Document:

exv10w1

 

AMENDMENT NO. 1 TO CREDIT AGREEMENT

     This AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “Amendment”), dated as of June 11,
2007, is entered into by and among (1) AMERICAN COMMERCIAL LINES LLC, a Delaware limited liability
company, JEFFBOAT LLC, a Delaware limited liability company, and ACL TRANSPORTATION SERVICES LLC, a
Delaware limited liability company (formerly known as Louisiana Dock Company LLC) (each a
“Borrower” and collectively, the “Borrowers”); (2) the Required Lenders (as defined
in the Credit Agreement referred to below); and (3) WELLS FARGO BANK, NATIONAL ASSOCIATION as
Administrative Agent, Security Trustee, L/C Issuer and Swing Line Lender, with respect to the
following:

     A. The Borrowers, the Administrative Agent and the Lenders have previously entered into that
certain Credit Agreement dated as of April 27, 2007 (the “Existing Credit Agreement” and as
the same may be amended, restated, supplemented or otherwise modified and in effect from time to
time, including, but not limited to, by this Amendment, the “Credit Agreement”).
Capitalized terms are used in this Amendment as defined in the Credit Agreement, unless otherwise
defined herein.

     B. In connection with a proposed stock purchase program for the purchase of the stock of
American Commercial Lines Inc., a Delaware corporation, as described below, the Borrowers have
requested certain amendments to the Existing Credit Agreement as set forth below.

     C. The Administrative Agent and the Required Lenders are willing to grant such requests on the
terms and subject to the conditions set forth in this Amendment.

          NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

          1. Effectiveness. The effectiveness of the provisions of Section 2 of this Amendment
is subject to the satisfaction of the conditions further described in Section 3 of this Amendment.

          2. Amendments.

               (a) New Definition. On the terms and subject to the conditions of this Amendment,
Section 1.01 of the Existing Credit Agreement is hereby amended by adding a new definition for
“Permitted Stock Purchase Program” in its appropriate alphabetical position as follows:

     “Permitted Stock Purchase Program” shall mean the first stock purchase program
adopted by Parent in calendar year 2007 with the authorization of the board of directors of
Parent for the purchase of up to $200,000,000 of the stock of Parent pursuant to which such
purchased stock will be retained as treasury stock until such time as such stock is caused
to be outstanding stock after such purchase.

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               (b) Fixed Charge Coverage Ratio. On the terms and subject to the conditions of this
Amendment, the definition of Fixed Charge Coverage Ratio in Section 1.01 of the Existing Credit
Agreement is hereby amended and restated in its entirety as follows:

     “Fixed Charge Coverage Ratio” shall mean, for any four consecutive fiscal
quarter period, (a) the aggregate of Adjusted EBITDA for such period plus operating
lease expenses of the Borrowers and their Subsidiaries paid during such period minus
the sum of (x) the aggregate amount of all Maintenance Capital Expenditures made during such
period, (y) cash taxes required to be paid by a Loan Party during such period, and (z) the
aggregate amount of all Distributions made during such period (excluding Distributions to
Parent made during such period (up to $200,000,000 in the aggregate for all periods) which
are used for the purchase of the stock of Parent pursuant to the Permitted Stock Purchase
Program to the extent permitted by this Agreement), divided by (b) Fixed Charges for
such period.

               (c) Conditions Precedent to each Credit Event. On the terms and subject to the
conditions of this Amendment, Section 3.02(a) of the Existing Credit Agreement is hereby amended
and restated in its entirety as follows:

     “(a) The Borrowers shall have delivered to the Administrative Agent and, if applicable,
the L/C Issuer or the Swing Line Lender, (i) the Notice of Borrowing, Letter of Credit
Application, Notice of Conversion or Notice of Interest Period Selection, as the case may
be, for such Credit Event in accordance with this Agreement and (ii) for any Credit Event
related to a Distribution to Parent which will be used for the purchase of the stock of
Parent or otherwise related to the Permitted Stock Purchase Program, (A) separate written
notice that such Credit Event is related to a Distribution to Parent which will be used for
the purchase of the stock of Parent or otherwise related to the Permitted Stock Purchase
Program, (B) upon request, to the extent deemed prudent by the Administrative Agent, legal
opinions in form and substance and from counsel satisfactory to the Administrative Agent
with respect to the legality of the Permitted Stock Purchase Program and transactions
contemplated thereby, compliance with Regulations T, U and X and related matters, (C) upon
request, to the extent deemed prudent by the Administrative Agent, a certificate from the
chief financial officer or treasurer of the Borrowers and Parent providing calculations
demonstrating compliance with the requirements of the corporation law of Delaware in
connection with the proposed purchase of the stock of Parent under the Permitted Stock
Purchase Program and (D) upon request and to the extent required by applicable law or
otherwise deemed prudent by the Administrative Agent, a fully executed and completed Form
U-1 (or Form G-3, as applicable) for each Lender (and, if applicable, for each Participant);
and”

               (d) Margin Stock; Other Regulations. On the terms and subject to the conditions of
this Amendment, Section 4.01(l) of the Existing Credit Agreement is hereby amended and restated in
its entirety as follows:

     “(l) Margin Stock; Other Regulations. No Loan Party owns any Margin Stock
which, in the aggregate, would constitute a substantial part of the assets of the Borrowers
or the Loan Parties (taken as a whole), and no proceeds of any Loan or any Letter of

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Credit will be used, whether directly or indirectly, to purchase, acquire or carry any
Margin Stock or to extend credit, directly or indirectly, to any Person for the purpose of
purchasing or carrying any Margin Stock; provided that, so long as the conditions
precedent in Section 3.02 are satisfied (including Section 3.02(a)) and the
representations and warranties in Section 4.01(y) are true and correct in all
material respects and such purchase does not and will not result in a violation of any of
the regulations of the Federal Reserve Board, including Regulations T, U and X, the proceeds
of Loans up to $200,000,000 in the aggregate may be used to make Distributions to Parent
which will be used to the purchase stock of Parent pursuant to the Permitted Stock Purchase
Program. No Loan Party is subject to regulation under the Investment Company Act of 1940,
the Federal Power Act, the Interstate Commerce Act, any state public utilities code or to
any other Governmental Rule limiting its ability to incur indebtedness.

               (e) Permitted Stock Purchase Program. On the terms and subject to the conditions of
this Amendment, Article IV of the Existing Credit Agreement is hereby amended by adding a new
Section 4.01(y) as follows:

     “(y) Permitted Stock Purchase Program. The adoption of the Permitted Stock
Purchase Program and any and all transactions entered into or consummated by a Loan Party in
connection with the Permitted Stock Purchase Program (including the purchase of the stock of
Parent) will be and have been consummated in accordance with applicable law (including,
without limitation, the corporation law of Delaware).”

               (f) Use of Proceeds. On the terms and subject to the conditions of this Amendment,
Section 5.01(f) of the Existing Credit Agreement is hereby amended and restated in its entirety as
follows:

     “(f) Use of Proceeds. The Borrowers shall use the proceeds of the Revolving
Loans (i) to refinance certain existing indebtedness of the Borrowers; (ii) to pay fees and
expenses incurred in connection with the transactions contemplated by this Agreement, (iii)
to finance Permitted Acquisitions, and (iv) (together with Letters of Credit issued
hereunder) to provide for the working capital and general corporate purpose needs of the
Loan Parties. No part of the proceeds of any Loan or any Letter of Credit shall be used,
whether directly or indirectly, (i) to purchase, acquire or carry any Margin Stock
(provided that, so long as the conditions precedent in Section 3.02 are
satisfied (including Section 3.02(a)) and the representations and warranties in
Section 4.01(y) are true and correct in all material respects and such purchase does
not and will not result in a violation of any of the regulations of the Federal Reserve
Board, including Regulations T, U and X, the proceeds of Loans up to $200,000,000 in the
aggregate may be used to make Distributions to Parent which will be used for the purchase
stock of Parent pursuant to the Permitted Stock Purchase Program) or (ii) for any purpose
that entails a violation of any of the regulations of the Federal Reserve Board, including
Regulations T, U and X.”

               (g) Distributions. The Borrowers understand and agree that any Distributions made in
connection with the Permitted Stock Purchase Program must comply with Section 5.02(f)(iv) of the
Credit Agreement.

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               (h) Minimum Net Worth. On the terms and subject to the conditions of this Amendment,
Section 5.03(c) of the Existing Credit Agreement is hereby amended and restated in its entirety as
follows:

     “(c) Minimum Net Worth. The Borrowers shall not permit Net Worth as of the
last day of any fiscal quarter (such date to be referred to herein as a “Determination
Date”) which occurs after the Closing Date to be less than the sum on such Determination
Date of the following:

               (1) $304,854,704.35; plus

               (2) Fifty percent (50%) of the cumulative sum of the Loan Parties’ annual consolidated Net
Income for each fiscal quarter of the Borrower ending after December 31, 2006 through and including
the fiscal year ending immediately prior to the Determination Date (excluding any quarter in which
net income is negative); plus

               (3) One-hundred percent (100%) of the Net Proceeds from the issuance of Equity Securities by
Parent or any other Loan Party the proceeds of which are received from a Person that is not a Loan
Party from and after December 31, 2006; minus

               (4) an amount equal to (i) the aggregate decrease in Net Worth directly resulting from the
purchase of the stock of Parent pursuant to the Permitted Stock Purchase Program times (ii)
0.85.”

               (i) Additional Forms. On the terms and subject to the conditions of this Amendment,
Article VIII of the Existing Credit Agreement is hereby amended by adding a new Section 8.05(j) as
follows:

     “(j) Additional Forms. If required by applicable law or otherwise deemed
prudent by the Administrative Agent, each Borrower and each Lender shall prepare, execute
and deliver a completed Form U-1 (or Form G-3, as applicable) for each Lender (and, if
applicable, for each Participant, in which case the applicable Lender shall cause its
Participant to satisfy the requirements of this Section).”

               (j) Compliance Certificate. On the terms and subject to the conditions of this
Amendment, Exhibit J (Compliance Certificate) to the Existing Credit Agreement is hereby amended
and restated in its entirety as set forth on Exhibit J attached hereto.

          3. Conditions Precedent to the Effectiveness of this Amendment. The effectiveness of
the provisions of Section 2 of this Amendment is conditioned upon, and such provisions shall not be
effective until, satisfaction of the following conditions (the first date on which all of the
following conditions have been satisfied being referred to herein as the “Amendment Effective
Date”):

               (a) The Administrative Agent shall have received, on behalf of the Lenders, this Amendment,
duly executed and delivered by the Borrowers, the Administrative Agent, the Required Lenders and
the Guarantors.

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               (b) The Administrative Agent shall have received, on behalf of the Lenders, a certificate of
an authorized officer of each of the Borrowers and the Guarantors, dated as of the date of this
Amendment, certifying that attached thereto are true and correct copies of resolutions duly adopted
by the board of directors or other governing body of the Borrowers and the Guarantors and
continuing in effect, which authorize the execution, delivery and performance by the Borrowers and
the Guarantors of this Amendment and the consummation of the transactions contemplated hereby.

               (c) The representations and warranties set forth in this Amendment shall be true and correct
as of the Amendment Effective Date.

          4. Representations and Warranties. In order to induce the Administrative Agent and
the Lenders to enter into this Amendment and to amend the Existing Credit Agreement in the manner
provided in this Amendment, the Borrowers represent and warrant to the Administrative Agent and
each Lender as follows:

               (a) Authorization of Agreements. The execution and delivery of this Amendment by the
Borrowers and the Guarantors and the performance by the Borrowers of the Existing Credit Agreement
as amended by this Amendment (hereafter referred to as the “Amended Credit Agreement”) (i)
are within the power of the Borrowers and the Guarantors and (ii) have been duly authorized by all
necessary actions on the part of the Borrowers and the Guarantors.

               (b) Enforceability. Each of this Amendment and the Amended Credit Agreement has been
duly executed and delivered by the Borrowers and the Amendment has been duly executed and delivered
by the Guarantors and, in each case, constitutes a legal, valid and binding obligation of the
Borrowers and the Guarantors (as applicable), enforceable against the Borrowers and the Guarantors
(as applicable) in accordance with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the enforcement of creditors’ rights generally
and general principles of equity.

               (c) Non-Contravention. The execution and delivery by the Borrowers and the Guarantors
of this Amendment and the performance by the Borrowers of each of this Amendment and the Amended
Credit Agreement do not (i) violate any Requirement of Law applicable to any Loan Party; (ii)
violate any provision of, or result in the breach or the acceleration of, or entitle any other
Person to accelerate (whether after the giving of notice or lapse of time or both), any Contractual
Obligation of any Loan Party where such violation, breach or acceleration could result in a
Material Adverse Effect; (iii) result in the creation or imposition of any Lien (or the obligation
to create or impose any Lien) upon any property, asset or revenue of any Loan Party (except for
Permitted Liens) or (iv) violate any provision of any existing law, rule, regulation, order, writ,
injunction or decree of any court or Governmental Authority to which it is subject, where such
breach could result in a Material Adverse Effect.

               (d) Governmental Consents. No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or regulatory body is required for the due
execution, delivery and performance by the Borrowers or the Guarantors of this Amendment.

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               (e) Representations and Warranties in the Credit Agreement. The Borrowers confirm
that as of the Amendment Effective Date and after giving effect to this Amendment, (i) the
representations and warranties contained in Article IV of the Credit Agreement are true and correct
in all material respects (except to the extent any such representation and warranty is expressly
stated to have been made as of a specific date, in which case it shall be true and correct as of
such specific date) and (ii) no Default has occurred and is continuing.

          5. Miscellaneous.

               (a) Reference to and Effect on the Existing Credit Agreement and the other Credit
Documents.

                    (i) Except as specifically amended by this Amendment and the documents executed and delivered
in connection herewith, the Existing Credit Agreement and the other Credit Documents shall remain
in full force and effect and are hereby ratified and confirmed by the Borrowers in all respects.

                    (ii) The execution and delivery of this Amendment and performance of the Amended Credit
Agreement shall not, except as expressly provided herein, constitute a waiver of any provision of,
or operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders
under, the Existing Credit Agreement or any of the other Credit Documents.

                    (iii) Upon the conditions precedent set forth herein being satisfied, this Amendment shall be
construed as one with the Existing Credit Agreement, and the Existing Credit Agreement shall, where
the context requires, be read and construed throughout so as to incorporate this Amendment.

                    (iv) If there is any conflict between the terms and provisions of this Amendment and the terms
and provisions of the Credit Agreement or any other Credit Document, the terms and provisions of
this Amendment shall govern.

               (b) Expenses. The Borrowers acknowledge that all costs and expenses of the
Administrative Agent incurred in connection with this Amendment will be paid by the Borrowers in
accordance with Section 8.02 of the Existing Credit Agreement.

               (c) Headings. Section and subsection headings in this Amendment are included for
convenience of reference only and shall not constitute a part of this Amendment for any other
purpose or be given any substantive effect.

               (d) Counterparts. This Amendment may be executed in any number of identical
counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a
complete, executed original for all purposes. Transmission by telecopier (or by email of a PDF or
similar electronic image file) of an executed counterpart of this Amendment shall be deemed to
constitute due and sufficient delivery of such counterpart.

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               (e) Governing Law. This Amendment shall be governed by and construed in accordance
with the laws of the State of New York without reference to conflicts of law rules other than
Section 5-1401 of the General Obligations Law of the State of New York.

          6. Credit Documents. This Amendment is a Credit Document as defined in the Credit
Agreement, and the provisions of the Credit Agreement generally applicable to Credit Documents are
applicable hereto and incorporated herein by this reference.

[This Space Intentionally Left Blank]

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of
the date first above written.

	 	 	 	 	 
	 	AMERICAN COMMERCIAL LINES LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Christopher A. Black
 	 
	 	 	Name:  	Christopher A. Black 	 
	 	 	Title:  	Senior Vice President/Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	JEFFBOAT LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Christopher A. Black
 	 
	 	 	Name:  	Christopher A. Black 	 
	 	 	Title:  	Senior Vice President/Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	ACL TRANSPORTATION SERVICES LLC,

a Delaware limited liability company (formerly known

as Louisiana Dock Company LLC)

 	 
	 	By:  	/s/ Christopher A. Black
 	 
	 	 	Name:  	Christopher A. Black 	 
	 	 	Title:  	Senior Vice President/Chief Financial Officer 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent, Security Trustee, 

L/C Issuer, Swing Line Lender and a Lender

 	 
	 	By:  	/s/ James M. Stehlik
 	 
	 	 	Name:  	James M. Stehlik 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	BANK OF AMERICA, N.A. 

 	 
	 	By:  	/s/ Adam Goettsche
 	 
	 	 	Name:  	Adam Goettsche 	 
	 	 	Title:  	Senior Vice President 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	BRANCH BANKING AND TRUST COMPANY 

 	 
	 	By:  	/s/
Johnny L. Perry
 	 
	 	 	Name:  	Johnny L. Perry 	 
	 	 	Title:  	Senior Vice President 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	FIFTH THIRD BANK

 	 
	 	By:  	/s/ David O'Neal
 	 
	 	 	Name:  	David O'Neal 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A. 

 	 
	 	By:  	/s/
Stephen J. Wood
 	 
	 	 	Name:  	Stephen J. Wood 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	LASALLE BANK NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Andrew J. Crask
 	 
	 	 	Name:  	Andrew J. Crask 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	NATIONAL CITY BANK 

 	 
	 	By:  	/s/ Jeffrey T. Wiltrout
 	 
	 	 	Name:  	Jeffrey T. Wiltrout 	 
	 	 	Title:  	Corporate Banking Officer 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	PNC BANK, NATIONAL ASSOCIATION 

 	 
	 	By:  	/s/ Chester A. Misbach, Jr.
 	 
	 	 	Name:  	Chester A. Misbach, Jr. 	 
	 	 	Title:  	Senior Vice President 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	SUNTRUST BANK

 	 
	 	By:  	/s/ Kap Yarbrough
 	 
	 	 	Name:  	Kap Yarbrough 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

	 	 	 	 	 
	 	WACHOVIA BANK, N.A. 

 	 
	 	By:  	/s/
Bradford Vieira
 	 
	 	 	Name:  	Bradford Vieira 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

Each of the undersigned hereby acknowledges and consents to the foregoing Amendment and confirms
and agrees that the Guaranty executed by it in connection with the Credit Agreement remains in full
force and effect in accordance with its terms and is hereby reaffirmed and ratified by each of the
undersigned, and each of the undersigned hereby confirms that the representations and warranties
contained in each such Guaranty (including any incorporated by reference to the Credit Agreement)
are (before and after giving effect to this Amendment) true and correct in all material respects.

	 	 	 	 	 
	 	AMERICAN COMMERCIAL LINES INC.,

a Delaware corporation

 	 
	 	By:  	/s/ Christopher A. Black
 	 
	 	 	Name:  	Christopher A. Black 	 
	 	 	Title:  	Senior Vice President/Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	COMMERCIAL BARGE LINE COMPANY,

a Delaware corporation

 	 
	 	By:  	/s/ Christopher A. Black
 	 
	 	 	Name:  	Christopher A. Black 	 
	 	 	Title:  	Senior Vice President/Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	AMERICAN COMMERCIAL BARGE LINE LLC,

a Delaware corporation

 	 
	 	By:  	/s/ Christopher A. Black
 	 
	 	 	Name:  	Christopher A. Black 	 
	 	 	Title:  	Senior Vice President/Chief Financial Officer 	 
	 

[Signature Page to Amendment No. 1 to Credit Agreement — ACL]

 

 

EXHIBIT J

UPDATED COMPLIANCE CERTIFICATE

(See Attached)

 

 

EXHIBIT J

COMPLIANCE CERTIFICATE

_____________ ___, 20___

Wells Fargo Bank, National Association,

      as Administrative Agent

300 N. Meridian St., Suite 1600

Indianapolis, IN 46204

Attention: James M. Stehlik, Vice President

Tel. No. (317) 977-1115

Fax No. (317) 977-1118

          This Compliance Certificate is delivered pursuant to Section 5.01(a)(iii) of that
certain Credit Agreement, dated as of April ___, 2007 (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), by and among (1) American
Commercial Lines LLC, a Delaware limited liability company (“ACL”), Jeffboat LLC, a
Delaware limited liability company (“Jeffboat”), and ACL Transportation Services LLC, a
Delaware limited liability company (formerly known as Louisiana Dock Company LLC) (“ACLTS”;
and together with ACL and Jeffboat, each a “Borrower” and collectively, the
“Borrowers”); (2) each of the financial institutions party thereto from time to time
(collectively, the “Lenders”); and (3) Wells Fargo Bank, National Association, as
administrative agent for the Lenders (in such capacity, the “Administrative Agent”), as
Security Trustee, as Lead Arranger, as L/C Issuer and as Swing Line Lender.

          Terms defined in the Credit Agreement and not otherwise defined in this Compliance Certificate
(this “Compliance Certificate”) shall have the meanings defined for them in the Credit
Agreement. Section references herein relate to the Credit Agreement unless stated otherwise. In the
event of any conflict between the calculations set forth in this Compliance Certificate and the
manner of calculation required by the Credit Agreement, the terms of the Credit Agreement shall
govern and control.

          This Compliance Certificate is delivered in accordance with Section 5.01(a)(iii) of
the Credit Agreement by an undersigned Responsible Officer of each Borrower, in each undersigned’s
capacities as such and not his or her individual capacity, on behalf of such Borrower. This
Compliance Certificate is delivered for the
fiscal quarter (the “Test Period”) ended
_________, ___ (the “Test Date”).
Computations indicating compliance with respect to the covenants in Sections 5.01(i), 5.02(a),
5.02(d), 5.02(e) and 5.03 of the Credit Agreement are set forth below:

1. Section 5.01(i) — Updated Schedules for new Subsidiaries.

          During the fiscal quarter ended on the Test Date, no Loan Party has reorganized, recapitalized
or consolidated with or merged into any other Person or permitted any other Person to merge into
it, acquired any Person as a new Subsidiary or

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acquired all or substantially all of the assets of any other Person, except as described below:

 

 

 

 

     During the Test Period, if any Loan Party established or acquired any new Domestic
Subsidiary, any new Foreign Subsidiary or any new Equity Securities of any existing Subsidiary,
please attach a written supplement to Schedule 4.01(o).
Applicable during the Test Period?

Yes___ No___

2. Section 5.02(a) — Indebtedness.

     (a) Section 5.02(a)(vii). The principal amount of purchase money
Indebtedness and Capital Lease obligations of the Loan Parties is $______.
The principal amount of such Indebtedness shall not exceed and since the Closing Date has never
exceeded $50,000,000.

     (b) Section 5.02(a)(ix). The principal amount of Maritime
Administration Financing Indebtedness and other additional Indebtedness (as
described in Section 5.02(a)(ix) of the Credit Agreement) of the Loan Parties is
$______. The principal amount of such Indebtedness shall not exceed and
since the Closing Date has never exceeded $25,000,000.

3. Section 5.02(d) — Mergers, Acquisitions, etc.

          As of the Test Date, all acquisitions by the Loan Parties were consummated in accordance with
Section 5.02(d) of the Credit Agreement and the Borrowers have delivered to the Administrative
Agent all information required to be delivered pursuant to Section 5.02(d) of the Credit Agreement.

4. Section 5.02(e) — Investments.

     (a) As of the Test Date, Investments (including any loans or
advances) by Loan Parties made directly or indirectly in the aggregate for all Foreign
Subsidiaries are $______. Such Investments may not exceed, and have never
exceeded since the Closing Date $30,000,000 in the aggregate at any one time for all Foreign
Subsidiaries.

     (b) As of the Test Date, Investments by the Borrowers and their
Domestic Subsidiaries in Joint Ventures which are organized under the laws of the
United States of America or any state thereof in an aggregate amount (valued at
cost) are as follows as to each such Joint Venture:[name of JV]: $______[add

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more references as needed]. Such Investments are not to exceed, and since the Closing Date have
never exceeded (i) $50,000,000 as to any single Joint Venture which is organized under the laws of
the United States of America or any state thereof or (ii) $100,000,000 as to all such Joint
Ventures since the date of the Credit Agreement.

     (c) As of the Test Date, loans and advances to employees in the
ordinary course of business and in accordance with past practices were $______
in the aggregate. Such Investments may not exceed, and have never exceeded since the Closing Date
$5,000,000 in the aggregate at any one time.

     (d) As of the Test Date, additional Investments (as contemplated by
Section 5.02(e) of the Credit Agreement) were $______in the aggregate.
Such Investments may not exceed, and have never exceeded since the Closing Date $5,000,000 in the
aggregate at any one time.

5. Section 5.03(a) — Total Leverage Ratio. As of the Test Date, the Total Leverage
Ratio was ___:1.00. The maximum permitted Leverage Ratio is [3.00:1.00][3.50:1.00].1

The Total Leverage Ratio as of the Test Date was computed as follows:

	 	 	 	 	 
	(a) Total Debt on a consolidated basis on the Test Date
	 	 	 	 
	 
	 	 	 	 
	(i) All obligations of the Loan Parties
evidenced by notes, bonds, debentures or other similar
instruments and all other obligations of the Loan Parties
for borrowed money (including obligations to
repurchase receivables and other assets sold with
recourse) (other than Revolving Loans and L/C
Obligations)

	 	 	 	$______
	 
	 	 	 	 
	(ii) All obligations of the Loan Parties for the
deferred purchase price of property or services
(including obligations under letters of credit and other
credit facilities which secure or finance such purchase
price), except for accounts payable arising in the
ordinary course of business that are payable on terms
customary in the trade

	 	 	 	$______

 

			
	1	 	Notwithstanding the maximum permitted Leverage Ratio above, if (i) any Permitted
Acquisition
is consummated after the Closing Date and (ii) as of the closing date of any such Permitted
Acquisition the Total Leverage is actually greater than 2.50 to 1.00 or is greater than 2.50 to
1.00 on a pro forma basis after giving effect to such Permitted Acquisition, the maximum Permitted
Leverage ratio shall be 3.50 to 1.00 for twelve consecutive months beginning on the date of such
Permitted Acquisition is consummated (and the maximum ratio shall revert to 3.00 to 1.00 after the
end of such twelve month period)]

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	(iii) All
obligations of the Loan Parties
under conditional sale or other
title retention agreements with
respect to property acquired by
the Loan Parties (to the extent of
the value of such property if the
rights and remedies of the seller
or the lender under such agreement
are limited solely to repossession
or sale of such property)

	 	 	 	$______
	 
	 	 	 	 
	(iv) All obligations of
the Loan Parties as lessee under
or with respect to Capital Leases
and synthetic leases

	 	 	 	$______
	 
	 	 	 	 
	(v) All obligations of
the Loan Parties, contingent or
otherwise, under or with respect
to Surety Instruments

	 	 	 	$______
	 
	 	 	 	 
	(vi) All net obligations
of the Loan Parties, contingent or
otherwise, under or with respect
to Rate Contracts on a marked to
market basis;

	 	 	 	$______
	 
	 	 	 	 
	(vii) All Unfunded Pension
Liabilities of the Loan Parties

	 	 	 	$______
	 
	 	 	 	 
	(viii) All obligations of
the Loan Parties with respect to
letters of credit, whether drawn
or undrawn, contingent or
otherwise

	 	 	 	$______
	 
	 	 	 	 
	(ix) All Guaranty
Obligations of the Loan Parties
with respect to the obligations of
other Persons of the types
described in clauses (i) — (vii)
above and all other Contingent
Obligations of the Loan Parties

	 	 	 	$______
	 
	 	 	 	 
	(x) All obligations of
other Persons of the types
described in clauses (i) — (ix)
above to the extent secured by (or
for which any holder of such
obligations has an existing right,
contingent or otherwise, to be
secured by) any Lien on any
property (including accounts and
contract rights) of the Loan
Parties, even though the Loan
Parties have not assumed or become
liable for the payment of such
obligations.

	 	 	 	$______

4

 

	 	 	 	 	 
	provided that Indebtedness of a Joint
Venture that is not a wholly-owned Subsidiary shall
be included at the amount of the Indebtedness of
such Joint Venture times the Loan Parties’
percentage ownership interest of any such Joint
Venture (the “Equity Adjusted Amount”)
unless there is recourse to one or more
Loan Parties in respect
of such Indebtedness, in which case such
Indebtedness shall be included at an amount equal to
the greater of (A) the Equity Adjusted Amount and
(B) the maximum amount of such recourse (which shall
be 100% of such Indebtedness if no maximum amount of
recourse is stated)).	 	See Attached
Schedule A for
calculation of
adjustments
required by this
proviso
	 
	 	 	 	 
	(a) — Total Debt — equals
	 	 	 	 
	 
	 	 	 	 
	[Sum, without duplication, of
(i)+(ii)+(iii)+(iv)+(v)+(vi)+(vii)+(viii)+(ix)+(x)]

	 	 	 	$______
	 
	 	 	 	 
	Divided by:
	 	 	 	 
	 
	 	 	 	 
	(b) Adjusted EBITDA of the Loan Parties for the
four consecutive fiscal quarter period ending on the
Test Date (the “Annual Period”)
	 	 	 	 
	 
	 	 	 	 
	(i) Net Income for the Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(ii) Interest Expense for the Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(iii) Expense for income taxes 

for the Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(iv) Depreciation and
amortization for the Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(v) Non-recurring costs or
expenses incurred during the Annual
Period with respect to a permitted
financing or refinancing, Permitted
Acquisition or other acquisition
approved by the Required Lenders

	 	 	 	$______
	 
	 	 	 	 
	(vi) An amount equal to the
non-cash, share-based compensation
deducted in accordance with SFAS 123 for
the Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(vii) Extraordinary non-cash
losses or charges for the Annual Period
(including non-cash transaction
expenses, the amortization of debt
discounts, losses from impairment of
tangible or intangible assets,
translation gains or losses)

	 	 	 	$______
	 
	 	 	 	 
	(viii) Additional add backs as
may be agreed to in writing by the
Administrative Agent (in its sole
discretion without the consent of the
Required Lenders

	 	 	 	$______

5

 

	 	 	 	 	 
	for any such additional add
backs up to $5,000,000 in the aggregate,
and otherwise with the consent of the
Required Lenders in their reasonable
discretion))
	 	 	 	 
	 
	 	 	 	 
	(ix) Extraordinary gains
realized during the Annual
Period

	 	 	 	$______
	 
	 	 	 	 
	(x) Any non-cash
income or non-cash gains during
the Annual Period,
	 	 	 	 
	 
	 	 	 	 
	all calculated for the Loan Parties on a 

consolidated basis, in accordance with GAAP

	 	 	 	$______
	 
	 	 	 	 
	provided that Adjusted EBITDA of a
Joint Venture that is not a wholly-owned
Subsidiary shall be included at the amount
of the Adjusted EBITDA of such Joint
Venture times the Loan Parties’ percentage
ownership interest of any such Joint
Venture	 	See Attached Schedule B
for calculation of
adjustments required by
this proviso
	 
	 	 	 	 
	Items (ii) through (viii) are included to
the extent deducted in determining such Net
Income for the Annual Period (without
duplication).
	 	 	 	 
	 
	 	 	 	 
	Items (ix) and (x) are included to the
extent added in determining such Net Income
for the Annual Period (without
duplication).
	 	 	 	 
	 
	 	 	 	 
	equals (b) — Adjusted EBITDA
	 	 	 	 
	[(i)+(ii)+(iii)+(iv)+(v)+(vi)+(vii)+(viii)-(ix)-(x)]

	 	 	 	$______
	 
	 	 	 	 
	Total Leverage Ratio =
	 	 	 	 
	[(a) ÷(b)]

	 	 	 	______:1.00

6. Section 5.03(b) — Fixed Charge Coverage Ratio. As of the Test Date, the Fixed
Charge Coverage Ratio was ______:1.00. The minimum permitted Fixed Charge Coverage
Ratio is 1.50:1.00 as of the Test Date.

The Fixed Charge Coverage Ratio as of the Test Date was computed as follows:

	 	 	 	 	 
	(a) Adjusted EBITDA of the Loan
Parties for the four consecutive fiscal
quarter period ending on the Test Date (the
“Annual Period”) as calculated in Section
5(b) above

	 	 	 	$______
	 
	 	 	 	 
	(b) Operating lease expenses of
the Borrowers and their Subsidiaries paid
during the Annual Period

	 	 	 	$______

6

 

	 	 	 	 	 
	(c) The aggregate amount of all
Maintenance Capital Expenditures made during the
Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(d) Cash taxes required to be paid by a
Loan Party during the Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(e) The aggregate amount of all
Distributions made during the Annual Period

	 	$______	 	 
	 
	 	 	 	 
	(f) Distributions to Parent made during the
Annual Period (up to $200,000,000 in the aggregate
for all Annual Periods) which were used for the
purchase of the stock of Parent pursuant to the
Permitted Stock Purchase Program to the extent
permitted by this Agreement during the Annual Period	 	$______

(not to exceed $200,000,000 in the aggregate for all Annual
Periods)
	 
	 	 	 	 
	(g) Adjusted amount of Distributions made during
the Annual Period [(e)-(f)]

	 	 	 	$______
	 
	 	 	 	 
	(h) Numerator for Fixed Charge Coverage Ratio
	 	 	 	 
	[(a)+(b)-(c)-(d)-(g)]

	 	 	 	$______
	 
	 	 	 	 
	Divided by
	 	 	 	 
	 
	 	 	 	 
	(i) Fixed Charges for the Annual Period:
	 	 	 	 
	 
	 	 	 	 
	(i) Cash Interest Expense for the 

Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(ii) Payments of principal on
Indebtedness scheduled or required to be
paid during the Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(iii) The portion of payments,
other than optional payments, made under
Capital Leases that should be treated as
payment of principal in accordance with
GAAP required to be paid during the
Annual Period

	 	 	 	$______
	 
	 	 	 	 
	(iv) Operating lease expenses of
the Borrowers and their Subsidiaries paid
during the Annual Period

	 	 	 	$______
	 
	 	 	 	 
	equals (i) — Fixed Charges
[(i)+(ii)+(iii)+(iv)]

	 	 	 	$______
	 
	 	 	 	 
	Fixed Charge Coverage Ratio equals [(h)÷(i)]

	 	 	 	______:1.00

     7. Section 5.03(c) — Minimum Net Worth. As of the Test Date, Net Worth is
$_________. As of the Test Date, the minimum required amount of Net Worth
is $_________.

7

 

The minimum required amount of Net Worth as of the Test Date was computed as
follows:

	 	 	 	 	 
	(a) $304,854,704.35

	 	 	 	$304,854,704.35
	 
	 	 	 	 
	(b) Fifty percent (50%) of the cumulative sum of the
Loan Parties’ annual consolidated Net Income for each
fiscal quarter of the Borrowers ending after
December 31, 2006 through and including the fiscal
year ending immediately prior to the Test Date
(excluding any quarter in which net income is negative)

	 	 	 	$______
	 
	 	 	 	 
	(c) One-hundred percent (100%) of the Net
Proceeds from the issuance of Equity Securities by
Parent or any other Loan Party the proceeds of which
are received from a Person that is not a Loan Party from
and after December 31, 2006

	 	 	 	$______
	 
	 	 	 	 
	(d) The aggregate decrease in Net Worth directly
resulting from the purchase of the stock of Parent
pursuant to the Permitted Stock Purchase Program

	 	 	 	$______
	 
	 	 	 	 
	(e) Adjusted Net Worth Decrease Amount [(d) x 0.85]

	 	 	 	$______
	 
	 	 	 	 
	(f) Minimum required Net Worth

[(a)+(b)+(c)-(e)]

	 	 	 	$______

8. No Default. During the fiscal quarter ending on the Test Date, no Default or
Event of Default has occurred and is continuing, with the exceptions set forth below in response to
which the Borrowers have taken (or caused to be taken) or proposes to take (or cause to be taken)
the following actions (if none, so state).

[This Space Intentionally Left Blank]

8

 

Each of the undersigned, Responsible Officers of the Borrowers, in their capacity as such and not
in their individual capacities, on behalf of the Borrowers certifies that the calculations made and
the information contained herein are derived from the books and records of the Borrowers and that
each and every matter contained herein correctly reflects those books and records.

	 	 	 	 	 
	 	Dated: _________, 20___

 	 
	 	BORROWERS:

AMERICAN COMMERCIAL LINES LLC, 

a Delaware limited liability company

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	 
	 	JEFFBOAT LLC,

a Delaware limited liability company

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	 
	 	ACL TRANSPORTATION SERVICES LLC, 

a Delaware limited liability company (formerly 

known as Louisiana Dock Company LLC)

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

9Exhibit 10.1

 

Exhibit 10.1

SEPARATION
AND CONFIDENTIALITY AGREEMENT AND GENERAL RELEASE

THIS SEPARATION AND CONFIDENTIALITY AGREEMENT AND GENERAL RELEASE
(“Agreement”), dated April 18, 2007, is made between The Cato Corporation (“Cato”) and
Reynolds C. Faulkner, his heirs, executors, administrators,
successors, and assigns (“Faulkner”).
(Cato and Faulkner are referred to as “Parties”). This Agreement shall be effective on the date
Faulkner and Cato sign, subject to the revocation rights set forth below.

     WHEREAS, Faulkner previously was employed by Cato as its Executive Vice-President
and Chief Financial Officer under a letter agreement dated March 6, 2006 (“Employment
Agreement”);

     WHEREAS, upon being told by Cato that he would be terminated without cause and
given the option to do so, Faulkner resigned rather than be terminated without cause, with such
resignation effective October 30, 2006;

     WHEREAS, the Parties wish to settle and resolve all possible controversies between
them amicably and expeditiously;

     NOW THEREFORE, in consideration of the mutual promises set forth herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by
Faulkner, the Parties agree as follows:

     1. Last
Day of Employment. Faulkner’s last day of active employment with Cato
was October 30, 2006. Faulkner is not eligible to participate in Cato’s 401(k) Retirement and
Savings Plan or any other Cato-sponsored employee benefit plan after October 30, 2006, except
as set forth below.

     2. Consideration. In consideration for signing this Agreement, Cato will do the
following:

	 	(a)	 	Pay to Faulkner on the next business day after the Revocation Period described in
Paragraph 15, in a lump sum, $750,000, less (i) $29,196.12 already paid in
November 2006, or $720,803.88, and (ii) less $3,357.86 as described in Section
2(b) below. Of the $720,803.88 lump sum amount, $583,303.88 shall be deemed
to be compensation in settlement of any wage, bonus, stock, severance, or
employment claims and will be subject to withholding for Federal and North
Carolina income tax purposes and for which Faulkner will be issued a Form W-2
for the year 2007 at the time provided for under existing governmental
regulations. For the balance of the lump sum amount, or $137,500 paid in
settlement of other claims, including in tort or any other basis, that Faulkner
releases herein, Faulkner will be issued a Form 1099 for the year 2007 with
respect thereto at the time provided for under existing governmental regulations.

	 
	 	(b)	 	Continue Faulkner’s health insurance coverage (on the same basis and at the same
level it is provided to current Cato associates) from October 31, 2006 through October 31, 2007 or until Faulkner becomes eligible for another employer’s group

 

 

	 	 	 	health insurance benefits, whichever occurs first. Faulkner’s share of the health
insurance premiums will be $3,357.86. Faulkner agrees that this $3,357.86
amount will be withheld by Cato from the $720,803.88 lump sum payment above.
From the $3,357.86 amount, Cato will deduct any amounts needed to pay prior
months of coverage, and going forward, Cato will deduct $306.07 each month for
Faulkner’s share of the health insurance premiums. In the event Faulkner
becomes eligible for another employer’s group health insurance benefits before
October 31, 2007, Faulkner will notify Cato and Cato will pay to Faulkner any
amount of the $3,357.86 that has not already been applied to Faulkner’s monthly
share of the health insurance premiums.

	 
	 	(c)	 	Faulkner may convert the existing group life insurance coverage to an individual
plan upon request to Cato’s Director of Benefits and Cato will provide the
necessary paperwork and information upon Faulkner’s request.

	 
	 	(d)	 	As of November 1, 2007, Faulkner will be eligible to continue group health and
major medical coverage pursuant to the Consolidated Omnibus and Reform Act
(COBRA), at the applicable COBRA rate for his coverage (excluding Life
Insurance, Short Term Disability and Long Term Disability coverage), provided
that Faulkner pays his monthly COBRA charges on or before the first day of each
month of continuing coverage. Faulkner will be responsible for premium
increases should any occur. Unless Faulkner informs Cato that he has become
eligible for another employer’s group health insurance benefits before October 31,
2007, Cato’s Human Resources Department will send information to Faulkner for
such continuation election prior to October 31, 2007.

     3. General Release of All Claims. In consideration of the provisions of this
Agreement running to Faulkner’s benefit, Faulkner knowingly and voluntarily releases and
forever discharges Cato, its affiliates, subsidiaries, divisions, predecessors, insurers, benefit
plans, successors, and assigns as well as their current and former employees, attorneys, officers,
directors, and agents thereof, both individually and in their official capacities (collectively,
the “Cato Affiliates”), of and from any and all claims, known and unknown, asserted or unasserted,
which Faulkner has or may have against Cato or the Cato Affiliates as of the effective date of
this Agreement, including, but not limited to, any alleged violation of:

	 	•	 	Title VII of the Civil Rights Act of 1964;

	 
	 	•	 	Sections 1981 through 1988 of Title 42 of the United States Code;

	 
	 	•	 	The Employee Retirement Income Security Act of 1974 (except for any vested
benefits under any tax qualified benefit plan);

	 
	 	•	 	The Immigration Reform and Control Act;

	 
	 	•	 	The Americans with Disabilities Act of 1990;

	 
	 	•	 	The Age Discrimination in Employment Act of 1967;

2

 

	 	•	 	The Workers Adjustment and Retraining Notification Act;

	 
	 	•	 	The Fair Credit Reporting Act;

	 
	 	•	 	The Sarbanes-Oxley Act of 2002;

	 
	 	•	 	All North Carolina statutes, laws, and regulations;

	 
	 	•	 	Any other federal, state, or local law, rule, regulation, or ordinance;

	 
	 	•	 	Any public policy, contract, tort, or common law; or

	 
	 	•	 	Any basis for recovering costs, fees, or other expenses including attorneys’ fees
incurred in any such matters.

     4. Covenant
Not to Sue. Faulkner agrees that he will never institute a
claim released above in Paragraph 3 against Cato or the Cato
Affiliates. If Faulkner violates this
agreement by suing Cato or any of the Cato Affiliates for any claims released herein, Faulkner
agrees that he will pay all costs and expenses of defending any such suit incurred by Cato or any
of the Cato Affiliates, including reasonable attorneys’ fees.

     5. Affirmations. Faulkner makes the following affirmations:

	 	(a)	 	He has not filed, nor caused to be filed, nor is he presently a party to, any claim
against Cato or any Cato Affiliate that (i) is not being released by this instrument,
and (ii) if filed, has not been withdrawn or dismissed.

	 
	 	(b)	 	He has been paid for and/or
has received all leaves (paid or unpaid),
compensation, wages, bonuses, stock awards, commissions, and/or benefits to
which he may be entitled other than those provided to be paid under the terms of
this Agreement.

	 
	 	(c)	 	He has no known workplace injuries or occupational diseases.

	 
	 	(d)	 	He will not apply in the future for employment, or accept employment, with Cato
or any of its subsidiaries.

     6. Confidentiality
and Return of Property. (a) Faulkner agrees not to disclose
any information regarding the existence or substance of this Agreement, except to his immediate
family, tax and financial advisor, and/or an attorney with whom Faulkner chooses to consult
regarding his consideration of this Agreement. Furthermore, to the extent Faulkner is permitted
to disclose and does disclose such information, Faulkner agrees to require, and he warrants, that
the person receiving such information will maintain its confidentiality. Faulkner warrants and
represents that from March 2, 2007 through his execution of this Agreement, he has not breached
the confidentiality provisions of this Agreement.

	 	(b)	 	Faulkner acknowledges the highly competitive nature of Cato’s business and
affirms that he has not divulged, and will not divulge, to anyone outside of Cato

3

 

	 	 	 	any proprietary or confidential information of Cato. “Confidential Information”
means any information (i) which is, or is designed to be or may be used in Cato’s
business, (ii) which is private or confidential in that it is not generally known or
available to the public, and (iii) which gives or may give Cato an opportunity to
obtain an advantage over competitors or possible competitors, or which, if
obtained by a competitor or possible competitor, would give or may give that
competitor or possible competitor an advantage over Cato that a competitor may
not otherwise have. Faulkner further acknowledges and affirms that he has not
divulged, and will not divulge, to anyone outside of Cato any non-public
information about Cato’s company performance, future plans, or performance of
Cato Affiliates, whether “Confidential Information” or not, that Faulkner learned
in the course of and because of his employment with Cato. Faulkner also
acknowledges that he will not divulge to anyone outside of Cato any non-public
information about Cato’s internal business practices, whether “Confidential
Information” or not, that Faulkner learned in the course of and because of his
employment with Cato. Provided, however, that Faulkner shall be entitled,
subject to Paragraph 7 below, to respond to questions by a prospective employer
with respect to his business relationship as Chief Financial Officer with John Cato
as Chief Executive Officer that led to Faulkner’s resignation from the company.

	 
	 	(c)	 	At Cato’s reasonable advance request, and at mutually convenient times, Faulkner
will make himself available to answer factual questions or provide factual
information on subjects related to business matters of Cato of which he has
knowledge arising from his former employment with Cato. In any legal
proceeding to which he is not a party, his sworn testimony, including testimony in
discovery, shall, however, be procured by subpoena.

	 
	 	(d)	 	The Parties agree that nothing in this Paragraph is intended to limit or prohibit, or
shall be construed as limiting or prohibiting, either Party from providing
information in response to a lawfully issued subpoena or otherwise complying
with any legal requirement, or from participating in any investigation if requested
to do so by a federal, state or local agency. The Parties further agree that the
existence and substance of this Agreement may be disclosed in order to enforce
its terms.

	 
	 	(e)	 	Faulkner affirms that he has
returned all of Cato’s property, documents, and/or
any confidential information in whatever form, and any duplicates thereof, in his
possession or control. Faulkner also affirms that he is in possession of all of his
property and that Cato is not in possession of any of his property.

     7. Non-Disparagement. Faulkner and Cato agree that Faulkner and Cato’s Senior
Executives (President, Executive Vice Presidents, Senior Vice Presidents, and Assistant to the
President) will refrain from making negative, disparaging, defamatory or slanderous comments,
references, criticism or characterizations concerning Faulkner, Cato, or the Cato Affiliates, either
verbally, in writing, or in any other manner, to any third party for any purpose whatsoever,
unless a legal duty to do so is imposed. Faulkner further agrees not to make any other statement,
written or oral (including but not limited to any media source or to any other party), that would

4

 

disrupt, impair or affect adversely the reputation, business interests, or profitability of Cato or
any of the Cato Affiliates, unless a legal duty to do so is imposed.

     8. Neutral Reference. In the event that any outside entities seek input from Cato
for purposes of hiring Faulkner, Cato will provide a neutral reference limited to his dates of
employment, position, and annual salary.

     9. No Solicitation. Faulkner agrees that for a period of one year from the
effective date of his resignation, he will not solicit any Cato employee to leave Cato’s employment,
initiate such a solicitation by a third party, allow himself to be listed as a reference by a Cato
employee, or hire or recommend for hire by any entity by whom he is employed anyone
employed by Cato.

     10. Governing Law and Interpretation. This Agreement shall be governed and
conformed in accordance with the laws of the State of North Carolina without regard to its
conflict of laws provisions. In the event of a breach of any provision of this Agreement, either
Party may institute an action specifically to enforce any term or terms of this Agreement and/or
seek any damages for breach. Should any provision of this Agreement be declared illegal or
unenforceable by any court of competent jurisdiction, and should such provision be unable to be
modified to be enforceable, excluding the general release language, such provision shall
immediately become null and void, leaving the remainder of this Agreement in full force and
effect.

     11. No Wrongdoing. The Parties agree that neither this Agreement nor the
furnishing of the consideration for this Agreement shall be deemed or construed at any time for
any purpose as an admission by Cato of wrongdoing or evidence of any liability or unlawful
conduct of any kind.

     12. Amendment. This Agreement may not be modified, altered, or changed except
in writing and signed by both Parties.

     13. Notices. Any delivery of funds or notices required under this Agreement shall be
served upon the Parties via hand delivery, certified mail, or overnight priority mail through a
commercial third-party carrier (such as UPS or FedEx) as follows:

	 	 	 
	Notices to Cato:

	 	Robert C. Brummer

Senior Vice President

The Cato Corporation

8100 Denmark Road

Charlotte, NC 28273
	 
	 	 
	Notices to Faulkner:

	 	Reynolds C. Faulkner

C/O E. Osborne Ayscue, Jr.

Helms Mullis & Wicker

201 North Tryon Street

Charlotte, North Carolina 28202

5

 

     14. Entire Agreement. This Agreement sets forth the entire agreement between the
Parties and replaces any prior agreements or understandings between the Parties, including
without limitation the Employment Agreement. Faulkner acknowledges that he has not relied on
any representations, promises, or agreements of any kind made to him in connection with his
decision to accept this Agreement, except for those set forth in this Agreement.

     15. ADEA Waiver and Acknowledgement. Faulkner acknowledges that he
knowingly and voluntarily waives any rights he has under the Age Discrimination in
Employment Act (“ADEA”), 29 U.S.C. 621 et seq., except those that may arise under the ADEA
after the date this Agreement is executed. Faulkner further acknowledges that the consideration
he is receiving under this Agreement is in addition to anything of value to which Faulkner
already is entitled. Faulkner acknowledges that he may, if desired, have a period of twenty-one
(21) calendar days to consider this Agreement, including its reference to the ADEA
contained here and in Paragraph 3 (the “Consideration Period”). In addition, Faulkner may revoke this
Agreement within a period of seven (7) calendar days following its execution (the “Revocation
Period”). If Faulkner does not revoke the Agreement and Release during the Revocation Period,
it will become fully effective upon expiration of the Revocation Period. Faulkner acknowledges
that he has been advised by Cato that he can and should consult with an attorney.

FAULKNER AND CATO FREELY AND KNOWINGLY, AND AFTER DUE
CONSIDERATION, ENTER INTO THIS AGREEMENT INTENDING TO WAIVE,
SETTLE AND RELEASE ALL CLAIMS THEY HAVE OR MIGHT HAVE AGAINST
ONE ANOTHER.

The Parties knowingly and voluntarily sign this Agreement as of the date(s) set forth below:

	 	 	 	 	 	 	 
	REYNOLDS C. FAULKNER
	 	THE CATO CORPORATION, a
	 

	 	 	 	Delaware corporation
	 
	 	 	 	 	 	 
	By:

	 	/s/ Reynolds C. Faulkner
	 	By:
	 	/s/ Robert C. Brummer
	 

	 	 
	 	 	 	 
	 

	 	Reynolds C. Faulkner	 	 	 	Robert C. Brummer
	 

	 	 	 	 	 	Senior Vice President
	 
	 	 	 	 	 	 
	Date:

	 	April 18, 2007
	 	Date:
	 	April 18, 2007

6

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