Case KG Doc 407 Filed 10/30/18 Page 1 of 10 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE : : : :

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1 Case KG Doc 407 Filed 10/30/18 Page 1 of 10 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re HERITAGE HOME GROUP LLC, et al., Debtors x Chapter 11 Case No (KG) Jointly Administered Hearing Date December 12, 2018 at 300 p.m. (ET) Objection Deadline November 13, 2018 at 400 p.m. (ET) DEBTORS MOTION FOR ENTRY OF AN ORDER, PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 9019, APPROVING THE SETTLEMENT AGREEMENT BY AND BETWEEN THE DEBTORS AND RAYMOUR & FLANIGAN FURNITURE The above-captioned debtors and debtors in possession (collectively, the Debtors ) hereby submit this motion (this Motion ) seeking entry of an order, substantially in the form attached hereto as Exhibit A (the Proposed Order ), pursuant to section 105(a) of title 11 of the United States Code (the Bankruptcy Code ) and Rule 9019 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), approving the settlement agreement (the Settlement Agreement ), 2 by and between the Debtors and Raymours Furniture Company, Inc. d/b/a Raymour & Flanigan Furniture ( Raymour, and together with the Debtors, the Parties ). In support of this Motion, the Debtors respectfully represent as follows JURISDICTION 1. The Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157 and 1334, and the Amended Standing Order of Reference from the United States District The Debtors in these chapter 11 cases, along with the last four digits of each debtor s tax identification number, as applicable, are Heritage Home Group LLC (9506); HH Global II B.V. (0165); HH Group Holdings US, Inc. (7206); HHG Real Property LLC (3221); and HHG Global Designs LLC (1150). The Debtors corporate headquarters is located at 1925 Eastchester Drive, High Point, North Carolina A copy of the Settlement Agreement is attached as Exhibit 1 to the Proposed Order.

2 Case KG Doc 407 Filed 10/30/18 Page 2 of 10 Court for the District of Delaware dated as of February 29, This is a core proceeding under 28 U.S.C. 157(b) and venue is proper in this district pursuant to 28 U.S.C and The statutory predicates for the relief requested herein are section 105(a) of the Bankruptcy Code and Bankruptcy Rule Pursuant to Rule (f) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware, the Debtors consent to the entry of a final judgment or order with respect to this Motion if it is determined that the Court would lack Article III jurisdiction to enter such final order or judgment absent the consent of the Debtors. BACKGROUND 3. On July 29, 2018 (the Petition Date ), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The cases are being jointly administered pursuant to Bankruptcy Rule 1015(b). The Debtors continue to operate their business and manage their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 4. On August 8, 2018 the Office of the United States Trustee for the District of Delaware (the U.S. Trustee ) appointed an official committee of unsecured creditors in these chapter 11 cases (the Committee ). No trustee or examiner has been appointed in these chapter 11 cases. 5. Information regarding the Debtors businesses, capital structure, and the circumstances leading to these chapter 11 cases is set forth in the Declaration of Robert D. Albergotti in Support of Chapter 11 Petitions and First-Day Motions [D.I. 12] (the First Day Declaration )

3 Case KG Doc 407 Filed 10/30/18 Page 3 of As set forth in the First Day Declaration, the Debtors paramount goal in these chapter 11 cases is to maximize the value of their estates for the benefit of the Debtors creditor constituencies and other stakeholders through the sale of the Debtors business units and remaining assets. At this time, the majority of the Debtors sale process is complete, with the Court having entered the following Orders a. On September 26, 2018, the Court entered an order [D.I. 324] approving the sale of substantially all of the Debtors assets related to the Hickory Chair, Pearson, Maitland-Smith, and La Barge Brands (the Luxury Sale ). The Luxury Sale closed on October 12, b. On September 27, 2018, the Court entered a final order 3 [D.I. 331] authorizing, among other things, the Debtors to enter into and perform their obligations under that certain store closing and asset disposition agreement dated as of August 29, 2018, by and among SB360 Capital Partners, LLC. c. On October 23, 2018, the Court entered orders [D.I ] approving the sales of the Debtors intellectual property and other assets related to the Debtors business of designing, manufacturing, sourcing, licensing, and selling home furnishings under the Broyhill, Thomasville, Drexel, Drexel Heritage, and Henredon brands. The Debtors are continuing to market certain remaining assets, which include both real and personal property. THE SETTLEMENT AGREEMENT 7. Prior to their sale process, the Debtors were world leaders in designing, manufacturing, sourcing and retailing home furnishings. In the ordinary course of their business, the Debtors sold and delivered certain products to Raymour for sale in its stores through a series of purchase orders. The Debtors contend that the amount currently due and owing from Raymour as a result of recent sales is $1,255,000 (the Unpaid Receivable ). Raymour contends An amended final order was entered on September 28, 2018 [D.I. 335]. 3

4 Case KG Doc 407 Filed 10/30/18 Page 4 of 10 that because the Debtors will not be able to fulfill their warranty obligations with respect to the products delivered, it should not be required to remit payment for the Unpaid Receivable. 8. The Debtors engaged in good faith negotiations with Raymour in an effort to resolve their dispute regarding the Unpaid Receivable. As a result of those discussions, the Parties have agreed to resolve and settle their dispute with respect to the Unpaid Receivable on the terms and conditions set forth in the Settlement Agreement. The Parties have agreed that Raymour will pay the Debtors the Settlement Payment (as defined below) for the purpose of resolving all claims that the Debtors and Raymour may have against one another, without admission of liability. The Debtors believe that entry into the Settlement Agreement will allow the Debtors to avoid incurring substantial litigation costs and expenses, and is in the best interests of the Debtors estates. The salient terms of the Settlement Agreement are as follows 4 a. Payment by Raymour. Within one (1) business day of entry of the Proposed Order, Raymour shall remit to the Debtors a payment in the amount of $1,068, (the Settlement Payment ), which shall represent a final settlement of the Debtors claims against Raymour. b. Debtors Release of Raymour. Upon payment of the Settlement Payment, the Debtors, their estates, predecessors-in-interest, successors-in-interest (including, without limitation, any plan trustee, liquidating trustee, plan administrator or other liquidating agent under any plan of reorganization or any bankruptcy trustee (including any Chapter 7 trustee) appointed in these chapter 11 cases), and their affiliates, and their respective officers, directors, shareholders, employees, and agents (and with the Debtors, collectively, the Debtor Release Parties ) hereby irrevocably and unconditionally waive, release, relinquish, remise, acquit and forever discharge Raymour, its respective affiliates, partners, trustees, members, officers, directors, representatives, employees, managers, attorneys, agents, personal representatives, heirs, executors, administrators, successors and assigns (collectively, the Raymour Release Parties ), from any and all claims, rights, cause and causes of action, manner of action This summary is for informational purposes only and is not intended to modify in any way the terms and conditions of the Settlement Agreement. To the extent that there is any inconsistency between the terms described herein and the terms of the Settlement Agreement, the terms of the Settlement Agreement shall control. Any capitalized terms used in this section not otherwise defined herein shall be given the meanings ascribed to them in the Settlement Agreement. 4

5 Case KG Doc 407 Filed 10/30/18 Page 5 of 10 and actions, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, agreements, promises, attorneys fees, costs, judgments, executions, claims, damages, and demands whatsoever, in law or in equity, whether known or unknown, accrued or unaccrued, and whether foreseeable or unforeseeable, of whatever kind or character whatsoever (collectively, Claims ). Notwithstanding the foregoing in Section 3 of the Settlement Agreement, nothing in the Settlement Agreement shall be deemed to release Raymour of its obligations under the Settlement Agreement. c. Raymour s Release of the Debtors. Upon payment of the Settlement Payment, the Raymour Release Parties hereby irrevocably and unconditionally waive, release, relinquish, remise, acquit and forever discharge the Debtor Release Parties from any and all Claims. Notwithstanding the foregoing in Section 4 of the Settlement Agreement, nothing in the Settlement Agreement shall be deemed to release Debtors of their obligations under the Settlement Agreement; provided, further, if a bankruptcy trustee or creditor or assignee of one or more Debtors asserts against Raymour, that the settlement herein was not valid to compromise or settle the debts of Raymour to Debtors existing on the date hereof, or that sums in excess of the Settlement Payment are due and owing by Raymour on account of sums allegedly owing to one or more Debtors on the date hereof, Debtors jointly and severally shall indemnify, defend and hold harmless Raymour from and against any such additional amount subsequently paid as well as the reasonable attorneys fees and expenses incurred by Raymour in defending such assertion. 9. The Debtors have shared a copy of the Settlement Agreement with the Committee, PNC Bank, National Association, in its capacity as Pre-Petition Agent and DIP Agent, and KPS Special Situations Fund III (A), L.P., in its capacity as Pre-Petition Term Agent, and each of these parties has informed the Debtors that it supports the Debtors entry into the Settlement Agreement. RELIEF REQUESTED 10. By this Motion, the Debtors request entry of an order, substantially in the form of the Proposed Order attached hereto as Exhibit A, approving the Settlement Agreement

6 Case KG Doc 407 Filed 10/30/18 Page 6 of BASIS FOR RELIEF 11. Bankruptcy Rule 9019, which governs the approval of compromises and settlements by a debtor, provides that, [o]n motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. FED. R. BANKR. P Further, section 105(a) of the Bankruptcy Code provides that [t]he court may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title. 11 U.S.C. 105(a). 12. A starting point in analyzing any proposed settlement is the general policy of encouraging settlements and favoring compromises. See Myers v. Martin (In re Martin), 91 F.3d 389, 394 (3d Cir. 1996). To approve a settlement, a bankruptcy court must determine that such settlement is in the best interest of a debtor s estate. Law Debenture Trust Co. of New York v. Kaiser Aluminum Corp. (In re Kaiser Aluminum Corp.), 339 B.R. 91, (D. Del. 2006). In addition, a court must assess and balance the value of the claim that is being compromised against the value to the estate of the acceptance of the compromise proposal in light of four factors (1) the probability of success in the litigation, (2) the likely difficulties in collection, (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it, and (4) the paramount interests of the creditors. Id. at 96 (quoting Martin, 91 F.3d at 393). The United States District Court for the District of Delaware has explained that a court s ultimate inquiry is whether a settlement is fair, reasonable, and in the best interest of a debtor s estate. In re Marvel Entm t Grp., Inc., 222 B.R. 243, 249 (D. Del. 1998) (quoting In re Louise s, Inc., 211 B.R. 798, 801 (D. Del. 1997)). 13. The decision to approve a particular settlement lies within the sound discretion of the bankruptcy court. In re World Health Alts., Inc., 344 B.R. 291, 296 (Bankr. D. Del. 2006). A court need not decide the numerous issues of law and fact raised by the settlement 6

7 Case KG Doc 407 Filed 10/30/18 Page 7 of and it need not be convinced that the proposed settlement is the best possible, rather [t]he court need only conclude that the settlement falls within the reasonable range of litigation possibilities somewhere above the lowest point in the range of reasonableness. In re Nutritional Sourcing Corp., 398 B.R. 816, 833 (Bankr. D. Del. 2008) (quoting In re Coram Healthcare Corp., 315 B.R. 321, 330 (Bankr. D. Del. 2004)). 14. In the Debtors business judgment, the resolution embodied in the Settlement Agreement is reasonable and in the best interest of the Debtors, their estates, their creditors and other parties in interest. The proposed settlement provides for a fair and practical resolution of the issues presented, which, if litigated, would consume the Debtors limited resources, and complicate and delay recovery of a significant receivable. The Settlement Agreement was the product of extensive good-faith discussions and negotiations between the Parties, culminating in a settlement that falls well within the range of reasonable litigation outcomes. Among other things, the Settlement Agreement provides for prompt payment to the Debtors of the Settlement Payment, and resolves any and all claims that Raymour may have otherwise asserted in these chapter 11 cases. In addition, as discussed below, the applicable Martin factors weigh in favor of approving the Settlement Agreement. A. The Probability of Success in Litigation 15. Had the Parties failed to reach a consensual resolution, the Debtors might have been forced to litigate with Raymour, at a significant cost to the Debtors and their estates. By contrast, the terms of the Settlement Agreement will permit the Debtors to promptly collect the Settlement Payment, which represents less than a 15% discount of the Outstanding Receivable, without the expense, delay and uncertainty of litigation, including regarding various complex setoff, recoupment and damages issues. In light of the foregoing, the first Martin factor weighs significantly in favor of approving the Settlement Agreement. 7

8 Case KG Doc 407 Filed 10/30/18 Page 8 of 10 B. The Complexity of the Litigation Involved, and the Expense, Inconvenience and Delay Necessarily Attending It 16. Absent the Parties entry into the Settlement Agreement, resolving the issues between the Parties would involve litigation and discovery. Such litigation and discovery, and the uncertainty associated with it, would be at a considerable expense to the Debtors estates and creditors. By fully and finally resolving all of the Parties disputes as provided for in the Settlement Agreement, the Debtors, their estates and creditors are afforded certainty with respect to such matters in a timely and efficient manner, without the need to incur the costs necessarily associated with litigating with Raymour, and the attendant distraction to the Debtors efforts to wind down their affairs. Accordingly, the third Martin factor weighs in favor of approving the Settlement Agreement. C. The Paramount Interest of Creditors 17. Here, the paramount interest of creditors will be best served by approving the Settlement Agreement. Such approval will avoid costly and time-consuming litigation with Raymour, the outcome of which would be uncertain, while providing an immediate benefit to the Debtors estates in the form of a favorable settlement, which, among other things, will allow the Debtors to recover a significant receivable and avoid any claims that may have been asserted by Raymour, and to focus their efforts on winding down their affairs in a timely and efficient manner. Thus, the Court s approval of the Settlement Agreement is in the best interests of the Debtors, their creditors and their estates, and, for the reasons set forth above, this Martin factor weighs in favor of approving the Settlement Agreement. REQUEST FOR WAIVER OF STAY 18. To implement the Settlement Agreement, the Debtors seek a waiver of any stay of the effectiveness of the order approving this Motion. Pursuant to Bankruptcy Rule

9 Case KG Doc 407 Filed 10/30/18 Page 9 of (h), any order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise. The Debtors submit that ample cause exists to justify a waiver of the 14-day stay imposed by Bankruptcy Rule 6004(h) to allow the Settlement Agreement take effect immediately to bring finality to a pending dispute. Accordingly, the Debtors respectfully request a waiver Bankruptcy Rule 6004(h) to the extent it is deemed applicable. NOTICE 19. Notice of the Motion has been provided to (i) the U.S. Trustee; (ii) PNC Bank, National Association, in its capacity as Pre-Petition Agent and DIP Agent; (iii) KPS Special Situations Fund III (A), L.P., in its capacity as Pre-Petition Term Agent; (iv) counsel to the Committee; (v) Raymour; and (vi) those parties who have filed formal requests for notice in these chapter 11 cases pursuant to Bankruptcy Rule The Debtors respectfully submit that, in light of the nature of the relief requested, no other or further notice need be given

10 Case KG Doc 407 Filed 10/30/18 Page 10 of 10 WHEREFORE, the Debtors respectfully request that the Court (i) enter an order, substantially in the form attached hereto as Exhibit A, approving the Settlement Agreement; and (ii) grant such other and further relief as the Court deems just and proper. Dated October 30, 2018 Wilmington, Delaware YOUNG CONAWAY STARGATT & TAYLOR, LLP /s/ Kenneth J. Enos Pauline K. Morgan (No. 3650) Kenneth J. Enos (No. 4544) Jaime Luton Chapman (No. 4936) Ashley E. Jacobs (No. 5635) Shane M. Reil (No. 6195) Rodney Square 1000 North King Street Wilmington, Delaware Telephone (302) Facsimile (302) Counsel to the Debtors and Debtors in Possession

11 Case KG Doc Filed 10/30/18 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re HERITAGE HOME GROUP LLC, et al., Debtors. 1 Chapter 11 Case No (KG) Jointly Administered x NOTICE OF MOTION Hearing Date December 12, 2018 at 300 p.m. (ET) Objection Deadline November 13, 2018 at 400 p.m. (ET) TO (I) THE OFFICE OF THE UNITED STATES TRUSTEE FOR THE DISTRICT OF DELAWARE; (II) COUNSEL TO PNC BANK, NATIONAL ASSOCIATION, IN ITS CAPACITY AS PRE-PETITION AGENT AND DIP AGENT; (III) COUNSEL TO KPS SPECIAL SITUATIONS FUND III (A), L.P., IN ITS CAPACITY AS PRE-PETITION TERM AGENT; (IV) COUNSEL TO THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS; (V) RAYMOUR; AND (VI) ALL PARTIES WHO HAVE REQUESTED NOTICE IN THESE CHAPTER 11 CASES PURSUANT TO BANKRUPTCY RULE The above captioned debtors and debtors in possession (collectively, the Debtors ) have filed the attached Debtors Motion for Entry of an Order, Pursuant to Section 105(a) of the Bankruptcy Code and Bankruptcy Rule 9019, Approving the Settlement Agreement by and Between the Debtors and Raymour & Flanigan Furniture (the Motion ). PLEASE TAKE FURTHER NOTICE that any objections or responses to the relief requested in the Motion must be filed on or before November 13, 2018 at 400 p.m. (ET) (the Objection Deadline ) with the United States Bankruptcy Court for the District of Delaware, 824 N. Market Street, 3 rd Floor, Wilmington, Delaware At the same time, copies of any responses or objections to the Motion must be served upon the undersigned counsel to the Debtors so as to be received on or before the Objection Deadline. PLEASE TAKE FURTHER NOTICE THAT A HEARING TO CONSIDER THE MOTION WILL BE HELD ON DECEMBER 12, 2018 AT 300 P.M. (ET) BEFORE THE HONORABLE KEVIN GROSS IN THE UNITED STATES BANKRUPTCY COURT FOR 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s tax identification number, as applicable, are Heritage Home Group LLC (9506); HH Global II B.V. (0165); HH Group Holdings US, Inc. (7206); HHG Real Property LLC (3221); and HHG Global Designs LLC (1150). The Debtors corporate headquarters is located at 1925 Eastchester Drive, High Point, North Carolina

12 Case KG Doc Filed 10/30/18 Page 2 of 2 THE DISTRICT OF DELAWARE, 824 N. MARKET STREET, 6TH FLOOR, COURTROOM NO. 3, WILMINGTON, DELAWARE PLEASE TAKE FURTHER NOTICE THAT IF NO OBJECTIONS OR RESPONSES TO THE MOTION ARE TIMELY FILED AND RECEIVED IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED THEREIN WITHOUT FURTHER NOTICE OR A HEARING. Dated October 30, 2018 Wilmington, Delaware YOUNG CONAWAY STARGATT & TAYLOR, LLP /s/ Kenneth J. Enos Pauline K. Morgan (No. 3650) Kenneth J. Enos (No. 4544) Jaime Luton Chapman (No. 4936) Ashley E. Jacobs (No. 5635) Shane M. Reil (No. 6195) Rodney Square, 1000 North King Street Wilmington, Delaware Telephone (302) Facsimile (302) Counsel to the Debtors and Debtors in Possession

13 Case KG Doc Filed 10/30/18 Page 1 of 10 EXHIBIT A PROPOSED ORDER

14 Case KG Doc Filed 10/30/18 Page 2 of 10 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x Chapter 11 In re Case No (KG) HERITAGE HOME GROUP LLC, et al., Jointly Administered Debtors. 1 RE Docket No x ORDER, PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 9019, APPROVING THE SETTLEMENT AGREEMENT BY AND BETWEEN THE DEBTORS AND RAYMOUR & FLANIGAN FURNITURE Upon the motion (the Motion ), 2 filed by the above-captioned debtors and debtors in possession (collectively, the Debtors ), seeking entry of an order approving a settlement agreement by and between the Debtors and Raymour (collectively, the Parties ); and this Court having found that it has jurisdiction over this matter pursuant to 28 U.S.C. 1334(b) and 157, and the Amended Standing Order of Reference from the United States District Court for the District of Delaware dated as of February 29, 2012; and this Court having found that venue of these cases and the Motion in this district is proper pursuant to 28 U.S.C and 1409; and this Court having found that this matter is a core proceeding pursuant to 28 U.S.C. 157(b); and this Court having found that it may enter a final order consistent with Article III of the United States Constitution; and this Court having found that notice of the Motion has been given as set forth in the Motion and that such notice is adequate and no other or further notice need be given; and this Court having found that the relief sought in the Motion is in the best interests of The Debtors in these chapter 11 cases, along with the last four digits of each debtor s tax identification number, as applicable, are Heritage Home Group LLC (9506); HH Global II B.V. (0165); HH Group Holdings US, Inc. (7206); HHG Real Property LLC (3221); and HHG Global Designs LLC (1150). The Debtors corporate headquarters is located at 1925 Eastchester Drive, High Point, North Carolina Capitalized terms used in this Order but not otherwise defined herein shall have the meanings ascribed to such terms in the Motion. 1

15 Case KG Doc Filed 10/30/18 Page 3 of 10 the Debtors, their estates, their creditors, and all other parties in interest; and this Court having found that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and after due deliberation and sufficient cause appearing therefor, IT IS HEREBY ORDERED THAT 1. The Motion is GRANTED as set forth herein. 2. The Settlement Agreement attached hereto as Exhibit 1 is approved in its entirety, pursuant to section 105(a) of the Bankruptcy Code and Bankruptcy Rule The Debtors are authorized to enter into the Settlement Agreement, and to take any and all actions necessary and appropriate to consummate the Settlement Agreement, including, without limitation, executing and delivering any documents, agreements or instruments and remitting payments, as may be necessary or appropriate to implement the Settlement Agreement. 4. Raymour shall pay the Debtors the amount of $1,068, within one (1) business day after the entry of this Order. 5. This Order and the Settlement Agreement shall be binding on the Debtors and Raymour, either of the foregoing parties successors and/or assigns, and all other creditors and parties in interest in the chapter 11 cases (including, without limitation, the Committee, any trustee or examiner appointed in the chapter 11 cases or any chapter 7 trustee, or any other person, party or entity to, in any jurisdiction anywhere in the world, directly or indirectly). 6. Notwithstanding any provision in the Bankruptcy Rules to the contrary, including, without limitation, Bankruptcy Rule 6004 (a) this Order shall be effective immediately and enforceable upon its entry; (b) the Debtors are not subject to any stay in the implementation, enforcement or realization of the relief granted in this Order; and (c) the

16 Case KG Doc Filed 10/30/18 Page 4 of 10 Debtors are authorized and empowered to, and may in their discretion and without further delay, take any action and perform any act necessary to implement and effectuate the terms of this Order. 7. The automatic stay in the chapter 11 cases is hereby modified to the extent necessary to permit the implementation of the terms of the Settlement Agreement. 8. This Court shall retain jurisdiction with respect to any matters, claims, rights or disputes arising from or related to the Motion, the Settlement Agreement or the implementation of this Order

17 Case KG Doc Filed 10/30/18 Page 5 of 10 EXHIBIT 1 SETTLEMENT AGREEMENT

18 Case KG Doc Filed 10/30/18 Page 6 of 10 SETTLEMENT AGREEMENT AND MUTUAL RELEASE THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (the Settlement Agreement ) is made as of October 30th, 2018 (the Effective Date ), by and between HERITAGE HOME GROUP LLC ( HHG ); HH GLOBAL II B.V., HH GROUP HOLDINGS US, INC., HHG REAL PROPERTY LLC, and HHG GLOBAL DESIGNS LLC (collectively, the Debtors ) and RAYMOURS FURNITURE COMPANY, INC. D/B/A RAYMOUR & FLANIGAN FURNITURE ( Raymour ). BACKGROUND WHEREAS, Raymour purchased a certain quantity of goods from HHG under the Broyhill and Thomasville brand names through a series of purchase orders; WHEREAS, at the time Raymour purchased goods from HHG, the Broyhill and Thomasville brand names were owned by HHG and HHG represents and warrants it has not sold or assigned its right to collect the purchase price for such goods from Raymour; WHEREAS, the Debtors filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court in Wilmington, Delaware (the Court ) on July 29, 2018 (the Bankruptcy Cases ); WHEREAS, a dispute arose between HHG and Raymour regarding the amount of a receivables owed by Raymour to HHG; WHEREAS, the Debtors and Raymour have agreed to enter into this Settlement Agreement for the purpose of resolving all claims that the Debtors and Raymour may have against one another, without admission of liability; and WHEREAS, the Debtors will seek Bankruptcy Court approval of this Settlement Agreement by filing a motion (including a proposed order) in the Bankruptcy Cases under Rule 9019 of the Federal Rules of Bankruptcy Procedure (the 9019 Motion ). NOW, THEREFORE, in consideration of the recitals made above (which are made a part of this Settlement Agreement), the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Debtors and Raymour agree as follows 1. Approval by the Court. This Settlement Agreement and the terms and conditions herein are subject to the Court's entry of a final and non-appealable order in the Bankruptcy Cases pursuant to the 9019 Motion, which order approving this Settlement Agreement shall incorporate the terms and conditions of this Settlement Agreement (the Proposed Order ). The Proposed Order shall be final and non-appealable if the order has not been reversed, stayed, modified, or amended; the time to appeal or to seek certiorari or to move for an appellate reargument or rehearing has expired and no such action has been timely taken; or if an appeal, petition for certiorari or appellate motion for reargument or rehearing has been filed, such matter has been resolved

19 Case KG Doc Filed 10/30/18 Page 7 of Payment by Raymour. Within one business day of the entry of the Proposed Order, Raymour shall remit to the Debtors a payment in the amount of $1,068, (the Settlement Payment ), which shall represent a final settlement of the Debtors claims against Raymour. 3. Debtors Release of Raymour. Upon payment of the Settlement Payment, the Debtors, their estates, predecessors-in-interest, successors-in-interest (including, without limitation, any plan trustee, liquidating trustee, plan administrator or other liquidating agent under any plan of reorganization or any bankruptcy trustee (including any Chapter 7 trustee) appointed in the Bankruptcy Cases), and their affiliates, and their respective officers, directors, shareholders, employees, and agents (and with the Debtors, collectively, the Debtor Release Parties ) hereby irrevocably and unconditionally waive, release, relinquish, remise, acquit and forever discharge Raymour, its respective affiliates, partners, trustees, members, officers, directors, representatives, employees, managers, attorneys, agents, personal representatives, heirs, executors, administrators, successors and assigns (collectively, the Raymour Release Parties ), from any and all claims, rights, cause and causes of action, manner of action and actions, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, agreements, promises, attorneys fees, costs, judgments, executions, claims, damages, and demands whatsoever, in law or in equity, whether known or unknown, accrued or unaccrued, and whether foreseeable or unforeseeable, of whatever kind or character whatsoever (collectively, Claims ). Notwithstanding the foregoing in this Section 3, nothing in this Settlement Agreement shall be deemed to release Raymour of its obligations under this Settlement Agreement. 4. Raymour s Release of the Debtors. Upon payment of the Settlement Payment, the Raymour Release Parties hereby irrevocably and unconditionally waive, release, relinquish, remise, acquit and forever discharge the Debtor Release Parties from any and all Claims. Notwithstanding the foregoing in this Section 4, nothing in this Settlement Agreement shall be deemed to release Debtors of their obligations under this Settlement Agreement; provided, further, if a bankruptcy trustee or creditor or assignee of one or more Debtors asserts against Raymour, that the settlement herein was not valid to compromise or settle the debts of Raymour to Debtors existing on the date hereof, or that sums in excess of the Settlement Payment are due and owing by Raymour on account of sums allegedly owing to one or more Debtors on the date hereof, Debtors jointly and severally shall indemnify, defend and hold harmless Raymour from and against any such additional amount subsequently paid as well as the reasonable attorneys fees and expenses incurred by Raymour in defending such assertion. 5. Remedies. In the event Raymour fails to observe and perform any term or condition of this Settlement Agreement to be observed or performed by Raymour, including, but not limited to, Raymour s obligation to make the Settlement Payment, without any further notice required to be given to Raymour, a default shall be deemed to have occurred hereunder, and the Debtors shall have all rights and remedies allowed under applicable law or equity, or under any provisions of this Settlement Agreement. 6. Miscellaneous (a) Any notice pursuant to this Settlement Agreement shall be given in writing by (i) overnight delivery service with proof of delivery or (ii) 2

20 Case KG Doc Filed 10/30/18 Page 8 of 10 United States Mail, postage prepaid, registered or certified mail, return receipt requested sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given either at the time of personal delivery, or, in the case of overnight delivery service or mail, as of the date of first attempted delivery at the address and in the manner provided herein. Unless changed in accordance with the preceding sentence, the addresses for notices given pursuant to this Settlement Agreement shall be as follows If to Debtors Heritage Home Group LLC Attn Robert D. Albergotti 1925 Eastchester Drive High Point, North Carolina With a copy (which shall not constitute notice) to Young Conaway Stargatt & Taylor, LLP Attn Kenneth J. Enos 1000 N. King Street Wilmington, Delaware If to Raymour Raymour & Flanigan Furniture Attn Neil A. Rube Corporate Office 7248 Morgan Road Liverpool, New York (b) Entire Agreement. This Settlement Agreement constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes and revokes all prior agreements and understandings, oral and written, between the parties hereto or otherwise with respect to the same subject matter. No change, amendment, termination or attempted waiver of any of the provisions hereof shall be binding upon any party unless set forth in an instrument in writing signed by the party to be bound. (c) Counterparts. This Settlement Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. A pdf of a signature will have the same legal effect as an originally drawn signature. Each party shall have the right to request and receive an originally drawn signature from the other party (d) Headings. The article, section and other headings contained in this Settlement Agreement are for reference purposes only and shall not be deemed to be a part of this Settlement Agreement or to affect the meaning or interpretation of this Settlement Agreement. 3

21 Case KG Doc Filed 10/30/18 Page 9 of 10 (e) (f) (g) (h) (i) (j) Construction. Within this Settlement Agreement, the singular shall include the plural and the plural shall include the singular, and any gender shall include all other genders, all as the meaning and the context of this Agreement shall require. The parties acknowledge that the parties and their counsel have reviewed, negotiated and revised this Settlement Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Settlement Agreement or any exhibits or amendments hereto. Governing Law. The validity and interpretation of this Settlement Agreement shall be construed in accordance with and governed by the internal laws of the state of Delaware, without giving effect to principles of conflicts of laws. Cooperation. The parties hereto shall cooperate fully at their own expense, except as otherwise provided in this Settlement Agreement, with each other and their respective counsel and accountants in connection with all steps to be taken as part of their obligations under this Settlement Agreement. Severability. If any term, covenant, condition or provision of this Settlement Agreement or the application thereof to any circumstance shall be invalid or unenforceable to any extent, the remaining terms, covenants, conditions and provisions of this Settlement Agreement shall not be affected thereby and each remaining term, covenant, condition and provision of this Settlement Agreement shall be valid and shall be enforceable to the fullest extent permitted by law. If any provision of this Settlement Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only as broad as is enforceable. Retention of Jurisdiction in the Court. The Court shall retain exclusive jurisdiction to resolve any disputes or controversies arising from or related to this Settlement Agreement and any related matters, and the Proposed Order shall provide that the Court shall retain said jurisdiction. Time is of the Essence. Time is of the essence with respect to performance under this Settlement Agreement

22 Case KG Doc Filed 10/30/18 Page 10 of 10 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have caused their duly authorized representatives to execute this Settlement Agreement. RAYMOUR & FLANIGAN FURNITURE By /s/ Neil A. Rube Name Neil A. Rube Title Senior Vice President & General Counsel HERITAGE HOME GROUP, LLC, et. al By /s/ Robert D. Albergotti Name Robert D. Albergotti Title Chief Restructuring Officer