (or is designee) a Lock-Box Agreement
     with respect to each such collection account, duly acknowledged by the bank
     holding each such collection account.  Thereupon each such collection
     account shall, without further action, become a Lock-Box Account, and such
     Lock-Box Accounts thereafter shall be under the irrevocable and exclusive
     ownership and control of the Purchaser or its designee;

          (b) Each Seller shall perform all of its obligations under the
     Contracts related to the Transferred Receivables originated by such Seller
     to the same extent as if such Seller had not sold or contributed
     Receivables hereunder and the exercise by the Purchaser of its rights
     hereunder shall not relieve such Seller from such obligations or its
     obligations with respect to the Transferred Receivables originated by such
     Seller;

          (c) The Purchaser shall not have any obligation or liability with
     respect to any Transferred Receivables or related Contracts, nor shall the
     Purchaser be obligated to perform any of the obligations of any Seller
     thereunder;

                                      44
<PAGE>
 
          (d)  Each Seller shall cooperate with the relevant Servicer in
     collecting amounts due from Obligors in respect of the Transferred
     Receivables; and

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

          SECTION 6.06.  Further Assurances.  (a)  Each Seller agrees that from
time to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that the Purchaser may
reasonably request in order to perfect, protect or more fully evidence the
ownership of and security interest in the Receivables, and the Related Security
and Collections with respect thereto, or to enable the Purchaser to exercise or
enforce any of its respective rights hereunder.

          (b)  Without limiting the generality of the foregoing, each Seller
will upon the Purchaser's request:

               (i)  execute and file such financing or continuation statements,
          or amendments thereto or assignments thereof, and such other
          instruments or notices, as may be necessary or appropriate;

              (ii)  deliver to the Purchaser copies of all Contracts and all
          records relating to the Contracts and the Receivables, whether in hard
          copy or in magnetic tape or diskette format (which if in magnetic tape
          or diskette format shall be compatible with the Purchaser's computer
          equipment); and

             (iii)  mark conspicuously each invoice or other agreement
          evidencing each Receivable originated by such Seller and the related
          Contract with a legend, acceptable to the Purchaser, stating that such
          Receivables and the Related Security and Collections with respect
          thereto have been sold, or a security interest therein has been
          granted, in accordance with this Agreement.

          (c)  Each Seller hereby authorizes the Purchaser to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or

                                      45
<PAGE>
 
any of the Receivables originated by such Seller and the Related Security now
existing or hereafter arising without the signature of such Seller where
permitted by law.  A photocopy or other reproduction of this Agreement shall be
sufficient as a financing statement where permitted by law.

          (d)  If any Seller fails to perform any of its agreements or
obligations under this Agreement, the Purchaser may (but shall not be required
to) itself perform, or cause performance of, such agreement or obligation, and
the expenses of the Purchaser incurred in connection therewith shall be payable
jointly and severally by the Sellers as provided in Section 8.01 or Section
9.06, as applicable.

          SECTION 6.07.  Transfer of Records to Purchaser.  Each Purchase and
contribution of Receivables hereunder shall include the transfer to the
Purchaser of all of the relevant Seller's right and title to and interest in the
records relating to such Receivables and shall include an irrevocable non-
exclusive license to the use of such Seller's computer software system to access
and create such records.  Such license shall be without royalty or payment of
any kind, is coupled with an interest, and shall be irrevocable until all of the
Transferred Receivables are either collected in full or become Defaulted
Receivables.

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

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

                                      46
<PAGE>
 
                                  ARTICLE VII

                             EVENTS OF TERMINATION

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

          (a) A Servicer Default shall have occurred; or

          (b)  Any Seller, any Affiliate of any Seller, or any designee of any
     Seller, as the case may be, shall fail (i) to transfer to the Purchaser
     when requested any rights which such Seller, such Affiliate or such
     designee, as the case may be, then has as Servicer within ten Business Days
     of the Purchaser's giving the notice referred to in Section 6.01(b)
     designating a new Servicer to succeed such Seller, such Affiliate or such
     designee, as the case may be, as Servicer, or (ii) to comply with the
     requirements of Section 2.03(b); or

          (c)  Any representation or warranty made or deemed made by any Seller
     or Interco under or in connection with this Agreement, the Original PCA or
     the Interco Agreement or any information or report delivered by any Seller
     or Interco under or in connection with this Agreement, the Original PCA or
     the Interco Agreement or any Monthly Report or other information or report
     delivered pursuant hereto or thereto or the Interco Agreement shall prove
     to have been incorrect or untrue in any material respect when made or
     deemed made or delivered and (if correctable) shall remain incorrect or
     untrue for ten days after the earlier of actual knowledge by such Seller or
     Interco, as the case may be, of such incorrectness or untruth or written
     notice to such Seller or Interco thereof, as the case may be; or

          (d) (i) Any Seller shall fail to perform or observe any covenant
     contained in Section 5.01, paragraph (a), (b), (d), (e), (f) or (g) of this
     Agreement and any such failure shall remain unremedied for twenty days
     after the earlier of such Seller's actual knowledge thereof or written
     notice to such Seller thereof, or (ii) any Seller or Interco shall fail to
     perform or observe any other term, covenant or agreement contained in this
     Agreement or the Interco Agreement (other than as described in paragraph
     (a) above or clause (i) of this paragraph (d)) or in any other agreement
     delivered in connection herewith on such Seller's or Interco's part to be
     performed or observed and any such failure shall remain unremedied for ten
     days after the

                                      47
<PAGE>
 
     earlier of such Seller's or Interco's actual knowledge thereof or written
     notice thereof shall have been given by the Purchaser to such Seller or
     Interco, as the case may be; or

          (e) Any Seller or Interco or any of its Subsidiaries shall fail to pay
     any principal of or premium or interest on any of its Indebtedness which is
     outstanding in a principal amount of at least $10,000,000 in the aggregate
     when the same becomes due and payable (whether by scheduled maturity,
     required prepayment, acceleration, demand or otherwise), or any other event
     shall occur or condition shall exist under any agreement or instrument
     relating to any such Indebtedness, and such failure to pay, event or
     condition shall continue after the applicable grace period, if any,
     specified in such agreement or instrument, and as a result thereof, the
     maturity of such Indebtedness is accelerated; or any such Indebtedness
     shall be declared to be due and payable, or required to be prepaid in full
     (other than by a regularly scheduled required prepayment), redeemed,
     purchased or defeased, or an offer to repay, redeem, purchase or defease
     such Indebtedness in full shall be required to be made, in each case prior
     to the final stated maturity thereof; or any such Indebtedness shall fail
     to be paid at the final stated maturity thereof; or
 
          (f) Any Purchase or contribution of Receivables hereunder, the Related
     Security with respect thereto, and the Collections with respect thereto,
     shall for any reason cease to constitute valid and perfected ownership of
     such Receivables, Related Security and Collections free and clear of any
     Adverse Claim except as provided for herein; provided, however, that no
     Event of Termination shall occur under this paragraph (f) if (i) the
     aggregate Outstanding Balance of the Receivables described above in this
     paragraph (f) does not exceed $250,000 at any time and (ii) the relevant
     Seller or Sellers repurchase all of such Receivables in accordance with the
     terms of Section 2.04(b) on or prior to the next Settlement Date; or

          (g) Any Seller or Interco shall make a general assignment for the
     benefit of creditors; or any proceeding shall be instituted by or against
     any Seller or Interco seeking to adjudicate it a bankrupt or insolvent, or
     seeking liquidation, winding up, reorganization, arrangement, adjustment,
     protection, relief, or composition of it or its debts under any law
     relating to bankruptcy, insolvency or reorganization or relief of debtors,
     or seeking the entry of an order for relief or the appointment of a
     receiver, trustee, custodian or other similar official for it or for

                                      48
<PAGE>
 
     any substantial part of its property and, in the case of any such
     proceeding instituted against any Seller or Interco (but not instituted by
     any of them), either such proceeding shall remain undismissed or unstayed
     for a period of 30 days, or any of the actions sought in such proceeding
     (including, without limitation, the entry of an order for relief against,
     or the appointment of a receiver, trustee, custodian or other similar
     official for, it or for any substantial part of its property) shall occur;
     or any Seller or Interco shall take any corporate action to authorize any
     of the actions set forth above in this subsection (g); or

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

          (i) Interco shall cease to own, directly or indirectly, a number of
     shares of any Seller sufficient to elect a majority of the board of
     directors of such Seller;

then, and in any such event, the Purchaser may, by notice to the Sellers,
declare the Facility Termination Date to have occurred, except that, in the case
of any event described above in subsection (g) with respect to any Seller, the
Facility Termination Date shall be deemed to have occurred automatically upon
the occurrence of such event.  Upon any such termination of the Facility, the
Purchaser shall have, in addition to all the rights and remedies under this
Agreement, all other rights and remedies with respect to the Receivables
provided after default under the UCC of the applicable jurisdiction and under
other applicable laws, which rights and remedies shall be cumulative.


                                 ARTICLE VIII

                                INDEMNIFICATION

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

          (i)  reliance on any representation or warranty made by any Seller
     under or in connection with this Agreement, any Monthly Report or any other
     information or report delivered

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<PAGE>
 
     by any Seller pursuant hereto, which shall have been incorrect in any
     material respect when made;

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

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

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

          (v)  the existence of any dispute, claim, offset or defense (other
     than discharge in bankruptcy of the Obligor) of the Obligor to the payment
     thereof (including, without limitation, a defense based on such Receivable
     or the related Contract not being a legal, valid and binding obligation of
     such Obligor enforceable against it in accordance with its terms), or of
     any other claim resulting from the sale of the products or services related
     to such Receivable or from the furnishing or failure to furnish such
     products or services; provided, however, this clause (v) shall not be
     deemed to include any dispute, claim, set-off or defense to the payment of
     any Receivable arising after the transfer of such Receivable to the
     Purchaser hereunder and arising solely as a result of actions taken by the
     Purchaser or its assigns;

         (vi)  any failure of any Seller, as Servicer or otherwise, to perform
     its duties or obligations in accordance with the provisions of Article VI
     or to perform its duties or obligations under any Contract related to a
     Transferred Receivable;

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

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<PAGE>
 
       (viii)  any commingling of Collections of Receivables by any Seller, an
     Affiliate of any Seller, or a designee of any Seller, as Servicer or
     otherwise, at any time with other funds of such Seller or an Affiliate;

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

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

         (xi) any Dilution with respect to any Transferred Receivable.

It is expressly agreed and understood by the parties (i) that the foregoing
indemnification is not intended to, and shall not, constitute a guarantee of the
collectibility or payment of the Transferred Receivables and (ii) that nothing
in this Section 8.01 shall require any Seller to indemnify any Indemnified Party
(A) for Receivables which are not collected, not paid or uncollectible on
account of the insolvency, bankruptcy, or financial inability to pay of the
applicable Obligor, (B) for damages, losses, claims or liabilities or related
costs or expenses resulting from such Indemnified Party's gross negligence or
willful misconduct, (C) for any income tax or franchise tax imposed on such
Indemnified Party by (i) the jurisdiction under the laws of which such
Indemnified Party is organized (or any political subdivision thereof), (ii) any
jurisdiction in which an office of such Indemnified Party maintaining the
ownership of the Transferred Receivables is located (or any political
subdivision thereof), or (iii) any jurisdiction in which such Indemnified Party
is already subject to tax, and arising out of or as a result of this Agreement
or in respect of any Receivable or any Contract.


                                  ARTICLE IX

                                 MISCELLANEOUS

          SECTION 9.01.  Amendments, Etc.  No amendment or waiver of any
provision of this Agreement nor consent to any departure by any Seller therefrom
shall in any event be effective unless the same shall be in a writing signed by
the Purchaser and, in the case of an amendment, the Sellers, and then such
amendment,

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<PAGE>
 
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

          SECTION 9.02.  Notices, Etc.  (a)  All notices and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including facsimile communication) and be telefaxed or delivered, to
each party hereto, at its address set forth under its name on the signature
pages hereof or at such other address as shall be designated by such party in a
written notice complying with the requirements of this Section 9.02 to the other
parties hereto.

          (b)  Notices and communications by facsimile shall be effective upon
confirmation (which may be verbal) of receipt.

          SECTION 9.03.  No Waiver; Remedies.  No failure on the part of the
Purchaser to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right.  The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.

          SECTION 9.04.  Binding Effect; Assignability.  (a)  This Agreement
shall be binding upon and inure to the benefit of the Sellers, the Purchaser and
their respective successors and assigns; provided, however, that no Seller may
assign its rights or obligations hereunder or any interest herein without the
prior written consent of the Purchaser.  In connection with any sale or
assignment by the Purchaser of all or a portion of the Transferred Receivables,
the buyer or assignee, as the case may be, shall, to the extent of its purchase
or assignment, have all rights of the Purchaser under this Agreement (as if such
buyer or assignee, as the case may be, were the Purchaser hereunder) except to
the extent specifically provided in the agreement between the Purchaser and such
buyer or assignee, as the case may be.

          (b)  This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until such time, after the Facility Termination Date,
when all of the Transferred Receivables are either collected in full or become
Defaulted Receivables; provided, however, that rights and remedies with respect
to any breach of any representation and warranty made by any Seller pursuant to
Article IV and the provisions of Article VIII and Sections 9.06, 9.07 and 9.08
shall be continuing and shall survive any termination of this Agreement.


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<PAGE>
 
          SECTION 9.05.  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE PURCHASER'S OWNERSHIP OF OR
SECURITY INTEREST IN THE RECEIVABLES, OR REMEDIES HEREUNDER IN RESPECT THEREOF,
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

          SECTION 9.06.  Costs, Expenses and Taxes.  (a)  In addition to the
rights of indemnification granted to the Purchaser pursuant to Article VIII
hereof, the Sellers jointly and severally shall pay on demand all costs and
expenses in connection with the preparation, execution, delivery and
administration of this Agreement and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Purchaser with respect thereto and with respect to
advising the Purchaser as to its rights and remedies under this Agreement, and
the Sellers jointly and severally agree to pay all costs and expenses, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement of this Agreement and the other documents to be delivered hereunder
excluding, however, any costs of enforcement or collection of Transferred
Receivables.

          (b)  In addition, the Sellers jointly and severally agree to pay any
and all stamp and other taxes and fees payable in connection with the execution,
delivery, filing and recording of this Agreement or the other documents to be
delivered hereunder, and the Sellers jointly and severally agree to indemnify
the Purchaser against any liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.

          SECTION 9.07.  No Proceedings.  Each Seller hereby agrees that it will
not institute against the Purchaser any proceeding of the type referred to in
Section 7.01(g) so long as there shall not have elapsed one year plus one day
since the later of (i) the Facility Termination Date and (ii) the date upon
which all of the Transferred Receivables are either collected in full or become
Defaulted Receivables.

          SECTION 9.08.  Confidentiality.  The Purchaser agrees to use
reasonable efforts to keep confidential any financial reports or other
information relating to the Transferred Receivables previously or from time to
time supplied to it by the Sellers hereunder to the extent that such information
is not and does not become publicly available through or with the consent or
acquiescence of the relevant Seller and will use such financial reports and
other information only in connection with the

                                      53
<PAGE>
 
transactions contemplated by this Agreement and for no other purpose, provided
that the Purchaser may disclose any such information (a) to any party to the CL
Sale Agreement and any agreement executed in connection therewith, (b) to the
extent required by applicable law, (c) to counsel for any party to the CL Sale
Agreement and any agreement executed in connection therewith, or to their
respective accountants, each of whom shall also be bound by the confidentiality
obligations set forth herein, (d) to agents, examiners and auditors and
appropriate government examining authorities, (e) to the extent necessary or
appropriate in connection with any litigation to which the Purchaser or any
party to the CL Sale Agreement and any agreement executed in connection
therewith, is a party or (f) to any actual or prospective holder, participant in
or assignee of all or any part of the Transferred Receivables provided that each
such actual or prospective holder, participant or assignee has agreed in writing
that it will comply with the restrictions contained in this Section 9.08 to the
same extent as if it were the Purchaser.  The determination by the Purchaser as
to the application of the circumstances described in the foregoing clauses (a)
through (f) shall be conclusive if made in good faith.

          SECTION 9.09.  Independent Decision.  Each Seller acknowledges that it
has, independently and without reliance upon the Purchaser and based upon such
documents and information as it has deemed appropriate, made its own analysis
and decision to enter into this Agreement.

          SECTION 9.10.  Third Party Beneficiary.  Each of the parties hereto
hereby acknowledges that the Purchaser may assign all or any portion of its
rights under this Agreement and the Interco Agreement and that such assignees
may (except as otherwise agreed to by such assignees) further assign their
rights under this Agreement and the Interco Agreement, and each Seller hereby
consents to any such assignments.  All such assignees, including parties to the
CL Sale Agreement in the case of assignment to such parties, shall be third
party beneficiaries of, and shall be entitled to enforce the Purchaser's rights
and remedies under, this Agreement and the Interco Agreement to the same extent
as if they were parties thereto, except to the extent specifically limited under
the terms of their assignment.

          SECTION 9.11.  Execution in Counterparts, Etc.  (a) 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.

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<PAGE>
 
          (b)  Delivery of an executed counterpart of a signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement.


















                                      55
<PAGE>
 
          IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

SELLERS:                 THE LANE COMPANY, INCORPORATED


                         By:   David P. Howard
                             ------------------------------
                             Name:  David P. Howard
                             Title: Vice President

                         Address:

                         The Lane Company, Incorporated
                         c/o Interco Incorporated
                         101 South Hanley Road
                         St. Louis, Missouri  63105
                         Attention:  Lynn Chipperfield,
                                     Assistant Secretary
                         Facsimile No.:  (314) 863-5306


                         ACTION INDUSTRIES, INC.


                         By:    David P. Howard
                             ------------------------------
                             Name:  David P. Howard
                             Title: Vice President

                         Address:

                         Action Industries, Inc.
                         c/o Interco Incorporated
                         101 South Hanley Road
                         St. Louis, Missouri  63105
                         Attention:  Lynn Chipperfield,
                                      Assistant Secretary
                         Facsimile No.:  (314) 863-5306

                                      56
<PAGE>
 
                         BROYHILL FURNITURE INDUSTRIES, INC.


                         BY:   David P. Howard
                             ------------------------------
                             Name:  David P. Howard
                             Title: Vice President

                         Address:

                         Broyhill Furniture Industries, Inc.
                         c/o Interco Incorporated
                         101 South Hanley Road
                         St. Louis, Missouri  63105
                         Attention:  Lynn Chipperfield,
                                     Assistant Secretary
                         Facsimile No.:  (314) 863-5306



                         THOMASVILLE FURNITURE INDUSTRIES, INC.


                         By:    David P. Howard
                             ------------------------------
                             Name:
                             Title:

                         Address:
                         Thomasville Furniture Industries, Inc.
                         c/o Interco Incorporated
                         101 South Hanley Road
                         St. Louis, Missouri  63105
                         Attention:  Lynn Chipperfield,
                                     Assistant Secretary
                         Facsimile No.:  (314) 863-5306

                                      57
<PAGE>
 
PURCHASER:               INTERCO RECEIVABLES CORP.


                         By:   Lynn Chipperfield
                             -----------------------------
                             Name:  Lynn Chipperfield
                             Title: Vice President

                         Address:

                         Interco Receivables Corp.
                         101 South Hanley Road
                         St. Louis, Missouri  63105
                         Attention:  Lynn Chipperfield,
                                     Secretary
                         Facsimile No.:  (314) 863-5306


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