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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
REGISTRANT: THE CATO CORPORATION
COMMISSION FILE NUMBER O-3747
State of Incorporation: Delaware I.R.S. Employer Identification
Number: 56-0484485
Address of Principal Executive Registrant's Telephone Number:
Offices: 704/554-8510
8100 Denmark Road
Charlotte, North Carolina 28273-5975
SECURITIES REGISTERED PURSUANT TO SECURITIES REGISTERED PURSUANT
SECTION 12(b) OF THE ACT: TO SECTION 12(g) OF THE ACT:
NONE CLASS A COMMON STOCK
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of The Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark, if disclosure of delinquent filers pursuant to Item
405 of the Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
As of March 31, 1995, there were 23,132,327 shares of Class A Common Stock
and 5,264,317 shares of Convertible Class B Common Stock outstanding. The
aggregate market value of the Registrant's Class A Common Stock held by Non-
affiliates of the Registrant as of March 31, 1994 was approximately
$113,390,397 based on the last reported sale price per share on the NASDAQ
National Market System on that date.
Documents incorporated by reference:
Portions of the proxy statement dated April 24, 1995, relating to the 1995
annual meeting of shareholders are incorporated by reference into the
following part of this annual report:
Part III - Items 10, 11, 12 and 13
THE CATO CORPORATION
FORM 10-K
TABLE OF CONTENTS
Page
Part I:
Item 1. Business Page 2
Item 2. Properties Page 9
Item 3. Legal Proceedings Page 9
Item 4. Results of Votes of Security Holders Page 9
Part II:
Item 5. Market for Registrant's
Common Equity and Related
Stockholder Matters Page 10
Item 6. Selected Financial Data Page 11
Item 7. Managements' Discussion of
Analysis of Financial Condition and
Results of Operations Page 12 - 15
Item 8. Financial Statements and Supplementary Data Page 16
Item 9. Disagreements on Accounting and Financial Page 16
Disclosures
Part III:
Item 10. Directors and Executive Officers Page 17
Item 11. Executive Compensation Page 20
Item 12. Security Ownership of Certain Beneficial Page 20
Owners and Management
Item 13. Certain Relationships and Related Transactions Page 20
Part IV:
Item 14. Exhibits, Financial Statement Schedules Page 21
and Reports on Form 8-K
Page 2
PART I
Item 1. Business:
General
The Company, founded in 1946, operated 538 women's apparel
specialty stores at January 28, 1995 under the names "Cato,"
"Cato Fashions" and "Cato Plus" in 22 states, principally in non-
metropolitan markets in the South and Southeast. The Company's
merchandising strategy is to provide a wide variety of value-
priced merchandise in misses, junior and large sizes for the
fashion conscious low- to middle-income female customer, aged 18
to 45 and in fiscal 1994 the Company began offering clothing and
accessories for girls ages 4 - 14 in selected locations. With
the objective of offering head-to-toe dressing for its customers,
the Company's stores feature a broad assortment of apparel and
accessories, including casual and dressy sportswear, dresses,
careerwear, coats, hosiery, shoes, costume jewelry, handbags and
millinery. A substantial portion of the Company's merchandise is
sold under its private labels and is produced by various vendors
in accordance with the Company's specifications. Most stores
range in size from 4,800 to 8,000 square feet and are located
primarily in strip shopping centers anchored by major discount
stores. The Company emphasizes personalized customer service and
coordinated merchandise presentations in an appealing store
environment. The Company offers its own credit card and layaway
plan. Credit and layaway sales represented 32% of retail sales
in fiscal 1994. In addition to its Cato Stores, the Company
operated 108 off-price family apparel and accessories stores at
January 28, 1995 under the name "It's Fashion!" These stores are
managed separately from the Cato stores with respect to
merchandising and store operations but use the same
administration, distribution and financial systems as the Cato
stores.
Business
The Company's objective is to be the leading women's apparel
specialty retailer for fashion conscious low- to middle-income
females in its markets. Management believes the Company's
success is dependent upon its ability to differentiate its stores
from department stores, mass merchandise discount stores and
competing women's specialty stores. The key elements of the
Company's business strategy are:
Merchandise Assortment. The Company's stores
offer a wide assortment of apparel and accessory items
in regular and large sizes and emphasize color,
product coordination and selection.
Value Pricing. The Company offers quality
merchandise that is generally priced below comparable
merchandise offered by department stores and higher-
end specialty apparel chains but is generally more
fashionable than merchandise offered by discount
stores.
Page 3
Item 1. Business: (continued)
Strip Shopping Center Locations. The Company
locates its stores principally in strip centers
convenient to our customers anchored by major discount
stores, such as Wal-Mart and Kmart, that attract large
numbers of potential customers.
Customer Service. Store managers and sales
associates are trained to provide prompt and courteous
service and to assist customers in merchandise
selection and wardrobe coordination.
Credit and Layaway Programs. The Company offers
its own credit and a layaway plan to make the purchase
of its merchandise more convenient.
Expansion. The Company plans to open new stores
and relocate or expand existing stores in small to
medium-sized towns and in selected larger cities and
metropolitan areas, principally in the South and
Southeast.
Merchandising
Merchandising
The Company offers a broad selection of apparel and
accessories to suit the various lifestyles of the fashion
conscious low-to middle-income female, aged 18 to 45. In
addition, the Company features a value pricing strategy with
lower initial markups, product quality and consistent merchandise
flow providing color and product coordination.
The Company's merchandise lines include dressy and casual
sportswear, dresses, careerwear, coats, shoes, lingerie, hosiery,
costume jewelry, handbags and millinery. In fiscal 1994,
clothing and accessories for girls ages 4 -14 was added to
selected Cato stores. The Company plans to expand these lines to
additional stores in fiscal 1995. Most of the Company's
merchandise is sold under its private labels.
In fiscal 1994, approximately 29% of Cato stores' retail
sales represented merchandise for large size customers. This
merchandise is marketed in its stores under two formats: as a
distinct display area in "Cato" and "Cato Fashions" stores and as
a separate department in the combined "Cato Fashions" and "Cato
Plus" stores.
Page 4
Item 1. Business: (continued)
As a part of its merchandising strategy, members of the
Company's merchandising staff frequently visit selected stores,
monitor the merchandise offerings of other retailers, regularly
communicate with store operations personnel and frequently confer
with key vendors. The Company tests most new fashion-sensitive
items in selected stores to aid it in determining their appeal
before making a substantial purchasing commitment. The Company
also takes aggressive markdowns on slow-selling merchandise and
does not carry over merchandise to the next season.
Purchasing, Allocation and Distribution
Although the Company purchases merchandise from
approximately 1,500 suppliers, most of its merchandise is
purchased from approximately 100 primary vendors. In fiscal
1994, purchases from the Company's largest vendor accounted for
approximately 8% of the Company's total purchases. No other
vendor accounted for more than 4% of total purchases. The
Company is not dependent on its largest vendor or any other
vendor for merchandise purchases and the loss of any single
vendor or group of vendors would not have a material adverse
affect on the Company's operating results or financial condition.
A substantial portion of the Company's merchandise is sold under
its private labels and is produced by various vendors in
accordance with the Company's specifications. The Company
purchases most of its merchandise from domestic importers and
vendors, which typically minimizes the time necessary to purchase
and obtain shipments in order to enable the Company to react to
merchandise trends in a more timely fashion. Although a
significant portion of the Company's merchandise is manufactured
overseas, principally in the Far East, any economic, political or
social unrest in that region is not expected to have a material
adverse affect on the Company's ability to obtain adequate
supplies of merchandise.
An important component of the Company's strategy is the
allocation of merchandise to individual stores based on an
analysis of historical and current sales trends by merchandise
category, customer profiles and climatic conditions. A
computerized merchandise control system provides current
information on the sales activity of each merchandise style in
the Company's stores. Point-of-sale terminals in the stores
collect and transmit sales and inventory information to the
Company's central computer, permitting timely response to sales
trends on a store-by-store basis.
All merchandise is shipped directly to the Company's
distribution center in Charlotte, North Carolina where it is
inspected and allocated by the merchandise distribution staff for
shipment to individual stores. The flow of merchandise from
receipt at the distribution center to shipment is controlled by
an on-line computer system. Shipments are made by common
carrier, and each store receives at least one shipment per week.
Page 5
Item 1. Business: (continued)
Advertising
The Company uses direct mail, local newspapers, radio and in-
store promotional advertising as its primary advertising media.
Weekly newspaper advertisements typically promote specific items
or merchandise at promotional prices. The Company uses radio
advertising in selected broadcast areas that include high
concentrations of its stores. The Company's total advertising
expenditures were approximately 2.0% of retail sales in fiscal
1994.
Store Operations
The Company's store operations management team consists of
an executive vice president, seven regional vice presidents and
61 district managers. Regional vice presidents receive a salary
plus a bonus based on achieving targeted goals for sales, payroll
expense, shrinkage control and store profitability. District
managers receive a salary plus a bonus based on achieving
targeted objectives for district sales increases and shrinkage
control. Stores are staffed with a manager, two assistant
managers and additional part-time sales associates depending on
the size of the stores and seasonal personnel needs. Store
managers receive a salary and all other store personnel are paid
on an hourly basis. Store managers and assistant managers are
eligible for monthly and semi-annual bonuses based on achieving
targeted goals for their store's sales increases and shrinkage
control.
The Company has training programs at each level of store
operations. New store managers are trained in training stores
managed by experienced personnel who have achieved superior
results in meeting the Company's goals for store sales, payroll
expense and shrinkage control. The type and extent of district
manager training varies depending on whether the manager is
promoted from within or recruited from outside the Company. All
district managers receive at a minimum a one-week orientation
program at the Company's home office.
Store Locations
Most of the Company's stores are located in the South and
Southeast in small to medium-sized towns, with populations of
10,000 to 50,000 and retail trade areas of 25,000 to 100,000.
Approximately 150 stores, operating under the name "Cato" or
"Cato Fashions," average approximately 4,000 square feet.
Substantially all of the remaining stores are combination "Cato
Fashions" and "Cato Plus" stores, ranging in size from 4,800 to
8,000 square feet. These combination stores have two distinct
signs and selling areas but use a common sales staff and service
desk.
Page 6
Item 1. Business: (continued)
All of the Company's stores are leased. Approximately 89%
are located in strip shopping centers, 3% in downtown locations
and 8% in enclosed shopping malls. Where lease terms are
acceptable and a potential location meets the Company's
demographic and other site-selection criteria, the Company
locates stores in strip shopping centers anchored by major
discount stores, such as Wal-Mart and Kmart stores. The
Company's strip center locations provide ample parking and
shopping convenience for its customers.
The Company's store development activities consist of
opening new stores, expanding certain existing stores and
relocating other existing stores to more desirable locations in
the same market area. The following table sets forth information
with respect to the Company's development activities for its Cato
stores since fiscal 1990.
Cato Store Development
(Excluding It's Fashion Stores)
Number of Stores
Number Number Number of Stores
Fiscal Year Beginning of Opened Closed End of Year
Year
1990 494 10 32 472
1991 472 6 47 431
1992 431 33 26 438
1993 438 65 13 490
1994 490 57 9 538
The Company intends to open approximately 63 new stores and
to relocate or expand approximately 40 existing stores in fiscal
1995. In fiscal 1996, the Company expects to open approximately
63 new stores and to relocate or expand approximately 40 existing
stores. The Company anticipates that 33 of the 63 new stores to
be opened in fiscal 1995 and 33 of the 63 new stores to be opened
in fiscal 1996 will be off-price "Its Fashion!" stores.
The Company periodically reviews its store base to determine
whether any particular store should be closed based on its sales
trends and profitability. The Company intends to continue this
review process and to close underperforming stores or relocate
them to more desirable locations in their existing markets.
Page 7
Item 1. Business: (continued)
Credit and Layaway
Credit Card Program
The Company offers its own credit card, which accounted for
approximately 22% of retail sales in fiscal 1994. The Company's
net bad debt expense in fiscal 1994 was 2.8% of credit sales.
Customers applying for the Company's credit card are
approved for credit if they have a satisfactory credit record and
meet a minimum income test. Customers are required to make
minimum monthly payments based on their account balances. If the
balance is not paid in full each month, the Company charges a
finance charge based on the allowable rates in the customer's
state of residence.
Layaway Plan
Under the Company's layaway plan, merchandise is set aside
for customers who agree to make periodic payments. The Company
adds a nonrefundable administrative fee to each layaway sale. If
no payment is made for nine weeks, the customer is considered to
have defaulted, and the merchandise is returned to the selling
floor and again offered for sale, often at a reduced price. All
payments made by customers who subsequently default on their
layaway purchase are returned to the customer upon request, less
the administrative fee and a restocking fee. Layaway sales
represented approximately 10% of retail sales in fiscal 1994.
It's Fashion Stores
The Company operated 108 off-price stores at January 28,
1995 in 11 states in the South and Southeast under the name "It's
Fashion!" These stores are smaller than the Cato stores,
averaging approximately 3,000 square feet, and offer limited
selections of first-quality family apparel and accessories at
prices ranging from 20% to 80% off regular retail prices. The
Company's credit and layaway plans are not available in these
stores. Most of the merchandise for these stores is purchased at
close-out prices from manufacturers with excessive inventories
due to overruns or order cancellations. The It's Fashion stores
are managed separately from the Cato stores with respect to
merchandising and store operations but use the same
administrative, distribution and financial systems as the Cato
stores. Sales from It's Fashion stores represented 11% of the
Company's retail sales during fiscal 1994. As part of its
planned expansion program, the Company currently intends to open
approximately 33 new It's Fashion stores in fiscal 1995 and 33 in
fiscal 1996.
Page 8
Management Information Systems
The Company's systems provide daily financial and
merchandising information that is used by management to enhance
the timeliness and effectiveness of purchasing and pricing
decisions. Management uses a daily report comparing actual sales
with planned sales and a weekly best seller/worst seller report
to monitor and control purchasing decisions. Weekly reports are
also produced which reflect sales, weeks of supply of inventory
and other critical data by product categories, by store and by
various levels of responsibility reporting. Purchases are made
based on projected sales but can be modified to accommodate
unexpected increases or decreases in demand for a particular
item.
Sales information is projected by merchandise category and,
in some cases, is further projected and actual performance
measured by stockkeeping unit. Merchandise allocation models are
used to distribute merchandise to individual stores based upon
historical sales trends, climatic differences, customer
demographic differences and targeted inventory turnover rates.
Competition
The women's retail apparel industry is highly competitive.
The Company believes that the principal competitive factors in
its industry include merchandise assortment and presentation,
fashion, price, store location and customer service. The Company
competes with retail chains that operate similar women's apparel
specialty stores. In addition, the Company competes with local
apparel specialty stores and, to some degree, with major
department stores, general merchandise chains and discount store
chains. To the extent that the Company opens stores in larger
cities and metropolitan areas, competition is expected to be more
intense in those markets. Many of the Company's competitors have
substantially greater financial, marketing and other resources
than the Company.
Regulation
A variety of laws affect the revolving credit program
offered by the Company. The Federal Consumer Credit Protection
Act (Truth-in Lending) and Regulation Z promulgated thereunder
require written disclosure of information relating to such
financing, including the amount of the annual percentage rate and
the finance charge. The Federal Fair Credit Reporting Act also
requires certain disclosures to potential customers concerning
credit information used as a basis to deny credit. The Federal
Equal Credit Opportunity Act and Regulation B promulgated
thereunder prohibit discrimination against any credit applicant
based on certain specified grounds. The Federal Trade Commission
has adopted or proposed various trade regulation rules dealing
with unfair credit and collection practices and the preservation
of consumers' claims and defenses. The Company is also subject
to the provisions of the Fair Debt Collection Practices Act,
which regulates the manner in which the Company collects payments
on revolving credit accounts. In addition, various state laws
regulate collection practices, require certain disclosures to
credit customers and limit the finance charges, late fees and
other charges which may be imposed by the Company.
Page 9
Employees
As of January 28, 1995, the Company employed approximately
6,600 full-time and part-time employees. The Company also
employs additional part-time employees during the peak retailing
seasons. The Company is not a party to any collective bargaining
agreements and considers that its employee relations are good.
Item 2. Properties:
The Company's distribution center and general offices are
located in a Company-owned building of approximately 492,000
square feet located on a 15-acre tract in Charlotte, North
Carolina. The Company's automated merchandise handling and
distribution activities occupy approximately 418,000 square feet
of this building and its general offices and corporate training
center are located in the remaining 74,000 square feet.
Substantially all of the Company's retail stores are leased
from unaffiliated parties. Most of the leases have an initial
term of five years, with two to three five-year renewal options.
Substantially all of the leases provide for fixed rentals plus a
percentage of sales in excess of a specified volume.
Item 3. Legal Proceedings:
There are no material pending legal proceedings to which the
registrant or its subsidiaries is a party, or to which any of
their property is subject.
Item 4. Results of Votes of Security Holders:
None
Page 10
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Market & Dividend Information
The Company's Class A Common Stock trades in the over-the-
counter market under the NASDAQ National Market System symbol
CACOA. Below is the market range and dividend information for
the four quarters of 1994 and 1993. All per share amounts have
been adjusted to reflect a three-for-two stock split effected
June 28, 1993.
_________________________________________________________________
Price
1994 High Low Dividend
First quarter $21 1/2 $9 1/2 $.025
Second quarter 14 3/4 9 1/2 .04
Third quarter 12 1/4 8 1/2 .04
Fourth quarter 9 3/4 5 1/2 .04
Price
1993 High Low Dividend
First quarter $21 1/3 $15 7/8 $.013
Second quarter 23 1/2 15 3/4 .025
Third quarter 24 1/2 14 3/4 .025
Fourth quarter 24 3/4 14 .025
- - ----------------------------------------------------------------
As of March 31, 1995 the approximate number of holders of
the Company's Class A Common stock was 8,000 and there were 16
record holders of the Company's Class B Common Stock.
Page 11
Item 6. Selected Financial Data:
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, dated as of the
16th day of December, 1994 (the "Loan Agreement" or "Agreement"),
is by and between
THE CATO CORPORATION, a Delaware corporation with its
principal offices in Charlotte, North Carolina ("Cato"); CHW
CORPORATION, a Delaware corporation ("CHW"); and
NATIONSBANK OF NORTH CAROLINA, N.A. ("NationsBank") and
WACHOVIA BANK OF NORTH CAROLINA, N.A. ("Wachovia"), each a
national banking association with offices in Charlotte, North
Carolina (collectively, the "Lenders"); and NATIONSBANK OF NORTH
CAROLINA, N.A., as agent, acting in the manner and to the extent
described in Article XII hereof (in such capacity, the "Agent").
Recitals
A. Cato and CHW are co-borrowers of the Loans to be made
hereunder. As such, each is sometimes referred to individually
as a "Borrower" and together they are sometimes collectively
referred to as the "Borrowers."
B. The Borrowers and the Lenders are parties to a Loan
Agreement dated March 9, 1993, pursuant to which (i) the Lenders
established a $35,000,000 revolving credit facility and the
Borrowers may convert up to $20,000,000 of the principal amount
of outstanding loans advanced thereunder into one or more term
loans, and (ii) the Lenders will from time to time issue for the
account of the Borrowers irrevocable letters of credit.
C. The Borrowers and the Lenders desire to amend and
restate the terms of their Agreement to incorporate an additional
$15,000,000 facility to support the issuance of letters of
credit, to amend certain negative covenants, and to change the
relative size of the Lenders' Commitments.
D. The Borrowers will use the proceeds of the Loans (i)
to provide working capital; (ii) to support the issuance of
letters of credit and (iii) for such other corporate purposes as
the Borrowers shall determine, other than uses restricted
hereunder, all as more fully set forth herein.
E. The Lenders are willing to make the Loans and issue
the Letters of Credit described herein based on the terms and
conditions set forth in this Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agent hereby agree as follows:
ARTICLE IDefinitions1.1Defined Terms. For purposes of this Loan
Agreement, the following terms shall have the meanings set forth
below:
"Additional LC Facility" means the facility made available
by the Lenders to the Borrowers pursuant to Article IIA hereof.
"Additional LC Facility Termination Date" means the date
that the Additional LC Facility will terminate pursuant to
Section 2.2A (as such date may be extended from time to time by
written agreement of all the Lenders).
"Adjusted Cash Flow" shall mean, for a specified period,
the sum of (i) the net income of Cato and its Subsidiaries on a
consolidated basis for such period, before deduction of income
taxes, depreciation expense, interest expense (including, without
limitation, interest expense attributable to Capital Leases) and
amortization of intangible assets plus (ii) the Gross Rental
Expense for such period, all as determined in accordance with
Generally Accepted Accounting Principles.
"Affiliate" shall mean, as to any Person, each of the
Persons that directly or indirectly, through one or more
intermediaries, owns or controls, or is controlled by or under
common control with, such Person. For the purpose of this
definition, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of
management and policies, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall mean the Agent as provided in Article XII
hereof, and its successors and assigns.
"Agreement" or "this Agreement" or "Loan Agreement" shall
mean this Loan Agreement and shall include all amendments,
modifications and supplements hereto, and all annexes, schedules
and exhibits hereto, and shall refer to this Agreement as the
same may be in effect at the time such reference becomes
operative.
"Applicable Rate" shall mean, for any day, the lesser of
(i) the then current Prime Rate or (ii) the Floating Adjusted
Certificate of Deposit Rate for such day. The Applicable Rate
shall be determined from time to time by each Lender with respect
to its pro rata portion of the Loans (based on such Lender's
Commitment as compared to the Total Commitment) and each such
calculation with respect to such portion of the Loans shall be
conclusive and binding upon the Borrowers in the absence of
manifest error.
"Assessment Rate" shall mean, for any day, the then maximum
net assessment rate (expressed as a decimal fraction) for
determining the annual assessment payable by the Lender to the
Federal Deposit Insurance Corporation (or any successor) for
insuring Dollar deposits made at the offices of the Lender in the
United States.
"Assignee" shall mean any Person to whom any Lender assigns
any of its rights and obligations under this Loan Agreement, and
its successors and assigns.
"Assignment and Acceptance" shall mean an Assignment and
Acceptance Agreement between any Lender and an Assignee, pursuant
to which such Lender assigns to such Assignee, and the Assignee
accepts, all or a portion of such Lender's rights and obligations
under this Loan Agreement.
"Bankruptcy Code" shall mean 11 U.S.C. 101 et. seq., as
amended, and any successor statute or statute having
substantially the same function.
"Borrower" or "Borrowers" shall mean each of Cato and each
of its Subsidiaries which is now or hereafter becomes a party to
this Loan Agreement, and their respective successors and assigns.
"Business Day" shall mean any day excluding Saturday,
Sunday and any day which shall be in the City of Charlotte, North
Carolina a legal holiday or a day on which national banking
institutions are authorized by law or other governmental actions
to close.
"CD Rate" shall mean, for any day, the average daily market
interest rate (per annum) in the secondary market on negotiable
certificates of deposit with a term of three months, as compiled
and published by the Federal Reserve System of the United States
of America, or any successor agency (such rate being currently
available in a weekly publication designated "H.15(519) -
Selected Interest Rates").
"CD Reserve Requirement" shall mean, on any date, that
percentage (expressed as a decimal fraction) that is in effect on
such date, applied for determining the maximum applicable reserve
requirements under Regulation D. Each determination by the
Lender of the CD Reserve Requirement of such Lender shall be
conclusive and binding on the Borrowers in the absence of
manifest error.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C.A.
9601 et. seq., as amended from time to time, and all rules and
regulations from time to time promulgated thereunder.
"Capital Asset" shall mean any asset of a Person that
would, in accordance with Generally Accepted Accounting
Principles, be required to be classified and accounted for as a
capital asset.
"Capital Expenditure Limitation" shall mean, for any fiscal
year of Cato, the sum of (i) the net income of Cato and its
Subsidiaries on a consolidated basis, before deduction of
depreciation expense and amortization of intangible assets, for
the immediately preceding fiscal year, as determined in
accordance with Generally Accepted Accounting Principles plus
(ii) the amount of contributions made by any of the Borrowers or
a Subsidiary of the Borrower to the 401(k) Cato Associate Profit
Sharing/Retirement Savings Plan in such immediately preceding
fiscal year to the extent such contributions are reflected as
reductions in the net income of Cato and its Subsidiaries on a
consolidated basis for such period plus (iii) employee bonus
payments made by a Borrower or a Subsidiary of a Borrower in such
immediately preceding fiscal year in shares of the common stock
of Cato to the extent such payments are reflected as reductions
in net income of Cato and its Subsidiaries on a consolidated
basis for such period.
"Capital Expenditures" shall mean, for any fiscal year of
Cato, the aggregate cost (less the amount of trade-in allowance
included in such cost) of all capital assets acquired by any of
the Borrowers or any Subsidiary of a Borrower during such fiscal
year, less the proceeds of any capital dispositions made in the
ordinary course of business, plus all Capital Lease Obligations
incurred by Cato, during such fiscal year, each calculated in
accordance with Generally Accepted Accounting Principles.
"Capital Lease" shall mean any lease of any property that
would, in accordance with Generally Accepted Accounting
Principles, be required to be classified and accounted for as a
capital lease on a balance sheet of the lessee.
"Capital Lease Obligations" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee
thereunder that would, in accordance with Generally Accepted
Accounting Principles, appear as a liability on a balance sheet
of such lessee in respect of such Capital Lease.
"Capitalized Rents" shall mean, at any time, the product of
(i) the Gross Rental Expense for the four most recent fiscal
quarters multiplied by (ii) eight (8).
"Cash" shall mean legal currency of the United States of
America.
"Change in Control" shall mean any event resulting in any
Person (i) owning, directly or indirectly, more than fifty
percent (50%) of the combined voting power of the outstanding
shares of voting stock of Cato or (ii) having the power to elect
a majority of the board of directors of Cato; provided, however,
that no change in control shall be deemed to have occurred so
long as Wayland H. Cato, Jr., Edgar T. Cato, and any of their
children and trusts for their benefit, own or have the right to
vote or to direct the voting of shares of the outstanding voting
stock of Cato equal to over 50% of the total combined voting
power of the outstanding voting stock of Cato.
"Closing" shall mean the consummation of the lending
transaction contemplated hereby to occur at the time and place
specified in Section 5.1 hereof.
"Closing Date" shall mean the date referred to in Section
5.1 hereof.
"Commitment" shall mean, at any time, for any Lender, the
amount set forth opposite such Lender's name on Annex I hereto
under the heading "Commitment."
"Conversion Date" shall mean, with respect to any Term
Loan, the date of conversion of certain of the Revolving Loans
into such Term Loan pursuant to Section 2.4 which date shall be
set forth in the Conversion Notice and shall be not later than
three (3) Business Days after the delivery of the Conversion
Notice by the Borrowers to the Agent and in no event shall be
later than May 31, 1998.
"Conversion Notice" shall mean the notice in the form
attached hereto as Exhibit C setting forth the Borrowers'
election to convert a certain portion of the Revolving Loans into
Term Loans pursuant to Section 2.4 and specifying the Conversion
Date.
"Current Assets" shall mean, at any date, the aggregate of
the current assets of Cato and its Subsidiaries on a consolidated
basis, determined in accordance with Generally Accepted
Accounting Principles.
"Current Liabilities" shall mean, at any date, the
aggregate of the current liabilities of Cato and its Subsidiaries
on a consolidated basis, all determined in accordance with
Generally Accepted Accounting Principles, except that outstanding
borrowings of the Borrowers under the Revolving Line of Credit
shall not be considered Current Liabilities.
"Default" shall mean any of the events specified in
Article IX, regardless of whether there shall have occurred any
passage of time or giving of notice or both that would be
necessary to constitute such default an Event of Default.
"Default Rate" shall mean, with respect to any Loan, an
interest rate equal to the Prime Rate plus four (4) percentage
points.
"Designated Officer" shall mean the President or Chief
Financial Officer of a Borrower or any other officer of a
Borrower authorized by resolution of the Board of Directors of
such Borrower to engage in the activity specified herein with
respect to such officer.
"Disbursement Date" shall mean the date on which the LC
Bank shall have notified the Borrowers of the presentation for
payment of a draft under any Letter of Credit.
"Documentary Letter of Credit" shall mean a Letter of
Credit that by its terms requires, as a condition to any draw
thereunder, the presentation of documents of title to goods
purchased upon payment pursuant to such draw.
"Dollars" or "$" shall mean dollars of the United States of
America.
"Employee Plan" shall mean any "employee benefit plan"
within the meaning of Section 3(3) of ERISA maintained by any
Borrower or one of its Subsidiaries.
"Environmental Laws" shall mean any and all federal, state,
local and foreign laws or regulations, codes, plans, orders,
decrees, judgments, injunctions, notices or demand letters
issued, promulgated, approved or entered under any of the
foregoing, relating to pollution or protection of the
environment, including without limitation, laws relating to
emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including
without limitation ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminates,
chemicals or industrial, toxic or hazardous substances or wastes,
and specifically including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C.
9601 et seq., as amended from time to time, and the Resource
Conversation and Recovery Act 42 U.S.C. 6901 et seq., as
amended from time to time.
"EPA" shall mean the United States Environmental Protection
Agency.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, and all rules and
regulations from time to time promulgated thereunder.
"Event of Default" shall have the meaning specified in
Article IX hereof.
"Financials" or "Financial Statements" shall mean the
consolidated balance sheet and statements of income and cash
flow, delivered to the Lenders by the Borrowers prior to the
Closing Date in connection with this Loan Agreement or to be
delivered to the Lenders by the Borrowers pursuant to Section 7.3
hereof.
"Fixed Charge Coverage Ratio" shall mean, as of the end of
any fiscal quarter of Cato, the ratio of (i) the Adjusted Cash
Flow for the four-fiscal-quarter period then ended to (ii) the
Fixed Charges for such period.
"Fixed Charges" shall mean, for the relevant period, the
sum of (a) the interest expense (including, without limitation,
interest expense attributable to Capital Leases) of Cato and its
Subsidiaries on a consolidated basis, (b) regularly scheduled
payments of principal of Funded Debt of Cato and its Subsidiaries
on a consolidated basis and (c) the Gross Rental Expense for such
period, all as determined in accordance with Generally Accepted
Accounting Principles.
"Floating Adjusted Certificate of Deposit Rate" shall mean,
on any given day, with respect to the Loans made by a Lender, the
sum of:
(a) the quotient of (i) the CD Rate for the next
preceding Business Day divided by (ii) the difference
between one (1.00) minus the CD Reserve Requirement; plus
(b) the Assessment Rate of such Lender; plus
(c) 0.75 percentage points;
provided, however, that for any Saturday or Sunday, the CD Rate
used in the foregoing calculation shall be the CD Rate for the
immediately preceding Thursday (or if such Thursday is not a
Business Day, then the Business Day next preceding such Thursday)
and for any other day that is not a Business Day, the CD Rate
used in the foregoing calculation shall be the CD Rate for the
next preceding Business Day. The Floating Adjusted Certificate
of Deposit Rate shall be calculated from time to time by each
Lender with respect to its pro rata portion of the Loans (based
on such Lender's Commitment as compared to the Total Commitment)
and each such calculation with respect to such portion of the
Loans shall be conclusive and binding upon the Borrowers in the
absence of manifest error.
"Funded Debt" shall mean at any time the aggregate amount
of Indebtedness for money borrowed of Cato and its Subsidiaries,
on a consolidated basis, including the amount of any guaranties
but excluding the face amount of any Documentary Letter of Credit
issued for the account of any Borrower.
"Generally Accepted Accounting Principles" shall mean, with
respect to any Borrower, generally accepted accounting
principles, as recognized by the American Institute of Certified
Public Accountants, consistently applied and maintained on a
consistent basis for such Borrower throughout the period
indicated and consistent with the prior financial practice of
such Borrower as reflected on the respective Financial
Statements.
"Gross Rental Expense" shall mean for any period the rental
expense under non-cancellable operating leases for such period
of Cato and its Subsidiaries on a consolidated basis determined
in accordance with Generally Accepted Accounting Principles.
"Indebtedness" shall mean all liabilities, obligations and
indebtedness any of the Borrowers of any and every kind and
nature, including, without limitation, the Obligations and all
obligations to trade creditors, whether heretofore, now or
hereafter owing, arising, due or payable from any of the
Borrowers to any Person and howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed or otherwise and whether matured or unmatured.
Without in any way limiting the generality of the foregoing,
Indebtedness specifically includes the following:
(a) all obligations or liabilities of any Person that
are secured by any lien, claim, encumbrance or security
interest upon property owned by any of the Borrowers, even
though such Borrower has not assumed or become liable for
the payment thereof;
(b) all obligations or liabilities created or arising
under any lease (including but not limited to Capital
Leases) of real or personal property, or conditional sale
or other title retention agreement with respect to property
used or acquired by a Borrower, even though the rights and
remedies of the lessor, seller or lender thereunder are
limited to repossession of such property;
(c) all unfunded employee benefit plan obligations
and liabilities; and
(d) deferred taxes.
"Intangible Assets" shall mean all intangible assets of
Cato and its Subsidiaries, on a consolidated basis, including,
without limitation, covenants not to compete, and any other asset
that would be treated as an intangible under Generally Accepted
Accounting Principles.
"Intercompany Loans" shall mean any loans or advances or
other extensions of credit by either of the Borrowers solely to
or for the benefit of the other Borrower.
"Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
"LC Agreement" means the application for and all other
agreements and other documentation relating to a Letter of Credit
including the Continuing Letter of Credit Agreement in the form
attached hereto as Exhibit B.
"LC Bank" shall mean NationsBank or such other of the
Lenders as may be designated by the Required Lenders as the
issuing bank for the Letters of Credit to be issued pursuant to
Article III hereof.
"Lenders" shall mean, collectively, NationsBank of North
Carolina, N.A. and Wachovia Bank of North Carolina, N.A.,
national banking associations with offices in Charlotte, North
Carolina, and their successors or assigns.
"Letters of Credit" shall mean the Outstanding Letters of
Credit and all letters of credit issued upon the application by a
Borrower pursuant to Article III hereof.
"Loan" or "Loans" shall mean and collectively refer to the
advances made hereunder which shall be evidenced by the Notes.
"Loan Documents" shall mean and collectively refer to this
Agreement, the Notes, the LC Agreements, all Supplemental
Documentation and any and all amendments, modifications,
replacements, substitutes and supplements to such documents,
together with any other documents executed by or on behalf of any
of the Borrowers that designate themselves Loan Documents under
this Agreement.
"Margin Stock" shall have the meaning provided in
Regulation U.
"Material Adverse Effect" shall mean a material adverse
effect on the financial condition or results of operations of the
Borrowers and their Subsidiaries taken as a whole or upon the
Borrowers' ability to perform their obligations under any of the
Loan Documents.
"Multiemployer Plan" shall mean any "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA to which any
Borrower is required to make contributions.
"Net Income" shall mean the consolidated net income of
Cato and its Subsidiaries determined in accordance with Generally
Accepted Accounting Principles.
"Net Worth" shall mean at any time the combined
stockholders' equity of Cato and its Subsidiaries on a
consolidated basis at such time determined in accordance with
Generally Accepted Accounting Principles.
"Notes" shall mean the promissory notes of the Borrowers
executed and delivered to the Lenders pursuant to Article II
hereof, evidencing the obligation of the Borrowers to repay funds
advanced pursuant to the Commitment of each Lender individually,
and the Total Commitment in the aggregate, together with any
amendments, modifications, substitutes and supplements thereto,
any substitutes therefor, and any replacements, renewals or
extension thereof, in whole or part.
"Notice of Borrowing" shall have the meaning given to such
term in Section 2.1(b).
"Obligations" shall mean and include the Loans and all
other loans, advances, indebtedness, liabilities, obligations,
covenants and duties (including post-petition interest on the
foregoing, to the extent lawful) owing, arising, due or payable
jointly or severally, from any Borrower to the Agent or any
Lender of any kind or nature, present or future, howsoever
evidenced, created, incurred, acquired or owing, whether arising
under this Agreement, the Notes, the LC Agreements or otherwise
with respect to the Letters of Credit, or the other Loan
Documents, whether direct or indirect (including those acquired
by assignment), absolute or contingent, primary or secondary, due
or to become due, now existing or hereafter arising and however
acquired, but excluding obligations under Letters of Credit
described in the final sentence of Section 3.1. The term
includes, without limitation, all interest, charges, expenses,
fees, attorneys' fees and any other sums chargeable to any
Borrower by the Agent or any Lender under this Agreement or any
of the other Loan Documents.
"OSHA" shall mean the Occupational Safety and Health Act,
as amended from time to time, and all rules and regulations from
time to time promulgated thereunder.
"Outstanding Letters of Credit" shall mean any and all
letters of credit issued by NationsBank for the account of any
Borrower that are outstanding as of the date hereof, including
any extensions or renewals thereof.
"Participant" shall mean any Person, now or at any time
hereafter, participating with any Lender in the Loans to the
Borrowers pursuant to this Agreement, and its successors and
assigns.
"Pension Plan" shall mean any "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA which is
maintained by any of the Borrowers, except that Pension Plan
shall not include any Multiemployer Plan.
"Person" shall mean a corporation, an association, a joint
venture, a partnership, an organization, a business, an
individual, a trust or a government or political subdivision
thereof or any government agency.
"Permitted Liens" shall mean any of the following liens
securing any Indebtedness of a Borrower on its property, real or
personal, whether now owned or hereafter acquired:
(a) Liens of carriers, warehousemen, mechanics and
materialmen imposed by mandatory provisions of law arising
in the ordinary course of business for sums not yet due and
payable or such liens securing an aggregate Indebtedness of
not more than $100,000 that are being contested in good
faith;
(b) Liens incurred in the ordinary course of business
in connection with worker's compensation, unemployment
insurance or other forms of governmental insurance or
benefits or to secure obligations on surety or appeal
bonds;
(c) Liens for current taxes (including income
withholding taxes), assessments or other governmental
charges that are not delinquent or remain payable without
any penalty or that are being contested in good faith and
with due diligence by appropriate proceedings, if the
affected Borrower has established adequate reserves with
respect thereto in accordance with Generally Accepted
Accounting Principles or, with respect to liens arising in
connection with income tax withholding, such Borrower has
established adequate reserves with respect thereto;
(d) Statutory liens of banks and other financial
institutions arising during the collection of instruments
in the ordinary course of business;
(e) pledges or deposits in the ordinary course of a
Borrower's business to secure the performance of leases or
contracts entered into in the ordinary course of business;
(f) Liens upon any assets subject to a Capital Lease
and securing payment of the obligations arising under such
Capital Lease and any liens upon any equipment subject to
an equipment operating lease and securing payment of the
obligations arising under such lease;
(g) zoning restrictions, easements, licenses,
landlord's liens or restrictions on the use of property
which do not materially impair the use of such property in
the operation of the business of a Borrower;
(h) Purchase Money Liens securing aggregate
Indebtedness of the Borrowers and their Subsidiaries of no
more than $1,000,000; and
(i) Liens not described in subclauses (a) through (i)
above that relate to liabilities not in excess of $100,000
in the aggregate.
"Preferred Stock" shall mean Stock of any of the Borrowers
that gives the holder thereof a preference over the holders of
such Borrower's common stock with respect to the payment of
dividends or liquidation proceeds, or otherwise designated by
such Borrower as "preferred stock."
"Prime Rate" shall mean the per annum interest rate
publicly announced from time to time by NationsBank from its
principal office in Charlotte, North Carolina to be its prime
rate, which may not necessarily be its best lending rate, and
adjusted to conform to changes as of the opening of business on
the date of any such change in such prime rate. In the event
NationsBank shall abolish or abandon the practice of announcing
its prime rate or should the same be unascertainable, the
Required Lenders shall designate a comparable reference rate
which shall be deemed to be the Prime Rate under this Loan
Agreement and the other Loan Documents.
"Prohibited Transaction" shall have the meaning given such
term under ERISA.
"Purchase Money Liens" shall mean any lien or security
interest granted in Capital Assets at the time of, or within ten
(10) days after, the acquisition thereof by any Borrower or any
Subsidiary of a Borrower to secure Indebtedness for all or a
portion of the purchase price thereof, provided (i) any such lien
or security interest shall not encumber any other property of
such Borrower or such Subsidiary and (ii) any such lien shall not
exceed the purchase price of the Capital Assets so acquired.
"RCRA" shall mean the Resource Conservation and Recovery
Act, 42 U.S.C.A. 6901 et seq., as amended from time to time,
and all rules and regulations from time to time promulgated
thereunder.
"Realty" shall mean all realty and interests in realty
owned or leased by any Borrower or any Subsidiary of a Borrower,
now or in the future.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 204, or
any successor or other regulation relating to reserve
requirements applicable to member banks of the Federal Reserve
System.
"Regulation G" shall mean Regulation G promulgated by the
Board of Governors of the Federal Reserve System, 12 C.F.R. Part
207, or any successor or other regulation hereafter promulgated
by said Board to replace the prior Regulation G and having
substantially the same function.
"Regulation T" shall mean Regulation T promulgated by the
Board of Governors of the Federal Reserve System, 12 C.F.R. Part
220, or any successor or other regulation hereafter promulgated
by said Board to replace the prior Regulation T and having
substantially the same function.
"Regulation U" shall mean Regulation U promulgated by the
Board of Governors of the Federal Reserve System, 12 C.F.R. Part
221, or any successor or other regulation hereafter promulgated
by said Board to replace the prior Regulation U and having
substantially the same function.
"Regulation X" shall mean Regulation X promulgated by the
Board of Governors of the Federal Reserve System, 12 C.F.R. Part
224, or any successor or other regulation hereafter promulgated
by said Board to replace the prior Regulation X and having
substantially the same function.
"Reportable Event" shall have the meaning given such term
in ERISA.
"Required Lenders" shall mean at any time the Lenders
providing Commitments in the aggregate of at least 75% of the
Total Commitment.
"Revolving Credit Commitment" shall mean, at any time for
any Lender, the difference between such Lender's Commitment minus
such Lender's pro rata portion (based on such Lender's Commitment
as compared to the Total Commitment) of the aggregate principal
amount (as of the Conversion Date) of the Revolving Loans
converted to Term Loans pursuant to Section 2.4 hereof, if any.
"Revolving Line of Credit" shall mean the revolving line of
credit made available by the Lenders to the Borrowers pursuant to
Article II hereof.
"Revolving Loan Obligations" shall mean all Obligations of
the Borrower under this Loan Agreement and the other Loan
Documents other than the obligation to repay the Term Loans and
to make interest payments thereon and the obligations of the
Borrowers that, as set forth in this Loan Agreement, are to
survive the repayment of the Loans.
"Revolving Loan Termination Date" shall mean the earliest
of (i) prepayment by Borrowers of all Obligations, including
without limitation all outstanding principal of the Revolving
Loans and interest thereon, and termination of all Letters of
Credit, together with a notice from each Borrower terminating
this Agreement; (ii) May 31, 1998 (unless such date extended by
written agreement of all of the Lenders pursuant to Section 2.2
hereof); (iii) the date of termination of this Agreement by the
Lenders after the occurrence of an Event of Default; (iv) such
date as is mutually agreed upon by the parties; and (v) the date
after which all Obligations have been paid in full and no Lender
is obligated to make advances or Loans hereunder or under any
Letter of Credit.
"Revolving Loan" shall mean the Loans made by the Lenders
to the Borrowers under the Revolving Line of Credit.
"Stock" shall mean all shares, options, interests or other
equivalents (howsoever designated) of or in a corporation,
whether voting or nonvoting, including, without limitation,
common stock, warrants, preferred stock, convertible debentures
and all agreements, instruments and documents convertible, in
whole or in part, into any one or more or all of the foregoing.
"Subordinated Debentures" shall mean any Indebtedness of
any Borrower which expressly contains in the instruments
evidencing such Indebtedness, or in the indenture or other
similar instrument pursuant to which such Indebtedness is issued,
subordination provisions, satisfactory to the Required Lenders,
and substantially to the effect that the holder agrees that the
Indebtedness evidenced by such instrument, and any renewals or
extensions thereof, shall at all times and in all respects be
subordinate and junior in right of payment to the Obligations
hereunder.
"Subsidiary" shall mean any corporation, fifty percent
(50%) or more of the outstanding stock of which is at the time,
directly or indirectly, owned by any Borrower or one or more of
its Subsidiaries.
"Supplemental Documentation" shall mean all agreements,
instruments, documents or other written matter necessary or
requested by the Agent or the Lenders to consummate the
transactions contemplated by this Agreement and the other Loan
Documents.
"Tangible Net Worth" shall at any time mean Net Worth less
all Intangible Assets.
"Term Loan" means a Loan made by the Lenders pursuant to
the Borrowers' election to convert a portion of the Revolving
Loans, pursuant to Section 2.4, into a term loan to be repaid as
specified in Section 2.5.
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Lenders at such time.
"Total Revolving Credit Commitment" shall mean the
difference between the Total Commitment and the aggregate
principal amount (as of the Conversion Date) of the Revolving
Loans converted to Term Loans pursuant to Section 2.4 hereof, if
any.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code of the State of North Carolina, as amended from time to
time, unless in any particular instance the Uniform Commercial
Code of another state is applicable, in which case it shall mean
the Uniform Commercial Code of such state.
1.2Accounting Terms. Any accounting terms used in this
Agreement that are not specifically defined shall have the
meanings customarily given them in accordance with Generally
Accepted Accounting Principles; provided, however, that, in the
event that changes in Generally Accepted Accounting Principles
shall be mandated by the Financial Accounting Standard Board, or
any similar accounting body of comparable standing, or any change
in accounting practices shall be recommended by Cato's
independent certified public accountants, and to the extent that
such changes would modify or could modify such accounting terms
or the interpretation or computation hereof, such changes shall
be followed in defining such accounting terms only from and after
the date the Borrowers and the Required Lenders shall have
amended this Loan Agreement to the extent necessary to reflect
any such changes in the financial covenants and other terms and
conditions of this Loan Agreement.
1.3Singular/Plural. Unless the context otherwise requires,
words in the singular include the plural and words in the plural
include the singular.
1.4Other Terms. All terms contained in this Agreement
shall, when the context so indicates, have the meanings provided
for by the Uniform Commercial Code of the State of North Carolina
to the extent the same are used or defined therein.
ARTICLE II Loan Facility2.1Revolving Line of Credit.
(a) The Lenders hereby agree to establish, subject to the
terms and conditions of this Agreement and in reliance upon the
representations and warranties made hereunder, a Revolving Line
of Credit in favor of the Borrowers in the aggregate principal
amount of up to Thirty-five Million Dollars ($35,000,000) and
agree to make and remake one or more advances to the Borrowers,
upon the terms and conditions set forth in this Article II, from
time to time on any Business Day during the period from the date
hereof through the Revolving Loan Termination Date. The
Borrowers may borrow, repay and reborrow any amount of the
Revolving Line of Credit, provided that the sum of (i) the
aggregate principal amount outstanding at any one time under the
Revolving Line of Credit plus (ii) the face amount of all Letters
of Credit (excluding Letters of Credit issued pursuant to the
Additional LC Facility) then outstanding may not exceed the Total
Revolving Credit Commitment; provided further, that the amount
advanced by an individual Lender pursuant to this Article shall
not exceed such Lender's Revolving Credit Commitment at any time.
Notwithstanding the foregoing, no Lender shall have any
obligation to lend funds at any time when an Event of Default
exists or when there exists any event or condition that, with the
lapse of time, giving of notice or making of such advance, would
constitute an Event of Default or when one or more of the
conditions set forth in Article V has not been satisfied.
(b) Whenever the Borrowers desire to borrow Revolving
Loans under the Revolving Line of Credit, a Designated Officer or
other officer authorized by a Designated Officer shall give each
Lender prior to 2:00 p.m. (Charlotte, North Carolina time) on or
prior to the day of borrowing written notice (or telephonic
notice promptly confirmed in writing) of each Revolving Loan to
be made hereunder. Each such notice (each a "Notice of
Borrowing") shall be irrevocable and shall specify (i) the
aggregate principal amount of the Revolving Loans to be made by
each Lender (which shall be pro rata based on each Lender's
Revolving Credit Commitment as compared to the Total Revolving
Credit Commitment) pursuant to such borrowing, (ii) the date of
the borrowing (which shall be a Business Day), (iii) disbursement
instructions with respect to such Loan, (iv) the amount of
Revolving Loans outstanding, (v) the amount of the Revolving
Loans that had been converted to Term Loans, and (vi) the face
amounts of outstanding Letters of Credit issued pursuant to the
Revolving Line of Credit and the Additional LC Facility,
respectively. Each Notice of Borrowing shall also set forth the
total Revolving Loans and Letters of Credit outstanding with
respect to each Lender after giving effect to the Revolving Loans
requested.
(c) (i) No later than 3:00 p.m. (Charlotte, North
Carolina time) on the date specified in each Notice of Borrowing,
each Lender will make available its pro rata portion of each
borrowing requested to be made on such date in the manner
provided below.
(ii) All amounts that a Lender is to fund shall be
made available in Dollars and immediately available funds to the
Borrowers in accordance with the Notice of Borrowing.
(iii) Nothing herein shall be deemed to relieve any
Lender from its obligation to fulfill its commitments hereunder
or make any Lender responsible for the default of any other
Lender in its obligation to make Loans hereunder.
2.2Term. The term of the Revolving Line of Credit will
begin on the date hereof and end on May 31, 1998, unless
terminated sooner in accordance with the terms of this Agreement;
provided, however, that the term of the Revolving Line of Credit
may be extended for successive one-year periods upon the request
of the Borrowers and the agreement in writing of all of the
Lenders to any such extension.
2.3Notes. On the Closing Date, each of the Borrowers shall
execute and deliver to each of the Lenders a Note to evidence the
Loans to be made by such Lender. Each Note shall (i) be dated as
of the Closing Date, (ii) be in an amount equal to such Lender's
Commitment, (iii) be payable to the order of such Lender,
(iv) bear interest in accordance with this Loan Agreement hereof,
and (v) be in the form of Exhibit A attached hereto with blanks
appropriately completed in conformance herewith. On the date of
the amendment and restatement of this Agreement, as specified
above, the Borrowers will execute and deliver to each of the
Lenders a new note dated as of such date but otherwise in
accordance with the preceding sentence. The amount of principal
owing on the Notes at any given time shall be the aggregate
amount of all advances made under the Revolving Line of Credit,
less all payments of principal theretofore paid by the Borrower.
2.4Conversion to Term Loans. Subject to the terms and
conditions hereof, the Borrower, from time to time, may elect to
convert up to Twenty Million Dollars ($20,000,000) of the
aggregate principal amount of the Revolving Loans into Term Loans
by delivering to each of the Lenders at any time before May 31,
1998, an executed Conversion Notice setting forth the Conversion
Date. Notwithstanding any provision of this Loan Agreement, no
portion of the Revolving Loans may be converted to Term Loans at
any time during the continuance of a Default or Event of Default.
The amount of Revolving Loans held by any Lender that are so
converted into Term Loans on the Conversion Date shall be in the
proportion of such Lender's Commitment as compared to the Total
Commitment.
2.5Repayment.
(a) The Borrowers shall repay the outstanding principal
balance of the Revolving Loans in full, immediately upon the
occurrence of any Event of Default and acceleration by the
Lenders pursuant to Articles IX and X hereof of the principal and
interest due under the Notes.
(b) On the Revolving Loan Termination Date, the aggregate
outstanding principal balance of the Revolving Loans under the
Revolving Line of Credit plus all other Revolving Loan
Obligations as of the Revolving Loan Termination Date shall be
payable in full.
(c) The Borrowers shall repay the outstanding principal
balance of the Term Loans.
(i) In sixteen equal quarterly installments,
each equal to one sixteenth of the initial
principal amount of such Term Loan, due on
the last Business Day of each fiscal quarter
of Cato commencing on the first such date
following the Conversion Date of such Term
Loan;
(ii) In full, immediately upon the occurrence
of any Event of Default and acceleration by
the Lenders pursuant to Articles IX and X
hereof of the principal and interest due
under the Notes.
2.6Use of Proceeds. The proceeds of the Loans shall be used
by the Borrowers solely (i) to provide working capital; (ii) to
support the issuance of letters of credit; and (iii) for such
other corporate purposes as the Borrowers may determine, other
than uses restricted hereunder.
2.7Revolving Line of Credit Facility Fee. During the term
of the Revolving Line of Credit, the Borrowers shall pay to each
Lender such Lender's pro rata portion (based on such Lender's
Commitment as compared to the Total Commitment) of a facility fee
of Seventy Thousand Dollars ($70,000) per annum. Such fee shall
accrue from the Closing Date and shall be payable to each Lender
on the last day of each fiscal quarter of Cato thereafter, in
arrears.
2.8Term Loan Commitment Fee. On the Closing Date, the
Borrowers shall pay to each Lender its pro rata portion (based on
such Lender's Commitment as compared to the Total Commitment) of
a $50,000 fee in consideration of such Lender's commitment to
permit the conversion of Revolving Loans to Term Loans pursuant
to Section 2.4 hereof. On the date of this amendment and
restatement the Borrowers shall pay to each Lender its pro rata
portion (based on such Lender's Commitment as compared to the
Total Commitment) of a $10,000 fee in consideration of the
extension of such Lender's Commitment to permit the conversion of
Revolving Loans to Term Loans pursuant to Section 2.4.
2.9Interest. (a) The Borrowers covenant and agree to pay
to each Lender interest at the Applicable Rate on the unpaid
principal amount of the Revolving Loans made by such Lender.
(b) The Borrowers covenant and agree to pay to each Lender
interest at the Prime Rate on the unpaid principal amount of the
Term Loan made by such Lender.
(c) All interest accrued on the Loans pursuant to the Notes
shall be due and payable on the last Business Day of each fiscal
quarter of Cato.
2.10Computation. Interest on the Loans and fees due
hereunder shall be computed on the basis of the actual days
elapsed in a year consisting of 360 days.
2.11Default Rate; Post-petition Interest. Notwithstanding
any other provision of this Agreement, during the continuance of
any Event of Default all outstanding principal amounts of the
Loans, and to the full extent permitted by law, all interest
accrued on the Loans shall bear interest at the Default Rate, and
shall be payable on demand. To the full extent permitted by
applicable law, interest shall continue to accrue on the Notes
after the filing by or against any or all of the Borrowers of any
petition seeking any relief in bankruptcy or under any act or law
pertaining to insolvency or debtor relief, whether state, federal
or foreign.
2.12Maximum Interest Rate. Nothing contained in this
Agreement or in the Notes shall be deemed to establish or require
the payment of interest to any Lender at a rate in excess of the
maximum rate permitted in the jurisdiction of enforcement of this
Agreement or the Notes. In the event that the rate of interest
required to be paid under other provisions of this Agreement or
the Notes exceeds the maximum rate permitted in such
jurisdiction, the rate of interest required to be paid hereunder
and under the Notes shall be automatically reduced to the maximum
rate permitted in such jurisdiction and any amounts collected in
excess of the permissible amount shall be deemed a prepayment of
principal on the Notes.
2.13Payment.
(a) All payments (including prepayments) by any Borrower on
account of principal, interest and fees due hereunder and under
the Notes shall be made, in immediately available funds, to the
appropriate Lender at such Lender's address as shown on Annex I
attached hereto prior to 2:00 p.m., Charlotte, North Carolina
time, on the date payment is due, or at such other place as is
designated in writing by such Lender. Any payments under this
Agreement which are made later than 2:00 p.m. (Charlotte, North
Carolina time) shall be deemed to have been made on the next
succeeding Business Day.
(b) Upon the failure of the Borrowers to make any principal
or interest payment within five (5) days of the due date thereof,
and immediately upon the due date of any fees, expenses or other
charges due hereunder or under any of the Loan Documents, the
Borrowers hereby authorize and direct each Lender to pay itself
all such amounts by drawing such amounts under the Revolving Line
of Credit. Such Lender shall give the Borrowers telephonic
notice of the amount of any such draws on the day of such draws;
provided, however, that a failure to give such notice shall not
affect the validity of any such draws. Failure of any Lender to
make payments to itself pursuant to this subparagraph shall in no
way release or excuse the Borrowers from making the payments due
the Lenders hereunder.
2.14Application of Principal Payments; Register; Pro Rata
Borrowigs.
(a) All payments made by the Borrowers shall be applied
(i) first, to the payment of fees, interest and expenses due and
payable on the Notes, and (ii) second, to the payment of unpaid
principal on the Notes that is due and payable (to the extent any
payment of unpaid principal exceeds the amount of the installment
of principal of the Term Loans then due and payable, such excess
shall be applied to the principal amount of the Revolving Loans
unless otherwise specified by the Borrowers in a notice delivered
to the Lenders at the time of such payment).
(b) Each Lender will record on its internal records the
amount of each Loan made by it and each payment in respect
thereof. Failure to make any such recordation, or any error in
such recordation, shall not affect the Borrowers' obligations in
respect of such Loans.
(c) Each Loan under this Agreement shall be loaned by each
Lender in the proportion of such Lender's Commitment as compared
to the Total Commitment.
ARTICLE IIAAdditional Letter of Credit Facility
2.1AAdditional Letter of Credit Facility. The Lenders
hereby agree to establish, subject to the terms and conditions of
this Agreement and in reliance upon the representations and
warranties made hereunder, an Additional LC Facility in the
amount of Fifteen Million Dollars ($15,000,000.00).
2.2ATerm. The Additional LC Facility shall exist for a term
beginning on December 16, 1994 and ending on May 31, 1995;
provided, however, that the term of the Additional LC Facility
may be extended from time to time for additional periods of up to
364 days upon the request of the Borrowers and the agreement in
writing of all of the Lenders. The Borrowers may, within 60 days
prior to the end of the then-current term, make a written request
to the Lenders for an extension of the term of the Additional LC
Facility, and within 30 days after the Lenders' receipt of such a
request the Lenders shall give the Borrowers written notice of
their agreement to extend the term or their refusal to do so.
Any failure of the Lenders to respond will be deemed a refusal to
extend the term.
2.3APurpose. The sole purpose of the Additional LC Facility
is to support the issuance of Letters of Credit pursuant to
Article III.
2.4AFacility Fee. During the term of the Additional LC
Facility the Borrowers shall pay each Lender such Lender's pro
rata portion (based on such Lender's Commitment compared to the
Total Commitment) of a facility fee of Eighteen Thousand Seven
Hundred Fifty Dollars ($18,750) per annum. Such fee shall accrue
from December 16, 1994 and shall be payable to each Lender on the
last day of each fiscal quarter of Cato thereafter, in arrears.
2.5APayment; Computation. Payment, applications of
payments, and calculations with respect to such facility fee will
be made pursuant to the provisions of Article II.
ARTICLE IIILetters of Credit3.1Letters of Credit. During the
term of this Agreement, any Borrower may request from time to
time that the LC Bank issue for such Borrower's account one or
more Letters of Credit to facilitate the purchase of inventory by
the Borrowers in the ordinary course of business. Applications
for Letters of Credit shall be made on the forms provided by the
LC Bank to such Borrower for such purpose, which forms shall be
substantially similar to the form attached hereto as Exhibit B.
If the face amount of the Letter of Credit requested is available
under the terms hereof, the LC Bank agrees to issue the Letter of
Credit requested, on behalf of all of the Lenders, provided that
(i) the expiration date of the requested Letter of Credit is no
later than the Revolving Loan Termination Date; (ii) there is no
currently existing Event of Default, and (iii) all of the other
terms and conditions of this Agreement and any LC Agreements have
been met. Notwithstanding the restriction of clause (i) above,
the LC Bank agrees to issue Letters of Credit having expiration
dates that are after the Revolving Loan Termination Date and
having an aggregate face amount of not more than Four Million
Dollars ($4,000,000) provided that (w) the expiration date of
such Letters of Credit are not more than 91 days after the
Revolving Loan Termination Date, (x) such Letters of Credit by
their terms require, as a condition to any draw thereunder, the
presentation of documents of title to goods purchased upon
payment pursuant to such draw, (y) the Borrower's reimbursement
obligations to the LC Bank with respect to such Letters of Credit
are fully secured, to the satisfaction of the Lenders, by cash
collateral on deposit with the LC Bank, and (z) the conditions of
clauses (ii) and (iii) above are satisfied at the time the
Borrower applies for such Letters of Credit.
In each application for a Letter of Credit the Borrowers
shall designate whether such Letter of Credit shall be issued
pursuant to the Revolving Line of Credit or the Additional LC
Facility, but (i) no Letter of Credit with an expiration date
that is more than 90 days after the Additional LC Facility
Termination Date (as of the date of such application) will be
issued pursuant to such Additional LC Facility, and (ii) the
aggregate face amount of all Letters of Credit outstanding
pursuant to the Additional LC Facility at any one time may not
exceed $15,000,000.
3.2Notice of Issuance. Whenever a Borrower desires the
issuance of a Letter of Credit, it shall, in addition to
completing any application procedures and documents required by
the LC Bank for the issuance of a Letter of Credit, notify the LC
Bank no later than 2:00 p.m. (Charlotte time) on the Business Day
of the proposed date of issuance. Each such notice shall specify
(i) the proposed date of issuance (which shall be a Business
Day), (ii) the face amount of the Letter of Credit, (iii) the
expiration date of the Letter of Credit, and (iv) the name and
address of the beneficiary with respect to such Letter of Credit.
3.3Reimbursements. Prior to 2:00 p.m., Charlotte, North
Carolina time, on any Disbursement Date the Borrowers will
reimburse the LC Bank for all amounts which it has disbursed
under a Letter of Credit. In the event the LC Bank is not
reimbursed by the Borrowers on the Disbursement Date, the Lenders
shall fund (without any requirement that the conditions set forth
in Article V shall have been fulfilled) the reimbursement
obligation therefor by making Revolving Loans as provided in
Section 2.1 (the Borrowers being deemed to have given a timely
request therefor for such amount); provided, however, for the
purpose of determining the availability of a borrowing under the
Revolving Line of Credit immediately prior to giving effect to
the application of the proceeds of such Revolving Loans, such
Letter of Credit shall be deemed not to be outstanding at such
time.
The Borrowers' obligations under this Section 3.3 to
reimburse the LC Bank with respect to each disbursement
(including interest thereon) in respect of a Letter of Credit,
shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or
defense to payment that the Borrowers may have or have had
against any Lender or any beneficiary of a Letter of Credit,
including any defense based upon the occurrence of any Default or
Event of Default, any draft, demand or certificate or other
document presented under a Letter of Credit proving to be forged,
fraudulent, invalid or insufficient, the failure of any
disbursement to conform to the terms of the applicable Letter of
Credit (if in good faith opinion of the LC Bank, such
disbursement is determined to be appropriate) or any
nonapplication or misapplication by the beneficiary of the
proceeds of such disbursement, or the legality, validity, form,
regularity or enforceability of such Letter of Credit.
3.4Letter of Credit Fees. The Borrowers agree to pay the LC
Bank, on demand, the LC Bank's standard opening and operating
fees, commissions and charges in effect from time to time for
issuing and administering any Letters of Credit, all in
accordance with the LC Agreements relating to such Letters of
Credit, and all interest due under such LC Agreements. The
Borrowers further agree to pay to the LC Bank (i) a fee at the
rate of three-quarters percent (3/4%) per annum of any Letter of
Credit that is not a Documentary Letter of Credit for the period
commencing on the date of issuance of such Letter of Credit and
ending on the termination date of such Letter of Credit, payable
on the date of issuance of such Letter of Credit and (ii) a fee
at the rate of three-sixteenths of one percent (0.1875%) of the
amount of each drawing under a Documentary Letter of Credit,
payable at the time of the drawing; provided, however, that the
minimum fee for any Documentary Letter of Credit shall be $50.
The Lenders shall fund (without any requirement that the
conditions set forth in Article V shall have been fulfilled) the
amount of any such fees, commissions, charges and interest when
due and payable through Revolving Loans, to the extent available
(the Borrowers being deemed to have given a timely Loan request
therefor).
3.5Reimbursement and Other Obligations. All obligations of
a Borrower to pay money to the LC Bank, including without
limitation, any reimbursement obligations pursuant to Section 3.3
or pursuant to the LC Agreements, shall be deemed Obligations of
all Borrowers hereunder jointly and severally, and shall
constitute Obligations under the Agreement and the other Loan
Documents.
3.6Other Terms. All other terms and conditions of the
Letters of Credit shall be subject to and governed by the
provisions of the LC Agreements relating to each specific Letter
of Credit.
3.7Participations in Letters of Credit. The LC Bank will
sell and the other Lenders will purchase, participation interests
in the Letters of Credit, such that the relative risks, benefits,
fees and expenses of each Letter of Credit will be shared by the
Lenders pro rata based on each Lender's Commitment as compared to
the Total Commitment.
ARTICLE IVProvisions Applicable to Both the Letters Of Creditand
he Revolving Credit Loans
4.1 Capital Adequacy. In the event that any Lender shall
have determined that the adoption of any applicable law, rule,
regulation or guideline regarding capital adequacy, or any change
therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof
or by any court, or compliance by such Lender with any request or
directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of
return on such Lender's capital as a consequence of its
obligations hereunder to a level below that which such Lender
could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's policies as the case may
be, with respect to capital adequacy) by an amount deemed by such
Lender to be material, then the Borrowers, within fifteen (15)
days of any written request by such Lender, shall pay to such
Lender such additional amount or amounts as will compensate such
Lender for any such reduction suffered; provided that no Borrower
shall be obligated to pay any such amounts for actual reductions
suffered more than one hundred-twenty (120) days prior to the
date of such request. Within a reasonable time after making a
request for such additional amount hereunder, the Lender will
furnish to the Borrowers a statement certifying the amount
hereunder, the Lender will furnish to the Borrowers a statement
certifying the amount of such reduction and describing the event
giving rise to such reduction, which describing the event giving
rise to such reduction, which determination shall be conclusive
absent manifest error. Failure on the part of a Lender to demand
payment of any additional amounts hereunder shall not constitute
a waiver of such Lender's right to demand payment of any amounts
arising at any subsequent time. Nothing herein contained shall
be construed or so operate as to require the Borrowers to pay any
interest, fees, costs or charges greater than is permitted by
applicable law.
4.2Taxes.
(a) Any and all payments by the Borrowers hereunder or
under the Notes, the LC Agreements or the other Loan Documents
shall be made in accordance with the terms hereof and thereof,
free and clear of and without deduction for any and all present
or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding
taxes measured by net income, and franchise taxes imposed on any
Lender, by the jurisdiction under the laws of which such Lender
is organized or transacting business or any political subdivision
thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred
to as "Taxes"). If the Borrowers shall be required by law to
deduct any Taxes from or in respect of any sum payable under any
such documents to a Lender, (i) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section 4.2) such Lender receives an amount
equal to the sum it would have received had no such deductions
been made, (ii) the Borrowers shall make such deductions,
(iii) the Borrowers shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law, and (iv) the Borrowers shall deliver to such
Lender evidence of such payment to the relevant taxation
authority or other authority.
(b) In addition, the Borrowers agree to pay any and all
present or future intangibles, stamp or documentary taxes or any
other excise or property taxes, charges or similar levies of the
United States or any state or political subdivision thereof or
any applicable foreign jurisdiction that arise from any payment
made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement (hereinafter
referred to as "Other Taxes").
(c) The Borrowers hereby agree jointly and severally to
indemnify the Agent and each Lender for the full amount of Taxes
or Other Taxes (including without limitation, any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this
Section 4.2) paid by the Agent and any Lender (as the case may
be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date the
Agent or any Lender makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes
pursuant to this Section 4.2, the Borrowers will furnish to the
relevant Lender the original or a certified copy of a receipt
evidencing payment thereof.
(e) Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and
obligations of the Borrowers contained in this Section 4.2 shall
survive the payment in full of principal and interest and all
other payments due hereunder.
ARTICLE VClosing; Conditions of Closing and Borrowing
5.1Closing. The Closing shall take place at 10:00 a.m. on
March 9, 1993 at the offices of Robinson, Bradshaw & Hinson,
P.A., 1900 Independence Center, 101 North Tryon Street,
Charlotte, North Carolina 28246 or at such time as the parties
hereto shall mutually agree.
5.2Conditions of Loans and Advances. The obligation of the
Lenders to close this financing or to make any Loans or advances
under this Agreement is subject to: (a) the accuracy and
correctness of the representations and warranties of the
Borrowers contained herein, in the other Loan Documents and in
any certificate delivered pursuant to this Agreement or the other
Loan Documents, in all respects as if made on the date of such
Loan or advance; (b) the performance by the Borrowers of their
respective agreements contained herein and in the other Loan
Documents; and (c) the continued satisfaction of the following
conditions:
5.2.1Executed Loan Documents.
(a) Certain Documents. The following Loan Documents shall
have been duly authorized, executed and delivered by the
appropriate Borrower or Borrowers, in form and substance
satisfactory to each Lender, shall be in full force and effect
and no event of default, as defined therein, or event or
condition that, with the lapse of time or giving of notice, or
both, would constitute an event of default thereunder, shall
exist, and the Agent and each Lender shall have received fully
executed originals thereof:
(i) the Notes; and
(ii) the Continuing Letter of Credit Agreement
attached hereto as Exhibit B.
(b) Intercreditor Matters. The Agent and the Lenders shall
have entered into a satisfactory intercreditor agreement setting
forth the rights and responsibilities of the Agent and the
Lenders.
5.2.2Closing Certificates, etc.
(a) Certificates of the Borrowers. The Agent and the
Lenders shall have received a certificate dated as of the Closing
Date from each Borrower, in form and substance satisfactory to
the Lenders, to the effect that all representations and
warranties of such Borrower contained in this Agreement and the
other Loan Documents are true, correct and complete; that such
Borrower is not in violation of any of the covenants contained in
this Agreement or the other Loan Documents; that, giving effect
to the transactions contemplated by this Agreement, no Event of
Default nor any event or condition which with notice, lapse of
time, or both would constitute such an Event of Default, has
occurred and is continuing; and that each Borrower has satisfied
each of the closing conditions applicable to such Borrower. Each
request for an advance under the Revolving Line of Credit, each
application for a Letter of Credit and each advance made or
Letter of Credit issued by any Lender on behalf of a Borrower
pursuant to such request or application shall be deemed to be a
new certification by the Borrowers under this Section 5.2.2(a) as
of the date of such request or advance.
(b) Certificates of Secretary. The Agent and the Lenders
shall have received a certificate dated as of the Closing Date of
the Secretary or an Assistant Secretary of each Borrower
certifying: (a) that attached thereto is a true and complete copy
of the bylaws of such Borrower, as in effect on the date of such
certification; (b) that attached thereto is a true and complete
copy of resolutions adopted by the Board of Directors of such
Borrower authorizing the execution, delivery and performance of
this Agreement and the other Loan Documents; and (c) as to the
incumbency and genuineness of the signature of each officer of
such Borrower, as applicable, executing this Agreement or any of
the other Loan Documents.
(c) Articles of Incorporation. The Agent and the Lenders
shall have received copies of the certificate of incorporation of
each Borrower and all amendments thereto, certified as of a
recent date by the Secretary of State of such Borrower's state of
incorporation and a certification by each Borrower that such
certificate of incorporation have not been amended since such
date.
(d) Certificates of Good Standing. With respect to each
Borrower, the Agent and the Lenders shall have received (i) a
long-form certificate as of a recent date of such corporation's
good standing under the laws its state of incorporation and of
each state in which it is authorized to transact business, and
(ii) good standing certificates from the Department of Revenue of
the state of incorporation of each Borrower, indicating that such
Borrower has filed all required tax returns and such Borrower
owes no delinquent taxes.
(e) Opinion of Counsel to the Borrower. The Lenders shall
have received the favorable opinion of the law firm of Moore &
Van Allen, counsel for the Borrowers, dated as of the Closing
Date and addressed to the Lenders, as to the matters set forth on
Exhibit D hereto, in form and substance satisfactory to the
Lenders.
5.2.3Consents, No Adverse Change.
(a) Governmental Approvals. All necessary approvals,
authorizations and consents, if any be required, of all
governmental bodies (including courts) having jurisdiction with
respect to the transactions contemplated by this Agreement shall
have been obtained.
(b) No Injunction, Etc. No injunction, restraining order,
or judgment before any court, governmental agency or legislative
body shall have been obtained which enjoins, restrains, or
prohibits, or awards substantial damages in respect of, this
Agreement or the consummation of the transactions contemplated
hereby.
(c) Event of Default. No Event of Default, nor any event
or condition which, with notice, lapse of time or the making of
any Loan or advance, would constitute an Event of Default, shall
have occurred and be continuing.
5.2.4Miscellaneous.
(a) Proceedings and Documents. All certificates and other
instruments and documents and all proceedings in connection with
the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Lenders. The Agent and
the Lenders shall have received copies of all other certificates,
instruments and documents, and other evidence as they may
reasonably request, in form and substance satisfactory to the
Lenders, with respect to the transactions contemplated by this
Agreement and the taking of all actions in connection therewith.
(b) Disbursement Instructions. The Lenders shall have
received written instructions and authorization from the
Borrowers to the Lenders as to the payment of any proceeds of
Loans made under this Agreement that are to be paid on the
Closing Date.
(c) Payment at Closing. There shall have been paid by the
Borrowers to the respective parties entitled thereto the fees and
expenses due hereunder, including the fees described in
Section 2.8.
5.3Waiver of Conditions Precedent. If any Lender makes any
Loan or advance hereunder prior to the fulfillment of any of the
conditions precedent set forth in this Article V, the making of
such Loan or advance shall constitute only an extension of time
for the fulfillment of such condition and not a waiver thereof,
and each Borrower shall thereafter use its best efforts to
fulfill each such condition promptly.
ARTICLE VIRepresentations and Warranties
In order to induce the Lenders to enter into this Agreement
and to make the Loans, each of the Borrowers (severally and
jointly with the other Borrowers) makes the following warranties
and representations to the Agent and the Lenders, all of which
shall be true and correct as of the date the initial Loan is made
hereunder and shall survive the execution of this Agreement and
the making of such initial Loan:
6.1Corporate Organization and Power. Each of the Borrowers
(i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and
(ii) is qualified to do business and is in good standing in every
other jurisdiction in which the nature of its business or the
ownership of its properties requires it to be so qualified and
where failure to so qualify would have a Material Adverse Effect.
Each Borrower (x) has the requisite corporate power and authority
and the right to own and operate its properties, to lease the
property it operates under lease, and to conduct its business as
now and proposed to be conducted; (y) has full power to engage in
the transactions contemplated hereby and in the other Loan
Documents; and (z) has the full power, authority and legal right
to execute and deliver this Agreement, and the other Loan
Documents executed by it and to perform and observe the terms and
provisions hereof and thereof. Cato, as of the date hereof, has
no Subsidiaries except CHW, which is a wholly owned Subsidiary of
Cato.
6.2Litigation; Government Regulation. As of the Closing
Date, there are no material actions, suits, investigations or
proceedings pending or, to the knowledge of each Borrower,
threatened against or affecting any Borrower, or that question
the validity of this Agreement, or any of the Loan Documents, at
law or in equity before any court or administrative officer or
agency, and no Borrower is in violation of or in default under
any applicable statute, rule, order, decree, writ, injunction or
regulation of any governmental body (including any court) where
such violation may have a Material Adverse Effect.
6.3Taxes. No Borrower is delinquent in the payment of any
taxes, including sales taxes, that have been levied or assessed
by any governmental authority against it or its assets, unless
such taxes are being diligently contested by such Borrower by
appropriate proceedings and the failure to timely pay such taxes
will not have a Material Adversely Effect. Each Borrower has
timely filed all tax returns that are required by law to be
filed, and has paid all taxes shown on said returns and all other
assessments or fees levied upon such Borrower, or upon its
properties to the extent that such taxes, assessments or fees
have become due and if not due, such taxes have been adequately
provided for. To the knowledge of each Borrower, no material
controversy in respect of income taxes is pending or threatened.
6.4Enforceability of Loan Documents; Compliance With Other
Instruents. Each of the Loan Documents executed by any Borrower
is the legal, valid and binding obligation of such Borrower,
enforceable against such Borrower in accordance with its terms.
No Borrower is in default in any material respect with respect to
any indenture, loan agreement, mortgage, lease, deed or similar
agreement related to the borrowing of monies to which such
Borrower is a party or by which it is bound. Neither the
execution, delivery or performance of the Loan Documents executed
by the Borrowers, nor compliance therewith: (a) conflicts or
will conflict with or results or will result in any breach of, or
constitutes or will constitute with the passage of time or the
giving of notice or both, a default under, (i) the certificate of
incorporation or bylaws of any Borrower, (ii) any law, order,
writ, injunction or decree of any court or governmental
authority, or (iii) any agreement or instrument to which any
Borrower is a party or by which any Borrower, or its respective
properties, is bound or (b) results or will result in the
creation or imposition of any lien, charge or encumbrance upon
its properties pursuant to any such agreement or instrument,
except Permitted Liens.
6.5Governmental Authorization. No authorization, consent or
approval of, or declaration or filing with, any governmental
authority is required for the valid execution, delivery and
performance by each Borrower of the Loan Documents or the
consummation by each Borrower of the transactions contemplated
hereby and thereby. Each Borrower has, and is in good standing
with respect to, all material governmental approvals, permits,
certificates, inspections, consents and franchises necessary to
continue to conduct its respective businesses as heretofore
conducted and to own or lease and operate its properties as now
owned or leased by it. None of such approvals, permits,
certificates, consents, or franchises contains any term,
provision, condition or limitation more burdensome than such as
are generally applicable to Persons engaged in the same or
similar business as such Borrower.
6.6Event of Default. No event has occurred and is
continuing that constitutes an Event of Default or would
constitute such an Event of Default after notice or lapse of time
or both.
6.7Margin Securities. Neither the making of any Loan
hereunder, nor the use of the proceeds thereof, will violate or
be inconsistent with the provisions of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System and no part
of the proceeds of any Loans will be used to purchase or carry
any Margin Stock in violation of Regulation U or to extend credit
for the purpose of purchasing or carrying any Margin Stock in
violation of Regulation U.
6.8Full Disclosure. None of the Loan Documents, nor any
statements furnished to the Agent or any Lender by or on behalf
of a Borrower in connection with the transactions contemplated
Loan Documents, contains any untrue statement of a material fact
or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact
known to either Borrower not disclosed to the Lenders in writing
that has or, to the best of either Borrower's knowledge, would
have a Material Adverse Effect.
6.9ERISA.
(a) No accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Internal Revenue
Code), whether or not waived, has occurred with respect to any
Employee Plan, and no termination event or Reportable Event has
occurred or is reasonably expected to occur with respect to any
Employee Plan. The present value of all accrued benefits under
each Employee Plan (based on those assumptions used to fund such
Employee Plan) did not, as of the most recent valuation date,
exceed the then current value of the assets of such Employee Plan
allocable to such benefits. Full payment has been made on or
before the due date thereof of all amounts that each Borrower is
required under the terms of each Employee Plan to have paid as
contributions to such plan.
(b) No Borrower has incurred any withdrawal liability under
Section 4201 of ERISA.
(c) No Borrower has participated in any prohibited
transaction (as defined in Section 406 or ERISA or Section 4975
of the Internal Revenue Code), which has subjected, or may
subject, it to any material civil penalty or tax imposed by
Section 502(i) of ERISA or Section 4975 of the Internal Revenue
Code, respectively. No Borrower has incurred, or is reasonably
expected to incur, any liability to the Pension Benefit Guaranty
Corporation (other than for insurance premiums which have been
paid when due).
(d) To the knowledge of each Borrower and based on
actuarial reports, the present value (determined using actuarial
and other assumptions that are reasonable in respect of the
benefits provided and the employees participating) of the
liability of each Borrower for post-retirement benefits to be
provided to its current and former employees under all welfare
benefit plans (as defined in Section 3(1) of ERISA) does not, in
the aggregate, exceed the assets under all such plans allocable
to such benefits by an amount that would have a Material Adverse
Effect.
(e) The execution and delivery of this Agreement will not
involve any transaction which is subject to the prohibitions of
Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975 of the Internal Revenue Code.
(f) No Borrower is making or has ever made or been required
to make any contributions to a Multiemployer Plan.
6.10Financial Statements. The Financial Statements of the
Borrowers delivered to the Lenders by the Borrowers in connection
with this Loan Agreement have been prepared by the Borrowers in
accordance with Generally Accepted Accounting Principles, and in
the case of the most recent annual Financial Statements have been
audited by Ernst and Young, independent certified public
accountants, in accordance with generally accepted auditing
standards, and they contain no material misstatement or omission
and fairly present the consolidated financial position, assets
and liabilities of the Borrowers as of the respective dates
thereof and the results of operations of the Borrowers for the
respective periods then ended. Since the date of the unaudited
Financial Statements for the most recent fiscal quarter, there
has been no material adverse change in the consolidated assets,
liabilities or financial position of Cato and its Subsidiaries or
in the consolidated results of operations of Cato and its
Subsidiaries, and neither of the Borrowers has incurred any
obligation or liability that would have a Material Adverse
Effect.
6.11Title to Assets. Each Borrower has good, indefeasible
and merchantable title in fee simple (or its equivalent under
applicable law) to and ownership of the properties owned by it
(as reflected in the Financial Statements) and all of its other
assets, including without limitation, the assets reflected in the
most recent Financial Statements, free and clear of all liens,
claims, security interests and encumbrances, except those in
favor of the Lenders and Permitted Liens; and, except for
financing statements filed in connection with a loan agreement
being terminated on the Closing Date following the discharge on
the Closing Date of all indebtedness thereunder, which financing
statements shall be promptly terminated, and financing statements
filed in connection with the Permitted Liens, no financing
statement under the Uniform Commercial Code that names any
Borrower as debtor has been filed and is still in effect, other
than in favor of the Lenders, and no Borrower has signed any
financing statement or any security agreement authorizing any
secured party thereunder to file any such financing statement.
Each Borrower enjoys peaceful and undisturbed possession under
substantially all of its leases and all such leases are valid and
subsisting and in full force and effect.
6.12Use of Proceeds. Each Borrower's uses of the proceeds
of any Loans made by the Lenders to the Borrowers pursuant to
this Agreement are, and continue to be, legal and proper uses and
such uses are and will be consistent with all applicable laws and
statutes, as in effect from time to time.
6.13Environmental Matters. Except for permitted operations
in full compliance with all applicable federal, state and local
Environmental Laws, regulations and rules: (a) No dangerous,
hazardous or toxic substances, pollutants, contaminants,
chemicals, wastes, or materials, within the meaning of any
applicable federal, state or local laws, regulations or orders
and including without limitation urea-formaldehyde,
polychlorinated biphenyls (PCB's), nuclear fuel or waste, and
petroleum, including but not limited to crude oil, natural gas,
natural gas liquids, gasoline and synthetic gas, are stored or
otherwise located on the Realty owned or leased by any Borrower
(excluding de minimis quantities of materials and quantities of
such materials in normal office and cleaning products) and no
part of the Realty owned or leased by any Borrower, including the
groundwater located thereon and thereunder, is presently known by
the Borrower to be contaminated by any such substance. No
improvement located on the Realty owned or leased by any Borrower
is known to contain any friable asbestos or substances containing
asbestos and deemed hazardous by any federal, state or local
laws, regulations or orders respecting such material. To the
knowledge of the Borrower, there were no releases of such
hazardous substances, materials or wastes on any Realty
previously owned by the Borrower while the Borrower owned such
Realty;
(b) No Realty owned or leased by the Borrower has, to the
knowledge of the Borrower, ever been used as or for a mine, a
gasoline service station, or an above-ground petroleum products
storage facility, a landfill, a dump or other disposal facility,
or for industrial, or manufacturing purposes;
(c) To the knowledge of the Borrowers, there are no
underground storage tanks situated on the Denmark Road Real
Estate, other than tanks installed by the Borrower which have
been appropriately emptied and filled in compliance with all
applicable Environment Laws and, to the knowledge of the
Borrower, no underground leakage from such tanks has occurred;
(d) All activities, and operations of each Borrower meet in
all material respects the requirements of all applicable
Environmental Laws and regulations of all federal, state and
local governments or regulatory bodies having jurisdiction over
such Borrower, or its properties, including without limitation,
RCRA and CERCLA;
(e) The Borrower, to its knowledge, has never sent a
hazardous substance to a site which, pursuant to CERCLA or any
similar state law, (1) has been placed on the "National
Priorities List" of hazardous wastes, or (2) which is subject to
a claim, an administrative order or other request to take
"removal" or "remedial" action (as defined under CERCLA) or to
pay for the costs of cleaning up such a site;
(f) The Borrower, to its knowledge, is not involved in any
suit or proceeding nor has it received any notice from any
governmental agency with respect to a release of hazardous
substances nor has it received notice of any claims from any
person or entity relating to personal injuries from exposure to
hazardous substances; and
(g) The Borrower has timely filed all material reports
required to be filed, has acquired all necessary certificates,
approvals and permits and has generated and maintained in all
material respects all required data, documentation and records
under any applicable Environmental Laws.
6.14Authorization. The execution, performance and delivery
of the Loan Documents by the Borrowers are within the corporate
powers of such Borrowers and have been duly authorized by all
necessary and appropriate corporate action and validly executed
and delivered.
6.15Assets for Conduct of Business. Each of the Borrowers
possesses adequate assets, licenses, patents, patent
applications, copyrights, trademarks, servicemarks and trade
names to continue to conduct its business as heretofore
conducted, without any material conflict with the rights of
others.
6.16Compliance With Laws. Each of the Borrowers has duly
complied with, and the Realty and its business operations and
leaseholds are in compliance in all material respects with, the
provisions of all federal, state and local law, rules and
regulations applicable to such Borrower, the Realty or the
conduct of such Borrower's business, including, without
limitation, all federal and state securities and antitrust laws,
ERISA and OSHA, and there have been no citations, notices or
orders of noncompliance issued to such Borrower under any such
law, rule or regulation which would have a Material Adverse
Effect.
6.17Withholding Taxes. Each of the Borrowers is current in
respect to payment of all federal and state withholding taxes,
social security taxes and other payroll taxes. Each of the
Borrowers currently accrues its payroll tax obligations and
maintains sufficient available funds or borrowing capacity to
satisfy its payroll tax liability, if any.
6.18Contracts; Labor Disputes. No Borrower is a party to
any contract or agreement, or subject to any charge, corporate
restriction, judgment, injunction, decree, rule, regulation or
order of any court of governmental authority, which has or would
have a Material Adverse Effect. As of the Closing Date, no
Borrower is a party to any general labor disputes, and there are
no strikes or walkouts relating to any labor contracts to which
any Borrower is a party.
6.19Outstanding Indebtedness. As of the Closing Date, no
Borrower has outstanding any Indebtedness for money borrowed,
other than for outstanding Letters of Credit issued for the
account of any Borrower, in excess of $50,000.
ARTICLE VIIAffirmative Covenants
Until payment in full of all Obligations of each of the
Borrowers to each of the Lenders, each of the Borrowers covenants
and agrees that, unless the Lenders consent otherwise in writing:
7.1Repayment of Obligations. The Borrowers will promptly
repay the Obligations when due, including without limitation the
amounts due under the Notes, according to the terms of this
Agreement and the other Loan Documents.
7.2Performance Under Loan Documents. Each Borrower will
perform all obligations required to be performed by it under the
terms of this Agreement and the other Loan Documents and any
other agreements now or hereafter existing or entered into
between any of the Borrowers and the Lenders, subject to notice
and cure provisions contained therein.
7.3Financial and Business Information about the Borrowers.
The Borrowers shall deliver, or cause to be delivered, to each
Lender:
(a) As soon as practicable and in any event within forty-
five (45) days after the close of each fiscal quarter (except the
fourth quarter in each fiscal year) of Cato, a consolidated
balance sheet of Cato and its Subsidiaries as of the close of
such fiscal quarter and consolidated statements of income and
retained earnings and cash flows for that fiscal quarter and for
the portion of the fiscal year then ended, prepared in accordance
with Generally Accepted Accounting Principles, applied on a basis
consistent with that of the preceding period or containing
disclosure of the effect on the financial position or results of
operation of any change in the application of accounting
principles and practices during the period and certified by the
chief financial officer of Cato;
(b) As soon as practicable and in any event within one
hundred twenty (120) days after the close of a fiscal year of
Cato, beginning with the close of the fiscal year ending January
30, 1993, an audited consolidated balance sheet of Cato and its
Subsidiaries as of the close of such fiscal year, and an audited
consolidated statement of income, and retained earnings and cash
flows prepared in accordance with Generally Accepted Accounting
Principles, each audited by an independent certified public
accountant acceptable to the Lenders in accordance with generally
accepted auditing standards, applied on a basis consistent with
those of the preceding year or containing disclosure of the
effect on the financial position or results of operation of any
change in the application of accounting principles and practices
during the year; such financial statements shall be accompanied
by a report thereon by such certified public accountants,
containing an opinion that is not qualified with respect to scope
limitations or accounting principles followed by Cato and its
Subsidiaries not being in accordance with Generally Accepted
Accounting Principles, all in a form acceptable to the Agent and
the Lenders;
(c) Concurrently with the delivery of the financial
statements of the Borrower described in subsection (b) above, a
certificate from the independent certified public accountants
that in making their examination of the financial statements of
the Borrower, they obtained no knowledge of the occurrence or
existence of any condition or event which constitutes or would
constitute, upon the giving of notice or lapse of time or both,
any Event of Default, or a statement specifying the nature and
period of existence of any such condition or event disclosed by
their examination;
(d) Concurrently with the delivery of the financial
statements described in subsections (a) and (b) above, a
certificate from the Borrowers by a Designated Officer certifying
to the Lenders that the Borrowers have kept, observed, performed
and fulfilled in all material respects each and every covenant,
obligation and agreement binding upon any Borrower contained in
this Loan Agreement or the other Loan Documents, and that no
Event of Default, or any event which with the giving of notice or
lapse of time or both would constitute an Event of Default, has
occurred, or specifying any such Event of Default;
(e) Such other information about the financial condition
and operations of any Borrower as the Required Lenders may from
time to time reasonably request.
7.4Notice of Certain Events. The Borrowers shall promptly,
but in no event later than three (3) Business Days after an
executive officer of any Borrower obtains knowledge thereof, give
written notice to the Lenders of: (a) any material litigation or
proceeding brought against any Borrower, whether or not the claim
is considered by any such Borrower to be covered by insurance
(for the purpose hereof, any litigation against any Borrower
seeking to recover $1,000,000 or more in damages shall be deemed
material); (b) any written notice of a violation received by any
Borrower from any governmental regulatory body or law enforcement
authority which, if such violation were established, would have a
Material Adverse Effect; (c) any labor controversy that has
resulted in a strike or other work action that might reasonably
be expected to have a Material Adverse Effect; (d) any
attachment, lien, or levy that may be placed on or assessed
against or threatened against any Borrower, or any property of a
Borrower, other than Permitted Liens; (e) any judgments or orders
involving cost to the Borrowers in aggregate of more than
$500,000 in any fiscal year; (f) any Event of Default or any
Default; and (g) any other matter that has or would have a
Material Adverse Effect. The Borrowers shall promptly give
notice to the Lenders of any change in any Designated Officer.
7.5Corporate Existence and Maintenance of Properties. (a)
Each of the Borrowers shall maintain and preserve its corporate
existence and all rights, privileges and franchises now enjoyed;
provided, however, that any Subsidiary of Cato may merge with and
into Cato or any other Subsidiary of Cato; (b) each of the
Borrowers shall conduct its business in an orderly, efficient and
customary manner, keep its tangible properties in good working
order and condition (normal wear and tear excepted), and from
time to time make all needed repairs to, renewals of or
replacements of such properties (except to the extent that any of
such properties is obsolete or is being replaced) so that the
efficiency of such property shall be fully maintained and
preserved; and (c) each Borrower shall file or cause to be filed
in a timely manner all reports, applications, estimates and
licenses that shall be required by any governmental authority and
which, if not timely filed, would have a Material Adverse Effect.
7.6Payment of Indebtedness; Performance of Other
Obligations. Each of the Borrowers shall pay all Indebtedness
for money borrowed at maturity when due, and all other
obligations in accordance with customary trade practices.
7.7Maintenance of Insurance.
Notwithstanding any provision in any other Loan Documents
requiring specified types or amounts of insurance, the Borrowers
shall maintain worker's compensation insurance, liability
insurance and insurance on its properties, assets and business,
now owned or hereafter acquired, against such casualties, risks
and contingencies, and in such types and amounts and with such
insurance companies as shall be selected by management of Cato in
its reasonable discretion and as are customarily maintained by
prudent companies similarly situated in the Borrower's industry.
7.8Maintenance of Books and Records; Inspection. The
Borrower shall maintain adequate books, accounts and records, and
prepare all financial statements required under this Agreement in
accordance with Generally Accepted Accounting Principles and in
compliance with the regulations of any governmental regulatory
body having jurisdiction over it. Each of the Borrowers shall
permit any representative of the Lenders to visit and inspect any
of the properties of such Borrower, to examine all books of
accounts, records, reports and other papers, to make copies and
extracts therefrom, and to discuss the affairs, finances and
accounts of such Borrower with its executive officers and, upon
the consent of such Borrower, which shall not be unreasonably
withheld, its independent public accountants (and by this
provision each Borrower authorizes said accountants to discuss
the finances and affairs of such Borrower and to provide said
accountants with such further written authorization as they may
require), all at such reasonable times and as often as may be
reasonably requested.
7.9Compliance with ERISA. Each Borrower shall: (i) make
timely payment of contributions required to meet the minimum
funding standards set forth in ERISA with respect to any Employee
Plan; (ii) promptly, upon the request of any Lender, furnish to
the Lenders copies of any annual report required to be filed
under ERISA in connection with the Employee Plan; (iii) not take
any action or fail to take action, the result of which action or
inaction could be a material liability of Borrower to the Pension
Benefit Guaranty Corporation or to a Multiemployer Plan; and
(iv) notify the Lenders as soon as practicable of any Reportable
Event and of any additional act or condition arising in
connection with any Pension Plan which such Borrower believes
might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by
the appropriate United States District Court of a trustee to
administer such plan. No Borrower shall participate in any
Prohibited Transaction which could subject any Borrower to any
material civil penalty under ERISA or material tax under the
Internal Revenue Code. Each Borrower shall furnish to a Lender
upon a Lender's request such additional information about any
Employee Plan or other employee benefit plan as may be reasonably
requested by such Lender.
7.10COBRA. The Employee Plans shall be operated in such a
manner that none of the Borrowers will incur any material tax
liability under Section 4980B of the Internal Revenue Code or any
material liability to any qualified beneficiary as defined in
Section 4980B.
7.11Payment of Taxes. Each Borrower will pay and discharge
all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a
lien or charge upon any properties of such Borrower, provided
that such Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings if it has maintained adequate
reserves (in the good faith judgment of the management of such
Borrower) with respect thereto in accordance with Generally
Accepted Accounting Principles.
7.12Compliance with Statutes, etc. Each Borrower will
comply with all applicable statutes, regulations and orders of,
and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable
statutes, regulations, orders and restrictions relating to
environmental standards and controls) other than those the
noncompliance with which would not have a Material Adverse
Effect. Each Borrower shall also observe and remain in
compliance with all licenses, permits, franchises or other
authorizations necessary to the ownership of its properties or
the conduct of its business, and all covenants and conditions of
all agreements and instruments to which a Borrower is a party,
where failure to comply or failure to obtain would have a
Material Adverse Effect.
ARTICLE VIIINegative Covenants
Until payment in full of the Obligations, the Borrowers
jointly and severally covenant and agree that, unless the
Required Lenders consent in writing, the Borrowers will not, nor
will any Borrower permit any of its Subsidiaries, if any, to,
individually or in the aggregate:
8.1Merger and Dissolution. Liquidate, windup or dissolve,
or enter into any consolidation, merger, syndicate or other
combination or sell, lease or dispose of, in a single transaction
or a series of related transactions, its business or assets as a
whole or such part as in the opinion of the Required Lenders
constitutes a substantial portion of its business or assets or
change its name; provided that any Borrower or Subsidiary of a
Borrower may enter into a merger or share exchange transaction
without the Required Lenders' prior written consent, if (i) such
Borrower or such Subsidiary will be the surviving entity; (ii)
immediately prior to the merger no Default or Event of Default
exists hereunder; (iii) immediately following the merger no
Default or Event of Default will exist hereunder; (iv) the merger
does not violate Section 8.13 hereof and (v) the merger will have
no material adverse effect on the Borrowers' ability to repay the
Loans when due.
8.2Indebtedness. Create, incur or suffer to exist any
Indebtedness for money borrowed or the equivalent except for:
(a) the Obligations owed to the Lenders under this Agreement and
the other Loan Documents; (b) Indebtedness owed from one Borrower
solely to the other Borrower; (c) aggregate Indebtedness of the
Borrowers and their Subsidiaries secured by Purchase Money Liens
not exceeding $1,000,000; (d) Indebtedness permitted pursuant to
Section 8.4; (e) Indebtedness permitted pursuant to Section 8.16;
and (f) other Indebtedness for money borrowed not in excess of
$250,000.
8.3Liens and Encumbrances. Create, assume or suffer to
exist any deed of trust, mortgage, encumbrance or other lien
(including a lien of attachment, judgment or execution) or
security interest (including the interest of a conditional seller
of goods), securing a charge or obligation, on or of any of its
property, real or personal, whether now owned or hereafter
acquired, except for the liens and security interests in favor of
the Lenders and the Permitted Liens.
8.4Subordinated Debentures and Preferred Stock. Issue any
Subordinated Debenture or Preferred Stock; provided, however,
that Cato may issue Subordinated Debentures or Preferred Stock if
each of the following conditions are satisfied: (i) such
Subordinated Debentures or Preferred Stock shall not entitle the
holder thereof to cause any of the Borrowers or their
Subsidiaries to redeem or repurchase such Subordinated Debentures
or Preferred Stock at any time before May 31, 2002 (or, if
earlier, a date four years after the Conversion Date if any of
the Revolving Loans are converted to Term Loans pursuant to
Section 2.4); (ii) at the time of issuance of such Subordinated
Debentures or Preferred Stock no Default or Event of Default
shall exist; and (iii) the issuance of such Subordinated
Debentures or Preferred Stock would not cause a Default or Event
of Default to exist.
8.5Transactions with Related Persons. (a) Directly or
indirectly make any loan or advance to, purchase, assume or
guarantee any note to or from any of its officers, directors, or
Affiliates, or to or from any member of the immediate family of
any of its officers, directors, or Affiliates, or subcontract any
operations to any Affiliate, except for (i) transactions, loans
or advances solely between Cato, CHW and their Subsidiaries and
(ii) transactions pursuant to the reasonable requirements of such
Borrower's or such Subsidiary's business and upon fair and
reasonable terms to such Borrower or Subsidiary that are no less
favorable to such Borrower or such Subsidiary than would be
obtained in a comparable arm's length transaction with a Person
not an Affiliate of such Borrower or such Subsidiary.
8.6Restrictions on Dividends, Share Repurchase, etc.
(a) Declare or pay any dividends (other than dividends
payable solely in its own Stock) upon any of its Stock (other
than dividends paid to a Borrower) if a Default or Event of
Default exists or would exist immediately after the payment of
such dividend;
(b) Repurchase shares of its own capital stock, provided,
however, that Cato may pay up to $12,000,000 in the aggregate to
purchase shares of its own capital stock unless a Default or
Event of Default exists or would exist immediately after payment
for any such purchase; or
(c) Make any other distribution of property or assets
(other than distributions of cash or Stock) among the holders of
shares of its Stock.
8.7Hazardous Wastes. Permit any hazardous or toxic wastes,
contaminants, oil, radioactive or other materials the removal of
which is required or the maintenance of which is restricted,
prohibited or penalized by any federal, state or local agency,
authority or governmental unit, to be brought on to any Realty
owned or operated by any Borrower or any Subsidiary of a
Borrower, or if so brought or found located thereon, the presence
of such material shall be related to operations in full
compliance with all applicable Environmental Laws, or the
Borrower shall cause such material to be removed as quickly as
practicable, with proper disposal, and all required environmental
cleanup procedures to be diligently undertaken pursuant to all
such laws, ordinances and regulations.
8.8Restricted Investments. Except as otherwise permitted
pursuant to this Agreement, purchase, own, invest in or otherwise
acquire, directly or indirectly, any Stock, evidence of
indebtedness, or other obligation or security or any interest
whatsoever in any other Person, or make or permit to exist any
loans, advances or extensions of credit to, or any investment in
cash or by delivery of property in, any Person, except for the
following:
(i) investments in Cash or in any of the
following:
(A) investments in debt instruments or preferred
stock of issuers having short-term debt
securities rated no less than A-1 by
Standard & Poor's Corporation or the
equivalent thereof or no less than P-1 by
Moody's Investor Service, Inc. or the
equivalent thereof or long-term securities
rated no less than A by Standard & Poor's
Corporation or the equivalent thereof by a
different rating agency, secured repurchase
agreements in which the underlying debt
instruments have such rating, or demand
deposits, time deposits, certificates of
deposit and banker's acceptances issued by or
entered into with a financial institution
organized under the laws of the United States
of America or any state thereof; and
(B) investments in common stock of issuers having
debt instruments rated at least A or A-1 or
the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent
thereof by Moody's Investor Service, Inc.;
(C) provided, however, that the aggregate amount
of investments in common stock described in
clause (B) shall not exceed ten percent (10%)
of the aggregate amount of investments
described in this clause (i);
(ii) Intercompany Loans;
(iii) loans and advances to employees for
reasonable travel and business and relocation
expenses in the ordinary course of business;
(iv) investments in Subsidiaries existing on the
Closing Date or created thereafter subject to the
conditions set forth in Section 8.14; and
(v) any other investments not exceeding in the
aggregate $500,000.
8.9Net Worth. Permit Tangible Net Worth at the end of any
fiscal quarter of Cato ending after October 29, 1994 to be less
than the sum of $120,000,000 plus (i) 50% of Net Income from
October 30, 1994 through the end of such fiscal quarter and
(ii) the net proceeds to Cato of the sale of any of its capital
stock from October 30, 1994 through the end of such fiscal
quarter, minus (x) any amount paid by Cato to purchase shares of
its own capital stock from October 30, 1994 through the end of
such fiscal quarter.
8.10Current Ratio. Permit the ratio of Current Assets to
Current Liabilities at the end of any Fiscal quarter of Cato to
be less than 1.5 to 1.0.
8.11Debt to Capitalization Ratio. Permit the ratio at the
end of any fiscal quarter of Cato of (a) the sum of the aggregate
amount of Funded Debt then outstanding plus Capitalized Rents to
(b) the sum of Tangible Net Worth plus the aggregate amount of
Funded Debt then outstanding plus Capitalized Rent to be greater
than 0.75 to 1.0.
8.12Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio at the end of any fiscal quarter of Cato to be
less than 1.75 to 1.0.
8.13New Business. Engage in any business other than the
business in which any Borrower is currently engaged or a business
reasonably related thereto.
8.14Subsidiaries or Partnerships. Create any new Subsidiary
or transfer any assets to a Subsidiary, or become a partner or
joint venturer, except as otherwise provided herein; provided,
however, that the Borrowers may create any Subsidiary or transfer
any assets to a Subsidiary if such Subsidiary enters into this
Loan Agreement and delivers a guaranty of the Obligations, such
guaranty to be in form and substance satisfactory to the Required
Lenders.
8.15Capital Expenditures. Make Capital Expenditures in any
fiscal year of Cato in excess of the sum of (i) the Capital
Expenditure Limitation for such fiscal year plus (ii) the amount
by which the Capital Expenditure Limitation for the immediately
preceding fiscal year exceeded the Capital Expenditures for such
fiscal year.
8.16Guaranties. Guarantee or otherwise, in any way, become
liable with respect to the obligations or liabilities of any
Person except by endorsement of instruments or items of payment
for deposit to the general account of the Borrowers or for
delivery to the Lenders on account of the Obligations of the
Borrowers and except for guaranties of Indebtedness in an
aggregate amount of no more than $5,000,000.
8.17Change in Control. Permit a Change in Control to occur.
8.18Fiscal Year. Change its fiscal year from a fiscal year
ending on the Saturday nearest January 31.
ARTICLE IXEvents of Default9.1Events of Default. The occurrence
of any one or more of the following events shall constitute an
"Event of Default":
(a) Any Borrower fails to make when due any principal
payment, or any reimbursement for any amount disbursed under a
Letter of Credit, within five (5) Business Days of the date such
payment or reimbursement is due hereunder or any payment of
interest, fees or expenses relating to the Obligations within ten
(10) Business Days of the date such payment is due hereunder;
(b) Any Borrower fails or neglects to observe, perform or
comply with any term, provision, condition or covenant contained
in Sections 7.5(a) and 7.7 or any of the Sections in Article VIII
(other than Sections 8.5, 8.7, 8.9, 8.10, 8.11, 8.12 and 8.15) of
this Loan Agreement;
(c) Any Borrower fails or neglects to observe, perform or
comply with any other term, provision, condition or covenant
contained in this Loan Agreement, except those enumerated in
Sections 9.1(a) and 9.1(b) above, and the same is not cured to
the Lenders' satisfaction within thirty (30) days after any
executive officer of the Borrower acquires knowledge that such
failure has occurred and that such failure constitutes a Default
hereunder;
(d) If any representation or warranty made in writing by or
on behalf of any Borrower in this Agreement or the other Loan
Documents or in connection with the transactions contemplated
hereby, shall prove to have been false or incorrect in any
material respect at the time as of which such representation or
warranty was made;
(e) The filing by any Borrower of any voluntary petition
seeking liquidation, reorganization, arrangement, readjustment of
debts or for any other relief under the United States Bankruptcy
Code or under any other act or law pertaining to insolvency or
debtor relief, whether state, federal or foreign, now or
hereafter existing;
(f) The filing against any Borrower of any involuntary
petition seeking liquidation, reorganization, arrangement,
readjustment of debts or for any other relief under the
Bankruptcy Code or under any other act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign,
now or hereafter existing;
(g) Any Borrower is enjoined, restrained or in any way
prevented by court order from conducting all or any material part
of its business affairs;
(h) There shall occur any material uninsured damage to or
loss, theft or destruction of any material portion of the assets
of any Borrower.
(i) A notice of lien, levy or assessment of a material
amount is filed of record (other than with respect to a Permitted
Lien) on all or any portion of the assets of any Borrower by the
United States, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other governmental
agency, including, without limitation, the Pension Benefit
Guaranty Corporation, or if any taxes or debts owing at the time
or times hereafter by any one of them becomes a lien or
encumbrance upon any asset of the Borrower or its Subsidiaries
and the same is not dismissed, released or discharged within
thirty (30) days after the same becomes a lien or encumbrance or,
in the case of ad valorem taxes, prior to the last day when
payment may be made without penalty;
(j) The occurrence of any default or event of default on
the part of any Borrower (including specifically, but without
limitation, defaults due to nonpayment) under the terms of any
agreement, document or instrument pursuant to which such Borrower
has incurred any material Indebtedness for money borrowed, which
default would permit acceleration of such Indebtedness;
(k) The occurrence of any default or event of default on
the part of any Borrower under the terms of any agreement or
contract that is material to the affairs, financial or otherwise,
of such Borrower, and such default would have a Material Adverse
Effect;
(l) If a custodian, trustee, receiver or assignee for the
benefit of creditors is appointed or takes possession of any of
the assets of any of the Borrowers;
(m) The occurrence of any of the following events: (i) the
happening of a Reportable Event with respect to any Pension Plan;
(ii) the termination of any such plan; (iii) the appointment of a
trustee by an appropriate United States District Court to
administer any such plan; (iv) the institution of any proceedings
by the Pension Benefit Guaranty Corporation to terminate any such
plan or to appoint a trustee to administer any such plan; (v) the
failure of any Borrower to furnish promptly to each Lender, upon
request of the Required Lenders, a copy of each report that is
filed by such Borrower with the Secretary of Labor or the Pension
Benefit Guaranty Corporation; (vi) the failure of any of the
Borrowers to notify each Lender promptly upon receipt by such
Borrower of any notice of the institution of any proceeding or
any other actions that may result in the termination of any such
plan; or (vii) the failure of any Borrower to acquire and
maintain, when available, the contingent employer liability
coverage insurance provided for under Section 4023 of ERISA, such
insurance to be satisfactory to the Lenders in coverage and
amount;
(n) Any Borrower deliberately and willfully fails to
promptly provide any notice required by Section 7.4(f); or
(o) There shall occur any material adverse change in the
business of any Borrower, or its operations or conduct thereof,
that, individually or in the aggregate, would have a material
adverse effect on the ability of the Borrowers, taken as a whole,
to perform the obligations of the Borrowers under any of the Loan
Documents.
ARTICLE XRights and Remedies after Event of Default10.1Rights
andRemedies. Upon and after the occurrence of any Event of
Default, the Lenders may, in their sole discretion, take any or
all of the following actions, without prejudice to the rights of
any Lender to enforce its claims against the Borrowers, except as
otherwise specifically provided for in this Agreement (provided,
however, that if an Event of Default specified in clauses (f),
(g) or (n) shall occur, then the Lenders shall automatically be
deemed to have taken the following actions): (i) declare the
Total Commitment terminated, whereupon the Commitment of each
Lender shall forthwith terminate immediately and any accrued fees
payable in respect thereof shall forthwith become due and payable
without any other notice of any kind; (ii) declare all or any
part of the Obligations owing hereunder immediately due and
payable, whereupon such Obligations shall become immediately due
and payable without presentment, demand, protest, notice or legal
process of any kind, all of which are hereby expressly waived by
each Borrower and (iii) exercise all of the rights and remedies
of the Lenders under this Agreement, the other Loan Documents and
applicable law, in order to satisfy all of the Borrowers'
Obligations.
Notwithstanding the foregoing, if at any time within sixty
(60) days after an acceleration of the Loans, the Borrowers shall
pay all arrears of interest and all payments on account of
principal which shall have become due otherwise than by
acceleration (and, to the extent permitted by law, on interest or
overdue interest at the Default Rate) and all Events of Default
and Defaults (other than nonpayment of principal and interest due
solely by virtue of acceleration) shall have been remedied or
waived pursuant to Section 14.7, then the Lenders, by written
notice to the Borrowers, may at their option rescind and annul
the acceleration and its consequences; provided, however, that
such action shall not affect any subsequent Default or Event of
Default or remedies available thereon. The provisions of this
paragraph are for the benefit of the Lenders only, are not
intended to benefit the Borrowers and do not grant the Borrowers
the right to require the Lenders to rescind or annul any
acceleration hereunder, even if the conditions set forth herein
are met.
10.2Right of Set-off. In addition to any rights now or
hereafter granted under applicable law or otherwise, upon the
occurrence of an Event of Default, each Lender may, and is hereby
authorized by the Borrowers, at any time and from time to time,
to the fullest extent permitted by applicable laws, without
advance notice to any Borrower of any kind (any such notice being
expressly waived by each Borrower), to set off and apply any and
all deposits (general or special, time or demand, provisional or
final) at any time held and any other Indebtedness at any time
owing by such Lender to or for the credit or the account of any
Borrower against any or all of the Obligations of the Borrowers
to such Lender under this Agreement or any other agreement, now
or hereafter existing, whether or not such Obligations have
matured and any unreimbursed drawings made under any Letter of
Credit. Each Lender agrees promptly to notify the affected
Borrower after any such set-off or application, provided that the
failure to give such notice shall not affect the validity of such
set-off and application.
10.3Rights and Remedies Cumulative; Non-Waiver; Etc. The
enumeration of the Lenders' rights and remedies set forth in this
Agreement is not intended to be exhaustive and the exercise by
any Lender of any right or remedy shall not preclude the exercise
of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy
given hereunder, under the Loan Documents or under any other
Agreement between any of the Borrowers and any of the Lenders or
which may now or hereafter exist in law or in equity or by suit
or otherwise. No delay or failure to take action on the part of
the Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any
other right, power or privilege or shall be construed to be a
waiver of any Event of Default. No course of dealing between any
Borrower and the Agent or any Lender or the agents or employees
of either of them shall be effective to change, modify or
discharge any provision of this Agreement or to constitute a
waiver of any Default or Event of Default.
ARTICLE XIPayment of Fees and Expenses
Whether or not the transactions contemplated by this
Agreement shall be consummated, the Borrowers jointly and
severally undertake:
11.1Fees and Expenses. To pay or reimburse the Lenders and
the Agent upon demand for all reasonable expenses (including,
without limitation, reasonable attorneys' fees) incurred or paid
by the Lenders in connection with: (a) the preparation,
execution, delivery, interpretation, modification or amendment of
this Agreement or the other Loan Documents; (b) any litigation,
contest, dispute, suit, or proceeding or action (whether
instituted by the Lenders or any of them, any Borrower or any
other Person) in any way relating to this Agreement or the other
Loan Documents; (c) any attempt to enforce any rights of any of
the Lenders against any Borrower or any other Person that may be
obligated to the Lender by virtue of this Agreement or the other
Loan Documents; and (d) any refinancing or restructuring of the
credit arrangement provided under this Loan Agreement in the
nature of a "work-out" or in any insolvency or bankruptcy
proceeding. In addition, the Borrowers shall pay to the Lenders
on demand any and all fees, costs and expenses that the Lenders
pay to a bank or other similar institution arising out of or in
connection with (i) the forwarding to any Borrower, or any other
Person on any of the Borrower's behalf, by the Lenders of
proceeds of the Loans made by the Lenders to the Borrower
pursuant to this Agreement.
ARTICLE XIIThe Agent12.1Appointment. The Lenders hereby
designate and appoint NationsBank as Agent to act as specified
herein and in the other Loan Documents. Each Lender hereby
irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize,
the Agent to take such action on its behalf under the provisions
of this Agreement, the other Loan Documents and any other
instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as
are reasonably incidental thereto.
12.2Nature of Duties. The Agent shall not have any duties
or responsibilities except those expressly set forth in this
Agreement and in the other Loan Documents. Neither the Agent,
nor any of its officers, directors, employees or agents shall be
liable to the Lenders for any action taken or omitted by them as
such hereunder or under any other Loan Document or in connection
herewith or therewith, unless caused by their gross negligence or
willful misconduct. The duties of the Agent shall be mechanical
and administrative in nature; the Agent shall not have by reason
of this Agreement or any Loan Document a fiduciary relationship
in respect of any Lender; and nothing in this Agreement or any
Loan Document, expressed or implied, is intended to or shall be
so construed as to impose upon the Agent any obligations in
respect of this Agreement or any Loan Document except as
expressly set forth herein.
12.3Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by
Section 12.8.
12.4Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless the Agent has received notice
from the Borrowers or a Lender describing such Default or Event
of Default and stating that such notice is a "notice of default."
In the event that the Agent receives such a notice, the Agent
shall give prompt notice thereof to the Lenders. The Agent shall
take such action with respect to such Default or Event of Default
as shall be reasonably directed by the Lenders, provided that,
unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable in the best
interests of the Lenders.
12.5Lack of Reliance on the Agent. Independently and
without reliance upon the Agent, each Lender, to the extent it
has deemed and shall deem appropriate, has made and shall
continue to make (i) its own independent investigation of the
financial condition and affairs of the Borrowers in connection
with the making and the continuance of the Loans hereunder and
the taking or not taking of any action in connection herewith,
and (ii) its own appraisal of the creditworthiness of the
Borrowers, and, except as expressly provided in this Agreement or
in any other Loan Document, the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with
respect thereto, whether coming into its possession before the
making of the Loans, or at any time or times thereafter. The
Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or
in any other Loan Document or in any document, certificate or
other writing delivered in connection herewith or therewith or
for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or
sufficiency of this Agreement or any other Loan Document or the
financial condition of the Borrowers or any other Person or be
required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this
Agreement or any other Loan Document, or the financial condition
of the Borrowers or any other Person or the existence or possible
existence of any Default or Event of Default.
12.6Certain Rights of the Agent. If the Agent shall request
instructions from the Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or
any other Loan Document, the Agent shall be entitled to refrain
from such act or taking such action unless and until the Agent
shall have received instructions from the Lenders; and the Agent
shall incur no liability to any Person by reason of so
refraining. The Agent shall be fully justified in failing or
refusing to take any action hereunder or under any Loan Document
(i) if such action would, in the opinion of the Agent, as the
case may be, be contrary to law or the terms of this Agreement or
the other Documents, (ii) if it shall not receive such advice or
concurrence of the Lenders as it deems appropriate, or (iii) if
it shall not first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such
action. Without limiting the foregoing, no Lender shall have any
right of action whatsoever against the Agent (absent the Agent's
gross negligence or willful misconduct) as a result of it acting
or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of the Lenders.
12.7Reliance. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other
documentary, teletransmission or telephone message believed by it
to be genuine and correct and to have been signed, sent or made
by the proper Person. The Agent may consult with legal counsel
(including counsel for the Borrowers), independent public
accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants
or experts.
12.8Indemnification. To the extent the Agent is not
reimbursed and indemnified by or on behalf of the Borrowers, the
Lenders will reimburse and indemnify the Agent, in proportion to
their respective initial Commitments, for and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including counsel fees and
expenses) or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Agent in
performing its duties hereunder or under any other Loan Document
or in any way relating to or arising out of this Agreement or any
other Loan Document; provided, however, that no Lender shall be
liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements, finally determined by a court of competent
jurisdiction and not subject to any appeal, to be resulting from
the Agent's gross negligence or willful misconduct.
12.9Agent's Right to Seek Advice. The Agent shall have the
right, at any time, and from time to time, to seek advice or
directions from the Lenders regarding any action to be taken or
determination to be made under this Agreement. Upon delivery of
request for such advice or directions by the Agent to the
Lenders, the Lenders will respond to such request as soon as
reasonably possible with written instructions (or telephone
instructions promptly confirmed in writing). If such
instructions are not received by the Agent within a reasonable
time, the Agent may take such action as it deems appropriate in
its sole judgment, and the taking of such action by the Agent
shall not give rise to any liability on the part of the Agent,
except in the case of gross negligence or willful misconduct.
12.10The Agent in its Individual Capacity. With respect to
its obligations to make Loans under this Agreement, and with
respect to the Loans made by it and the Notes issued to it, the
Agent shall have the same rights and powers as any other Lender
or holder of a Note and may exercise the same as though it were
not performing the duties specified herein; and the term
"Lenders," "holders of Notes," or any similar terms shall, unless
the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend
money to, and generally engage in any kind of banking, trust,
financial advisory or other business with the Borrowers or any
Affiliate of the Borrower or any of its Subsidiaries as if it
were not performing the duties specified herein, and may accept
fees and other consideration from the Borrowers for services in
connection with this Agreement and otherwise without having to
account for the same to the Lenders.
12.11Holders. The Agent may deem and treat the payee of
any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment, transfer or endorsement
thereof, as the case may be, shall have been filed with the
Agent. Any request, authority or consent of any Person or entity
who, at the time of making such request or giving such authority
or consent, is the holder of any Note shall be conclusive and
binding on any subsequent holder, transferee, assignee or
endorsee, as the case may be, of such Note or of any Note(s)
issued in exchange therefor.
12.12Successor Agent. The Agent may resign from the
performance of all its functions and duties hereunder and/or
under the other Loan Documents at any time by giving ten (10)
Business Days' prior written notice to the Borrowers and the
Lenders or may be removed, with or without cause, by the Lenders,
and, so long as no Event of Default has occurred and is
continuing, with the consent (which consent shall not be
unreasonably withheld) of the Borrowers, at any time by giving
ten (10) Business Days' prior written notice to the Borrowers and
the Agent. Such resignation or removal, as the case may be,
shall take effect upon the appointment of a successor Agent as
provided herein below. Upon any such notice of resignation or
removal (and, in the case of removal, upon the consent of the
Borrowers, if required), as the case may be, the Lenders shall
with the consent of the Borrowers (which consent shall not be
unreasonably withheld), appoint a successor Agent hereunder or
thereunder who shall be a commercial bank, trust company or other
financial institution with a combined capital and surplus in
excess of $1,000,000,000. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's
resignation or removal, as the case may be, hereunder as Agent,
the provisions of this Article XII shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
ARTICLE XIIIAssignment And Participation13.1Assignments. (a)
Subject to the prior written consent of the Borrowers, which
shall not be unreasonably withheld, each Lender may at any time,
upon notice to the Agent of its intent to do so, assign to one or
more banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without limitation,
all or a portion of the outstanding Loans and the Lender's
Revolving Credit Commitment) and may act as agent for all such
Assignees. Upon the execution and delivery of an Assignment and
Acceptance Agreement in a form reasonably satisfactory to such
Lender (an "Assignment and Acceptance"), from and after the
effective date specified in each Assignment and Acceptance, (i)
the Assignee thereunder shall be deemed a party hereto and, to
the extent that rights and obligations (including any portion of
any Loans or Revolving Credit Commitment) hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall
have the rights and obligations of the assigning Lender hereunder
with respect thereto, including, without limitation, (x) the
right to approve or disapprove actions which, in accordance with
the terms hereof, require the approval of the Lenders (y) the
obligation to fund Loans pursuant to Section 2.1 and (2) the
right to enter into Participation Agreements pursuant to Section
13.2, and (ii) such Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion
of such Lender's rights and obligations under this Loan
Agreement, such Lender shall cease to be a party hereto).
13.2Participants. (a) Notwithstanding Section 13.1, each
Lender in its sole discretion may allow other Persons to
participate with such Lender in all or any part of the Loans or
the Commitments extended by such Lender or the Notes issued to
it; provided that such Lender shall act as sole agent for any
such Participant and such Participant, other than an Affiliate of
such Lender, shall not be entitled to require such Lender to take
or omit to take any action hereunder except action directly
affecting (i) the extension of the final maturity of the
principal amount of, or any payment date for interest on, a Loan
allocated to such participation, (ii) the reduction in the
principal amount of, or rate of interest payable on, the Loans,
or (iii) the release of all or substantially all of the
collateral or guaranties supporting any of the Loans or
Commitments in which such Participant is participating. The
Participant shall not have any rights under this Agreement or any
of the other Loan Documents (the Participant's rights against the
granting Lender in respect of such participation to be those set
forth in the agreement with such Lender creating such
participation) and all amounts payable by the Borrowers hereunder
shall be determined as if such Lender had not sold such
participation, provided that such Participant shall be considered
to be a "Lender" for purposes of Section 10.2, and shall be
entitled to the benefits thereto to the extent that such Lender
selling such participation would be entitled to such benefits if
the participation had not been entered into or sold. In the
event that any of the Lenders includes other Participants herein
at any time hereafter, the Borrowers will execute any documents
necessary to effectuate the rights of the Participants and to
delineate the rights, powers and obligations of the agent, such
as the Lender granting the participation may reasonably require.
(b) If a Participant shall at any time participate with a
Lender in making Loans hereunder or under any other Agreement
between such Lender and any Borrower, such Borrower hereby grants
to such Participant (in addition to any other rights that such
Participant shall have) and such Participant shall have and is
hereby given a continuing lien and security interest in any
money, securities or other property of such Borrower in the
custody or possession of the Participant, including the right to
set-off, to the extent of Participant's participation in the
Obligations of the Borrowers to such Lender, as it would have if
it were a direct lender to the Borrowers.
13.3Obligations of Lenders. Except pursuant to an
assignment, but only to the extent set forth in such Assignment
and Acceptance, no Lender shall, as between the Borrowers and
that Lender, be relieved of any of its obligations hereunder as a
result of any sale, transfer or negotiation of, or granting of
any participation in, all or any part of the Commitment, Loans or
Notes.
13.4Confidentiality. A Lender may, in connection with any
assignment or participation or proposed assignment or
participation pursuant to this Article XIII, disclose to the
Assignee or Participant or proposed Assignee or Participant any
information relating to the Borrowers furnished to the Lender by
or on behalf of the Borrowers; provided, however, that prior to
disclosing any such information to a Assignee or Participant or
proposed Assignee or Participant such Lender shall have obtained
from such Assignee or Participant or proposed Assignee or
Participant an agreement (being of a form standard or customary
in the banking industry) that such Assignee or Participant or
proposed Assignee or Participant keep such information
confidential (except to the extent such Assignee or Participant
deems necessary to enforce its rights hereunder or thereunder.)
ARTICLE XIVMiscellaneous14.1Survival of Agreements. All
agreements, representations and warranties contained herein or
made in writing by or on behalf of the Borrowers in connection
with the transactions contemplated hereby shall survive the
execution and delivery of this Agreement and the other Loan
Documents. No termination or cancellation (regardless of cause
or procedure) of this Agreement shall in any way affect or impair
the powers, obligations, duties, rights and liabilities of the
parties hereto in any way with respect to (a) any transaction or
event occurring prior to such termination or cancellation or (b)
any of the Borrowers' undertakings, agreements, covenants,
warranties and representations contained in this Agreement and
the other Loan Documents and all such undertakings, agreements,
covenants, warranties and representations shall survive such
termination or cancellation until payment in full of the
Obligations. The Borrowers further agree that to the extent any
Borrower makes a payment or payments to the Lenders, which
payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other
party under any bankruptcy, insolvency or similar state or
federal law, common law or equitable cause, then, to the extent
of such payment or repayment, the Obligation or part thereof
intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been received by the
Lenders.
14.2Governing Law; Waiver of Jury Trial. THIS AGREEMENT
HAS BEEN EXECUTED, DELIVERED AND ACCEPTED AT, AND SHALL BE
DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF). AS PART OF THE CONSIDERATION FOR NEW VALUE
THIS DAY RECEIVED, EACH BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
STATE OF NORTH CAROLINA, AND CONSENTS THAT ALL SERVICE OF PROCESS
BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO SUCH BORROWER
AT THE ADDRESS STATED IN SECTION 15.3 BELOW AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED
STATES MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF ANY LENDER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY
LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST ANY BORROWER OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THAT HAS
JURISDICTION OVER ANY BORROWER OR ITS PROPERTY.
14.3Notice. All notices and other communications hereunder
shall be in writing and shall be deemed to have been validly
served, given or delivered three (3) days after deposit in the
United States mails with postage prepaid, and addressed to the
party to be notified as follows:
If to the Borrowers: The Cato Corporation
8100 Denmark Road
Charlotte, North Carolina 28273-5975
CHW Corporation
8100 Denmark Road
Charlotte, North Carolina 28272-5975
With a copy to: Robinson, Bradshaw & Hinson, P.A.
1900 Independence Center
101 North Tryon Street
Charlotte, North Carolina 28246
Attention: Robert G. Griffin
If to the Agent at: NationsBank of North Carolina, N.A.
NationsBank Corporate Center
NC 1007-08-08
8th Floor
Charlotte, North Carolina 28255
Attention: Mark D.
Halmrast
With a copy to: Wachovia Bank of
North Carolina, N.A.
P.O. Box 31608
Charlotte, North
Carolina 28231
Attention: Zeta M.
Pittman
and if to any Lender, at its address specified for such Lender on
Annex I hereto (provided, however, that the attorneys listed
above will not receive copies of any reports or other business
information required to be provided by the Borrowers until the
Required Lenders request the Borrowers to do so), or to such
other address as each party may designate for itself by like
notice, or shall be deemed to have been validly served, given or
delivered on the date of delivery to such party at such address,
if notice is given or delivered by hand, telex, telegram or
facsimile transmitter.
14.4Indemnification of the Agent and the Lenders. From and
at all times after the date of this Agreement, and in addition to
all of the Agent's and the Lenders' other rights and remedies
against the Borrowers, each Borrower agrees to indemnify and hold
harmless the Agent and each Lender and each director, officer,
employee, agent and Affiliate of the Agent and each Lender
against any and all claims, losses, damages, liabilities, costs
and expenses of any kind or nature whatsoever (including without
limitation reasonable attorneys' fees, costs and expenses)
incurred by or asserted against the Agent or such Lender or any
such director, officer, employee, agent or Affiliate, from and
after the date hereof, whether direct, indirect or consequential,
as a result of or arising from or in any way relating to any
suit, action or proceeding (including any inquiry or
investigation) by any Person other than a Borrower, whether
threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute or
regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or
otherwise, arising from or in connection with the negotiation,
preparation, execution or performance of this Agreement or the
other Loan Documents or any transactions contemplated herein or
therein, whether or not the Agent or the Lender or any such
director, officer, employee, agent or Affiliate is a party to any
such action, proceeding, suit or the target of any such inquiry
or investigation; provided, however, that no indemnified party
shall have the right to be indemnified hereunder for any
liability resulting from the gross negligence or wilful
misconduct of such indemnified party. All of the foregoing
losses, damages, costs and expenses of the Agent or any Lender
shall be payable by the Borrowers upon demand by the Agent or
such Lender and shall be additional Obligations hereunder. The
Borrowers' obligations under this Section 14.4 shall survive any
termination of this Agreement or any other Loan Document.
14.5Waivers by the Borrowers. Except as otherwise provided
for in this Agreement, each Borrower waives (a) presentment,
demand and protest and notice of presentment, protest, default,
nonpayment, maturity and all other notices; (b) notice prior to
taking possession or control of any bond or security that might
be required by any court prior to allowing the Agent or any
Lender to exercise any of the Lenders' remedies under this
Agreement or the other Loan Documents; and (c) the benefit of all
valuation, appraisement and exemption laws.
14.6Assignment and Sale. The Borrowers may not sell,
assign or transfer this Agreement, or the other Loan Documents or
any portion thereof, including without limitation the Borrowers'
rights, title, interests, remedies, powers, and duties hereunder
or thereunder. No Lender may sell, assign or transfer this
Agreement, or the other Loan Documents or any portion thereof,
including without limitation such Lender's rights, title,
interests, remedies, powers and duties hereunder or thereunder
without the prior written consent of the Borrowers, which shall
not be unreasonably withheld.
14.7Amendment or Waiver. Neither this Agreement nor any
other Loan Document nor any terms hereof or thereof may be
changed, waived, discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by the
Required Lenders; provided, however, that no such change, waiver,
discharge or termination shall, without the written consent of
each Lender, (i) extend the scheduled payment of principal of any
Loan, or any portion thereof, or reduce the rate of or extend the
time of payment of interest thereon (other than as a result of
waiving the applicability of any post-default increase in
interest rates) or any fees relating thereto, or reduce the
principal amount thereof; (ii) amend, modify or waive any
provisions of this Section 14.7, Sections 2.2, 2.13, 2.14(c),
3.7, 4.1, 4.2, 7.1 and 9.1(a) or Articles XI or XIII; or (iv)
change any percentage specified in, or otherwise modify, the
definition of Required Lenders, (v) consent to the assignment or
transfer by the Borrower of any of its rights and obligations
under this Agreement or (vi) amend any provision in the Loan
Documents that calls for action, inaction or consent by all of
the Lenders. No provision of Article XII may be amended without
the consent of the Agent.
14.8Severability. To the extent any provision of this
Agreement is prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
14.9Entire Agreement. This Agreement and the other
documents, certificates and instruments referred to herein
constitute the entire Agreement between the parties and supersede
and rescind any prior agreements relating to the subject matter
hereof, including, without limitation, the commitment letter
dated January 15, 1993 between Cato and NationsBank.
14.10Binding Effect. All of the terms of this Agreement
and the other Loan Documents, as the same may from time to time
be amended, shall be binding upon, inure to the benefit of and be
enforceable by the respective successors and assigns of the
Agent, the Borrowers and the Lenders. This provision, however,
shall not be deemed to modify Section 14.6.
14.11Execution in Counterparts. This Agreement may be
executed in two or more counterparts, which when assembled shall
constitute one and the same agreement.
14.12Conflict of Terms. The provisions of the exhibits
hereto and the other Loan Documents and any schedule or annex
hereto are incorporated in this Agreement by this reference
thereto. Except as otherwise provided in this Agreement and
except as otherwise provided in the other Loan Documents, if any
provision contained in this Agreement is in conflict with, or
inconsistent with, any provision of the other Loan Documents, the
provision contained in this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their corporate names by their duly
authorized corporate officers, and have affixed their corporate
seals, as of the date first above written.
THE CATO CORPORATION
By: ______________________________
Wayland H. Cato, Jr.
Chief Executive Officer
ATTEST:
_________________________
Alan E. Wiley, Secretary
[CORPORATE SEAL]
CHW CORPORATION
By: ______________________________
Gordon W. Stewart, Vice President
ATTEST:
_________________________
Norman J. Shuman
Assistant Secretary
[CORPORATE SEAL]
NATIONSBANK OF NORTH CAROLINA, N.A.,
Individually and as Agent
By: _____________________________
Title:____________________________
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By:______________________________
Title:___________________________
Annex I
Lenders
Lender and Address Commitment
NationsBank of North Carolina, N.A. $24,500,000
NationsBank Corporate Center
NC 1007-08-08
Eighth Floor
Charlotte, North Carolina 28255
Attn: Kenneth A. Gill, III
Wachovia Bank of North Carolina, N.A. 10,500,000
Post Office Box 31608
Charlotte, North Carolina 28231
Attention: Zeta M. Pittman ____________
Total Commitment $35,000,000
TABLE OF CONTENTS
Page
Recitals1
ARTICLE I
Definitions
1.1 Defined Terms2
1.2 Accounting Terms15
1.3 Singular/Plural15
1.4 Other Terms15
ARTICLE II
Loan Facility
2.1 Revolving Line of Credit16
2.2 Term17
2.3 Notes17
2.4 Conversion to Term Loans17
2.5 Repayment18
2.6 Use of Proceeds18
2.7 Revolving Line of Credit Facility Fee18
2.8 Term Loan Commitment Fee18
2.9 Interest19
2.10 Computation19
2.11 Default Rate; Post-petition Interest19
2.12 Maximum Interest Rate19
2.13 Payment19
2.14 Application of Principal Payments; Register;
Pro Rata Borrowings20
ARTICLE IIA
Additional Letter of Credit Facility
2.1A Additional Letter of Credit Facility20
2.2A Term21
2.3A Purpose21
2.4A Facility Fee21
2.5A Payment; Computation21
ARTICLE III
Letters of Credit
3.1 Letters of Credit21
3.2 Notice of Issuance22
3.3 Reimbursements22
3.4 Letter of Credit Fees23
3.5 Reimbursement and Other Obligations23
3.6 Other Terms23
3.7 Participations in Letters of Credit24
ARTICLE IV
Provisions Applicable to Both the Letters Of Credit
and the Revolving Credit Loans
4.1 Capital Adequacy24
4.2 Taxes25
ARTICLE V
Closing; Conditions of Closing and Borrowing
5.1 Closing26
5.2 Conditions of Loans and Advances26
5.2.1 Executed Loan Documents26
5.2.2 Closing Certificates, etc.27
5.2.3 Consents, No Adverse Change28
5.2.4 Miscellaneous28
5.3 Waiver of Conditions Precedent28
ARTICLE VI
Representations and Warranties
6.1 Corporate Organization and Power29
6.2 Litigation; Government Regulation29
6.3 Taxes29
6.4 Enforceability of Loan Documents; Compliance
With Other Instruments30
6.5 Governmental Authorization30
6.6 Event of Default30
6.7 Margin Securities31
6.8 Full Disclosure31
6.9 ERISA31
6.10 Financial Statements32
6.11 Title to Assets32
6.12 Use of Proceeds33
6.13 Environmental Matters33
6.14 Authorization34
6.15 Assets for Conduct of Business34
6.16 Compliance With Laws34
6.17 Withholding Taxes34
6.18 Contracts; Labor Disputes35
6.19 Outstanding Indebtedness35
ARTICLE VII
Affirmative Covenants
7.1 Repayment of Obligations35
7.2 Performance Under Loan Documents35
7.3 Financial and Business Information about the
Borrowers35
7.4 Notice of Certain Events36
7.5 Corporate Existence and Maintenance of Properties37
7.6 Payment of Indebtedness; Performance of
Other Obligations37
7.7 Maintenance of Insurance37
7.8 Maintenance of Books and Records; Inspection38
7.9 Compliance with ERISA38
7.10 COBRA38
7.11 Payment of Taxes38
7.12 Compliance with Statutes, etc.39
ARTICLE VIII
Negative Covenants
8.1 Merger and Dissolution39
8.2 Indebtedness40
8.3 Liens and Encumbrances40
8.4 Subordinated Debentures and Preferred Stock40
8.5 Transactions with Related Persons40
8.6 Restrictions on Dividends, Share Repurchase, etc.41
8.7 Hazardous Wastes41
8.8 Restricted Investments41
8.9 Net Worth42
8.10 Current Ratio42
8.11 Debt to Capitalization Ratio42
8.12 Fixed Charge Coverage Ratio43
8.13 New Business43
8.14 Subsidiaries or Partnerships43
8.15 Capital Expenditures43
8.16 Guaranties43
8.17 Change in Control43
8.18 Fiscal Year43
ARTICLE IX
Events of Default
9.1 Events of Default43
ARTICLE X
Rights and Remedies after Event of Default
10.1 Rights and Remedies46
10.2 Right of Set-off46
10.3 Rights and Remedies Cumulative; Non-Waiver; Etc47
ARTICLE XI
Payment of Fees and Expenses
11.1 Fees and Expenses47
ARTICLE XII
The Agent
12.1 Appointment48
12.2 Nature of Duties48
12.3 Delegation of Duties48
12.4 Notice of Default49
12.5 Lack of Reliance on the Agent49
12.6 Certain Rights of the Agent49
12.7 Reliance50
12.8 Indemnification50
12.9 Agent's Right to Seek Advice50
12.10 The Agent in its Individual Capacity51
12.11 Holders51
12.12 Successor Agent51
ARTICLE XIII
Assignment And Participation
13.1 Assignments52
13.2 Participants52
13.3 Obligations of Lenders53
13.4 Confidentiality53
ARTICLE XIV
Miscellaneous
14.1 Survival of Agreements54
14.2 Governing Law; Waiver of Jury Trial54
14.3 Notice55
14.4 Indemnification of the Agent and the Lenders55
14.5 Waivers by the Borrowers56
14.6 Assignment and Sale56
14.7 Amendment or Waiver57
14.8 Severability57
14.9 Entire Agreement57
14.10 Binding Effect57
14.11 Execution in Counterparts57
14.12 Conflict of Terms57
Exhibits
Exhibit A From of Promissory Note
Exhibit B Form of Continuing Letter of Credit Agreement
Exhibit C Form of Conversion Notice
Exhibit D Form of Opinion of Borrowers' Counsel
MASTER EQUIPMENT LEASE AGREEMENT
BETWEEN
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
AND
THE CATO CORPORATION
January 27, 1995
TABLE OF CONTENTS
1. Definitions 1
2. Agreement for Lease of Equipment; Covenant of Quiet
Enjoyment 7
3. Conditions Precedent 7
(a) Initial Lease Supplement 7
(b) Subsequent Lease Supplements 8
(c) Additional Requirements 8
4. Delivery and Acceptance of Equipment 9
5. Basic Term; Renewal Term; Early Purchase Option; Early
Termination Option 9
(a) Basic Term 9
(b) Renewal Term 9
(c) Early Purchase Option 10
(d) Early Termination Option 10
7. Payments 11
(a) Basic Payments 11
(b) Supplemental Payments 11
(c) Method of Payment 11
8. Net Lease 11
9. Lessor's Title; Lessee's Title; Grant of Security Interest 12
(a) Lessor's Title; Lessee's Title 12
(b) Grant of Security Interest 12
10. Use of Equipment; Compliance with Laws 12
11. Operation and Maintenance of Equipment 13
12. Replacement of Parts; Alterations; Modifications and
Additions 13
13. Identification; Inspection; Reports; Change of Chief
Executive
Office and/or Name 14
(a) Identification 14
(b) Inspection 14
(c) Reports 14
(d) Change of Chief Executive Office 14
14. Assignment, Sublease or Transfer; Assignment; Consolidation
and
Merger 14
(a) Assignment, Sublease or Other Transfer by Lessee 14
(b) Assignment By Lessor 14
(c) Consolidation, Merger, Conveyance, Transfer and
Lease By
Lessee 15
15. Liens; Permitted Contests 16
16. Loss, Damage or Destruction 17
(a) Risk of Loss, Damage or Destruction 17
(b) Event of Loss with Respect to Equipment 17
(c) Application of Other Payments Upon Event of Loss 18
(d)Application of Payments Not Relating to an Event of Loss 19
17. Insurance 19
(a) Coverage 19
(b) Policy 20
(c) Evidence of Insurance 21
(d) Annual Insurance Certificate 21
18. General Tax Indemnity 21
19. General Indemnity 22
20. NO WARRANTIES 23
21. Lessee's Representations, Warranties and Covenants 24
(a) Due Organization and Existence 24
(b) Power and Authority 24
(c) Due Authorization 24
(d) Enforceability 25
(e) No Consents 25
(f) No Liens 25
(g) Perfection of Security Interest 25
(h) Financial Statements 25
(i) No Litigation 25
(j) Income Tax Return 25
(k) ERISA 26
(l) Investment Company 26
(m) Taxes 26
(n) No Offer to Sell or Assign 26
(o) Invoices 26
(p) Adverse Contract 26
(q) Misrepresentation 26
(r) Solvency 26
(s)Equipment Representations, Warranties and Indemnities 26
(t) Chief Executive Office 26
(u) Trade Names 26
22. Events of Default 26
(a) Payment 27
(b) Certain Covenants 27
(c) Other Covenants 27
(d) Default under Other Documents - Lessee 27
(e) Bankruptcy; Insolvency - Lessee 27
(f) Misrepresentation - Lessee 28
23. Remedies Upon Default 28
(a) Return of Equipment 28
(b) Sell, Use, Lease or Otherwise Employ Equipment 28
(c)Excess of Termination Value over Fair Market Sales Value 28
(d) Excess of Termination Value over Sales Proceeds 28
(e) Rescission 29
24. Lessor's Right to Perform for Lessee 29
25. Late Charges 29
26. Further Assurances 29
27. Transaction Costs, Fees and Expenses 29
28. Notices 30
29. End of Term Purchase Options 30
(a) Lessee Retention/Purchase or Third Party Purchase 30
(b) Lessee's Retention/Purchase 30
(c) Third Party Purchase 31
(d) End of Term Adjustment 31
(e) Settlement Terms 31
30. Federal and State Tax Consequences 33
31. Financial Information 33
32. Miscellaneous 33
33. Interest Rate Calculations 34
34. Personal Property Taxes 34
Exhibit
A - Lease Supplement and Acceptance Certificate
B - UCC Filing Offices
C - Trade Names
MASTER EQUIPMENT LEASE AGREEMENT
THIS MASTER EQUIPMENT LEASE AGREEMENT dated as of January
27, 1995 (as supplemented, amended modified, restated or replaced
from time to time the "Agreement") is between NATIONSBANC LEASING
CORPORATION OF NORTH CAROLINA, a North Carolina corporation (the
"Lessor"), having its principal place of business at NationsBank
Corporate Center, 100 North Tryon Street, NC1-007-12-01,
Charlotte, North Carolina 28255-0001 and THE CATO CORPORATION, a
Delaware corporation (the "Lessee"), having its principal place
of business at 8100 Denmark Road, Charlotte, North Carolina
28273.
WITNESSETH:
WHEREAS, Lessee has requested Lessor to purchase the Lessor
Titled Equipment (as defined hereinafter) and Lessee has
purchased the Lessee Titled Equipment and, simultaneously with
such acquisition, Lessee has requested Lessor to lease the
Equipment to Lessee for use in its operations; and
WHEREAS, Lessor is willing to purchase and lease the
Equipment subject to the terms and conditions hereinafter set
forth, and Lessee has agreed to lease the Equipment from Lessor
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Unless the context otherwise
requires, the following terms shall have the following meanings
for all purposes of this Agreement and shall be equally
applicable to both the singular and the plural forms of the terms
herein defined:
"Acceptance Date" means, with respect to any Equipment, the
Basic Payment Date on which Lessor executes the Lease Supplement
applicable to such item of Equipment and Lessee unconditionally
accepts such Equipment for lease hereunder, as evidenced by the
execution and delivery of such Lease Supplement related to such
Equipment and dated such date.
"Acquisition Cost" means, with respect to any Equipment, an
amount equal to the sum of (a) the total cost paid by Lessor (or
Lessee, in its capacity as Lessor's agent) for or in connection
with such Equipment (including without limitation, such amounts
paid by Lessor to Lessee respecting Lessee Titled Equipment),
plus (b) all excise, sales and use taxes and registration fees
paid by Lessor on or with respect to the acquisition of such
Equipment, less (c) the total cost paid by Lessor for or in
connection with any such particular items of Equipment which have
been the subject of an Event of Loss and for which an amount
equal to the Termination Value for such particular items of
Equipment has been paid in full to Lessor.
"Acquisition Expiration Date" means the date set forth in
the respective Lease Supplement or such other dates as determined
by Lessor in connection with any other Equipment.
"Affiliate" means a Person (other than a Subsidiary) which
directly or indirectly through one or more intermediaries
controls or is controlled by, or is under common control with,
Lessee, the Guarantor or a Subsidiary. The term "control" means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through ownership of voting stock, by contract or
otherwise.
"Appraisal Procedure" means the following procedure for
determining the Fair Market Sales Value of any property or any
other amount which may, pursuant to any provision of any
Transaction Document, be determined by such procedure: if either
party to this Agreement shall have given written notice to the
other party requesting determination of such value by the
Appraisal Procedure, the parties shall consult for the purpose of
appointing a qualified independent appraiser by mutual agreement.
If no such appraiser is so appointed within fifteen (15) days
after such notice is given, each party shall appoint a qualified
independent appraiser within twenty (20) days of the giving of
such notice. If one (1) party, but not the other, appoints an
appraiser pursuant to the preceding sentence, then the
appropriately appointed appraiser shall conduct the appraisal.
Any appraiser or appraisers appointed pursuant to the foregoing
procedure shall be instructed to determine such value within
thirty (30) days after his or their appointment. If the parties
shall have appointed a single appraiser, his determination of
values shall be final. If two (2) appraisers shall be appointed,
the values determined shall be averaged. The parties shall share
equally the costs and expenses of the appraiser or the
appraisers, as the case may be.
"Assignee" means any Person to whom Lessor or any assignee
has made any assignment, sale or transfer referred to in Section
14(b) hereof.
"Bank" shall mean NationsBank, N.A. (Carolinas), its
successors or assigns.
"Basic Payment" means the amounts payable for the Equipment
during the Term pursuant to Section 7(a) hereof.
"Basic Payment Date" means, with respect to any Equipment,
each of the dates set forth on the appropriate Lease Supplement
with respect to such Equipment.
"Basic Payment Factor" means, with respect to any Equipment,
the Basic Payment Factor set forth on each Lease Supplement with
respect to such Equipment.
"Basic Payment Period" means, with respect to any Equipment,
each period from the date immediately succeeding a Basic Payment
Date to the next occurring Basic Payment Date, except that the
initial Basic Payment Period under each Lease Supplement shall
also include the date of execution of such Lease Supplement.
"Basic Term" means with respect to any Equipment, the period
set forth in the applicable Lease Supplement with respect to such
Equipment.
"Business Day" means any day on which Lessor is open for the
transaction of business with the public of the nature required by
the Transaction Documents.
"Casualty Loss Value Date" means the last day of each Basic
Payment Period.
"Code" means the Internal Revenue Code of 1986, as
supplemented, amended, modified, restated or replaced from time
to time, and all rules and regulations promulgated thereunder.
"Consolidated Subsidiary" means at any date any Subsidiary
or other entity the accounts of which would be consolidated with
those of Lessee in its consolidated financial statements if such
statements were prepared as of such date.
"Consolidated Tangible Net Worth" means at any date the
consolidated stockholders' equity of Lessee and its Consolidated
Subsidiaries, less their consolidated Intangible Assets, all
determined as of such date. For purposes of this definition
"Intangible Assets" means the amount (to the extent reflected in
determining such consolidated stockholders' equity) of (a) all
write-ups (other than write-ups resulting from foreign currency
translations and write-ups of assets of a going concern business
made within twelve (12) months after the acquisition of such
business) in the book value of any assets owned by Lessee or a
Consolidated Subsidiary and (b) all goodwill, patents,
trademarks, service marks, trade names, copyrights, organization
or developmental expenses and other intangible assets.
"Default" means any event which with the giving of notice or
the passage of time or both would result in an Event of Default.
"Early Termination Date" means the last day of the Basic
Term or the last day of the Renewal Term, if any, on which Lessee
exercises its early termination option under Section 5(d) hereof.
"Equipment" means all items of the equipment described in
Annex A to the various Lease Supplements executed by Lessor and
Lessee in connection with this Agreement, together with any Parts
(including without limitation replacement Parts) which may from
time to time be incorporated in such equipment or other property
and title to which shall have vested in Lessor (including without
limitation all Lessor Titled Equipment and Lessee Titled
Equipment).
"ERISA" means the Employee Retirement Income Security Act of
1974, as supplemented, amended, modified, restated or replaced
from time to time, and all rules and regulations promulgated
thereunder.
"Event of Default" shall have the meaning given to such term
in Section 22 hereof.
"Event of Loss" means, with respect to any Equipment, any of
the following events: (a) loss of any Equipment or of the use
thereof due to theft or disappearance during the Term, or the non-
existence of any Equipment at the expiration or termination of
the Term prior to its expiration, (b) destruction, damage beyond
repair, or rendition of any Equipment permanently or temporarily
for longer than a commercially reasonable period of time, unfit
for normal use for any reason whatsoever, (c) any damage to any
Equipment which results in an insurance settlement with respect
to such Equipment on the basis of a total loss, or (d) the
condemnation, confiscation, seizure, or requisition of use or
title to any Equipment by any governmental authority under the
power of eminent domain or otherwise.
"Expiration Date" means, with respect to any Equipment, the
last day of the Term, unless this Agreement is sooner terminated
pursuant to the provisions hereof.
"Fair Market Sales Value" means, with respect to any
Equipment, the value which would obtain in an arm's length
transaction between an informed and willing buyer (other than a
lessee currently in possession or a used equipment dealer) and an
informed and willing seller under no compulsion, respectively, to
buy or sell. If the parties are unable to agree on the Fair
Market Sales Value within thirty (30) days of Lessor's giving of
notice as specified in Section 23(c) hereof, such Fair Market
Sales Value shall be determined by the Appraisal Procedure.
"Improvement" shall have the meaning given to such term in
Section 12 hereof.
"Indemnified Party" shall have the meaning given to such
term in Section 18 hereof.
"Lease Supplement" means a Lease Supplement and Acceptance
Certificate substantially in the form of Exhibit A hereto, to be
executed by Lessor and Lessee for each item of the Equipment
accepted under the terms of this Agreement on each Acceptance
Date, in accordance with the provisions of Section 4 hereof.
"Lessee Titled Equipment" means the Equipment accepted by
Lessee for lease pursuant to Lease Supplement and Acceptance
Certificate No. 1, titled solely in Lessee's name and subject to
the terms and conditions of this Agreement.
"Lessor Titled Equipment" means the Equipment accepted by
Lessee for lease subsequent to Lease Supplement and Acceptance
Certificate No. 1, titled solely in Lessor's name (or in the name
of Lessor's agent on behalf of Lessor) and subject to the terms
and conditions of this Agreement.
"Lien" means any interest in property securing any
obligation owed to, or claimed by, a Person other than the owner
of the property, whether such interest is based on the common
law, statute or contract, and including, without limitation, the
lien or security interest arising from a mortgage, encumbrance,
pledge, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes.
"Loan Agreement" shall have the meaning set forth in Section
22(d) hereof.
"Maximum Cost" means, with respect to any Equipment, an
amount specified by Lessee for such Equipment and approved by
Lessor and set forth in the Lease Supplement.
"Maximum Lessee Risk Amount" means, with respect to any
Equipment, the percentage set forth in Annex C of each Lease
Supplement applicable to such particular Equipment under the
heading Maximum Lessee Risk Amount Percentage multiplied by the
Acquisition Cost of such Equipment.
"Maximum Lessor Risk Amount" means, with respect to any
Equipment, the percentage set forth in Annex C of each Lease
Supplement applicable to such particular Equipment under the
heading Maximum Lessor Risk Amount Percentage multiplied by the
Acquisition Cost of such Equipment.
"Net Proceeds of Sale" means the net amount received by
Lessor from a third party purchaser of all (but not less than
all) the Equipment described on a particular Lease Supplement
pursuant to a sale of all (but not less than all) such Equipment
under Section 29 hereof.
"Option Election Notice Date" means the date occurring
ninety (90) days prior to the final day of the Basic Term or the
final Renewal Term, if any.
"Overall Transaction" means all of those transactions
referred to in, provided for in, or contemplated by, this
Agreement, including, without limitation, the financing,
operation and management of the Equipment.
"Overdue Rate" means the lesser of the maximum rate
permitted by applicable law and a per annum interest rate equal
to the Prime Rate plus two percent (2%).
"Parts" means all appliances, parts, instruments,
appurtenances, accessories and miscellaneous property of whatever
nature that may from time to time be incorporated or installed in
or attached to or otherwise part of the Equipment.
"Payments" means, collectively, Basic Payments and
Supplemental Payments.
"Permitted Contest" means any contest by Lessee with respect
to any Permitted Lien or any Taxes or Other Impositions incurred
with respect to which Lessee has provided a legal opinion from
outside counsel to Lessor stating in substance that the position
adopted by Lessee in its contest has merit and has a reasonable
likelihood of success, and so long as Lessee shall contest, in
good faith and at its expense, the existence, the amount or the
validity thereof, the amount of the damages caused thereby, or
the extent of its liability therefor, by appropriate proceedings
which do not result in (a) the collection of, or other
realization upon, the Permitted Lien or any Taxes or Other
Impositions so contested, (b) the sale, forfeiture or loss of any
item of Equipment, any Part, the Payments or any portion thereof,
or under any document, instrument, agreement or contract entered
into in relation hereto or otherwise in relation to the
Equipment, (c) any interference with the use of any item of
Equipment or any Part thereof, or (d) any interference with the
payment of the Payments or any portion thereof.
"Permitted Lien" means a Lien permitted by the provisions of
Section 15 hereof.
"Permitted Sublease" means a sublease (a) to which Lessor
has given its prior written consent (which consent shall not be
unreasonably withheld), (b) the sublessee with respect to which
shall be organized under the laws of the United States or any
state thereof and shall have its principal place of business in
the United States, (c) the term of which shall in no event exceed
the then remaining portion of the Term, (d) immediately prior to
the commencement of the term of which, and after giving effect to
which, there shall exist no Default or Event of Default and (e)
which shall contain unconditional payment provisions and
provisions relating to insurance, maintenance, operation in
accordance with applicable laws and insurance requirements,
possession, delivery and return conditions (insofar as the
general condition of the Equipment is concerned), events of
default, remedies and Permitted Liens on the Equipment which
provide for benefits and protections to Lessee, as lessor, which
are substantially similar to the benefits and protections
provided to Lessor by such provisions of this Agreement.
"Person" means any individual, corporation, partnership,
joint venture, association, joint stock company, trust,
trustee(s) of a trust, unincorporated organization, or government
or governmental authority, agency or political subdivision
thereof.
"Prime Rate" means the per annum rate of interest
established from time to time by the Bank at its principal office
as its Prime Rate. Any change in the interest rate resulting
from a change in the Prime Rate shall become effective as of
12:01 a.m. of the Business Day on which each change in the Prime
Rate is announced by the Bank. The Prime Rate is a reference
rate used by the Bank in determining interest rates on certain
loans and is not intended to be the lowest rate of interest
charged on any extension of credit to any debtor.
"Renewal Term" shall have the meaning given to such term in
Section 5(b) hereof.
"Replacement" shall have the meaning given to such term in
Section 12 hereof.
"Replacement Item" means any item of equipment conveyed to
Lessor pursuant to Section 16(b) hereof in replacement of any
item of Equipment.
"Required Alteration" shall have the meaning given to such
term in Section 12 hereof.
"Sales Expenses" means (a) all property, excise, sales and
use taxes and other taxes (as such may be applicable to the sale
or transfer of the Equipment), (b) all fees, costs and expenses
of such sale or transfer of the Equipment (including, without
limitation, registration fees and fees, costs and expenses of
attorneys or those associated with transportation, storage,
security or insurance) incurred by Lessor and (c) any and all
other amounts incurred in connection with such sale or transfer
of the Equipment for which, if not paid, Lessor would be liable
or which, if not paid, would constitute a Lien on the Equipment,
or any Part.
"Seller" means each seller executing a Warranty Bill of Sale
in favor of Lessor with respect to any Equipment.
"Solvent" means, when used with respect to any Person, that
at the time of determination:
(i) the fair value of its assets is in excess of
the total amount of its liabilities, including without
limitation, contingent liabilities and obligations which
would be required to be reflected as a liability on its
financial statements (including any footnotes thereto) in
accordance with generally accepted accounting principles;
and
(ii) it is then able and expects to be able to pay
its debts as they mature; and
(iii) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
"Subsidiary" of any Person means any corporation of which
more than fifty percent (50%) of the voting rights of the
outstanding capital stock at the time of determination is owned
directly or indirectly by such Person or one of the Subsidiaries
of such Person.
"Supplemental Payments" means all amounts, liabilities and
obligations which Lessee assumes or agrees to pay hereunder to
Lessor or others, including, without limitation, payments of
Termination Value, interim rental payments and indemnities, but
excluding Basic Payments.
"Taxes or Other Impositions" shall have the meaning given to
such term in Section 18 hereof.
"Term" shall mean the Basic Term and any Renewal Term(s).
"Termination Value" means, with respect to any Equipment, an
amount determined by multiplying the Acquisition Cost of such
Equipment by the Termination Value Percentage for such Equipment
as of the Expiration Date; provided, however, to the extent the
Expiration Date is not a Basic Payment Date, the Termination
Value Percentage shall be determined as of the immediately
preceding Basic Payment Date.
"Termination Value Percentage" means each termination value
percentage identified on Annex B to each Lease Supplement for the
applicable Basic Payment Date.
"Third Party Purchaser" means a third party purchaser of the
Equipment which is selected by Lessee, is reasonably acceptable
to Lessor, is financially capable of purchasing the Equipment and
is not an Affiliate or a Subsidiary of Lessee.
"Transaction Costs" means all the costs, fees and expenses
referenced in Section 27 hereof.
"Transaction Documents" means this Agreement, each Lease
Supplement, each Warranty Bill of Sale and the Uniform Commercial
Code financing statements (and with respect to each of the
foregoing, all supplements, amendments and modifications thereto)
whether heretofore, now or hereafter executed.
"Warranty Bill of Sale" means each warranty bill of sale, in
form and substance satisfactory to Lessor, referring to various
items of the Equipment duly executed by a Seller thereof in favor
of Lessor and dated as of the Acceptance Date for such Equipment.
The words "this Agreement", "herein", "hereunder", "hereof",
or other like words mean and include this Agreement and the Lease
Supplements and any amendments and supplements hereto or thereto.
SECTION 2. Agreement for Lease of Equipment; Covenant of
Quiet Enjoyment. Subject to, and upon all of the terms and
conditions of this Agreement, Lessor hereby agrees to lease to
Lessee and Lessee hereby agrees to lease from Lessor, each item
of the Equipment from and including the Acceptance Date therefor
for the duration of the Term. Provided that no Event of Default
has occurred and is continuing, Lessor agrees that it shall not
interfere with Lessee's quiet enjoyment and use of the Equipment
during the Term.
SECTION 3. Conditions Precedent.
(a) Initial Lease Supplement. The obligations of
Lessor to purchase, or to cause its agent to purchase, the
Equipment specified on the Lease Supplement dated as of the date
hereof, to reimburse Lessee with respect to any Lessee Titled
Equipment and to lease the Equipment to Lessee and enter into the
Overall Transaction are subject to the delivery to Lessor on or
prior to the date hereof of the following documents each in form
and substance satisfactory to Lessor:
(i) an officer's certificate from Lessee: (A)
certifying Lessee's articles of incorporation, by-laws and
resolutions, with such resolutions authorizing the Overall
Transaction and Lessee's execution, delivery and performance
of this Agreement; (B) containing an incumbency
certification of Lessee with the name(s), title(s) and
specimen signature(s) of the person or persons authorized on
behalf of Lessee to execute this Agreement; (C) stating that
no material adverse change has occurred in the condition of
Lessee (financial or otherwise) since July 30, 1994 which
would impair the ability of Lessee to pay and perform its
obligations under this Agreement; and (D) stating that no
Default or Event of Default shall have occurred and be
continuing as of such date;
(ii) a written opinion of counsel for Lessee;
(iii) a certificate of insurance evidencing the
coverages required under Section 17 hereof with respect to
the Equipment referenced in the Lease Supplement dated as of
the date hereof;
(iv) the Lease Supplement, duly executed by
Lessee, and dated as of the date hereof with respect to the
Equipment accepted by Lessee and subjected to the terms of
this Agreement as of the date hereof;
(v) Uniform Commercial Code filings as deemed
appropriate by Lessor's counsel duly executed by Lessee;
(vi) (intentionally omitted);
(vii) good standing certificates from the Secretary
of State of Lessee's state of incorporation, the state of
Lessee's principal place of business and the state(s) where
the Equipment shall be used as set forth in the applicable
Lease Supplement;
(viii) (intentionally omitted);
(ix) UCC-11 lien search results and all releases
of liens as required by Lessor;
(x) tax lien searches against Lessee and all
releases of such liens as required by Lessor;
(xi) judgment lien searches against Lessee and all
releases of such liens as required by Lessor; and
(xii) a closing fee of one-half of one percent
(.5%) of Acquisition Cost.
(b) Subsequent Lease Supplements. The obligations of
Lessor to purchase Equipment on the respective Acceptance Date(s)
therefor after the date hereof and to enter into the Lease
Supplement with respect thereto is subject to the delivery to
Lessor on such Acceptance Date of the following documents each in
form and substance satisfactory to Lessor:
(i) the Lease Supplement, duly executed by Lessee
and dated such Acceptance Date with respect to the Equipment
accepted by Lessee and subjected to the terms of this
Agreement on such Acceptance Date;
(ii) Uniform Commercial Code filings as deemed
appropriate by Lessor's counsel duly executed by Lessee;
(iii) a Warranty Bill of Sale specifically
referring to each item of the Equipment accepted by Lessee
and subjected to the terms of this Agreement on such date,
duly executed by the Seller thereof in favor of Lessor, or
its agent, and dated such Acceptance Date or such other date
as is acceptable to Lessor;
(iv) a written opinion of counsel for Lessee;
(v) certificates dated as of such Acceptance Date
from officers of Lessee stating that there has been no
material adverse change in the business, conditions or
operations (financial or otherwise) of Lessee and its
respective Consolidated Subsidiaries from that reflected in
the financial statements referenced in Sections 3(a)(i) and
(ii), that no Default or Event of Default shall have
occurred and be continuing from the date of the Agreement to
the respective Acceptance Date and that the representations
and warranties of Lessee in the Agreement are true and
correct as of such date;
(vi) a certificate of insurance evidencing the
coverages required under Section 17 hereof with respect to
the Equipment referenced in the Lease Supplement dated as of
such Acceptance Date;
(vii) (intentionally omitted);
(viii) UCC-11 lien search results and all releases
of liens as required by Lessor;
(ix) tax lien searches against Lessee and all
releases of such liens as required by Lessor;
(x) judgment lien searches against Lessee and all
releases of such liens as required by Lessor; and
(xi) a closing fee of one-half of one percent
(.5%) of Acquisition Cost.
(c) Additional Requirements. The obligations of
Lessor to purchase the items of Equipment on the respective
Acceptance Dates therefor and to enter into the respective Lease
Supplement are also subject to:
(i) the absence on the Acceptance Date of any
Liens on the Equipment, other than any Permitted Lien of the
type specified in Sections 15(a) or (b) hereof;
(ii) the aggregate Acquisition Cost of all
Equipment will not exceed the Maximum Cost;
(iii) the Acceptance Date shall be a date between
and inclusive of the date hereof and the Acquisition
Expiration Date;
(iv) Lessee shall have paid all fees and expenses
due and owing with respect to the Overall Transaction;
(v) in its sole discretion, Lessor shall have
agreed in writing to purchase items of Equipment in excess
of the original commitment of $25,000,000 or after the
Expiration Date and Lessor shall have obtained all internal
approvals as Lessor shall have deemed necessary and/or
appropriate; and
(vi) Lessor shall have received such other
documents, appraisals, certificates, financing statements
and other items, in form and substance satisfactory to
Lessor, as Lessor may require.
SECTION 4. Delivery and Acceptance of Equipment. Lessor
shall not be liable to Lessee for any failure or delay in
obtaining the Equipment or making delivery thereof. Lessor
hereby appoints Lessee as Lessor's agent for the sole and limited
purpose of acquiring and accepting delivery of each item of the
Lessor Titled Equipment and paying for the same. By the
Acceptance Date for any item of the Equipment (including without
limitation Lessor Titled Equipment and Lessee Titled Equipment),
Lessee shall have promptly inspected each item of Equipment, and
unless Lessee gives Lessor prompt written notice of any defect in
or other proper objection to any item of such Equipment, Lessee
shall promptly upon completion of such inspection execute and
deliver to Lessor the Lease Supplement, dated the Acceptance
Date. Lessee (in its capacity as agent for Lessor respecting
Lessor Titled Equipment and in its individual capacity respecting
Lessee Titled Equipment) shall also pay to the Seller the
Acquisition Cost of the Seller's Equipment referenced in the
applicable Lease Supplement if all of the conditions precedent
specified in Section 3 hereof have been fulfilled to Lessor's
satisfaction. The execution of the Lease Supplement by Lessee
and Lessor shall evidence that each item of Equipment has been
accepted under this Agreement, upon and subject to all of the
terms, conditions and provisions hereof and shall constitute
Lessee's unconditional and irrevocable acceptance of the
Equipment for all purposes under this Agreement. Lessee's
execution of the Lease Supplement shall constitute Lessee's
acknowledgement and agreement that, as between Lessor and Lessee,
each item of Equipment has been inspected to Lessee's
satisfaction, is in good operating order, repair and condition,
is of a size, design, capacity and manufacture selected by
Lessee, that each item of Equipment is duly certified or licensed
by any governmental entity which is charged with issuing such
certificates or licenses, that Lessee is satisfied that each item
of Equipment is suitable for its purpose, that Lessor has made no
warranty, expressed or implied, with respect to any item of
Equipment and that Lessee has unconditionally accepted each item
of Equipment under this Agreement.
SECTION 5. Basic Term; Renewal Term; Early Purchase Option;
Early Termination Option.
(a) Basic Term. The Basic Term for each item of
Equipment shall commence on the Acceptance Date set forth in the
applicable Lease Supplement, and, unless sooner terminated or
extended for the initial Renewal Term (in either case in
accordance with the provisions of this Agreement), shall
terminate on the date occurring one year from the Acceptance
Date.
(b) Renewal Term. So long as such renewal shall not
be prohibited by any applicable law or governmental regulation,
Lessee may (at its option) at the expiration of the Basic Term,
renew the lease of all but not less than all of the Equipment
subject to a particular Lease Supplement for not more than six
(6) renewal terms, each of one (1) year duration (each such term,
a "Renewal Term"). Such option to renew shall be exercised by
Lessee giving notice of renewal to Lessor (which notice shall be
irrevocable) at least 90 days (but not more than 180 days) prior
to the expiration of the Basic Term and each of the first five
(5) Renewal Terms, if any. If Lessee fails to give such a notice
within the permitted time period, Lessee shall be deemed to have
requested a Renewal Term extension. All of the provisions of
this Agreement shall be applicable during each Renewal Term,
Anything in this Section 5(b) to the contrary notwithstanding,
unless Lessor otherwise consents in writing, this Agreement may
not be renewed for any Renewal Term if a Default or an Event of
Default shall have occurred and be continuing on the day
preceding the first day of such Renewal Term.
(c) Early Purchase Option. So long as no Default or
Event of Default shall have occurred and be continuing, Lessee
may (at its option) at the expiration of the Basic Term or any
Renewal Term, retain all (but not less than all) of the Lessee
Titled Equipment and purchase all (but not less than all) of the
Lessor Titled Equipment for the aggregate Termination Value on
that date as set forth in Annex B to each Lease Supplement, plus
(i) all Basic Payments then due and owing and (ii) all
Supplemental Payments then due and owing or accrued. Such option
to retain and purchase shall be exercised by Lessee giving notice
to Lessor (which notice shall be irrevocable) at least 90 days
(but not more than 180 days) prior to the expiration of the Basic
Term or any Renewal Term. If Lessee fails to give such a notice
within the permitted time period, Lessee shall be deemed to have
requested a Renewal Term extension as set forth in Section 5(b)
hereof.
(d) Early Termination Option. To the extent no
Default or Event of Default shall have occurred and be
continuing, and upon a reasonable determination by the board of
directors of Lessee that the Equipment subject to a particular
Lease Supplement is obsolete or surplus for the purposes of
Lessee, Lessee may terminate this Agreement on any Early
Termination Date upon ninety (90) days' prior written notice to
Lessor. Lessee may exercise such early termination option to the
extent the following conditions are met: (i) Lessee arranges for
the sale of all but not less than all of the Equipment to a Third
Party Purchaser which is financially capable of purchasing the
Equipment; (ii) on the Early Termination Date, such Third Party
Purchaser pays Lessor the previously agreed purchase amount in
good, immediately available funds; (iii) in the event that such
purchase amount is less than the Termination Value determined as
of the Basic Payment Date immediately preceding the Early
Termination Date, Lessee shall pay Lessor the difference between
such purchase amount and such Termination Value; (iv) on the
Early Termination Date, Lessee shall pay all Basic Payments then
due and owing and all Supplemental Payments then due and owing or
accrued; (v) Lessee on a timely basis shall pay, or cause to be
paid, all Sales Expenses associated with such sale of the
Equipment; and (vi) Lessee shall deliver such Equipment to the
Third Party Purchaser in accordance with the provisions of
Section 6 hereof as if such Third Party Purchaser were the
Lessor; provided, further, that if the purchase amount paid by
the Third Party Purchaser (as referenced in Section 5(d)(ii)
hereof is in excess of the Termination Value referenced in
Section 5(d)(iii) hereof, Lessor may retain any such excess to
the extent, but only to the extent, Lessor has not been paid in
full all amounts owed to Lessor under this Section 5(d) and after
confirming receipt of all such amounts, Lessor shall promptly
return to Lessee the remainder, if any, of such excess. Upon
receipt of all funds then due and owing to Lessor hereunder,
Lessor shall sell the Lessor Titled Equipment to such Third Party
Purchaser on an "as-is, where-is" basis and deliver a bill of
sale and all other documentation reasonably necessary to transfer
to such Third Party Purchaser all of Lessor's right, title and
interest in and to the Lessor Titled Equipment and Lessee shall
transfer the Lessee Titled Equipment to such Third Party
Purchaser pursuant to a bill of sale and other documentation
reasonably satisfactory to Lessor reflecting a transfer of title
regarding the Lessee Titled Equipment consistent with the
obligations of Lessee hereunder to keep the Equipment free and
clear of Liens.
SECTION 6. End of Term Delivery of Equipment.
If this Agreement shall be in full force and effect and
Lessee shall not have elected to purchase the Lessor Titled
Equipment and retain the Lessee Titled Equipment in accordance
with Section 5(c) or with Section 29 hereof, then on the
Expiration Date Lessee shall deliver, at Lessee's expense, all
requested Equipment to Lessor (or to a third party to which the
Equipment shall be sold pursuant to Sections 5(d) or 29) to a
location or locations within the continental United States as
specified in writing by Lessor or such third party. The terms of
this Section 6 shall apply to Lessee's delivery of the Equipment.
At the time of such return to Lessor or delivery to the third
party, each item of Equipment (and each part or component
thereof) shall (i) be in good operating order, and in the repair
and condition as when originally delivered to Lessee, ordinary
wear and tear from proper use thereof excepted, and refurbished
where necessary, (ii) be capable of being immediately operated by
a third party purchaser or third party lessee without further
inspection, repair, replacement, alteration or improvement, (iii)
be in accordance and compliance with any and all statutes, laws,
ordinances, rules and regulations of any federal, state or local
governmental body, agency or authority applicable to the use and
operation of such item of Equipment, and (iv) be free and clear
of all Liens, other than those granted or placed thereon by
Lessor.
SECTION 7. Payments.
(a) Basic Payments. Lessee hereby agrees to pay
Lessor Basic Payments for the Equipment from and including the
Acceptance Date for each item of Equipment and throughout the
Term, in consecutive quarterly installments, with each
installment in an amount equal to the Basic Payment Factor set
forth on the Lease Supplement applicable to such items of
Equipment hereto multiplied by the Acquisition Cost thereof.
(b) Supplemental Payments. Lessee agrees to pay
Lessor, or to whomsoever shall be entitled thereto as expressly
provided herein, all Supplemental Payments promptly as the same
shall become due and owing, and in the event of any failure on
the part of Lessee to pay any such Supplemental Payment hereunder
Lessor shall have all rights, powers and remedies provided for
herein or by law or equity or otherwise in the case of nonpayment
of Basic Payments.
(c) Method of Payment. If the date that any Payment
is due is other than a Business Day, the Payment otherwise
payable on such date shall be payable on the next succeeding
Business Day. All Basic Payments and Supplemental Payments
required to be made by Lessee to Lessor hereunder shall be made
in immediately available funds and in United States dollars. In
the event of any assignment to an Assignee pursuant to Section
14(b) hereof, all payments which are assigned to such Assignee,
whether Basic Payments, Supplemental Payments or otherwise, shall
be paid in the same manner specified herein for payments to
Lessor at such address as shall be designated by such Assignee.
Time is of the essence in connection with the payment of Basic
Payments and Supplemental Payments.
SECTION 8. Net Lease. This Agreement is a net lease and
Lessee acknowledges and agrees that Lessee's obligations
hereunder, including, without limitation, its obligations to pay
all Payments payable hereunder, shall be absolute and
unconditional under any and all circumstances and shall be paid
without notice or demand and without any abatement, reduction,
diminution, setoff, defense, counterclaim or recoupment
whatsoever, including, without limitation, any abatement,
reduction, diminution, setoff, defense, counterclaim or
recoupment due or alleged to be due to, or by reason of, any
past, present or future claims which Lessee may have against
Lessor, any Assignee, or the manufacturer of any item of the
Equipment, any Part or unit or component of the Equipment, or any
other Person for any reason whatsoever. Except to the extent
expressly provided herein, and without in any manner limiting the
generality of the foregoing sentence, the obligations and
liabilities of Lessee hereunder shall in no way be released,
discharged or otherwise affected for any reason, including,
without limitation: (a) any defect in any item of the Equipment,
any Part or unit or component of the Equipment, or the condition,
design, operation or fitness for use thereof; (b) any damage to,
or any loss, abandonment, salvage, scrapping or destruction of,
any item of the Equipment, any Part or unit or component of the
Equipment; (c) any Liens or rights of others with respect to any
item of the Equipment, any Part or unit or component of the
Equipment; (d) any prohibition or interruption of or other
restriction against Lessee's use, operation or possession of any
item of the Equipment, any Part or unit or component of the
Equipment, for any reason whatsoever, or any interference with
such use, operation or possession by any Person or entity;
(e) any failure by Lessor to perform any of its obligations
herein contained; (f) any other indebtedness or liability,
howsoever and whenever arising, of Lessor or of any Assignee or
of Lessee to any other Person; (g) any insolvency, bankruptcy or
similar proceedings by or against Lessor, any Assignee, any
guarantor of Lessee's obligations or Lessee; or (h) any other
reason whatsoever, whether similar or dissimilar to any of the
foregoing, any present or future law to the contrary
notwithstanding; it being the intention of the parties hereto
that the Basic Payments and Supplemental Payments payable by
Lessee hereunder shall continue to be payable in all events and
in the manner and at the times herein provided, without notice or
demand, unless the obligation to pay the same shall be terminated
pursuant to the express provisions of this Agreement.
SECTION 9. Lessor's Title; Lessee's Title; Grant of
Security Interest.
(a) Lessor's Title; Lessee's Title. Title to each
item of Lessee Titled Equipment shall at all times remain in
Lessee and title to each item of Lessor Titled Equipment shall at
all times remain in Lessor. At no time during the Term for any
Equipment shall title become vested in any other party; provided,
notwithstanding the foregoing, Lessor shall be entitled to
exercise its rights under Section 35 hereof.
(b) Grant of Security Interest. This Agreement is a
lease intended as security. To secure the prompt payment and
performance when due of each and every obligation of Lessee from
time to time due and owing to Lessor under this Agreement or
under any of the other Transaction Documents, Lessee hereby
grants to Lessor a lien and security interest in and a right to
set-off against (and acknowledges and agrees that Lessor has and
shall continue to have a continuing lien and security interest in
and a right of set-off against) any and all right, title and
interest of Lessee in, to and under the following: (i) this
Agreement and each and every other Transaction Document and each
of Lessee's right, title and interest hereunder and thereunder,
whether such right, title or interest is now existing or
hereafter arising; (ii) each and every item of equipment,
fixtures and other personal property located at the sites set
forth in Annex A to the respective Lease Supplements executed in
connection with this Agreement from time to time (including
without limitation all of the Lessee Titled Equipment and the
Lessor Titled Equipment), together with all accessories,
equipment, parts and appurtenances pertaining or attached
thereto, whether now owned or hereafter acquired, and all
substitutions and renewals of any type or kind and additions,
improvements, accessions and accumulations to any and all of the
foregoing; and (iii) any and all proceeds of any kind or type
with respect to any of the items referenced in this Section 9(b),
including without limitation insurance proceeds.
SECTION 10. Use of Equipment; Compliance with Laws. Lessee
agrees that each item of Equipment will be used and operated only
(a) for purposes or operations in the ordinary course of its
business and at the location(s) set forth in the applicable Lease
Supplement and (b) in the manner set forth in, and in accordance
with, the terms, conditions and provisions of the insurance
policy or policies providing the coverages specified in Section
17 hereof. In no event shall Lessee use or operate any item of
Equipment, or knowingly permit any item of Equipment to be used
or operated, for any purpose for which such item of Equipment is
not designed or reasonably suitable, or in any fashion that may
reasonably subject such item of Equipment to any Liens, other
than Permitted Liens, or in any area excluded from coverage by
any such insurance policy or policies. Lessee further agrees
that each item of Equipment will be used and operated in the
conduct of Lessee's business and in compliance with all statutes,
law, ordinances, rules and regulations of any federal, state,
local or foreign government or governmental authority having
jurisdiction with respect to the use, operation, maintenance,
condition and occupancy of any item of Equipment (including,
without limitation, all zoning, environmental protection,
pollution, sanitary and safety laws). Lessee will not load, use,
operate, or store any item of Equipment, or knowingly permit the
loading, using, operating or storing of any item of Equipment, in
a negligent manner or otherwise in violation of this Agreement or
so as to void any of the insurance coverages specified in Section
17 hereof respecting any item of Equipment. Lessee shall procure
and maintain in effect all licenses, certificates, permits,
approvals and consents required by federal, state, local or
foreign laws or by any governmental body, agency or authority, in
connection with the delivery, use, operation, maintenance,
condition and occupancy of each item of Equipment. The Equipment
will at all times be and remain in the control of Lessee except
as Lessee's relinquishment of control of an item of Equipment is
specifically permitted by this Agreement and except while an item
of Equipment is undergoing maintenance. To the extent that any
applicable law requires the licensing or certification of an
operator of any item of the Equipment, each such operator shall
be duly licensed and currently certificated and qualified to
operate such item of Equipment and authorized by the terms of (in
accordance with the provisions and requirements of) the insurance
policy or policies providing the coverages specified in Section
17 hereof.
SECTION 11. Operation and Maintenance of Equipment. Lessee
agrees, at its own cost and expense, to keep, repair, maintain
and preserve the Equipment in good order and operating condition,
and in compliance with such maintenance and repair standards and
procedures as are set forth in the manufacturer's manuals
pertaining to the Equipment, and as otherwise may be required to
enforce warranty claims against each vendor and manufacturer of
each item of Equipment, and in compliance with the maintenance
and repair standards of Lessee for similar equipment and with
prudent industry standards and with all requirements of law
applicable to the maintenance and condition of the Equipment.
Lessee shall, at its own cost and expense, supply the necessary
power and other items required in the operation of the Equipment.
Lessee hereby waives any right now or hereafter conferred by law
to make repairs on the Equipment at the expense of Lessor.
SECTION 12. Replacement of Parts; Alterations;
Modifications and Additions. In case any part, component or unit
of the Equipment is required to be altered or modified, or any
equipment or appliance is required to be altered, added, replaced
or modified on any item of Equipment or in either case in order
to comply with the laws, regulations, requirements or rules
("Required Alteration") pursuant to Sections 10 or 11 hereof,
Lessee agrees to make such Required Alteration at its own
expense. Such Required Alteration shall immediately be and
become the property of Lessor hereunder and subject to the terms
of this Agreement. Lessee agrees that, within thirty (30) days
after the close of any calendar quarter in which Lessee has made
any material Required Alteration, Lessee will give written notice
thereof to Lessor describing, in reasonable detail, the Required
Alteration and specifying the cost thereof and the date or dates
when made. All parts, equipment and appliances incorporated or
installed in or attached to any item of Equipment in connection
with servicing, repairing, maintaining and overhauling any item
of Equipment pursuant to the requirements of Sections 10 or 11
hereof ("Replacement") shall be considered accessions to such
item of Equipment and shall immediately, without further act, be
and become the property of Lessor and part of the Equipment.
Lessee may, without the prior written consent of Lessor, affix or
install any accessory, equipment or device on the Equipment or
make any improvement or addition thereto other than a Required
Alteration or Replacement ("Improvement"); provided that, (a) a
nonremovable Improvement may only be made to the Equipment if
such Improvement does not reduce the value of the Equipment and
(b) any other Improvement may only be made to the Equipment if
such Improvement is readily removable without causing damage to
the Equipment or impairing the value, utility or condition the
Equipment would have had if such Improvement had not been so
affixed or installed. Improvements shall be considered
accessions to the Equipment and shall immediately without further
act, be and become the property of Lessor and part of the
Equipment. At the time title to any replacement Part, equipment
or appliance has become vested in Lessor pursuant to the
provisions of this Section 12, title to the part, equipment or
appliance replaced thereby shall thereupon vest in Lessee in its
individual capacity.
SECTION 13. Identification; Inspection; Reports; Change of
Chief Executive Office and/or Name.
(a) Identification. If requested by Lessor, Lessee
shall, promptly after each Acceptance Date, mark each item of the
Equipment accepted under this Agreement on such date so as to
identify that such item is owned by Lessor.
(b) Inspection. Lessor shall have the right on any
Business Day during normal business hours and upon reasonable
notice to Lessee to inspect (i) the Equipment (wherever located)
and (ii) Lessee's records with respect thereto; provided,
however, Lessor will conduct no such inspection which in Lessor's
reasonable judgment is likely to disrupt Lessee's business
operations. Upon receipt of Lessor's notice requesting to
inspect certain Equipment, Lessee shall promptly notify Lessor of
the location of the Equipment and shall make all necessary
arrangements to facilitate the inspection.
(c) Reports. Upon Lessor's written request, Lessee
shall furnish Lessor with an accurate statement showing the then
current location of each item of the Equipment.
(d) Change of Chief Executive Office and/or Name.
Lessee shall give Lessor written notice on or prior to the date
as of which Lessee shall change (i) its chief executive office
from the address referenced therefor in this Agreement and/or
(ii) its name. Lessee shall stipulate the new address and/or its
new name in such notice.
SECTION 14. Assignment, Sublease or Transfer; Assignment;
Consolidation and Merger.
(a) Assignment, Sublease or Other Transfer by Lessee.
LESSEE WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR
(WHICH SHALL BE GIVEN OR WITHHELD IN LESSOR'S SOLE DISCRETION),
ASSIGN, SUBLEASE OR OTHERWISE TRANSFER ITS RIGHTS OR OBLIGATIONS
WITH RESPECT TO ANY OF THE EQUIPMENT, HEREUNDER OR UNDER ANY OF
THE OTHER TRANSACTION DOCUMENTS AND ANY ATTEMPTED ASSIGNMENT,
SUBLEASE OR OTHER TRANSFER BY LESSEE WITHOUT SUCH LESSOR CONSENT
SHALL BE NULL AND VOID.
With respect to any sublease for which Lessor provides its
written consent, such sublease must be a Permitted Sublease, no
such sublease by Lessee will reduce any of the obligations of
Lessee hereunder or the rights of Lessor hereunder, and all of
the obligations of Lessee hereunder shall be and remain primary
and shall continue in full force and effect as the obligations of
a principal and not of a guarantor or surety. Lessee shall
furnish to Lessor not later than the effective date of such
sublease (i) new insurance certificates from Lessee's insurance
broker, in form and substance satisfactory to Lessor, indicating
compliance with the insurance provisions of this Agreement and
(ii) an officer's certificate from Lessee naming the sublessee
and specifying the address for the sublessee's chief executive
office. Lessee shall, and shall cause such sublessee to, execute
and deliver such instruments to the appropriate Person for filing
and to deliver copies of the same to Lessor (including sublease
agreements and Uniform Commercial Code financing statements) as
may be requested by Lessor in connection with any such sublease.
(b) Assignment By Lessor. Lessor may at any time (i)
assign, sell or transfer, in whole or in part, Lessor's right,
title and interest in, to and under this Agreement and any Lease
Supplement, including, without limitation, the right to receive
any or all Payments payable under this Agreement and under any
Lease Supplement with respect to the Equipment and (ii) sell or
transfer all of Lessor's right, title and interest in and to the
Equipment. Any such assignee, purchaser or transferee of
Lessor's rights (an "Assignee") shall have all of Lessor's right,
title and interest hereunder to the extent that the same relate
to the interest of the Assignee covered by the assignment,
including, without limitation, the right to receive such
Assignee's portion of the Basic Payments payable for the
Equipment sold or transferred for all Basic Payment Periods
commencing on or after the date of such assignment, the right to
receive such Assignee's portion of the Supplemental Payments
which are payable as a result of acts or events which occur on or
after the date of such assignment and the right to enforce,
either in such Assignee's name or in Lessor's name, but without
cost or expense to Lessor, all of Lessor's rights hereunder
assigned to such Assignee. Any Assignee may re-assign all or a
portion of its right, title and interest received in accordance
with the terms hereof. Any such assignment shall be subject to
Lessee's rights hereunder so long as no Event of Default has
occurred and is continuing hereunder; provided, however, Lessee
shall be deemed to have released Lessor from any liability under
this Agreement arising after the effective date of the assignment
and shall thereafter look solely to the Assignee for obligations
hereunder arising after such effective date. Lessee shall be
under no obligation to any Assignee except upon written notice of
such assignment from Lessor. Upon written notice from Lessor to
Lessee of such assignment, Lessee agrees to pay the Basic
Payments and Supplemental Payments to the Assignee in accordance
with the terms of this Agreement supplemented by the instructions
specified in such notice, to give all notices which are required
or permitted to be given by Lessee to Lessor hereunder to the
Person(s) specified to receive the same in such notice of
assignment and to otherwise comply with all reasonable notices,
directions and demands which may be given by such Assignee in
accordance with the provisions of this Agreement. Lessee agrees
to deliver to any Assignee an acknowledgement of the assignment
together with an opinion of Lessee's counsel regarding the
validity and enforceability of this Agreement and each Lease
Supplement against Lessee, an incumbency certificate of Lessee
and such authorizing resolutions as such Assignee may reasonably
request; provided, however, all out-of-pocket fees and expenses
incurred by Lessee in connection with the production or delivery
of the foregoing documents referenced previously in this sentence
shall be for the account of Lessor or such Assignee, as agreed to
by such parties.
Lessor may also transfer all, but not less than all, of
Lessor's right, title and interest in, to and under the other
Transaction Documents to the Assignee and after the effective
date of such transfer, the Assignee shall have all of Lessor's
right, title and interest under such other Transaction Documents.
(c) Consolidation, Merger, Conveyance, Transfer and
Lease By Lessee. Lessee shall not consolidate with or merge into
any other corporation or convey, transfer or lease substantially
all of its stock or assets as an entirety or in one or more
parcels to any Person or Persons unless:
(i) Lessee is the surviving entity of any such
consolidation or merger and the requirements of Sections
14(c)(ii)(B)-(D) are satisfied; or
(ii) (A) the corporation formed by such
consolidation or into which Lessee is merged, or the Person
which acquires by conveyance, transfer or lease of
substantially all of the stock or assets of Lessee as an
entirety, shall be a Solvent corporation organized and
existing under the laws of the United States or any state
thereof or the District of Columbia and shall execute and
deliver to Lessor an agreement containing an effective
assumption by such successor, transferee or lessee
corporation of the due and punctual performance and
observance of each covenant and condition of this Agreement;
provided any conveyance, transfer or lease of substantially
all of its stock or assets shall not release Lessee from its
obligations under this Agreement, which obligations shall at
all times remain primary and direct;
(B) immediately prior to and after giving
effect to such transaction, no Default or Event of
Default shall have occurred and be continuing;
(C) immediately after giving effect to such
transaction, the consolidated tangible net worth
(computed on the same basis as the Consolidated
Tangible Net Worth) of the corporation formed by such
consolidation or into which Lessee is merged or the
Person which acquired by conveyance, transfer or lease
substantially all the stock or assets of Lessee as an
entirety, as the case may be, shall not be less than
one hundred percent (100%) of the Consolidated Tangible
Net Worth of Lessee as reflected in the then most
recent financial statement furnished by Lessee pursuant
hereto prior to such consolidation, merger, conveyance,
transfer or lease; and
(D) Lessee shall have delivered to Lessor a
certificate signed by an officer, who may be the
President, any Vice President, the Chief Executive
Officer or the Chief Financial Officer, stating that
such consolidation, merger, conveyance, transfer or
lease and the assumption agreement mentioned in clause
14(c)(ii)(A) above comply with the requirements of this
Section 14(c) and that all conditions precedent herein
provided for relating to such transaction have been
complied with.
Upon any consolidation or merger in which Lessee is not the
surviving corporation, or any conveyance, transfer or lease of
substantially all the stock or assets of Lessee as an entirety,
in each case in accordance with this Section 14(c), the successor
corporation formed by such consolidation or into which Lessee is
merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for (but without release of
Lessee from any of its obligations hereunder with respect to any
conveyance, transfer or lease of substantially all the stock or
assets of Lessee as an entirety), and may exercise every right
and power of, Lessee under this Agreement with the same effect as
if such successor corporation had been named as a Lessee herein.
SECTION 15. Liens; Permitted Contests. Lessee will not
directly or indirectly create, incur, assume or suffer to exist
any Lien on or with respect to any item of Equipment, or Lessor's
title (or Lessee's title) thereto, except the following
(collectively, the "Permitted Liens"): (a) any Lien granted to
Lessor hereunder or granted or placed thereon by Lessor as a
result of an assignment pursuant to Section 14(b) hereof, (b) any
Lien resulting from an independent act of or claim against Lessor
which does not result from, arise out of or relate to the
manufacture, acquisition, ownership, operation, repair,
maintenance, storage, usage or leasing of such item of Equipment
or this Agreement or any Lease Supplement or any Default or Event
of Default, (c) any Lien for Taxes or Other Impositions either
not yet delinquent or which are the subject of a Permitted
Contest, and (d) any materialmen's, mechanics', workmen's,
repairmen's or employees' lien or any other like Lien arising in
the ordinary course of business, which is not delinquent or the
subject of a Permitted Contest. Lessee, at its own expense, will
promptly pay, satisfy and otherwise take such actions as may be
necessary to keep each item of Equipment free and clear of, and
to duly discharge or eliminate or bond in a manner satisfactory
to Lessor, any such Lien not excepted above if the same shall
arise at any time. Lessee will maintain each Lien on the
Equipment granted hereunder in favor of Lessor as a first
priority, perfected security interest. Lessee will notify Lessor
and any Assignee in writing promptly upon becoming aware of any
Taxes or Other Impositions or other Lien (other than any Lien
excepted above) that shall attach to any item of Equipment and of
the full particulars thereof.
Lessee shall pay, and save Lessor harmless against, any and
all losses, judgments, decrees and costs (including, without
limitation, all reasonable attorneys' fees and expenses) in
connection with any Permitted Contest and shall promptly after
the final settlement, compromise or determination (including any
appeals) of such contest, fully pay and discharge the amounts
which shall be levied, assessed, charged or imposed or be
determined to be payable therein or in connection therewith,
together with all penalties, fines, interests, costs and expenses
thereof or in connection therewith, and perform all acts, the
performance of which shall be ordered or decreed as a result
thereof.
SECTION 16. Loss, Damage or Destruction.
(a) Risk of Loss, Damage or Destruction. Lessee
hereby assumes all risk of loss, damage, theft, taking,
destruction, confiscation, requisition or commandeering, partial
or complete, of or to the Equipment, however caused or
occasioned, such risk to be borne by Lessee with respect to the
Equipment from the Acceptance Date therefor, and continuing until
the Equipment has been delivered in accordance with the
provisions of Section 6 hereof or has been purchased by Lessee or
a third party in accordance with the provisions of Sections 5 or
29 hereof. Lessee agrees that no occurrence specified in the
preceding sentence shall impair, in whole or in part, any
obligation of Lessee under this Agreement, including, without
limitation, the obligation to make Payments.
(b) Event of Loss with Respect to Equipment. (i) Upon
the occurrence of an Event of Loss with respect to any item of
Equipment during the Term, Lessee shall forthwith (and in any
event within ten (10) days after such occurrence) give Lessor
written notice of such Event of Loss and of its election to
perform one of the following options (it being agreed that if
Lessee shall not have given Lessor notice of such election within
such ten (10) days after such occurrence, Lessee shall be deemed
to have elected to perform the option set forth in the following
clause (B)), provided that Lessee shall not have the right to
select the option set forth in the following clause (A) if a
Default or Event of Default shall have occurred and be continuing
and in such circumstance shall be deemed to have selected the
option set forth in the following clause (B):
(A) As promptly as practicable, and in any event
within thirty (30) days of the occurrence of such Event of
Loss, Lessee shall convey or cause to be conveyed to Lessor
pursuant to Section 16(b)(ii), and to be leased by Lessee
hereunder in replacement for such item of Equipment, a
replacement item (the "Replacement Item"), such Replacement
Item to be free and clear of all Liens (other than Permitted
Liens) and to have a value and utility at least equal to,
and be in as good operating condition as, the item of
Equipment with respect to which such Event of Loss occurred,
assuming such item of Equipment was of the value and utility
and in the condition and repair required by the terms hereof
immediately prior to the occurrence of such Event of Loss;
provided that, if Lessee shall not perform its obligation to
effect such replacement under this clause (A) during the
period of time provided herein, then Lessee shall promptly
give notice to Lessor, and shall be deemed (whether or not
Lessee shall have so given such notice) to have elected to
perform the option set forth in clause (B) below by the date
and pursuant to the terms specified in said clause.
(Notwithstanding such Event of Loss, Lessee's obligation to
pay Basic Payments shall continue.)
(B) On the Casualty Loss Value Date next following the
earlier of thirty (30) days after the occurrence of such
Event of Loss and the date of receipt of insurance proceeds
in respect of such occurrence, Lessee shall pay Lessor the
sum of (i) the Termination Value (computed as of the
Casualty Loss Value Date next following the date of such
Event of Loss) for all the Equipment then subject to the
Event of Loss, plus (ii) all accrued and unpaid Basic
Payments (and/or any pro rata portion thereof) owing for all
Basic Payment Periods (and/or any pro rata portion thereof)
prior to such Casualty Loss Value Date, plus (iii) all
Supplemental Payments then accrued and unpaid or due and
owing. Upon payment in full of amounts specified in clauses
(i) through (iii) of the preceding sentence, (A) the
obligation of Lessee to pay Basic Payments hereunder, with
respect to such item of Equipment for all Basic Payment
Periods commencing after the occurrence of such Event of
Loss shall terminate, (B) the Term shall end with respect to
such item of Equipment, and (C) Lessor shall transfer to
Lessee, or Lessee's designee, its title to such item of
Lessor Titled Equipment consistent with the settlement terms
of Section 29(e) hereof.
(ii) Conveyance of Replacement Equipment. Prior
to or at the time of any conveyance of a Replacement Item,
Lessee, at its own expense, will furnish, or cause to be
furnished, to the Lessor the following documents (in form
and substance satisfactory to Lessor) which shall have been
duly authorized, executed and delivered by the respective
parties thereto and shall be in full force and effect on the
date of such conveyance:
(A) with respect to any such Replacement
Item, a full warranty bill of sale and Uniform
Commercial Code financing statements and such other
evidence of title as Lessor or its counsel may
reasonably request;
(B) a supplement to this Agreement, and if a
Permitted Sublease is in force and effect to such
Permitted Sublease, in each case covering such
Replacement Item, duly executed by Lessee and the
sublessee under the Permitted Sublease, if any;
(C) such evidence of compliance with the
insurance provisions of this Agreement with respect to
such Replacement Item, as Lessor may reasonably
request, including an independent insurance broker's
report (stating the opinion of such insurance broker
that such insurance complies with the terms of this
Agreement) with certificates of insurance; and
(D) such other documents and evidence with
respect to Lessee as Lessor or its counsel, may
reasonably request in order to establish the
consummation of the transactions contemplated by this
Section 16(b), the taking of all corporate proceedings
in connection with and compliance with the conditions
set forth in this Section 16(b), in each case in form
and substance satisfactory to Lessor.
Upon full compliance by Lessee with the terms of this
Section 16(b), Lessor shall convey to Lessee in its individual
capacity, at Lessee's cost and expense, all of Lessor's right,
title and interest, as-is, where-is, without recourse or
warranty, express or implied, in and to such replaced item of
Lessor Titled Equipment, with respect to which Event of Loss
occurred. No Event of Loss with respect to an item of Equipment
under the circumstances contemplated by the terms of this Section
16(b) shall result in any reduction in Basic Payments or Lessee's
obligation to pay Basic Payments hereunder.
Lessee further agrees to take such further action as Lessor
may reasonably request with respect to such Replacement Item to
perfect the interest of Lessor in such Replacement Item.
(c) Application of Other Payments Upon Event of Loss.
Any payments for damages to the Equipment (including, without
limitation, insurance proceeds) received at any time by Lessor or
by Lessee from any insurer, governmental authority or other party
as a result of the occurrence of an Event of Loss will be applied
as follows: (i) any such payments received at any time by Lessee
shall be promptly paid to Lessor for application pursuant to the
following provisions of this Section 16(c); (ii) so much of such
payments as shall not exceed the amounts required to be paid by
Lessee pursuant to Section 16(b) hereof shall be applied in
reduction of Lessee's obligation to pay such amount, if not
already paid by Lessee, or, if already paid by Lessee, shall be
applied to reimburse Lessee for its payment of such amount,
unless a Default or an Event of Default shall have occurred and
be continuing; and (iii) the balance, if any, of such payments
remaining thereafter shall be paid to or retained by Lessee,
unless a Default or an Event of Default shall have occurred and
be continuing.
(d) Application of Payments Not Relating to an Event
of Loss. Any payments (including, without limitation, insurance
proceeds) received at any time by Lessor or Lessee from any
insurer, governmental authority or other party with respect to
any condemnation, confiscation, theft or seizure of, or
requisition of title to or use of, or loss or damage to, any item
of the Equipment not constituting an Event of Loss, will be
applied (if no Default or Event of Default shall have occurred
and be continuing) directly in payment of repairs or for
replacement of property in accordance with the provisions of
Sections 11 and 12 hereof, if not already paid by Lessee, or if
already paid by Lessee and if no Default or Event of Default
shall have occurred and be continuing, shall be applied to
reimburse Lessee for such payment, and any balance remaining
after compliance with said Sections 11 and 12 with respect to
such loss or damage shall be paid to or retained by Lessee.
SECTION 17. Insurance.
(a) Coverage. Lessee shall:
(i) maintain property damage insurance for the
Equipment in an amount not less than Termination Value for
all property damage and loss including, without limitation,
loss, vandalism, malicious mischief, damage from fire, and
normal extended coverage perils customarily included in
policies available with respect to property comparable to
the Equipment;
(ii) maintain comprehensive general public
liability, including blanket contractual, personal injury,
property damage and loss of use of property of others,
insurance applicable to the Equipment in such amounts
usually carried by Lessee but in any event with a combined
single limit of not less than Termination Value or such
other amount as is mutually agreed to by Lessee and Lessor,
as such agreement shall be reflected in the Lease Supplement
applicable to certain Equipment; and
(iii) maintain such other insurance with respect to
the Equipment in such amounts and against such insurable
hazards as is usually carried by Lessee, but any loss of the
type customarily covered by the policies described in
Sections 17(a)(i) and (ii) whether actually covered in whole
or in part by such policies, shall be the responsibility of
Lessee and the absence of such coverage shall not relieve
Lessee from any of its obligations under any of the
documents or agreements related to the Overall Transaction.
All insurance policies carried in accordance with this
Section 17(a) (excepting any self-insurance permitted under this
Agreement) shall be maintained with insurers of recognized
responsibility and standing in the industry.
Any insurance policies carried in accordance with this
Section 17 shall be subject only to (A) exclusions of the sort
existing in the insurance policies in effect on the Acceptance
Date and (B) deductible amounts and/or retentions not in excess
of $100,000 per occurrence with respect to comprehensive general
public liability insurance and $10,000 per occurrence with
respect to property insurance.
Notwithstanding anything to the contrary in this Section 17,
(i) Lessee shall at all times maintain insurance with respect to
the Equipment in accordance with its standard corporate minimum
practice with respect to other similar equipment and (ii) any
loss of the type customarily covered by the policies described in
Sections 17(a), whether actually covered in whole or in part by
such policies, shall be the responsibility of Lessee and the
absence of such coverage shall not relieve Lessee from any of its
obligations under any of the documents or agreements related to
the Overall Transaction.
(b) Policy. Any insurance policy maintained by Lessee
pursuant to Section 17(a) hereof (excepting any self-insurance
permitted under this Agreement) shall:
(i) specify Lessor, as its interest may appear,
as a loss payee with respect to property damage insurance
and as an additional insured with respect to liability
insurance;
(ii) include effective waivers by the insurer of
all claims for insurance premiums or commissions or (if such
policies provide for the payment thereof) additional
premiums or assessments against Lessor;
(iii) provide that in respect of the interests of
Lessor such policies shall not be invalidated by any action
or inaction of Lessee or any other Person (except for
nonpayment of premiums, in which case Lessor shall receive
at least thirty (30) days prior written notice of such
nonpayment from the respective insurance carriers prior to
the invalidation of any insurance coverage referenced
hereunder) and shall insure the rights and interests of
Lessor regardless of, and any claims for losses shall be
payable notwithstanding:
(A) any act of negligence, including,
without limitation, any breach of any condition or
warranty in any policy of insurance, by Lessee, Lessor
or any other Person;
(B) the use of the Equipment for purposes
more hazardous than permitted by the terms of the
policy;
(C) any foreclosure or other proceeding or
notice of sale relating to the Equipment; or
(D) any change in the title to or ownership
of the Equipment;
(iv) provide that such insurance shall be primary
insurance and that the insurers under such insurance
policies shall be liable under such policies without right
of contribution from any other insurance coverage effected
by or on behalf of Lessor under any other insurance policies
covering a loss that is also covered under the insurance
policies maintained by Lessee pursuant to this Section 17
and shall expressly provide that all provisions thereof,
except the limits of liability (which shall be applicable to
all insureds as a group) and liability for premiums (which
shall be solely a liability of the Lessee), shall operate in
the same manner as if there were a separate policy covering
each insured;
(v) provide that any material adverse change
therein shall not be effective as to Lessor until at least
thirty (30) days after receipt by Lessor of written notice
thereof and provide that any cancellation thereof shall not
be effective as to Lessor until receipt by Lessor of written
notice of cancellation at thirty (30) days before the
effective date of cancellation;
(vi) waive any right of subrogation of the
insurers against Lessor and waive any right of the insurers
to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise, in respect of any
liability of Lessor;
(vii) provide that the whole or any part of the
right, title and interest of Lessor or Lessee therein may be
assigned; and
(viii) subject to Section 17(a) hereof, be reasonably
satisfactory to Lessor in all other material respects.
(c) Evidence of Insurance. Lessee shall deliver to
Lessor by the Acceptance Date for each item of the Equipment
certificates of insurance evidencing the provisions described in
Sections 17(a) and 17(b)(i-vii) hereof executed by the insurer or
its duly authorized agent.
(d) Annual Insurance Certificate. By the annual
anniversary of the Acceptance Date for each item of the Equipment
of each year commencing with January 27, 1995, and within thirty
(30) days after any material adverse change (including, without
limitation, any material increase in deductible and/or retention
amounts) in the information set forth in the certificates
provided pursuant to Section 17(c) hereof, Lessee shall deliver
to Lessor a certificate of insurance with respect to the same
items as described in Section 17(c).
SECTION 18. General Tax Indemnity. Lessee hereby assumes
liability for, and does hereby agree, whether or not any of the
transactions contemplated hereby are consummated, to indemnify,
protect, save, defend, exonerate, pay and hold harmless Lessor,
each Assignee and each of their respective officers, directors,
stockholders, successors, assigns, agents and servants (each such
party may be referred to herein as an "Indemnified Party") on an
after-tax basis (at the then highest marginal federal and
applicable state, local and foreign income tax rates) from, any
and all federal, state, local and foreign taxes, fees,
withholdings, levies, imposts, duties, assessments and charges of
any kind and nature whatsoever, together with any penalties,
fines or interest therein (herein called "Taxes or Other
Impositions") howsoever imposed, whether levied or imposed upon
or asserted against an Indemnified Party, Lessee or the Equipment
by any federal, state or local government or taxing authority in
the United States, or by any taxing authority or governmental
subdivision of a foreign country, upon or with respect to (a) the
Equipment, (b) the manufacture, construction, ordering, purchase,
acceptance or rejection, ownership, delivery, leasing,
re-leasing, subleasing, possession, use, operation, maintenance,
storage, registration or re-registration, titling or re-titling,
licensing or re-licensing, documentation, removal, return, sale
(including, without limitation, sale to Lessee by an Indemnified
Party pursuant to the terms hereof) or other applications or
dispositions thereof, (c) the payments, receipts or earnings
arising from the Equipment, or (d) this Agreement, any document,
instrument, agreement or contract entered into in relation hereto
or otherwise in relation to the Equipment or any payments payable
by Lessee or to an Indemnified Party hereunder or pursuant to any
document, instrument, agreement or contract entered into in
relation hereto or otherwise in relation to the Equipment;
provided, however, that the foregoing indemnity shall not apply
to any taxes imposed solely as the result of the gross negligence
or willful misconduct of an Indemnified Party or to the extent
based upon or measured by an Indemnified Party's net income or
gross receipts, which gross receipts tax is in the nature of a
tax on net income (unless such tax is a Covered Income Tax as
hereinafter defined), and which are imposed or levied by any
federal, state or local taxing authority in the United States.
For purposes of this Agreement, a "Covered Income Tax" shall mean
an income tax (including, without limitation, a tax imposed upon
gross income or receipts) imposed on an Indemnified Party by any
state or local taxing authority (excluding the United States
federal government) in whose jurisdiction, an Indemnified Party
(including, without limitation, for this purpose all entities
with which it is combined, integrated or consolidated in such
taxing authority's jurisdiction) would not engage in business,
would not maintain an office or other place of business, and
would not otherwise be located therein, but for an Indemnified
Party's role in the Overall Transaction, with respect to the
Equipment, its manufacture, construction, ordering, purchase,
acceptance or rejection, ownership, delivery, leasing, re-
leasing, subleasing, possession, use, operation, maintenance,
storage, registration or re-registration, titling or re-titling,
licensing or re-licensing, documentation, removal, return, sale
(including, without limitation, sale to Lessee by an Indemnified
Party pursuant to the terms hereof) or other applications or
dispositions thereof, or the presence of Lessee in such
jurisdiction.
Each Indemnified Party shall furnish Lessee with copies of
any requests for information received by such Indemnified Party
from any taxing authority relating to any Taxes or Other
Impositions with respect to which Lessee is required to indemnify
hereunder, and if a claim is made against such Indemnified Party
for any such Taxes or Other Impositions, with respect to which
Lessee is liable for a payment or indemnity hereunder, such
Indemnified Party shall give Lessee notice in writing at least 30
days (or if such Indemnified Party receives notice of such claim
within 30 days of the date a response is required, promptly upon
such receipt) prior to the expiration of the time period for
responding to such claim. Lessee may, at its sole cost and
expense, either in its own name or in the name of such
Indemnified Party, contest the validity, applicability or amount
of any such Taxes or Other Impositions by means of a Permitted
Contest; provided, however, that Lessee shall not be entitled to
pursue such a Permitted Contest without Lessor's prior written
consent (i) beyond the first level of appellate review or (ii) if
the contested amount is greater than $250,000.00. In all cases
except those expressly described in the proviso to the
immediately preceding sentence, an Indemnified Party shall have
the absolute right in its sole discretion to terminate any
Permitted Contest. Lessee shall pay, and save such Indemnified
Party harmless against, any and all losses, judgments, decrees
and costs (including, without limitation, all reasonable
attorneys' fees and expenses) in connection with any Permitted
Contest and shall promptly after the final settlement, compromise
or determination (including, without limitation, any appeals) of
such Permitted Contest, fully pay and discharge the amounts which
shall be levied, assessed, charged or imposed or be determined to
be payable therein or in connection therewith, together with all
penalties, fines, interests, costs and expenses thereof or in
connection therewith, and perform all acts, the performance of
which shall be ordered or decreed as a result thereof. If an
Indemnified Party shall obtain a refund of any amount paid by
Lessee pursuant to this Section 18, such Indemnified Party shall
pay to Lessee the amount of such refund, together with the amount
of any interest actually received by Lessor on account of such
refund. Lessee will promptly notify the appropriate Indemnified
Party of all reports or returns required to be made with respect
to any Taxes or Other Impositions with respect to which Lessee is
required to indemnify hereunder, and will promptly provide such
Indemnified Party with all information necessary for the making
and timely filing of such reports or returns by such Indemnified
Party. If an Indemnified Party requests that any such reports or
returns be prepared and filed by Lessee, Lessee will prepare and
file the same if permitted by applicable law to file the same,
and if not so permitted, Lessee shall prepare such reports or
returns for signature by such Indemnified Party, and shall
forward the same, together with immediately available funds for
payment of any Taxes or Other Impositions due, to such
Indemnified Party, at least 10 days in advance of the date such
payment is to be made. Upon written request, Lessee shall
furnish an Indemnified Party with copies of all paid receipts or
other appropriate evidence of payment for all Taxes or Other
Impositions paid by Lessee pursuant to this Section 18. The
provisions of this Section 18 and all of the indemnities and
obligations of Lessee contained in this Section 18 shall apply to
the Equipment and each component thereof and shall apply from the
date of execution of this Agreement and shall continue in full
force and effect notwithstanding the expiration or earlier
termination of this Agreement or any other documents,
instruments, agreements or contracts entered into in relation
hereto or otherwise in relation to the Equipment or any component
of the Equipment and are expressly made for the benefit of, and
shall be enforceable by, each Indemnified Party.
SECTION 19. General Indemnity. Lessee hereby assumes
liability for, and does hereby agree, whether or not any of the
transactions contemplated hereby are consummated, to indemnify,
protect, save, defend, exonerate, pay and hold harmless each
Indemnified Party on a net after-tax basis (at the then highest
marginal federal and applicable state, local and foreign income
tax rates) from and against any and all obligations, fees,
liabilities, losses, interest, damages, punitive damages,
penalties, fines, claims, demands, actions, suits, judgments,
costs and expenses, including, without limitation, reasonable
legal fees and expenses (including, without limitation, such
legal fees and expenses incurred in connection with the
enforcement of this Agreement or any other Transaction Document),
of every kind and nature whatsoever imposed on, incurred by, or
asserted against any Indemnified Party, in any way relating to or
arising out of (a) the manufacture, construction, ordering,
purchase, acceptance or rejection, ownership, delivery, leasing,
re-leasing, subleasing, possession, use, operation, maintenance,
storage, registration or re-registration, titling or re-titling,
licensing or re-licensing, documentation, removal, return, sale
(including, without limitation, sale by an Indemnified Party to
Lessee pursuant to the terms hereof) or other applications or
dispositions thereof, including, without limitation, any of such
as may arise from (i) loss or damage to any property or death or
injury to any Person, (ii) patent or latent defects in the
Equipment (whether or not discoverable by Lessee or any
Indemnified Party), (iii) any claims based on strict liability in
tort or otherwise, (iv) any claims based on patent, trademark or
copyright infringement, and (v) any claims based on liability
arising under the applicable environmental or noise or pollution
control law or regulation, (b) any failure on the part of Lessee
to perform or comply with any of the terms of this Agreement or
any document, instrument, agreement or contract entered into in
relation hereto or otherwise in relation to the Equipment but
excluding any claim based upon any failure on the part of an
Indemnified Party to comply with its obligations under this
Agreement or any document, instrument, agreement or contract
entered into by such Indemnified Party in relation hereto or
otherwise in relation to the Equipment or (c) any claims,
encumbrances, security interests, liens or legal processes
regarding such Indemnified Party's title to or interest in the
Equipment. Lessee shall not be required to indemnify any
Indemnified Party for any claims resulting from acts which would
constitute the willful misconduct or gross negligence of such
Indemnified Party. Lessee shall give each Indemnified Party
prompt notice of any occurrence, event or condition known to
Lessee as a consequence of which any Indemnified Party is or is
reasonably likely to be entitled to indemnification hereunder.
The indemnification provided in this Section 19 shall
specifically apply to and include claims or actions brought by or
on behalf of employees of Lessee and Lessee hereby expressly
waives, as against any Indemnified Party, any immunity to which
Lessee may otherwise be entitled under any industrial or worker's
compensation laws. Lessee shall promptly upon request of any
such Indemnified Party (but in any event within 15 days of such
request) reimburse such Indemnified Party for amounts expended by
it in connection with any of the foregoing or pay such amounts
directly. Lessee shall be subrogated to an Indemnified Party's
rights in any matter with respect to which Lessee has actually
reimbursed such Indemnified Party for amounts expended by it or
has actually paid such amounts directly pursuant to this Section
19. In case any action, suit or proceeding is brought against
any Indemnified Party in connection with any claim indemnified
against hereunder, such Indemnified Party will, after receipt of
notice of the commencement of such action, suit or proceeding,
notify Lessee thereof, enclosing a copy of all papers served upon
such Indemnified Party. Lessee may, and upon such Indemnified
Party's request will, at Lessee's expense, resist and defend such
action, suit or proceeding, or cause the same to be resisted or
defended by counsel selected by Lessee and reasonably
satisfactory to such Indemnified Party and in the event of any
failure by Lessee to do so, Lessee shall pay all costs and
expenses (including, without limitation, reasonable attorney's
fees and expenses) incurred by such Indemnified Party in
connection with such action, suit or proceeding. The provisions
of this Section 19, and all of the indemnities and the
obligations of Lessee under this Section 19, shall apply to the
Equipment and each component thereof and shall apply from the
date of the execution of this Agreement and shall survive the
expiration or earlier termination of this Agreement and all
documents, instruments, agreements and contracts entered into in
relation hereto or otherwise in relation to the Equipment or any
component of the Equipment and are expressly made for the benefit
of, and shall be enforceable by, each Indemnified Party
SECTION 20. NO WARRANTIES. LESSOR LEASES THE EQUIPMENT TO
LESSEE ON AN AS-IS, WHERE-IS BASIS AND EXCEPT AS OTHERWISE
EXPRESSLY STATED IN THIS AGREEMENT LESSOR EXPRESSLY DISCLAIMS AND
MAKES NO REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED,
AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE
EQUIPMENT, THE DESIGN OR CONDITION OF EQUIPMENT, ITS
MERCHANTABILITY, DURABILITY, SUITABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF
THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT TO THE
PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER OR ORDERS
RELATING THERETO, OR ANY OTHER MATTER CONCERNING, ANY ITEM OF THE
EQUIPMENT OR THE FINANCING THEREOF (WHICH DISCLAIMER LESSEE
HEREBY ACKNOWLEDGES). LESSEE HEREBY WAIVES ANY CLAIM (INCLUDING,
WITHOUT LIMITATION, INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR
EXPENSE CAUSED BY ANY ITEM OF THE EQUIPMENT OR BY LESSEE'S LOSS
OF USE THEREOF FOR ANY REASON WHATSOEVER. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, LESSOR SHALL NOT BE LIABLE OR
RESPONSIBLE FOR ANY DEFECTS, EITHER PATENT OR LATENT (WHETHER OR
NOT DISCOVERABLE BY LESSEE), IN ANY ITEM OF THE EQUIPMENT, OR FOR
ANY DIRECT OR INDIRECT DAMAGE TO PERSONS OR PROPERTY RESULTING
THEREFROM, OR FOR LESSEE'S LOSS OF USE OF ANY ITEM OF THE
EQUIPMENT OR FOR ANY INTERRUPTION IN LESSEE'S BUSINESS CAUSED BY
LESSEE'S INABILITY TO USE ANY ITEM OF THE EQUIPMENT FOR ANY
REASON WHATSOEVER. So long and only so long as an Event of
Default shall not have occurred and be continuing, and so long
and only so long as all of the Equipment described in a
particular Lease Supplement shall be subject to this Agreement
and Lessee shall be entitled to possession of the Equipment
hereunder, Lessor authorizes Lessee, at Lessee's sole expense, to
assert for Lessor's account, all rights and powers of Lessor
under any manufacturer's, vendor's or dealer's warranty on any
item of Equipment; provided, however, that Lessee shall
indemnify, protect, save, defend and hold harmless Lessor from
and against any and all claims, and all costs, expenses, damages,
losses and liabilities incurred or suffered by Lessor in
connection therewith, as a result of, or incident to, any action
by Lessee pursuant to the foregoing authorization.
SECTION 21. Lessee's Representations, Warranties and
Covenants. Lessee hereby represents, warrants and covenants to
Lessor that:
(a) Due Organization and Existence. Lessee is a
corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation, and is
qualified to do business in each jurisdiction in which such
qualification is necessary in order for Lessee to carry on its
business and to perform its obligations hereunder, and is in good
standing under the laws of each jurisdiction in which the failure
to be in good standing would have a material adverse effect on
the condition (financial or otherwise) of Lessee;
(b) Power and Authority. Lessee has the corporate
power and authority to execute and perform this Agreement and the
other Transaction Documents to which Lessee is a party and to
lease the Equipment hereunder, and has duly authorized the
execution, delivery and performance of this Agreement and the
other Transaction Documents to which Lessee is a party;
(c) Due Authorization. The leasing of the Equipment
from Lessor by Lessee, the execution and delivery by Lessee of
this Agreement and each Transaction Document to which it is a
party, and the compliance by Lessee with the terms hereof and
thereof, and the payment and performance by Lessee of all of its
obligations hereunder and thereunder (i) have been duly and
legally authorized by appropriate corporate action taken by
Lessee, (ii) are not in contravention of, and will not result in
a violation or breach of, any of the terms of Lessee's articles
of incorporation, by-laws or of any provisions of any agreements
relating to shares of the capital stock of Lessee, and (iii) will
not violate or constitute a breach of any provisions of law
applicable to Lessee, any order, writ, injunction, decree,
determination or award of any court or other agency of government
applicable to Lessee, or any indenture, agreement or other
instrument to which Lessee is a party, or by or under which
Lessee or the Guarantor or any of Lessee's property is bound, or
be in conflict with, result in a breach of, or constitute (with
due notice or lapse of time) a default under any such indenture,
agreement or any instrument, or result in the creation or
imposition of any Lien upon any of Lessee's property or assets;
(d) Enforceability. This Agreement, each Lease
Supplement and every other Transaction Document have been (or in
the case of future Lease Supplements, will be) executed by the
duly authorized officer or officers of Lessee and delivered to
Lessor and constitute (or in the case of future Lease
Supplements, will constitute) the legal, valid and binding
obligation of Lessee, enforceable in accordance with its terms;
(e) No Consents. Except as set forth in subsection
(g) below, neither the execution and delivery of this Agreement,
or any other Transaction Document by Lessee nor the payment and
performance by Lessee of all of its obligations hereunder and
thereunder, nor the sale of the Equipment by any Seller to Lessor
for the purpose of leasing the same to Lessee under this
Agreement requires the consent or approval of, the giving of
notice to, the registration, filing or recording with or the
taking of any action that has not already been taken and
completed in respect of, any federal, state, local or foreign
government or governmental authority or agency;
(f) No Liens. No mortgage, deed of trust, or other
Lien (other than the Lien granted to Lessor hereunder) which now
covers or affects, or which may hereafter cover or affect, any
property, or interest therein of Lessee, now attaches or
hereafter will attach to any item of Equipment, or in any manner
affects or will affect adversely Lessor's rights and interests
therein;
(g) Perfection of Security Interest. Except for the
filing of Uniform Commercial Code financing statements with the
filing offices referenced in Exhibit B, no further action,
including any filing or recording of any document (including,
without limitation, any additional financing statements under
Article 9 of the Uniform Commercial Code of any applicable
jurisdiction) is necessary in order to establish and perfect
Lessor's title to and interest in, the Equipment as against
Lessee or any third parties in any applicable jurisdiction;
(h) Financial Statements. All balance sheets,
statements of profit and loss and other financial data that have
been delivered to Lessor with respect to the Lessee (and its
Subsidiaries) (i) are complete and correct in all material
respects, (ii) accurately present the financial condition of the
Lessee (and its Subsidiaries) on the dates for which, and the
results of their respective operations for the periods for which,
the same have been furnished and (iii) have been prepared in
accordance with generally accepted accounting principles
consistently followed throughout the periods covered thereby; all
balance sheets disclose all known material liabilities, direct
and contingent, as of their respective dates, and there has been
no change in the condition of Lessee (and its Subsidiaries),
financial or otherwise, since the date of the most recent
financial statements delivered to Lessor with respect to the
Lessee (and its Subsidiaries), other than changes in the ordinary
course of business, none of which changes, either separately or
in the aggregate, has been materially adverse;
(i) No Litigation. There is no litigation or any
other proceedings now pending or, to the knowledge of Lessee,
threatened, against or affecting Lessee, in any court or before
any regulatory commission, board or other administrative
governmental agency which would directly or indirectly adversely
affect or impair the title and interest of Lessor in and to the
Equipment, or which, in the reasonable opinion of Lessee's
management, is likely to affect materially and adversely, the
business, properties, operations or condition of Lessee
(financial or otherwise), other than as disclosed in Lessee's
consolidated financial statements;
(j) Income Tax Return. Lessee has filed all United
States income tax returns which are required to be filed, and has
paid, or made provisions for the payment of, all taxes which have
or may become due pursuant to said returns or pursuant to any
assessment received by Lessee, except such taxes, if any, as are
being contested by means of a Permitted Contest;
(k) ERISA. The Lessee has not entered into the
Overall Transaction, directly or indirectly, in connection with
any arrangement in any way involving any employee benefit plan or
related trust to which it is a party in interest, all within the
meaning of the ERISA and the Code;
(l) Investment Company. Lessee is not an "investment
company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as
amended;
(m) Taxes. All sales, use, documentation or similar
taxes, fees or other charges due and payable prior to or as of
the date of each Lease Supplement shall be paid prior to or as of
the date of each Lease Supplement to the extent such are in
connection with the sale to and purchase by Lessor of the
Equipment or the leasing of the Equipment by Lessor to Lessee;
(n) No Offer to Sell or Assign. Lessee has not
offered any interest in this Agreement, the Payments, or the
Equipment or any similar security for sale to, or solicited
offers to buy any thereof from, or otherwise approached or
negotiated with respect thereto with, any prospective purchaser,
other than Lessor;
(o) Invoices. In connection with each Lease
Supplement, Lessee shall deliver or cause to be delivered to
Lessor true, correct and complete copies of all purchase
agreements, offering documents and invoices for the Equipment;
(p) Adverse Contract. Lessee is not a party to, or
bound by, any contract, agreement or instrument or subject to any
corporate restriction that would conflict with this Agreement or
any other Transaction Document or a breach of which would likely
have a material adverse effect on the business, properties,
operations or condition (financial or otherwise) of Lessee;
(q) Misrepresentation. Neither this Agreement nor any
other Transaction Document contains any misrepresentation or
untrue statement of fact or omits to state any material fact
necessary to make any of such Transaction Documents not
misleading;
(r) Solvency. Lessee is Solvent and it will remain
Solvent after giving effect to its entering into this Agreement
and each other Transaction Document to which it is a party and
carrying out any of the Overall Transaction;
(s) Equipment Representations, Warranties and
Indemnities. Lessee is not a party to, or a beneficiary of, any
contract, agreement or other document providing for any
representation, warranty, covenant or indemnity relating to the
Equipment and effective subsequent to the date hereof, and Lessee
shall promptly notify Lessor in writing if Lessee hereinafter
becomes such a party or a beneficiary;
(t) Chief Executive Office. The chief executive
office of Lessee is located at 8100 Denmark Road, Charlotte,
North Carolina 28273 and has been located at such address for no
less than the four (4) months prior to the date hereof; and
(u) Trade Names. Lessee has not, and does not, use
any trade name or any other name in the conduct of its business
except for (i) its name set forth on the signature page hereof
and (ii) the names listed on Exhibit C attached hereto.
SECTION 22. Events of Default. Any of the following events
shall constitute an "Event of Default" (whether any such event
shall be voluntary or involuntary, or come about or be effected
by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) Payment. Lessee shall fail to make (i) any Basic
Payments within five (5) days after verbal or written notice to
Lessee (as Lessor may elect in its sole discretion) that the same
is due and payable or (ii) any Supplemental Payment within ten
(10) days after receipt of written notice to Lessee that the same
is due and payable; or
(b) Certain Covenants. Lessee shall fail to observe
or perform any of the covenants or agreements of Lessee set forth
in Sections 6, 8, 14(a), 14(c), 15, 17 or 29 hereof; or
(c) Other Covenants. Lessee shall fail to perform or
observe any other covenant, condition, or agreement to be
performed or observed by it under this Agreement, or in any
agreement or certificate furnished to Lessor in connection
herewith, and such failure shall continue unremedied for thirty
(30) days after written notice to Lessee specifying such failure
and demanding the same to be remedied; provided, however, that if
Lessee shall have undertaken to cure any such failure and,
notwithstanding the reasonable diligence of Lessee in attempting
to cure such failure, such failure is not cured within said
thirty (30) day period but is curable with future due diligence,
there shall exist no Event of Default under this Section 22 for
such further time, not to exceed sixty (60) days, as may
reasonably be required to effect such cure, so long as Lessee is
proceeding with due diligence to cure such failure; or
(d) Default under Other Documents - Lessee. Lessee
shall be in default under any of the Transaction Documents to
which it is a party or with respect to any of the
representations, warranties, covenants or other provisions set
forth in that certain Amended and Restated Loan Agreement dated
as of December 16, 1994 (as the same may be amended, modified,
extended, replaced or substituted from the date hereof until the
final Basic Payment Date under the respective Lease Supplements,
the "Loan Agreement") among Lessee, CHW Corporation, Wachovia
Bank of North Carolina, N.A. and NationsBank of North Carolina,
N.A. (now known as NationsBank, N.A. (Carolinas)), as agent for
such lenders; provided, however, that (i) in the event the Loan
Agreement shall be refinanced or replaced by another credit
agreement, then so long as the Bank shall be a party thereto, the
representations, warranties, covenants and other provisions
hereunder shall be amended, and deemed to be replaced by, those
representations and warranties, covenants and other provisions
contained in such replacement credit agreement and (ii) if the
Loan Agreement is replaced and the Bank is not a party to such
replacement credit agreement or the Loan Agreement is terminated
and not replaced, then the representations, warranties, covenants
and other provisions shall be as provided herein as of the date
of such replacement or termination; or
(e) Bankruptcy; Insolvency - Lessee. Lessee shall
become insolvent or bankrupt or make an assignment for the
benefit of creditors or consent to the appointment of a trustee
or receiver; or a trustee or a receiver shall be appointed for
Lessee or for a substantial part of its property without its
consent and shall not be dismissed for a period of sixty (60)
days; or any petition for the relief, reorganization or
arrangement of Lessee or any other petition in bankruptcy or for
the liquidation, insolvency or dissolution of Lessee shall be
filed by or against Lessee and, if filed against Lessee shall be
consented to or be pending and not dismissed for a period of
sixty (60) days; or an order for relief under any bankruptcy or
insolvency law shall be entered by any court or governmental
authority of competent jurisdiction with respect to Lessee; or
any execution or writ of process shall be issued under any action
or proceeding against Lessee whereby any item of Equipment may be
taken or restrained; or Lessee's corporate existence shall cease;
or Lessee shall, without Lessor's prior written consent, sell,
transfer or dispose of, or pledge or otherwise encumber, all or
substantially all of its assets or property, or, except as
expressly permitted hereby, consolidate or merge with any other
entity, or engage in any form of corporate reorganization; or
(f) Misrepresentation - Lessee. Any material
representation, warranty, statement or certification made by
Lessee under this Agreement or in any other Transaction Document
to which Lessee is a party or in any document or certificate
furnished to Lessor in connection herewith or pursuant hereto)
shall prove to be untrue or incorrect when made in any material
respect, or shall be breached in any material respect.
SECTION 23. Remedies Upon Default. Upon the occurrence of
any Event of Default, Payments hereunder may be accelerated at
Lessor's sole election without further action and at any time
thereafter so long as the same shall be continuing, Lessor may
exercise one or more of the following remedies with respect to
the Equipment or any part thereof as Lessor in its sole
discretion shall elect:
(a) Return of Equipment. Lessor may cause Lessee,
upon the demand of Lessor and at Lessee's expense, to, and Lessee
shall, promptly return the Equipment (or any item thereof) as
Lessor may demand to Lessor at such location, in the manner and
condition required by, and otherwise in accordance with all the
provisions of, Section 6 hereof as if the Equipment were being
returned at the end of the Term; or Lessor, at its option, may
enter upon the premises where the Equipment is located or
believed to be located and take immediate possession of and
remove the Equipment (or any items thereof) without the necessity
for first instituting proceedings, or by summary proceedings or
otherwise, and Lessee shall comply therewith, all without
liability to Lessor for or by reason for such entry or taking
possession, whether for the restoration of damage to property
caused by such taking or otherwise;
(b) Sell, Use, Lease or Otherwise Employ Equipment.
Lessor may, by the exercise of its rights under Section 35 hereof
or otherwise, (i) sell or otherwise dispose of the Equipment, at
public or private sale and with or without notice to Lessee or
advertisement, as Lessor may determine or (ii) hold, use,
operate, lease to others or keep idle all or any part of the
Equipment as Lessor, in its sole discretion, may determine, in
the case of (i) or (ii) of this Section 23(b) free and clear of
any rights of Lessee except as hereinafter set forth in this
Section 23 and without any duty to account to Lessee with respect
to such action or inaction or for any proceeds with respect
thereto except to the extent required by Section 23(d) hereof in
the event Lessor elects to exercise its rights under said Section
23(d) in lieu of its rights under Section 23(b) hereof;
(c) Excess of Termination Value over Fair Market Sales
Value. Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under Sections
23(a) or (b) hereof with respect to the Equipment, Lessor, by
notice to Lessee specifying a payment date not earlier than the
next Basic Payment Date, may cause Lessee to pay to Lessor, and
Lessee shall pay to Lessor, on the payment date specified in such
notice, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Basic Payments for the Equipment due
after the specified payment date), any Payments with respect to
the Equipment due on or before or accrued as of such payment date
plus an amount equal to the excess, if any, of (i) the
Termination Value for all the Equipment, determined as of such
payment date over (ii) the Fair Market Sales Value for all the
Equipment, computed as of the payment date specified pursuant to
this Section 23(c), together with interest, to the extent
permitted by applicable law, at the Overdue Rate on such Payments
and the amount of such excess, if any, from such payment date
specified pursuant to this Section 23(c), to the date of actual
payment of all such Payments and other amounts;
(d) Excess of Termination Value over Sales Proceeds.
In the event Lessor, pursuant to Section 23(b) hereof, shall have
sold the Equipment, Lessor in lieu of exercising its rights under
Section 23(c) hereof with respect to the Equipment, may, if it
shall so elect, cause Lessee to pay Lessor, and Lessee shall pay
to Lessor, on the date of such sale, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic
Payments for the Equipment due after the date on which such sale
occurs), any Payments with respect to the Equipment due on or
before or accrued as of such date of sale, plus the amount of any
deficiency of the net proceeds of such sale below the Termination
Value of all the Equipment, determined as of the date of such
sale, together with interest, to the extent permitted by
applicable law, at the Overdue Rate on all such Payments and the
amount of such deficiency from the date of such sale to the date
of actual payment of all such Payments and other amounts; or
(e) Rescission. Rescind this Agreement as to the
Equipment or exercise any other right or remedy which may be
available under applicable law or proceed by appropriate court
action to enforce the terms hereof or to recover damages for the
breach hereof.
In addition, Lessee shall be liable for any and all
Supplemental Payments due hereunder before or after any
termination hereof, including all costs and expenses (including,
without limitation, reasonable attorney's fees and disbursements)
incurred by reason of the occurrence of any Event of Default or
the exercise of Lessor's remedies with respect thereto including
all costs and expenses incurred in connection with the return of
the Equipment in accordance with the terms of Section 6 hereof or
any appraisal of the Equipment. At any sale of the Equipment,
Lessor may bid for and purchase such property. Except as
otherwise expressly provided above, no remedy referred to in this
Section 23 is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above
or otherwise available to Lessor at law or in equity; and the
exercise or beginning of exercise by Lessor of any one or more of
such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all such other remedies. No express
or implied waiver by Lessor of any Event of Default hereunder
shall in any way be or be construed to be, a waiver of any future
or subsequent Event of Default. To the extent permitted by
applicable law, Lessee hereby waives any rights now or hereafter
conferred by statute or otherwise which may require Lessor,
otherwise than in accordance with the provisions of this Section
23, to sell, lease or otherwise use the Equipment in mitigation
of Lessor's damages or otherwise to limit or modify any of
Lessor's rights or remedies under this Section 23.
SECTION 24. Lessor's Right to Perform for Lessee. If
Lessee fails to make any Supplemental Payment required to be made
by it hereunder or fails to perform or comply with any of its
agreements contained herein, Lessor may itself, make such payment
or perform or comply with such agreement, and the amount of such
payment and the amount of the expenses of Lessor incurred in
connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest
thereon at the rate specified in Section 25 hereof, shall, if not
paid by Lessee to Lessor on demand, be deemed a Supplemental
Payment hereunder; provided, however, that no such payment,
performance or compliance by Lessor shall be deemed to cure any
Event of Default hereunder.
SECTION 25. Late Charges. Lessee shall pay to Lessor, upon
demand, to the extent permitted by applicable law, interest on
any Basic Payment not paid when due, and on any Supplemental
Payment or other amount payable under this Agreement which is not
paid when due, for any period for which any of the same is
overdue (without regard to any grace period) at a rate equal to
the Overdue Rate.
SECTION 26. Further Assurances. Lessor and Lessee agree to
cooperate in good faith and to execute and deliver such documents
and further assurances consistent with and in clarification of
the characterization and intent of the parties with respect to
the Overall Transactions.
SECTION 27. Transaction Costs, Fees and Expenses. Lessee
shall pay all out-of-pocket costs, fees and expenses of Lessor
and Lessee in connection with the negotiation, preparation,
execution, delivery and enforcement of the Transaction Documents
(and all amendments, modifications and supplements thereto in
connection with each Acceptance Date after the date hereof) and
all other such costs, fees and expenses of Lessor and Lessee in
connection with the Overall Transaction including without
limitation such costs, fees and expenses (a) of Moore & Van
Allen, (b) of any appraiser of the Equipment or any item thereof
and (c) associated with any and all filings, searches and
recordations necessary or appropriate in connection with the
Transaction Documents or the Overall Transaction.
SECTION 28. Notices. All notices provided for or required
under the terms and provisions hereof shall be in writing, and
any such notice shall be deemed given when personally delivered
or when deposited with a nationally recognized overnight delivery
service, with the cost therefor prepaid, or in the United States
mails, with proper postage prepaid, for first class certified
mail, return receipt requested, addressed (a) if to Lessor or
Lessee, at their respective addresses as set forth herein or at
such other address as either of them shall, from time to time,
designate in writing to the other, and (b) if to any Assignee, to
the address of such Assignee as such Assignee shall designate,
from time to time, in writing to Lessor and Lessee.
If to Lessor: NationsBanc Leasing Corporation
of North Carolina
NationsBank Corporate Center
100 North Tryon Street, NC1-
007-12-01
Charlotte, North Carolina 28255-0001
Attention: Manager of Corporate Lease
Administration
Telephone: (704) 386-7783
Telecopy: (704) 386-0892
If to Lessee: The Cato Corporation
P.O. Box 34216
Charlotte, North Carolina 28234
Attention: Mr. V. Hollis Scott
Telephone: (704) 551-7266
Telecopy: (704) 551-7626
SECTION 29. End of Term Purchase Options.
(a) Lessee Retention/Purchase or Third Party Purchase.
If this Agreement shall not have been earlier terminated with
respect to the Equipment specified in a particular Lease
Supplement, Lessee shall elect one of the options described in
Sections 29(b or c) hereof upon written notice to Lessor
delivered not later than 120 days prior to the final day of the
Term for such Equipment; provided, that Lessee shall be deemed to
have elected the option described in Section 29(b) hereof if
Lessor does not receive such notice within the time periods
specified in the preceding clause; provided, further that (x)
Lessor shall not be bound by Lessee's election of the option
described in Section 29(c) hereof unless an officer of Lessee
certifies to Lessor that the Equipment is obsolete or surplus to
its needs and (y) Lessor shall not be bound by Lessee's election
of the option described in Section 29(c) hereof if a Default or
Event of Default is continuing at the Expiration Date; provided,
further that such election by Lessee once made shall be
irrevocable.
(b) Lessee's Retention/Purchase. On the Expiration
Date, Lessee shall retain all (but not less than all) of the
Lessee Titled Equipment and shall purchase all (but not less than
all) of the Lessor Titled Equipment referenced in the particular
Lease Supplement. Lessee shall pay Lessor an amount equal to the
aggregate Termination Value of all such Lessee Titled Equipment
and Lessor Titled Equipment. Lessee shall also pay all other
Basic Payments and Supplemental Payments then due and owing and
all Sales Expenses. Lessor's sale of the Lessor Titled Equipment
shall be on an as-is, where-is basis, without recourse to or
warranty by Lessor and otherwise in accordance with the
settlement terms of Section 29(e) hereof. If Lessee has
exercised its option under this Section 29(b), but has not prior
to or on the Expiration Date paid all amounts for which it is
obligated under this Section 29(b), then Lessor in its sole
discretion may elect to refuse to sell the Lessor Titled
Equipment to Lessee and Lessee shall immediately upon the request
of Lessor transfer good, marketable title to Lessor respecting
the Lessee Titled Equipment pursuant to a bill of sale and other
documentation reasonably satisfactory to Lessor reflecting a
transfer of title regarding the Lessee Titled Equipment
consistent with the obligations of Lessee hereunder to keep the
Equipment free and clear of Liens, or Lessor, in its sole
discretion, may exercise its rights under Section 35 hereof.
(c) Third Party Purchase. Lessee shall solicit bona
fide bids for all the Equipment referenced in a particular Lease
Supplement from bona fide prospective Third Party Purchasers. If
Lessee so elects and Lessor agrees, Lessor, acting as Lessee's
agent, shall solicit such bona fide prospective Third Party
Purchasers for all such Equipment. All bids received by Lessee
or Lessor prior to the end of the Term shall be immediately
certified to the other in writing, setting forth the amount of
such bid and the name and address of the Person submitting such
bid. If any bid is received from a bona fide prospective Third
Party Purchaser for an amount in excess of the Maximum Lessor
Risk Amount for all such Equipment, or if Lessor agrees in its
reasonable discretion to accept a bid for less than the Maximum
Lessor Risk Amount for all such Equipment, then on the Expiration
Date (i) Lessor shall sell the Lessor Titled Equipment on an
as-is, where-is basis, without recourse or warranty (and Lessee
shall transfer the Lessee Titled Equipment pursuant to a bill of
sale and other documentation reasonably satisfactory to Lessor
reflecting a transfer of title regarding the Lessee Titled
Equipment consistent with the obligations of Lessee hereunder to
keep the Equipment free and clear of Liens), to the highest
bidder, (ii) such bidder shall pay Lessor the bid amount for the
all such Equipment solely for the account of Lessor and (iii)
Lessee shall pay, or cause to be paid, all Basic Payments and
Supplemental Payments then due and owing and all Sales Expenses.
If Lessor (X) does not receive any bid in excess of the Maximum
Lessor Risk Amount for all such Equipment from a bona fide
prospective Third Party Purchaser and does not accept any bids
received for less than the Maximum Lessor Risk Amount for all
such Equipment, or (Y) does not receive the bid amount from the
Third Party Purchaser on or prior to the Expiration Date, then on
the Expiration Date, Lessee shall pay Lessor the Maximum Lessee
Risk Amount for all such Equipment (and all amounts referenced in
Section 29(c)(iii)), Lessee shall cause new verification of title
to be issued in Lessor's name with respect to all such Equipment,
and Lessee shall return such Equipment to Lessor in accordance
with Section 6 hereof.
(d) End of Term Adjustment. If the Net Proceeds of
Sale are more than the Termination Value of all Equipment for the
Expiration Date, Lessor shall, on the Expiration Date, pay Lessee
an amount equal to such excess as an adjustment to the Payments
payable under this Agreement, provided that Lessor shall have the
right to offset against such adjustment payable by Lessor, any
amounts then due and payable from Lessee to Lessor. If the Net
Proceeds of Sale are less than the Termination Value for the
Expiration Date or if no sale occurs, Lessee shall, on the
Expiration Date pay to Lessor, an amount equal to such deficiency
as an adjustment to the Payments payable under this Agreement,
but in no event shall the amount Lessee is required to pay Lessor
with respect to such deficiency exceed the Maximum Lessee Risk
Amount for all the Equipment which has such Expiration Date.
(e) Settlement Terms. In the event that Lessee
retains or purchases any Equipment from Lessor pursuant to
Section 16(b)(i)(B) or Section 29(b) hereof, Lessor and Lessee
hereby agree that the following provisions shall apply:
(i) Representations and Warranties of Lessee.
Lessee shall represent, warrant, covenant and agree with
Lessor as of the date of any retention by Lessee of any
Lessee Titled Equipment or any sale of Lessor Titled
Equipment by Lessor to Lessee, except where specific
reference is made to another date or dates, that:
(A) Lessee has the full right, power and
authority to purchase such Lessor Titled Equipment from
Lessor as provided in this Agreement, to retain the
Lessee Titled Equipment and to carry out Lessee's
obligations under this Agreement (as such pertain to
the retention or sale of such Equipment), and all
requisite action necessary to authorize Lessee to enter
into the purchase of such Equipment or the retention of
such Equipment and to carry out Lessee's obligations
with respect thereto has been, or on or before the date
of any sale of such Equipment to Lessee or any
retention of such Equipment by Lessee, will have been,
taken;
(B) Lessee acknowledges that:
(1) Lessee is purchasing such
Lessor Titled Equipment, and such Equipment shall
be conveyed and transferred to the Lessee, "AS-IS,
WHERE-IS, AND WITH ALL FAULTS AND SPECIFICALLY AND
EXPRESSLY WITHOUT ANY RECOURSE OR WARRANTIES,
REPRESENTATIONS, COVENANTS OR GUARANTEES,
EXPRESSED OR IMPLIED, OF ANY KIND, NATURE, OR TYPE
WHATSOEVER FROM OR ON BEHALF OF LESSOR", provided,
that Lessor shall represent that it has not
voluntarily incurred any Liens on such Lessor
Titled Equipment other than Liens provided for in
the Transaction Documents. Lessee acknowledges
that it has not relied, and is not relying, on any
information, document, sales brochures, or other
literature, sketches, projection, pro forma,
statement, representation, guarantee, or warranty
(whether express or implied, or oral or written,
or material or immaterial) that may have been
given by, or made by, or on behalf of, Lessor;
(2) Lessee shall not be entitled
to, and should not rely on, Lessor or Lessor's
agents as to (a) the quality, nature, adequacy, or
physical condition of any Equipment; (b) the
quality of any labor or materials relating in any
way to such Equipment; or (c) the condition of
title to such Equipment;
(3) EXCEPT AS EXPRESSLY SET FORTH
IN THE PROVISO IN SUBPARAGRAPH (1) ABOVE (WITH
RESPECT TO VOLUNTARILY INCURRED LIENS), LESSOR HAS
NOT, DOES NOT, AND WILL NOT, WITH RESPECT TO ANY
EQUIPMENT, MAKE ANY WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF
LAW, INCLUDING BUT NOT IN ANY WAY LIMITED TO, ANY
WARRANTY OF CONDITION, MERCHANTABILITY,
HABITABILITY, OR FITNESS FOR A PARTICULAR USE, OR
WITH RESPECT TO THE VALUE, PROFITABILITY, OR
MARKETABILITY OF SUCH EQUIPMENT; and
(4) Without in any way limiting
the generality of the preceding subparagraphs (1)
through (3), Lessee specifically acknowledges and
agrees that Lessee hereby waives, releases, and
discharges any claim Lessee has, might have had,
or may have against Lessor with respect to the
condition of such Equipment, patent or latent, the
actual or potential income or profits to be
derived from such Equipment, and any other state
of facts which exists with respect to such
Equipment.
(ii) Survival Beyond Closing. The representations
and warranties of Lessee contained in this Agreement as set
forth in Section 29(e)(i) shall survive the closing of the
sale of any Equipment to the Lessee.
(iii) Seller. At the sale of any Lessor Titled
Equipment to Lessee, Lessor shall deliver or cause to be
delivered to Lessee, at Lessee's sole cost and expense
(except as provided to the contrary), a bill of sale of such
Lessor Titled Equipment, duly executed by Lessor.
SECTION 30. Federal and State Tax Consequences. It is
expressly agreed that for federal and state income tax purposes
the parties entered into the transaction contemplated by this
Agreement intending such transaction to be characterized as a
mere financing and for Lessee to be considered the owner of the
Equipment for such tax purposes; provided, however, Lessor makes
no representation or warranty as to the availability of such tax
treatment. Consistent with this, Lessee intends to claim the
cost recovery deductions associated with the Equipment, and
Lessor agrees not to take an inconsistent position on its federal
or state income tax returns.
SECTION 31. Financial Information. Lessee agrees to
furnish Lessor (a) as soon as available, and in any event within
ninety (90) days after the last day of each fiscal year of the
Lessee, (i) a copy of the consolidated balance sheet of the
Lessee and its Consolidated Subsidiaries as of the end of such
fiscal year, and related consolidated statements of income and
retained earnings of the Lessee and its Consolidated Subsidiaries
for such fiscal year, certified by an independent certified
public accounting firm of recognized standing, each on a
comparative basis with corresponding statements for the prior
fiscal year, or (ii) a copy of the Lessee's Form 10-K filed with
the Securities and Exchange Commission for such fiscal year (if
the Lessee is subject to the reporting requirements under the
rules and regulations promulgated by the Securities and Exchange
Commission), and (b) within forty-five (45) days after the last
day of each fiscal quarter of the Lessee (except the last such
fiscal quarter), (i) a copy of the consolidated balance sheet as
of the end of such quarter, and statement of income covering the
fiscal year to date of the Lessee and its Consolidated
Subsidiaries, each on a comparative basis with the corresponding
period of the prior year, all in reasonable detail and certified
by the treasurer or principal financial officer of the Lessee, or
(ii) a copy of the Lessee's Form 10-Q filed with the Securities
and Exchange Commission, all such other financial statements and
reports as the Lessee shall send to the Securities and Exchange
Commission.
SECTION 32. Miscellaneous. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating or
diminishing Lessor's rights under the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. No term or provision of
this Agreement may be amended, altered, waived, discharged or
terminated orally, but only by an instrument in writing signed by
a duly authorized officer or the party against which the
enforcement of the amendment, alteration, waiver, discharge or
termination is sought. A waiver on any one occasion shall not be
construed as a waiver on a future occasion. All of the
covenants, conditions and obligations contained in this Agreement
shall be binding upon and shall inure to the benefit of the
respective successors and assigns of Lessor and (subject to the
restrictions of Section 14(a) hereof) Lessee. This Agreement may
be executed in as many counterparts as shall be determined by the
parties hereto when so executed, each such counterpart shall be
binding on both parties hereto, notwithstanding that both parties
are not signatories to the same counterpart. This Agreement,
each Lease Supplement and each related instrument, document,
agreement and certificate collectively constitute the entire
agreement of Lessor and Lessee with respect to the financing of
the Equipment, and cancel and supersede any and all prior oral or
written understandings with respect thereto. THIS AGREEMENT AND
EACH OTHER TRANSACTION DOCUMENT SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NORTH CAROLINA, INCLUDING, WITHOUT LIMITATION, ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. LESSEE AND LESSOR HEREBY
IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION, AND THE
VENUE, OF A NORTH CAROLINA STATE OR FEDERAL COURT LOCATED IN
MECKLENBURG COUNTY, NORTH CAROLINA FOR ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT. LESSEE AND LESSOR HEREBY IRREVOCABLY AGREE
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD OR DETERMINED IN SUCH NORTH CAROLINA COURT, OR TO THE
EXTENT PERMITTED BY LAW, SUCH FEDERAL COURT. LESSEE AND LESSOR
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY ACTION OR PROCEEDING.
SECTION 33. Interest Rate Calculations. All rate
calculations made pursuant to this Agreement (including, without
limitation, any calculation of a late charge, the Overdue Rate)
shall be computed on the basis of the actual number of days
elapsed over a year of 360 days.
SECTION 34. Personal Property Taxes. Lessor and Lessee
hereby agree that to the extent permitted by law (a) Lessee will
file all returns and other appropriate documentation in regard to
personal property taxes on the Equipment, (b) pay all such
personal property taxes and (c) reimburse Lessor for any and all
such personal property taxes previously paid by Lessor.
SECTION 35. Power of Attorney. The Lessee hereby
constitutes and appoints the Lessor its true and lawful attorney-
in-fact for the limited purpose of executing all documentation
deemed necessary or advisable by Lessor or its counsel in the
exercise of the Lessor's remedies under this Agreement to
transfer title of all Lessee Titled Equipment to Lessor or with
respect to Lessor's right to retain the Equipment pursuant to
Section 29(c) hereof.
[The remainder of this page has been intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives
as of the date first above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By:________________________________
Name: George L. Robinson, Jr.
Title: Vice President
THE CATO CORPORATION
By:________________________________
Name: _________________________
Title:__________________________
COUNTERPART NO. _____ OF 4 SERIALLY NUMBERED MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT THAT THIS DOCUMENT CONSTITUTES
CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY
INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE TRANSFER AND
POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
EXHIBIT A
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE NO. __
This Lease Supplement and Acceptance Certificate is dated
_______________ and is executed by NATIONSBANC LEASING
CORPORATION OF NORTH CAROLINA, a North Carolina corporation
("Lessor") and THE CATO CORPORATION, a Delaware corporation
("Lessee"), pursuant to Section 4 of the Master Equipment Lease
Agreement, dated as of ________, 199__ between Lessee and Lessor
(the "Agreement"). All capitalized terms used herein but not
defined herein shall have the meanings given to such terms in the
Agreement.
Lessee hereby acknowledges and agrees that the equipment
specified on Annex A hereto (the "Equipment") has been delivered
to Lessee on or prior to the date hereof at the delivery place
described below, and that, as between Lessor and Lessee, the
Equipment (a) has been inspected to the complete satisfaction of
Lessee, (b) is in good operating order, repair and condition, (c)
is of a size, design, capacity and manufacture selected by
Lessee, (d) is suitable for Lessee's purposes, (e) has been
unconditionally accepted by Lessee on the date hereof, for all
purposes of the Agreement, and (f) is subject to all of the
terms, conditions and provisions of the Agreement. Lessee
further acknowledges, agrees and certifies that Lessor has made
no representation, warranty, covenant or guarantee of any type or
kind, expressed or implied, with respect to the Equipment and
that the insurance policies, certificates or other documents
evidencing the coverages required under the Agreement have been
delivered to Lessor.
Lessee hereby leases from Lessor the Equipment upon and
subject to all of the terms, conditions and provisions of the
Agreement, and Lessor and Lessee further agree and state as
follows:
1. Delivery Place and Location for the Equipment:
_______________________.
2. As of the date hereof, the Acquisition Cost is $__________.
3. The Acquisition Expiration Date for the Equipment set forth
on Annex A hereto is ________________, 1995.
4. The Basic Term for the Equipment commences on
_______________, and ends on _____________, both dates inclusive,
unless sooner terminated in accordance with the provisions of the
Agreement.
5. The Basic Payment Factor is _____%.
6. The Basic Payment Dates are ______________, ____________,
_____________ and _____________ during the Term. Each Basic
Payment shall be payable on the last day of each Basic Payment
Period to which such Basic Period corresponds.
7. The Basic Payment for the Equipment for each quarterly
period is in an amount equal to the Basic Payment Factor
multiplied by the aggregate Acquisition Cost for the Equipment
described in Annex A hereto.
8. The Termination Value Percentages for the Equipment during
the Term are set forth on Annex B hereto.
9. This Lease Supplement and Acceptance Certificate may be
executed in as many counterparts as shall be determined by the
parties hereto when so executed, and each such counterpart shall
be binding on both parties hereto, notwithstanding that both
parties are not signatories to the same counterpart.
10. The liability insurance coverage referenced in Section
17(a)(ii) of the Agreement and applicable exclusively to the
Equipment identified in this Lease Supplement shall be maintained
in any event with a combined single limit of not less than
$____________.
IN WITNESS WHEREOF, the parties hereto have caused this
Lease Supplement and Acceptance Certificate No. __ to be executed
by their duly authorized representatives as of the date first
above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By:_______________________________
Name: ________________________
Title: ________________________
THE CATO CORPORATION
By:_______________________________
Name: ________________________
Title: ________________________
COUNTERPART NO. _____ OF _____ SERIALLY NUMBERED MANUALLY
EXECUTED COUNTERPARTS. TO THE EXTENT THAT THIS DOCUMENT
CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO
SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE
TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART
NO. 1.
Annex A to
Lease Supplement
(Equipment Description and Location)
Any and all right, title and interest of Debtor in and to the
equipment, fixtures and other personal property (collectively,
the "Equipment") located at the sites referenced below in this
Annex A, together with all accessories, equipment, parts and
appurtenances pertaining or attached thereto, whether now owned
or hereafter acquired, and all substitutions and renewals of any
type or kind and additions, improvements, accessions and
accumulations to any and all of the foregoing.
The sites referenced in the prior paragraph shall include the
following:
___________________________________________
___________________________________________
___________________________________________
Annex B to
Lease Supplement
(Termination Value)
Termination Value
Termination Date Percentage
*
*Expressed as a percentage of aggregate Acquisition Cost for the
Equipment described in Annex A.
Annex C to
Lease Supplement
(Maximum Risk Amounts)
Maximum Lessor Maximum Lessee
Risk Amount Risk Amount
Risk Amount Date Percentage *
Percentage *
*Expressed as a percentage of aggregate Acquisition Cost for the
Equipment described in Annex A.
Annex D to
Lease Supplement
(Equipment Locations)
EXHIBIT B
UCC FILING OFFICES
[REFERENCED IN SECTION 21(G)]
EXHIBIT C
TRADE NAMES
[REFERENCED IN SECTION 21(U)]2